Saturday, May 9, 2009

Do-It-Yourself Investor


When you lose money in mutual funds, the mutual fund managers still take more of your money for what they did to your money. How absurd!

So, this year when the RRSP season came, I decided not to give money to my financial advisor anymore. If I have to lose my own money, I’d rather lose it myself. At least, I save the money that mutual fund managers have the audacity to charge me after they lose my money.

In late February this year, I opened up a self-directed RRSP account with TD Waterhouse. My contribution was $6,000 Canadian. It’s been sitting in this self-directed RRSP account since then till to-date, earning just a few pennies in interest.

Why? Because I decided to learn how to invest myself; I want to be a do-it-yourself investor.

I’ve been reading up on investments. I’ve been monitoring the market. I spend much time in identifying the constraints as a part-time investor, because I still have a day-time job to tend to.

And now I feel I am about ready to do my own investment.

The Canadian RRSP (Registered Retirement Savings Plan) is somewhat similar to the American 401(k) plan. The deadline for contribution to the RRSP of the previous year is the first 60 days of the year (usually the first day of March).


Thursday, May 7, 2009

Mutual Funds are No Fun


Like most Canadians, I don’t work in the finance industry. (In fact, I work in the computer industry.) Again, like most Canadians, I don’t do my own investment; I give my RRSP money (RRSP is similar to the 401(k) plan in the U.S.) to an investment advisor.

My investment advisor is with Manulife Financial. Like most investment advisors, my Manulife advisor advised me to put my money into various mutual funds. And that was fine with me.

And I know that mutual funds charge money for providing their services, and that was fine with me. They charge a certain percentage of the value of your holdings as their management fees. They call this percentage MER, short for Management Expense Ratio.

The MERs the mutual funds charged me were about 2% to 2.25% (depending on which particular fund), which was a bit higher than usual, but that was still fine with me, as long as the money they made for me was greater than their MER money.

What began to be not so fine with me was when all this financial tsunami started last year. On November 19, 2008, TSX dropped about 345 points to close at 8490.56. The following day (November 20), TSX dropped further to 7724.76, losing 765.80 points.

During that period, most people (if not everyone) lost 40% to 50% of their holdings in investments with mutual funds. Yet mutual funds still charged the same MER money.

If you make money for me, and you take some money from the extra money you made for me, I have no problem with that. But if you lose my money, and still take some money from my original money (the principal), then I really have problem with that.

Yes, there are gains and losses in investments. But if you (as an investment professional) lose my money, you still have the guts to take my money from my pot? To me, that’s preposterous!

As in my blog title: "If we don’t take care of our own money, it will become other people’s money." So in February this year (2009), I decided to sell all my mutual funds and have everything in cash (or money market).

By liquidating my positions, I managed to avoid the new low in March 9 this year. On that day, TSX hit a new low of 7566.94, and Dow Jones also hit a new low of 6547.05.

As of writing, I am still in all-cash (money market) position.


Tuesday, May 5, 2009

Monies or Moneys

The first question you may ask when you look at my blog title is, “What are monies? Shouldn’t it be moneys?”

Monies” and “moneys” are both the plural form of money in English. Their usage, however, is not exactly the same. “Monies” and “moneys” are interchangeable most the time, but not all the time.

Traditional English grammar books say that “money” is uncountable, therefore it does not have a plural form. However, as most linguists agree, languages are not static but are lively and ever-evolving.

Example 1:

“After my trip to Asia, I have three different kinds of moneys in my wallet.”
This sense of “moneys” means “currencies”.

Example 2:

“I have my own business. Three clients owe me sums of $100, $200 and $300. My bookkeeper records the three entries in the “monies due” column in my accounting books. The moneys due to my business are $600.”

In general, the usage of “moneys” is more general and casual. “Monies” is used more in an academic sense, as in traditional economics textbooks (modern economics textbooks may start using moneys). So, it seems to be more orthodox, or even authoritative in that sense to use “monies”.

Nowadays, “monies” is usually used more by professionals that require taking economics courses in their training, such as bankers, accountants, MBAs, etc.

In daily use, we use “moneys” more often than “monies”, probably because less people know (or care to know) the “proper” plural form of money is “monies”.

Sunday, May 3, 2009

Two Kinds of Monies

There are two kinds of moneys: our own money (OOM), or other people’s money (OPM).

It is important it is to take care of our own money. We all have heard over and over again that how people in the public sector (such as school boards, municipal, provincial and federal Governments) have wasted tons of taxpayers’ money. After all, it’s just other people’s money, not their own money.

If we don’t take care of our own money, it will become other people’s money.