Category Archives: Alberta (Commentary)

Do you need to be fully invested at all times?

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Years ago, one of my financial advisors placed me in an equity mutual fund which was 85% cash. I had questioned her about the approach the fund manager was taking because he only had 3 holdings whereas other mutual funds had 30-40 if not 100 stocks. She assured me that he was an outstanding investor and knew exactly what he was doing.  I again questioned about his technique because it seemed he was more lazy than prudent. Nevertheless, I invested in May of that year given my strong relationship with my advisor and great advice she had always given me and does so to this day!

All through June, the fund manager did not buy any stocks because he felt they were all overvalued. Then in July, he finally bought a 4th stock to add to his portfolio. At this time, many investors were fed up with his approach and had bailed out but I decided to stay with him because at least he had not lost any money.

Then the unpredictable happened in September of that year. Two planes crashed into the World Trade Center in New York and the rest is history. The fund manager had 300 million dollars sitting in cash and when the markets eventually opened up, he was able to purchase securities at discounted prices because he had followed his disciplined systematic approach to investing. The AIC American Focused Fund managed by Larry Sarbit made a 5 or 6% gain on the year which was far better than the 20-30% losses of other comparable investments.

Another great example is that if you had invested in the NASDAQ Composite back in March 2000 when it was at approximately 5000 points, you would still have lost more than 10% of your money since that time using a buy and hold strategy. This would have greatly underperformed holding your money in cash over the past 14 years!

The point I wish to make is that it is OK to be in cash if you are unsure what to do. Being fully invested means someone is making a commission when you part with all of your money.

Questions to ask your IT team member

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In any kind of team investment environment such as real estate, having an Information Technology expert is critical to success. There are many talented people who have degrees in computer science and whom I would never work with because they lack necessary business skills that I look for. The days of having an IT consultant who does not have any understanding of businesses are long gone. If your IT help does not have any business or investment training whatsoever, do not spend any time vetting them and move on. Here are two examples of what I now use to see if they have a basic understanding of the business side of the internet

1) If your IT team member is unable to install a widget on a website they are overseeing, they need to be fired immediately!  Widgets (such as what we have with Ratehub’s Mortgage rates) are fairly standard with any WordPress application and have been since approximately 2003. Not understanding widgets or being unable to install them on a website currently in use is comparable to not upgrading your mobile phone over the past decade!

2) If your IT member is building you a blog, have them present you a purely business case as to why they are using WordPress, Joomla or Drupal for the site. These are three most popular blogging formats with WordPress overseeing approximately 20% of the internet. If you are not using any of these very popular current formats, have your IT member thoroughly explain to you from both a technical and business perspective why they are not leveraging the most modern technologies available to developers today.

Before someone meets you today, chances are they have gone to your website and already evaluated you based on that impression. A loss in a joint venture or other business opportunity could result because of your IT consultant’s deficient and potentially outdated skillset.

An up and coming megatrend

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When I was completing my undergraduate degree in physics, I made no secret that I was a theoretical and not experimentally motivated student to solving problems. Back then, Star Trek the Next Generation was a very popular TV show and I called myself the “Greatest Experimentalist on the Holodeck”.

The Holodeck was a 3D dimensional recreation room where one could make any object or person appear.  Although the TV show was make believe in its time, it is rapidly approaching the point where science fiction is now becoming science fact.

3D Printing is a trend which many people believe will change the world. If one looks back to the middle ages, it can be argued that Gutenberg’s printing press was the greatest invention of that time period. 2D printing literally changed the world!

3D printing is a process of making a 3 dimensional solid object from a digital model. You can already buy a 3D printer on Amazon. I believe this will usher in a new type of industrial revolution which will affect manufacturing and medical advances to name but two areas which will see huge changes.  Eventually, everyone will have a 3D printer in their home to manufacture anything they desire. Watch for this megatrend to change the way real estate construction and manufacturing are done over the coming three decades.

The real purpose of investing

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Why do you invest in stocks, real estate or any other asset class. Some may scoff at the question, but I am quite serious about this.

As famed venture capitalist Kevin O’Leary often says, “It is to make money”. This is a common answer but i do not believe it to be the absolute and total truth.

Upon much reflection, I have subscribed to the Jim Dines explanation as to why we truly invest and that is for lifestyle!

Whether one wishes to acknowledge it or not, the prime symbol of our world is money just as stone was in Egypt thousands of years ago. Because of this attachment to necessities and the luxuries of living, we invest and often continue to invest in whatever asset classes we believe will give us the lifestyle we desire.

Investing is the difference between Honda or Ferrari, a weekend in the mountains or a month long cruise. Remember this the next time you make your next investment decision.

What do tenants look for in a property?

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In order for you the investor to succeed in the real estate game, seeing the deal through someone else’s eyes is essential to your success. We have previously looked at what a banker looks for in a real estate transaction. Suppose you have a found a great property and have closed the deal with bank financing in place and you are preparing it for a tenant to move in. The question now becomes what the tenant wants in a rental property.

A beginning investor will immediately respond that the tenants (customers) want a low rent. That quick answer is not correct however. In fact, one of the biggest draws for a tenant is the location of the property.  The old adage of location,location,location is also true for them as well as a property investor.

For more details, please refer to these two articles:

10 Amenities Tenants desire in a property: http://tinyurl.com/n99sxpq

What tenants really want in rental properties: http://tinyurl.com/kb3tq2t

A key requirement to success in real estate

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When investing in stocks, bonds, mutual funds or commodities, an analysis of the fundamentals and technicals along with a solid team can lead to success. This can usually be done with aid of a computer and smartphone.

The above mentioned points are essential to success in real estate but I have found there is one is hardly ever mentioned.  Real estate is far more physically demanding than investing in paper assets or commodities. The need to use one’s body (especially the back), handle stress and have healthy joints are some examples. Keeping physically fit and taking enough vitamins and minerals not only keeps you healthy but helps when you are under pressure closing a deal, multitasking or completing renovations.

Before you start your next real estate endeavour, ensure your body can keep pace with your own investment expectations. See a chiropractor, get a physical check up or go see a dietician. You will thank yourself for it!

The most important question to ask before investing

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Over the past 15 years, I have been exposed to a wide variety of investments in diverse asset classes from stocks, bonds and options, to licensing agreements, commodities and real estate. It is very important to know what you are investing in and be able to forecast a cash flow in your investment. It is also important to know if there could be a capital gain and have a clear understanding of where your money goes. I used to believe that these were the most important questions to ask.

I have completely revamped my philosophy and now ask the following question before anything else. Is the investment being offered to you legal or not? Let me give you a few examples.

Someone asks you to sign a document for a mortgage on a property which you claim to be moving into. You never actually live there as your home and collect a commission for lying on the mortgage application. Congratulations, you have an infinite rate of return (because you put no money into the deal) and have committed fraud!!

You attend an investment seminar whereby a promoter you have never met is selling shares in a real estate development project. They go to great lengths to discuss the rents, landscaping, new roads, amenities, etc. At the end of the seminar, they give you a piece of paper asking you to purchase shares in their real estate project. For the purposes of illustration, let us assume you are not an accredited investor (i.e. millionaire). The following questions must be asked by you:

1) Are they legally registered with the appropriate securities commission to solicit these non-real estate investments? If not, it is illegal.  Real estate is not the same as shares in a real estate project!!

2) Do they have a prospectus filed to prove that the securities being offered have been thoroughly vetted (i.e. reviewed).  Ask to see the prospectus (especially if they are not registered to do this work). If they don’t have one, this is also an indicator that the offering is most likely illegal.

The next time you see an investment offered for a development or quick cash for signing a mortgage application, ensure that it is legal? If uncertain, ask someone not interested in your transaction for assistance such as a real estate or securities lawyer before you invest.

When does the learning stop?

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As you begin down your investment path, many words and ideas will come to you. It is very difficult at first because of the investment vocabulary utilized by others and the fact that everyone has to start somewhere which is usually at the bottom. It is very much an emotional battle of getting out of one’s comfort zone.  You must go through a period of uncertainty and haze and know that this time of not knowing what you are doing will eventually lift. If you have purchased 1000 different securities or properties in your lifetime, the next one will have a slight difference to it compared to the previous purchases. This leads to the question as to when you will ever have enough information to be 100% knowledgeable when investing.

The answer is that you will never ever have all of the facts to make a decision. There is always something new to learn.  No matter how small, the intricacies are always there. Ultimately, investing is not about the facts and figures as it is about your instincts telling you to proceed or not.

2014: it is showtime!!

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If there is one thing we can all agree on is that 2013 is finished and it won’t be coming back!  It was the year of Nelson Mandela passing on, the Boston bombings and Alberta’s floods to name a few memorable moments. It was also the year we extended our internet reach worldwide. In over 60 countries, our impact has been acknowledged and is rapidly approaching a tipping point in which the world can no longer ignore Alberta’s role in the investment community through this website. It is always a thrill to see which countries around the globe are visiting our site. From the Americas, Europe and Asia Pacific, we welcome you all to read our unmatched daily research!

The initial stage of getting our name out to the world is now complete. 2014 will be the year where we are judged by our performance of providing Alberta’s real estate trends through the internet. We have only given you a sample of what is in store for you.

All the best and hang on for one hell of a ride!!

Happy Holidays

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December 24, 2013

I wanted to wish a happy holiday season to readers all around the world who frequent this site especially from the USA and France. To all of you in China and India, I will be positing this coming week but the volume will be light because of the global holiday season.