Comments on: This and That: Canadian common sense edition http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/ Helping you invest and prosper Sun, 12 Feb 2012 00:54:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: 0xcc http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182834 0xcc Sun, 22 Feb 2009 21:20:31 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182834 DAvid, I think that brad mean that in general when a loan is amortiized over aa set number of years the payment early in the amortization schedule have a higher interest portion than the payments closer to the end of the amortization schedule. DAvid, I think that brad mean that in general when a loan is amortiized over aa set number of years the payment early in the amortization schedule have a higher interest portion than the payments closer to the end of the amortization schedule.

]]> By: DAvid http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182832 DAvid Sun, 22 Feb 2009 20:17:34 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182832 Brad, Could you explain what you mean by "Front-Loaded Loans"? I have seen Front Load Mutual Funds, but I've not heard of a front load bank loan. DAvid Brad,
Could you explain what you mean by “Front-Loaded Loans”?

I have seen Front Load Mutual Funds, but I’ve not heard of a front load bank loan.

DAvid

]]> By: Phil S http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182789 Phil S Sat, 21 Feb 2009 23:57:38 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182789 I have the opposite problem where I have my next 2 yrs worth of RSP & TFSA contributions sitting in an ING account making a pittance of interest that is fully taxable. And that's totally separate from my "rainy day" account which is in an Alterna savings account which is just in case I get laid off work (which is a strong likelihood). That last point is the reason why I have definitely become a more conservative investor of late. Interesting on how we differ in our views. I'm a huge advocate of leveraged investing... But these days the momentum is still with the bears. The auto industry is still collapsing, manufacturing jobs are disappearing, the housing market is still in hot water, friends and acquaintances are getting laid off from non-automotive non-manufacturing jobs. Why on earth would anybody plough borrowed money into the stock market when it is likely to continue to fall as the unemployed have to continue to sell their investments to cover their costs of living? The people who are still selling in this bear market are people who don't have a choice. It's a choice between riding the market while starving, or taking a loss and having food on the table. I have the opposite problem where I have my next 2 yrs worth of RSP & TFSA contributions sitting in an ING account making a pittance of interest that is fully taxable. And that’s totally separate from my “rainy day” account which is in an Alterna savings account which is just in case I get laid off work (which is a strong likelihood). That last point is the reason why I have definitely become a more conservative investor of late.

Interesting on how we differ in our views. I’m a huge advocate of leveraged investing… But these days the momentum is still with the bears. The auto industry is still collapsing, manufacturing jobs are disappearing, the housing market is still in hot water, friends and acquaintances are getting laid off from non-automotive non-manufacturing jobs. Why on earth would anybody plough borrowed money into the stock market when it is likely to continue to fall as the unemployed have to continue to sell their investments to cover their costs of living? The people who are still selling in this bear market are people who don’t have a choice. It’s a choice between riding the market while starving, or taking a loss and having food on the table.

]]> By: brad http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182765 brad Sat, 21 Feb 2009 16:22:17 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182765 CC (and David): thanks...I will take your advice. After you titled your post the Canadian common sense edition; in the spirit of that I might as well use some common sense. CC (and David): thanks…I will take your advice. After you titled your post the Canadian common sense edition; in the spirit of that I might as well use some common sense.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182762 Canadian Capitalist Sat, 21 Feb 2009 16:02:17 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182762 brad: Borrowing $10K when you are expecting a $10K refund doesn't sound risky to me. If your accountant E-Files you should have the refund in about a week, so we're only talking a maximum of 2 month's interest. Especially since you are already in the highest bracket, it makes sense to contribute now. brad: Borrowing $10K when you are expecting a $10K refund doesn’t sound risky to me. If your accountant E-Files you should have the refund in about a week, so we’re only talking a maximum of 2 month’s interest. Especially since you are already in the highest bracket, it makes sense to contribute now.

]]> By: brad http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182753 brad Sat, 21 Feb 2009 13:47:58 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182753 Whoops, belay that last comment. I remembered that I have an amortization tool and just took a look and David is right. The interest portion of the first payment about be about $33. This makes it look like a no-brainer...so maybe I'll change my mind and go for it! Whoops, belay that last comment. I remembered that I have an amortization tool and just took a look and David is right. The interest portion of the first payment about be about $33. This makes it look like a no-brainer…so maybe I’ll change my mind and go for it!

]]> By: brad http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182751 brad Sat, 21 Feb 2009 13:43:03 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182751 @David: yes I know I'm being irrational but perhaps not quite as irrational as you make it out to be. On a 1-year $10,000 loan from ING at 3.98%, the total interest paid would be $217. Because interest is front-loaded in repayments, my first payment would be mostly interest. Not $217 but not $33 either (I don't have an amortization scheduler handy to verify the exact amount, but it doesn't matter). ING requires the first payment to be made one month after the advance date. I know my accountant, and she'll barely have filed my tax return by that date, so I definitely won't have my refund in hand. But I think for most people this kind of scenario would make sense...I'm not opposed to this kind of leveraging I'm just avoiding it for my own irrational reasons. @David: yes I know I’m being irrational but perhaps not quite as irrational as you make it out to be. On a 1-year $10,000 loan from ING at 3.98%, the total interest paid would be $217. Because interest is front-loaded in repayments, my first payment would be mostly interest. Not $217 but not $33 either (I don’t have an amortization scheduler handy to verify the exact amount, but it doesn’t matter). ING requires the first payment to be made one month after the advance date. I know my accountant, and she’ll barely have filed my tax return by that date, so I definitely won’t have my refund in hand.

But I think for most people this kind of scenario would make sense…I’m not opposed to this kind of leveraging I’m just avoiding it for my own irrational reasons.

]]> By: Doug http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182750 Doug Sat, 21 Feb 2009 13:01:13 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182750 http://emagazine.credit-suisse.com/app/_customtags/download_tracker.cfm?logged=true&dom=emagazine.credit-suisse.com&doc=/data/_product_documents/_shop/254094/research_institute_yearbook.pdf For 1984-2008, the equity risk premium of Canadian stocks versus Canadian bonds has been -2.9%. http://emagazine.credit-suisse.com/app/_customtags/download_tracker.cfm?logged=true&dom=emagazine.credit-suisse.com&doc=/data/_product_documents/_shop/254094/research_institute_yearbook.pdf

For 1984-2008, the equity risk premium of Canadian stocks versus Canadian bonds has been -2.9%.

]]> By: solfest http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182732 solfest Sat, 21 Feb 2009 03:45:44 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182732 Is buy and hold dead? No. But the question all (all being those of us 100% invested) of us are asking is how long is the hold? Is buy and hold dead?

No.

But the question all (all being those of us 100% invested) of us are asking is how long is the hold?

]]> By: DAvid http://www.canadiancapitalist.com/this-and-that-canadian-common-sense-edition/#comment-182729 DAvid Sat, 21 Feb 2009 02:15:41 +0000 http://www.canadiancapitalist.com/?p=1774#comment-182729 Brad said <i>"I am so resistant to the idea of paying interest to a bank that I just can’t stomach the possiblity that I’d have to pay interest on an RSP loan if my refund doesn’t come in time to allow me to pay it off all at once. And the way loans work, that first payment is nearly all interest so I’d be out a lot of money."</i> You're so averse to paying interest that you'd rather forgo a $10,000 tax refund to avoid $33 or so in interest costs? <b>Wow!</b> DAvid Brad said “I am so resistant to the idea of paying interest to a bank that I just can’t stomach the possiblity that I’d have to pay interest on an RSP loan if my refund doesn’t come in time to allow me to pay it off all at once. And the way loans work, that first payment is nearly all interest so I’d be out a lot of money.”

You’re so averse to paying interest that you’d rather forgo a $10,000 tax refund to avoid $33 or so in interest costs? Wow!

DAvid

]]>