Monday, August 29, 2011

Financial education –start small and start young

“The number one problem in today's generation and economy is the lack of financial literacy.” Alan Greenspan

Success in life is often measured in terms of the piles of accumulated "things" we possess but we are really missing the point of success by limiting ourselves to this measurement stick.  A good financial education will give us the possibility of obtaining not only material riches but the riches of experience which enable us to put deposits in our Memory Bank. Financial knowledge will also give us a good understanding of maintaining,  conserving and sharing our accumulated riches. If our children learn to manage money responsibly it will not end up managing them. 

Ideally we have to start teaching finance when kids are small, trusting and ready to soak up information. Perhaps you have heard of the 3-Jar method of teaching good financial habits? It is often used with young kids but adults could benefit from copying the idea of allocating their funds into three"jars". One jar is for 
SAVING (tough but necessary) - 
one is for SPENDING (Yay!!) and 
one is for SHARING (riches are better shared). 
Kids taught to handle their allowance or gifts of money in this way will end up being able to manage money wisely..  

I think that elementary and high school curricula should have mandatory courses in personal finance so that kids will hopefully avoid some of the pitfalls of poor financial decisions due to lack of knowledge. Learning Finance can actually be fun!! What's more, there is a payoff for doing well in the course - a sound financial education is a great investment in a comfortable future. We owe it to ourselves and our kids to teach them to not only control and manage their money but to share their wealth with others. 

"He had heard people speak contemptuously of money: he wondered if they had ever tried to do without it." Somerset Maugham in: "Of Human Bondage" 

Friday, August 12, 2011

Turbulence in the markets? Here's a strategy for sleeping better at night.

You have heard it all before - "What goes up must come down". This applies so very well to the stock markets and can cause untold grief to those who are not well prepared for the roller coaster ride. There are several strategies you can use to help you breathe easier when the next wave comes along:

1) DIVERSIFY: follow the old adage about not putting all your eggs in one basket. Have a mixture of fixed income and stocks and cash.
2) UNDERSTAND WHAT YOU ARE BUYING: do not buy shares in companies you do not understand.  Buy companies you deal with or indirectly use on a regular basis.
3) GO BASIC: some of the safest stocks to buy include Canadian banks (the Big Five, TD, BMO, RBC, ScotiaBank, CIBC) utilities (Enbridge), pharmacies and related companies (Shoppers Drug Mart, Johnson & Johnson, Proctor & Gamble), low-cost restaurants ( Tim Hortons, MacDonalds), transportation (CN, CP and Westjet), energy (oil and gas equipment e.g. Mullen Group). Real estate can be a good investment as Real Estate Investment Trusts (REITs e.g. RioCan, Chartwell or an ETF Reit) See More on REITs.
4) RIDE OUT THE VOLATILITY:  do not jump in and sell your investment when dips in the market happen. Follow the trends and take opportunities to use your cash to buy good companies at cheap prices.
5) INVEST IN HIGH QUALITY SEGREGATED FUNDS:  your investment will be covered with guarantees to protect you against major losses.
6) KEEP SOME CASH for buying opportunities. Remember, when everyone is selling that is the best time to buy and when most are buying, it is a good time to sell.
7) EDUCATE YOURSELF ON FINANCE:  read Jeremy Siegel's "Stocks for the Long Run" and the update on an old classic-  Benjamin Graham "The Intelligent Investor" See The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)

For more information on segregated funds and more ways of protecting your investment: Contact us at Celesta Financial