Monday, March 31, 2014

Let's Talk about Fearing Money

For whatever reason I read a lot of mommy blogs.  I don't know why this should be the case; I don't have kids - I get my exposure to children vicariously through my sister's kids.  Such blogs don't have anything to do with finances, but occasionally the worlds intersect.

A kid dressed in Christmas pyjamas running towards the Christmas tree and Christmas present.
What does this have to do with money?

A kid dressed in Easter pyjamas running towards the Easter present.
I can see in no way how this relates to money.

A kid dressed in birthday pyjamas running towards the birthday present and balloon.
OK, maybe parents spend a little bit of money on their children.

A picture of a kid, labelled with various places one might spend money: education, hair cuts, optometrists, dentists, doctors, toys, food, clothing, extracurricular activities, shoes.
Or maybe they spend a lot of money - I couldn't really comment either way.
So the worlds probably intersect more than anyone ever lets on.  But sometimes mommy bloggers actually TALK about financial things.

I read one such post by Alice Bradley, a blogger that I find delightful and quirky, a few years ago.  The post was called "Semi-Fictional Phone Conversation with New Financial Planner" and in conversation, she reveals her fear of money. (link).
"Me: I know so little about money things, I wouldn't know where to begin.
[Financial Planner]: (laughs)
Me: No, seriously. Money are me scary. You see? Even my syntax falls apart." --Alice Bradly
I was aware in an academic sort of way of the fact that with almost 9 billion people living on Earth, there is probably at least one person out there who is afraid or anxious about every single thing that exists.

A thing labelled 'thing', sitting on a table.

A thing sitting on a table.  A person in the background recoiling in fear, yelling "Aaagh!" labelled 'Person who is afraid of thing'.

Money is a thing so, statistically speaking, there would be someone out there who fears it.  But much like winning the lottery or spontaneously conceiving identical quintuplets, they are not odds I ever expect to see played out.

Five babies lying side by side, all throwing money in the air.
Or winning the lottery AND having the quintuplets.
Afterwards I read the comments and discovered that almost half of the comments were along the lines of "me too!" "I thought I was the only one!".  I was taken completely aback.  (A note for those who actually read the comments: Elle24 is not me.)

It was a revelation much like the time when I figured out that a friend of mine was terrified of my adorable, friendly, fluffy and completely harmless little dog.

Me crouching down next to a small white dog that is saying "Rawrf! Bark!".  A friend standing in the background looking nervous.
*Friend's face changed to protect the innocent.
 "You can't be scared of him!" I said, picking up my unprotesting lump of dog and holding him up to her.  "He doesn't do anything but bark and even that is friendly."

Me holding the dog up to the friend.  The friend looks more nervous and is backing away.

She remained unconvinced.

"Look, I can shove my hand in his mouth and all he does is squirm away."

Me sticking my hand in my dog's mouth.  Friend looking horrified and backing away.

No amount of trying to make my dog mangle my hand would ever convince her to change her mind.

Of course, I initially pictured a fear of money to be similar to my friend's fear of my dog.

Me staring suspiciously at a pile of money.

The money pile make the small noise 'rustle' and I panic.

But of course, it's more than that.  We are not a dog-based economy; we trade in money.

Fanart of Cruella DeVille
Well, most people.
--Image from Wikipedia
Money gets us food, shelter, clothing and, in sufficient quantities, status.

Adults are expected to know how to manage money and face penalties and judgement if they can't figure it out.  This skill of managing money, however, is presumed to be intuitive and gets very limited coverage in the school curriculum.

A mother bird kicking a baby bird out of the nest and saying: "Well, you're an adult now... have fun with that..."
Finances 101 - Lesson 1
I found money intuitive, but from discussions with other people, I get the sense that this is not the same way for everyone.  Those who have more trouble tend not to want to talk about money.  Sometimes, they might say that they're afraid of it.

Right or wrong, when I hear "I'm afraid of money" I assume that the person is saying "I'm scared that I'm going to screw up this whole money thing, and then everyone will laugh at me and my pain."

When I hear that someone is scared of something, I always want to make that thing seem less scary somehow.  Scared of dogs?  Look, this one's all friendly.  Scared of money?  Let's make jokes about personal finance until it seems harmless (and even perhaps, fun).

Except mice.  Mice will always be scary.
So here, let me try to put you all at ease with a few financial jokes jokes that I found on the internet.

Me telling a joke to someone who looks wary.  Me: "OK, here's a funny joke." Them: "OK..."  Me: "What's another name for a long-term investment?"  Them: "What?" Me: "A failed short-term investment!"

Me looking worried, telling a joke to someone who looks annoyed.  Me: "Actually, no... This one's better" Them: "..."  Me: "What leads most people into debt?"  Them: "?" Me: "Trying to catch up with people who are already there!"

Me, looking desperate, telling a joke to someone who looks very annoyed.  Me: "An investor to her advisor:"  "Is all my money really gone?" "No, of course not.  It's just with somebody else!" "...heh..."
"I'm here all night!  ...or if you prefer, I could leave right now!"
Wait... how is it that none of these are making anyone feel better about talking about investment?  They're kind of depressing.

Me telling a joke to someone who is annoyed and now ignoring me.  Me: "The stock market is driving its car..." "...and then it CRASHES..."  "Millions lose their life savings."  "The end."

Where are the financial jokes about someone enjoying the feeling of a well-made budget?  Or the satisfaction of finding out that your carefully chosen investments just raised their dividend payments?  What about a joke about realizing that you have more money in your bank account than you thought was there in the first place?

Oh yeah, it's the reason that no one jokes about long term, happy, committed relationships.  They're too boring.

Me telling a joke to someone.  Me: "So this girl makes a good investment..." "...that pays her a very normal return over a long period of time."  "Then she feels really good about herself.  The end."  Them:  "That's not funny."
"And then she ate fiber to stay regular."
Will any of this necessarily help anyone who is scared of money?

Maybe, probably not.

I want everyone to want to talk about investment.  I can't write off the people who are scared of money.

To those people, I offer this:

A chair, couch-like

Yes, it's a chair.  Consider it like a seat at the Let's Talk Investment table.  I'll leave it empty just for you.

Me, poking the chair and pointing at it.
"Look, it's not even biting me!"

Monday, March 24, 2014

Let's Talk about Investment Strategy: Part 2

I was away on vacation and am about to launch into a house renovation which will mess up 4 out of the 7 rooms in my house, including the computer room.  What this means is that I have very little time to write/draw.

So, fun pictures will be back next week.  This week is a summary of stock spreadsheets and how they are fun.

My parents have owned mutual funds for as long as I can remember.  When I was a kid, I remember that every so often, my mother would take the newspaper and flip to the financial section.  Instead of articles, this section held tiny printed columns of numbers, codes and arrows.  She would carefully highlight a few lines and then enter them into her blue financial tracking book, later her computerized financial software.

This was, obviously, the Before Common Internet Era (~10 BCIE).

At that time, picking your own stocks was considered Very Hard.  Really, it was a full time job involving printed reports and squinting at tiny numbers on a printed page.

We are now in the Common Internet Era.  What took my mother 45 minutes, I can get instantly through any number of internet-based portfolio trackers.

(Which internet-based portfolio trackers?  I use Google Finance.  If you have an online brokerage account, you log in and it will also tell give you the information.  There are other online trackers, but I don't use them and don't want to accidentally refer anyone to a scam.)

Company information and historical data that would formerly have required a trip to the library is easily obtained through numerous websites.  I use a collection of the following:
- Google Finance
- Yahoo Finance
- MSN Money
- Reuters

Then what?  I'll recap Part 1 (link), where I outlined how stock picking is mostly an exercise in narrowing down the field.

Let's break it down:
1 - Reduce the playing field.  Only buy stocks that give dividends.
2 - Reduce the playing field more.  Only buy stocks that have given dividends consistently over a period of time.

Where do you find a list of stocks that give dividends consistently over a long period of time?  There are lots of places.
The Canadian Dividend Aristocrats List
The Canadian Dividend All-Star List
The American Dividend Aristocrats List
The American Dividend Champions List

3 - Make a list.  List all of the stocks that meet the conditions above.4 - Analyze the list.  Download relevant stock information about each of the stocks on the list.
 What can you use to make such a list?

- Excel: this link tells you how to look up data on stocks automatically in Excel using "SMF Add-In"
- Google Drive documents: this link tells you how to download stock information.

5 - Compare and contrast.  Use a ranking system to give all the stocks a score.6 - Narrow the field even more.  Using the ranking system, find the top 10% scores.
How might you compare and contrast the stocks?  I use Google Docs.  Here is an example of the spreadsheet that I use:
- For US stocks, based on the American Dividend Champions List (link)
- For Canadian stocks, based on an amalgamation of a whole bunch of lists (link)

How they work:
- The "Sorted Ranking" tab lists the stocks in order of total score, based on the ranking system.
- The rankings are based on a number of different metrics (which I revise occasionally).  I'll talk more about various metrics later, and what they mean.
- The metrics are each weighted individually based on what I happen to think is important at any given time.  (If you're curious, you can find this ranking on the "Ranking" tab)

Note: The 'number 1' position is not necessarily the one that I buy, I usually stick within the top 10%, but sometimes I don't even do that.  I reserve the right to be waffle.

I also can't promise to keep the sheets updated on a regular basis, though I update the title whenever I do update them.  I'd encourage you to make a copy of either sheet and then play with the stock selection, the metrics and the rankings to suit your own fancy.

7 - Pick.  Decide which of the stocks in the top 10% is the most interesting.
8 - Buy.  Buy as much as possible.
Once you've narrowed it down this far, for me the final cut is a gut decision.
9 - Never sell.  But, if a stock lowers or cuts its dividend, sell it. 
That's it for now.  Hopefully I've given you some stuff to chew on while I'm trying to squeeze four rooms of furniture into my kitchen/dining room.


Please realize that "Let's Talk Investing" is not authored by a financial planner, adviser, or a professional investor in any capacity. As such, this is not expert advice in legal, taxation, financial, or any type of information that may be provided. The reader must realize this when reading these articles and must not rely on them as the ultimate source of information but must seek proper verification from the appropriate professionals before acting on any of this information.

Monday, March 17, 2014

Let's Talk about Brains

No, not that kind of talking about brains.

Yes, that kind.

This is your brain on investment.

The following admission might seem funny coming from a person who likes to talk about investment:

And who started a website on investment.

For the last week and a half, I haven't wanted to talk about investment.  In fact, I've been actively avoiding it.  Whenever my brain passes over the concept of investment (or in fact, calling my mother, who wants to talk to me about investment) the feeling emerges: malaise, ennui, overall dullitude (I made the last one up)   These feelings are the incorrect feelings to have, as they relate to the stock market.      

The correct attitude to have when dealing with the stock market is as you would regard a curious toy or a logic puzzle.

The stock market.

Unless you approach the stock market armed with this sense of logical curiosity, you will not be able to defend against the stock market's insidious and constant attacks against your psyche.  Its goal?  To turn you into a sheep.

No, not like this.

A sheep is the stock market's worst investor.  Buying at any price and borrowing to invest at the market's highest peaks, the sheep sells everything in the market's lowest valleys.  A sheep panics at the slightest negative sentiment and exalts the faintest of good news stories.  To "accomplish" all of this, the sheep expends vast amounts of mental energy.

Yes, the two headed monster kind.

So how do you use your logical curiosity as armour against sheepification?

Simple: Be logical and be curious.  

OK, fine, that's not very helpful.  Perhaps some examples would be more useful.


Example 1 - A person buys a stock.  The value of that stock increases.

The sheep -  "This stock is awesome;  I'm awesome for picking it.   I should probably buy more. " 

Logical curiosity - "I wonder what would make people suddenly think that this stock is worth more.  Would now be a good time to sell some shares?"

Example 2 - A person buys a stock.  The value of that stock decreases.

The sheep - "This stock is terrible; I'm stupid to have picked it.  I should probably sell what I have so that I don't lose any more money."

Logical curiosity - "I wonder what would make people suddenly think that this stock is worth less.  Would now be a good time to buy more shares?"

Example 3 - A person doesn't buy a stock.  The value of that stock increases.

The sheep - "Augh!  How could I screw this up so badly?  I need to buy some of that stock before it goes up even more!"

Logical curiosity - "At today's price and with today's information, would I buy this stock as opposed to a different stock?"

Example 4 - A person doesn't buy a stock.  The value of that stock decreases.

The sheep - "Ha ha, yes!  I'm a genius!  I knew that that stock was terrible and I didn't buy any!"

Logical curiosity - "At today's price and with today's information, would I buy this stock as opposed to a different stock?"


It turns out that I had been sheepified.  I was mired in Example 3, bemoaning the stock market that had risen all around me, bemoaning the "small" amount of money I had put into investment these last 5 years, mourning the Canadian dollar's decline versus the US dollar that would mean that it was more expensive to buy US shares.

What a bad day in the stock market might look like for me.

So how did I get rid of  my inner sheep?  I  wrangled my curiosity and spent a few hours working the bugs out of a brand new stock market spreadsheet, which is now up and running.   Then I curled up with a financial thriller about predictions for an upcoming stock-pocalypse.  

I won't say that my inner sheep is gone forever--she'll probably be back--but at least for now she's resting her eyes. 

Or maybe she's just nearsighted.


Please realize that "Let's Talk Investing" is not authored by a financial planner, adviser, or a professional investor in any capacity. As such, this is not expert advice in legal, taxation, financial, or any type of information that may be provided. The reader must realize this when reading these articles and must not rely on them as the ultimate source of information but must seek proper verification from the appropriate professionals before acting on any of this information.

Monday, March 10, 2014

Let's Talk about Experiences with Money

I was six years old when I lost my skates at the skating rink on a school field trip.

They weren't the first things that I had lost that winter.

"So cold... so very, very cold...  What could possibly cause this feeling?"

My mom wanted to break me of my habit of losing things by showing me that there were consequences for negligence.  I needed replacement skates so that I could participate in the school activity, but she decided that I would be the one to pay for them.

Money wasn't a new concept for me; I had recently started receiving an allowance.  I received 3$ per week, which I would take to the local gas station and buy myself candy.  I liked taffy and chocolate bars and penny candy.

"This offering of silver coins only feeds my inner rage." --Elle, 1991

I was sufficiently well-versed financially to know that my 3$ per week allowance wasn't enough to buy a new pair of skates.

We replaced my skates and I learned the concept of debt.

Every weekend for an eternity that probably lasted about 12 weeks, my mother would call me and my sister over to receive our allowances.  Each of us received three loonies.

Then, every weekend for an eternity that probably lasted about 12 weeks, I had to give the three loonies back to her.

Every week.  For months.

Yes, there was a log sheet.

I credit this experience with making me into a super awesome saver of money.

It did not cure me of my forgetfulness.