Author Topic: Investment Culture  (Read 465 times)

Offline segnosaur

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Re: Investments
« Reply #75 on: June 19, 2017, 02:33:18 pm »
I'm not very risk-adverse, although obviously I'd prefer not to lose my money.   I don't know what a broad-based index fund is.
Generally, an index fund is an investment (you can get it from a bank) which tracks the stock markets. (They do so by buying stocks in proportion to the Toronto Stock Exchange, or something similar. )

The advantages? Since you're not betting everything on one stock (or one sector of the economy) then it can be much more stable and you're less likely to loose money. Index funds also tend to have lower management fees (since whomever is offering the fund doesn't actually have to do any work to pick which stocks are going to do better... they just look at whatever the exchange is doing).

The disadvantages? Well, many index funds are based on the stock market, which can be volatile (like after the problems in 2008) so there is some risk.

They usually do pretty good... on average, you might expect them to go up around 5-10% per year (although keep in mind that some years they may actually go down in value.) I'm risk-adverse, but I use Index funds for the majority of my investments.
 
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The other option I'm considering is to do a small kitchen reno, because I plan to sell this townhouse in a year or two and kitchen reno would make it pretty and easier to sell.  it's a bit 'dated' and has some minor cosmetic damage.
If you want to put money into your home, the best investment is to paint or put up new siding. Maybe put in a new front door or do some landscaping. (And make sure there are no leaks.)

Remodeling a kitchen may improve your home's value, but you don't always get as much increase in value as you put into the renovations. Remember, what YOU might like in a kitchen may not be what a potential buyer wants in a kitchen, and they may decide your renovations are horrible and will want to make their own changes.

Offline dia

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Re: Investments
« Reply #76 on: June 19, 2017, 07:58:58 pm »
Generally, an index fund is an investment (you can get it from a bank) which tracks the stock markets. (They do so by buying stocks in proportion to the Toronto Stock Exchange, or something similar. )

The advantages? Since you're not betting everything on one stock (or one sector of the economy) then it can be much more stable and you're less likely to loose money. Index funds also tend to have lower management fees (since whomever is offering the fund doesn't actually have to do any work to pick which stocks are going to do better... they just look at whatever the exchange is doing).

The disadvantages? Well, many index funds are based on the stock market, which can be volatile (like after the problems in 2008) so there is some risk.

They usually do pretty good... on average, you might expect them to go up around 5-10% per year (although keep in mind that some years they may actually go down in value.) I'm risk-adverse, but I use Index funds for the majority of my investments.
 If you want to put money into your home, the best investment is to paint or put up new siding. Maybe put in a new front door or do some landscaping. (And make sure there are no leaks.) 
Thanks very much for the information, appreciate that you kept it simple and clear for me.   I may go talk to a bank person, or in my case a Credit Union person since that's who I bank with.

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Remodeling a kitchen may improve your home's value, but you don't always get as much increase in value as you put into the renovations. Remember, what YOU might like in a kitchen may not be what a potential buyer wants in a kitchen, and they may decide your renovations are horrible and will want to make their own changes.
It's in poor enough condition right now that a buyer could reasonably say "Drop the price because I'll have to fix the kitchen".   It's all cosmetic, so shouldn't cost too much to spruce it up, even if I do spring for a stone counter top, and I would keep colors neutral - no bright orange feature walls in my future.   :)     I'm definitely doing some landscaping, regardless of what I do with the kitchen.   :)
“Neither a man nor a crowd nor a nation can be trusted to act humanely or to think sanely under the influence of a great fear.”
Bertrand Russell, Unpopular Essays

Offline msj

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Re: Investment Culture
« Reply #77 on: June 22, 2017, 02:14:33 pm »
Anyone following the latest on Home Capital Group (HCG)?

After the OSC gets them for $30 million in penalties, and seeing their liquidity drop dangerously low (remember, this is a mortgage lender at 20:1 ratio) they get a loan from an Ontario pension plan (for which an investigation should be undergoing - if I was a member of that pension I would be livid about the relationship between HCG and the HOOP).

Now Warren Buffett steps in to save the day as one of his subsidiaries will replace the HOOP loan with a equity/debt deal.

On the equity side he gets 38% for about $400 million. 

His real goal, however, is to get $4-5 billion in mortgages which backstop the $2 billion loan on offer (at 9% rate plus other details).

If HCG goes broke, he gets those mortgages and loses on the equity (although who knows, maybe he sells out of the equity after the lock up period).

If HCG does survive, then he can ride the equity which he got on the relatively cheap ($10 per share) while still earning 9% on his loan.

Either way, hard for WB to lose on this deal even if GTA RE collapsed by 40%.  So good for him.

Then we have the chicken farmer from San Francisco, Marc Cohodes, who is shorting HCG from when the stock was around $53, allegedly is still shorting it. 

He is convinced that the equity will go to $0 and is waiting for the "fat lady" to sing.

Frankly, I would have ended my short when HCB touched $7 but whatever.

I think it is still possible for both Cohodes and Buffett to make a lot money here:

A) HCG goes to $0 so Cohodes makes his $50+ per share (since he sold shares around $50 or so and would be buying them at $0 he will have done very well).

B) Buffett loses, worst case, $400 million on the equity and the $2 billion on the loan.  However, he gets $4+ billion in high interest (albeit subprime) mortgages.

Who knows, maybe Buffett will start shorting HCG to hedge his position - hope HCG considered that and wrote it into the deal to not allow him to do this.

Isn't high finance fun?!
 
 

« Last Edit: June 22, 2017, 02:27:30 pm by msj »
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