Back on the Horse

Well the holiday season has past and while I was unable to keep up with the gym and posts, it wasn’t a terribly unhealthy month. I managed to make my way to the gym a couple of times a week and got out for one outdoor run. The cold snap we were experiencing seems to be over as well, so this week should provide a few more outdoor runs and the chance to try out some of the gear I received for Christmas.

The Spartan Race season is fast approaching, and I know I’ve got a lot of work ahead of me. This month will be all about ensuring consistent gym visits and staying on top of my diet. I ate far too many sweets and salty snacks over the break.

On the work front I have been given care of some preexisting clients, so I will be facing a new challenge in dealing with them. I’m not too worried, and excited to expand my network that much further. It is also humbling to be singled out by my coworkers as someone to trust their former clients with.

Expect weekly posts to begin again as well as random thoughts during the week regarding finance, fitness and health.

Ciao, theswellswede

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Week 9 Update

The Journey so Far: 128.4km + 10hrs other cardio

Weekly Distance/Cardio Tracker: 10km +2 hrs

★★★☆☆ Week: Work, work work still as we had into the holiday season. Was still able to get myself into a workout a little bit more often though, which was very good.

Takeaway for the week: It’s still December.

Books I’m reading: Still no books right now, but after Christmas that will probably change. Still heavily investing time into reading blockchain and cryptocurrency, as well as CFP for work.

Last Week’s Goal: Didn’t quite get three different runs in, but two of 5k made me happy still. Plus, had a soccer game and pickup basketball, so not the worst week. I’ll keep making sure I am at least getting some fitness in during the holidays, and be sure to go full bore again in the New Year.

Next Week’s Goal: Three runs + 5 workouts.

Canadian Inheritances

via Daily Prompt: Inheritance

Well, today has been interesting. Everywhere I’ve been today it someone has talking about RSP’s, inheritances and the lovely CRA. Lo and behold I sit down to lunch and the daily prompt is inheritance.

Many Canadian don’t realize this, but our country does not have an inheritance tax. Instead, when a person passes away they are deemed to have sold all of their assets just prior to death, and applicable taxes must be paid out of the estate. After this tax bill is dealt with, any remaining amounts can be released as inheritances. There are many strategies to reduce this tax bill, one of the most effective, but under utilized is life insurance. Without going into details, I’ll just let you know that most often the money an estate receives from a life insurance policy is going to be tax free. Knowing this, one could structure their will, investment and insurance package in a way that would drastically reduce taxes. An improperly structured will, or a hasty executor can really play havoc with this system so it is important to plan for the unavoidable as early in life as possible.

That’s all I really have time to write today, but don’t put off what is extremely simple for you to do!

Cody @theswellswede

Disappointing December

The Journey so Far: 118.4km + 8hrs other cardio

Weekly Distance/Cardio Tracker: 0 + 0 is still 0

★★☆☆☆ Week: Work has continued to be very busy, but the gym and my running routine has taken a huge hit. I only found myself working out two times this week, and I did no running.

Takeaway for the week: December is a tough month to stay active in.

Books I’m reading: No books right now, but swamping myself in blockchain and cryptocurrency articles. Some articles have been posted to Cryptolve, but I also buckled down on CFP studies again this weekend as well.

Last Week’s Goal: 25+km total running still didn’t happen. It’s been tough getting anything resembling a balance with all the work I’m giving myself.

Next Week’s Goal: Three runs, of minimum 5km each. Plus 5 workouts! Have to get back on the horse.

The Case For a Long Mortgage

Disclosure: This article is for information purposes only and should not be considered as investment or tax advice. 

Too often I see inaccurate advice being doled out regarding how a mortgage should be approached. In initial meetings with clients, many of them express their desire to rapidly pay off their homes. Across the internet and on different forums I usually see advice to that tune highly praised by the general public.

BUT WHY?

The general idea is that whatever rate you have on your mortgage is a guaranteed investment return, while any investment such as a mutual fund will have a fluctuating rate of return. This is true, but let’s look at some historical information.

A mortgage is often a long-term process, usually about 25 years. Many investments, especially those held by people just starting a mortgage, ie: young adults are intended to be held for about that time frame as well. Assuming an emergency fund is already established, it would not be too wild for this new home owner to purchase a balanced investment portfolio.

Five year fixed rate mortgages in Canada from 1986 to 2010, a 25 year period, averaged 8.24%. Meanwhile, the S&P 500 averaged 11.54% over the same time period.

mort vs snp
Fig. 1: 1986 to 2010 Comparison of Canadian 5 Year Fixed Rate Mortgages and S&P 500

The Problem

To put these differences in perspective without too much math let’s look at a quick example. Assume you had a $200,000 mortgage, paid off monthly for 25 years and the rate averaged 8.24%, just like the 1986 to 2010 time period. You would pay $267,152 in interest alone.

The Opportunity

But you’re a savvy individual, and you’re able to scrape together another $1000/mth  that you can either invest or pay off the mortgage with. Which should you do? Throwing it at the mortgage results in it being paid off a couple of years early, but you will still pay $224,438 in interest. That’s a $42,714 savings, definitely not chump change.

Alternatively, you could have invested that $1000/mth in a balanced investment portfolio and, assuming you were dedicated and didn’t panic in the dips, you could earn $97,165 in interest. That means you could be $54,451 better off by employing this strategy and sticking to it.

Problems

While the math in this example is sound, minus a few things that could be nitpicked (ie: assuming a steady interest rate on both options) we must remember the biggest mistake us humans make when it comes to investing. Acting with our emotions. It is easy to say you could stick to this strategy when the markets are going up, up, up. But what would you do if you had $10,000 after just making your $1000 lump sum investment, and then one year later when you go to put in your next installment, your portfolio is only worth $5000? The way you answer this question tells you a great deal about whether or not this strategy is for you.

As always, use a trusted financial advisor, preferably one that holds their CFP when making major financial decisions.

 

Slow Week on Recovery Road

The Journey so Far: 118.4km + 8hrs other cardio

Weekly Distance/Cardio Tracker: 10km  + 1.5hrs other cardio

★★★☆☆ Week: I had a good week with a lot of work completed and sports in general, but workout plan was not followed at all.

Takeaway for the week: Business picking up can’t mean I slack on the gym and runs.

Books I’m reading: No books right now, but swamping myself in blockchain and cryptocurrency articles.

Last Week’s Goal: 25+km total running didn’t happen, I hope to build up to that again and keep it constant even through the holiday weeks. The coffee went well, I had a cup every day, except Thursday where I was stuck in training all day and had much more than a single cup. Hopefully reduce it further next week.

Next Week’s Goal: Back to 25+km for the week and don’t miss any gym days. No excuses.


So, this was a pretty bummer week on the fitness front. I missed three planned gym days and only ran twice. I did have soccer and basketball to help make up for it, but still missed my goals. Business was good though, even the full day of training on Thursday and it’s been nice to have everything revving up for the holiday season. Something about Christmas shopping must make people they’d better get serious about their financial plans!

I’ve also started writing the occasional article for a new website that should be made available to the public soon, Cryptolve. From now on, any articles I release regarding cryptocurrencies or blockchain technology will be teasers, with the full article posted posted there. I will continue with my own personal posts about traditional finance and other random thoughts throughout the week however. It’s amazing what kind of opportunities the internet provides us!

Just a short update this week, I’ll be back on the horse by next Sunday!

Cody @theswellswede

Approaching Cryptocurrencies With a Strategy

Disclosure: This article is for information purposes only and should not be considered as investment or tax advice. The author does not endorse any of the products discussed.

From Cryptolve.

Cryptocurrency headlines are becoming increasingly popular in mainstream financial media, and have carved out quite the niche on the fringes over the past decade. Cryptocurrencies are attractive to DIY investors because of the astronomical gains they post, but it is also important to note their losses. With a sound understanding of basic investing principles, and the cryptocurrency environment, one could feel confident in allocating a portion of their overall investment portfolio to cryptocurrencies.

When you first begin to look at investing in cryptocurrencies, it is important to have a strategy and understand your various options. While most readers will know of the most popular offerings, such as Bitcoin, Ethereum and Litecoin, there is also a constant flow of newly available coins formed through Initial Coin Offerings. Because of this, cryptocurrencies should be divided into three simple categories in an investor’s mind: Established and Accepted Coins(EACs); Established Coins(ECs); and New Coins(NCs).

Now, any cryptocurrency investment involves a significant amount of risk, but the variance in volatility between these three categories can be likened to traditional investment vehicles, namely bonds, mutual funds, and individual stocks. Bonds are inherently less volatile than mutual funds, which are in turn less volatile than stocks. In much the same fashion, EAC volatility is less than EC volatility, which is less than NC volatility. However, all of the aforementioned investment options run the risk of their worth suddenly becoming $0.

Coins that should be considered Established and Accepted Coins are those that share the following characteristics with Bitcoin and Ethereum. They are in the top ten cryptocurrencies by market cap, they have been around for a minimum of two years, and they are accepted forms of payment. For any cryptocurrency portfolio EACs should form the core, or around 50% of the value. This is because they are the most liquid and the least likely of the cryptocurrencies to rapidly and permanently lose their value. The days of doubling overnight are probably over, but the long-term growth prospects coupled with relative stability makes them a must hold for the crypto investor.

The second category, Established Coins, should have the two following characteristics. An EC should be ranked highly by market cap, although not necessarily in the top ten, and it should have at least one year of trading history. These coins may or may not be accepted as payment, even on the web, but daily trading volume still allows for some measure of liquidity. A bonus for these coins, as with all coins, is if they are somehow differentiated from other cryptocurrencies. After all, if they are to carve out their own market share among the EACs they must bring something new to the market. Established Coins should form anywhere from a quarter to more than a third of a cryptocurrency portfolio, or 25-35%. An example of an EC would be IOTA.

The final and most speculative category of cryptocurrencies is the New Coin. New Coins are not just any cryptocurrency that doesn`t have the characteristics of an EAC or EC. That would be a junk coin. New Coins must have some differentiating characteristic to earn them the NC brand. It could be that they are backed by a new technology, or they could be quasi shares in a real-world enterprise. These desired characteristics could change from investor to investor, but the coin should display some intrinsic value. A new cryptocurrency that is only copying Bitcoins formula should not be considered an NC. Also, New Coins have low daily trading volume and as such are not very liquid. When investing in an NC, the hope is that in the future it will become an EC and then an EAC. If there is no clear path to that happening, it is probably best to leave that coin unpurchased. Due to the high volatility and lack of liquidity, NCs should not form more than a quarter of a cryptocurrency portfolio and should perhaps even be weighted lower, around 15-25%. ASTRO token is an example of an NC.

As with any investment, cryptocurrencies could result in you losing all of your investment. However, as they become more regulated and more widely accepted their volatility should reduce and ICOs should continue their morph into IPOs. The lines between EACs and ECs, as well as ECs and NCs are blurred, just as the definition of a blue-chip stock will differ from investor to investor. The final decision to purchase any cryptocurrency lies with you.

Six Weeks Strong

The Journey so Far: 108.4km + 7hrs other cardio

Weekly Distance/Cardio Tracker: 23km  + 2.5hrs other cardio

★★★★☆ Week: Had a great week with lots of weekly sports kicking into gear. Friends are running a pickup basketball night once a week now, plus my soccer season has started!

Takeaway for the week: It will take time to regain my old running form. The demands I’ve been placing on them have piled up.

Books I’m (still) reading: “Physics of the Future” by Michio Kaku. Probably wrap this one early in the week and see if I can’t find something new. Want to learn a lot about cutting edge research in a variety of fields? Than that’s the book for you.

Last Week’s Goal: Five mile ran as a TT. Didn’t do this, because of soccer and basketball starting up. Body was crying for a bit of rest, so I’m letting myself recoup with a fairly easy weekend.

Next Week’s Goal: For this week I’ve got two goals. One is to run 25+km over the course of the week, number two is to not have any coffee Monday through Wednesday. This may not seem very ambitious, but I drink about 4 to 6 cups a day, so trust me. It is.


Isn’t it amazing how being fit in one aspect doesn’t mean you’re fit in another? For example, even though I’ve been running steady again for 6 weeks I was absolutely beat after an hour and a half of pickup basketball. Sure I went for a small run beforehand, but it wasn’t much more than a prolonged warm up. I haven’t played interval style sports since last winter when I was only playing hockey once a week. Not enough to really build up the proper muscles and anaerobic system.

Soccer, the sport I play primarily uses the aerobic system, so while that system is still well trained and  has recently been boosted by my training, I was really lacking the ability to run in the small bursts needed for basketball. Never mind my terrible lack of skill! All of the physical troubles aside, the night was still great. It gave me something to do other than the usual gym, work, and home routine; something I’m realizing I need more of.

The soccer season should be pretty interesting. It is only a 6 team league, but two teams are the local college and university men’s teams, while the other 4 are made up primarily of 30+ yr olds. My teammates are all pretty fit, but have been suffered many injuries that continue to nag them over their playing careers. Hopefully the reduced running caused by the new facility will reduce the risk of those injuries becoming too much for them.

In other news, I’ve begun to volunteer at the local Salvation Army Church in a program being called “The English Cafe.” The program is open to anyone looking to better their ability to speak English, and is essentially a time for them to come and speak and learn from folks that use English as their primary language. The program is in its infancy and being used sparingly so far, but hopefully this week will see a few more interested participants. A South Korean man I’ve spoken with the last two weeks reads and writes English spectacularly well, but has troubles understanding figures of speech and slang. He very rapidly picks up on the meanings of these once he has them explained to them though, it’s remarkable how quickly he is mastering the language.

That’s all for this weeks update though, so ciao for now!

Cody, @theswellswede

Geographic or Home Bias

Disclosure: This article is for informative purposes only and should not be considered as investment or tax advice. 

In my work as a financial consultant I see home and/or geographic bias far too often. What is geographic or home bias you ask? My favourite site for a quick refresher in investment terminology, Investopedia defines it as:

“…the tendency for investors to invest in a large amount of domestic equities, despite the purported benefits of diversifying into foreign equities. This bias is believed to have arisen as a result of the extra difficulties associated with investing in foreign equities, such as legal restrictions and additional transaction costs.”

Now, in English. If an investor exhibits home bias than their portfolio, or investment basket, would be too focused on their home country. This term could be expanded to geographic bias, meaning an investment portfolio is too focused on any one country, regardless of whether it is their home.

So, why is focusing investments in one country bad? After all, Canada is a huge country, surely it must have a diverse economy?

There are several reasons having too many eggs in one basket is a bad idea. Continuing with Canada as our example, let’s look at my home country’s GDP by sector for the period of Aug. 2016 to Aug. 2017.

Here’s the two most troubling aspects:

10.3% of CAD GDP is from mining, quarrying, and oil and gas extraction. Cyclical (read volatile) industries if ever there was one. This stat alone is increasingly worrisome after today’s news of Norway’s sovereign fund massively divesting from oil.

5.9% of CAD GDP is from finance, insurance, real estate. The so-called FIRE economy is a pillar of most Western economies, and is usually relatively stable. However, one only has to look to the Lehman Brother’s incident of 2008 and its ensuing impact on global stock markets to see that this sector is not immune to chaos.

Clearly a shift in either of these two sectors would greatly impact a Canadian focused investment portfolio. Combined they make up nearly 1/6 of Canada’s GDP. I don’t know about you, but I certainly wouldn’t be comfortable knowing that an oil-price shift could have a lasting impact on my retirement plans.

How about the US though? The following figures are based on the 2016 calendar year.

Again, the two most concerning figures:

18.4% of US GDP is from manufacturing. Now this sector certainly doesn’t follow the cyclical nature of mining/oil production, but 18.4%!? That’s nearly a fifth of the economy. While it is extremely unlikely that manufacturing as an industry would disappear all of a sudden, let’s not forget that it was only 9 years ago (2008) that the auto-industry was devastated.

17.3% of US GDP is from the aforementioned FIRE economy industry. Again, banks, insurance companies, and real estate are relatively stable industries, but when they crash, they crash hard and bring the market with them.

Some quick math shows that 1/3 of America’s GDP stems from just two sectors. Again, not comforting to think that a new trade deal, or financial disruption (ie: continued increased acceptance of crypto-currencies) could impact such a huge portion of a US focused portfolio.

To summarize, Canada’s top two sectors combine for 16% of it’s GDP, while America’s top two sectors combine for a whopping 36% of it’s GDP, with the FIRE economy making up a significant portion of both countries GDP.  Here’s an article discussing the importance of geographically diversifying your investment portfolio and also examining Canada’s market makeup.

In short, geographical diversification is an important step in protecting your investments from volatility. The sector-risk associated with a non-geographically diverse portfolio is often overlooked by investors, but hopefully this brief article and accompanying links highlights its importance.

Ciao for now!

Cody @theswellswede