Alternative Investments

 Economics  11 Responses »
Aug 292012
 

When we talk about investing we generally think about the stocks or fixed income market. But as we all know the Toronto stock exchange hasn’t done very well in the last 5 years and bond yields are still relatively low. More investors are starting to look into alternative ways to put their cash to good use. One way to do this is through alternative investments.

Alternative investments behave differently than traditional markets. Their returns have a low correlations with those of standard asset classes. In other words, they don’t follow the stock market or the bond market. Some examples of alternative investment classes include commodities, hedge funds, managed futures, wine, art, private equity, real estate (residential, commercial, farmland, REITs, etc.)

Earlier this year I bought some silver coins. These are pure commodities. The value of these coins over the last 5 years definitely out performed the TSX composite.  Hedge funds and derivative contracts are usually for accredited investors with deep pockets. Vintage wine, paintings, or other types of art also do not fluctuate with the stock market and can be a great store of value over the long term. Real estate is a tough one. Depending on location this investment can either be hit or miss in the last 5 years. But it doesn’t follow the financial markets, and I don’t know anyone who has invested in land for a long time and have lost money consistently.

Getting into alternative investments isn’t difficult (^_^) If you own a REIT, either private or public, then you are already investing in this space. Buying a rental property also makes you an alternative investor. Please keep in mind that alternative investments are usually less liquid than traditional assets so if you are thinking about doing anything in this space I suggest you take a long term approach.

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Random Useless Facts:  The first European stock exchange was established in Antwerp, Belgium, in 1531.

Weekend Business and Blog Roundup – Aug 25th

 Uncategorized  7 Responses »
Aug 252012
 

Big win for Apple yesterday as a jury group ruled that Samsung has infringed on Apple’s patents and should pay Apple over a billion dollars for copying the technologies in iPads and iPhones. For consumers this probably doesn’t change anything in the immediate future. Samsung said they will try to appeal, so this case is just beginning and can last for years before we see a final outcome. Lawyers from both sides will have their works cut out for them.

Apple and Samsung have been fighting legal battles not just in the US, but all over the world where smart phones and tablets are sold. It raises an interesting question about how far you can patent something. For example Apple has a utility patent ’163 which lets users zooms in on an item of interest by tapping on the screen. At what point should a function be standardized? I’ve heard that in the past Apple has been sued for violating a double click patent.  Maybe some things are better left open source, so others can improve upon it to foster innovation. But on the other hand, if you have a great idea and get it to market, shouldn’t you be entitled to a period of time to profit from it before everyone else can use it? What’s the point of spending time and money on research and development if you can’t protect it?

Some interesting PF related articles from around the web

The Passive income earner gives us a look into how his dividend income is broken down as he made over $500 in August.
Free Money Finance has some great ideas if you’re looking for credit cards that give you cash back.
Not working asks if you would stop working if you become a millionaire over night. I would probably stop working, but only after I work out a plan on what I’m going to do with my life next.
Want to know what the richest 1% thinks about a graduate degree in engineering? 1 Am 1 percent tells us his views.
Modest Money shares with us his personal driving history and explains the importance of car insurance.
The Outlier Model has some ideas for free events for anyone planning to visit Washington DC.
Do you need life insurance? Not everyone does. If you’re in the same boat as Daisy from Add-vodka then you may want to think about holding off.
 Behind the numbers discusses what many Canadians are frustrated about. Corporations have hundreds of billions of dollars in the bank, but are not investing that money to create jobs, buy equipment, or do something productive to help our sluggish economy to grow faster.

Apple’s History and Hedge Fund Update

 Economics, Stocks  6 Responses »
Aug 212012
 

There doesn’t seem to be anything stopping the giant Apple Inc from its ever expanding size. Each Apple share now is worth more than $650. Investors believe that Apple, as a corporation, is worth altogether over $615,000,000,000. That’s quite a lot of moola. In fact Apple recently broke the historical world record for the largest market capitalization ever, meaning the largest company in the world. Its ridiculous size is roughly equivalent to the combined market caps of technology giants IBM, Google, Intel, and HP, all combined!

To explain what market cap is, let’s imagine a blogger who wants to sell his site for $1,000. But a buyer thinks the blog is only worth $200. The seller wants to value his blog at the highest price possible, but the buyer wants it at the lowest price possible. The price point in the middle which both parties can agree on is the market capitalization of the blog. In Apple’s case, buyers and sellers of Apple shares agree that the company is worth $615 Billion today… If tomorrow investors believe Apple is worth more then each share will be more expensive signalling people are willing to buy/sell the company at a higher price point. (Share price) x (Number of existing shares) = (Market Cap)

image credit: http://ihatepeacocks.com

 

Key Apple Market Cap Milestones

  • May 30, 2007 – Apple tops $100 billion
  • March 9, 2010 – Apple passes $200 billion
  • May 26, 2010 – Apple becomes 2nd largest stock, surpassing Microsoft’s market cap of $219 billion
  • Jan. 3, 2011 – Apple crosses $300 billion milestone
  • Aug. 10, 2011 – Apple becomes world’s largest stock, topping Exxon Mobil’s $331 billion market cap
  • Jan. 25, 2012 – Apple rises to $400 billion
  • Feb. 29, 2012 – Apple becomes 5th stock ever to cross $500 billion
  • Aug. 17, 2012 – Apple closes with a $600 billion market cap for the first time

Source: CNBC Analytics and S&P Capital IQ

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I have also updated my Hedge Fund...

More than 5 stocks DRIPed. A couple raised their dividends. And some new additions to the party include, Bombardier (they manufacture the skytrains I ride in Vancouver)  Vodaphone, Pengrowth Energy, and Keyera.

Putting the 1 Percent into Perspective

 Economics, Wealth  30 Responses »
Aug 172012
 

Read an article in the Globe that paints a pretty clear picture of who the richest 1% are. In order to join this elite club an individual has to make more than $230,000 a year. Sounds like a lot, but it’s still lower than what’s needed in the United States which is $380,000. Before we criticize these greedy pigs let’s take a look at some key points from the study.

  • Over half of them work more than 50 hours a week (o.O)
  • 58% of them have at least a bachelor’s degree. But only 19% of the entire adult population are university graduates.
  • Only 10% of these top earners work in the financial/insurance industry, despite getting the most heat from the public.
  • Only 17% of them are women
Most of us in the general population work around 35 to 45 hours a week. If you work more than 50 hours, you are in the top 20% of the hardest working folks in Canada.  A $230,000 salary translates into less than $150,000 of take-home pay here in BC. Sure that’s still a lot, but if I lived in a dual income household where my partner made as much as I do right now, then our combined after tax income would equal more than half of $150,000. So if a top 1% earner spends $100 on dinner, then we would spend maybe $50 or $60. Instead of buying a million dollar house we can only afford a $500,000 house. The quality of life for a top 1% earner and that of the average family’s isn’t that huge of a difference. Not even the 1% can have it all lol. I’m sure some of them lied, cheated, or didn’t work their way legitimately to the top.  But I believe many are diligent, hard working people and deserve what they get paid.

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Random Useless Facts: Ok, not so useless today. Here are some innovative ideas to try out if you spend a lot of time cooking or being around food. Found this on 9gag.com awhile ago.

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