Avrex Money

Welcome to Flatsome

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Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!

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Just another post with A Gallery

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A Simple Blog Post

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Financial Independence – Are We There Yet?

Avrex — Thu, 24 Sep 2015 11:54:46 +0000

The ultimate goal, here at Avrex Money, is to achieve Financial Independence.. This blog has been in existence for three years. During this time, I have written a whopping total of 22 posts. Wow! With that output rate, I can officially declare myself, the “Least Prolific Personal Finance Blogger in Canada.” Why have I written so few posts? Well, mostly because I’m lazy. Another reason is that there are already so many superb personal finance blogs out there, sharing quality information, that I feel I would just be repeating the same information. The final reason is that, if you’re disciplined, the road to Financial Independence is actually fairly simple. What does it take to reach Financial Independence?

LBYM Live Below Your Means. ie. Save more than you earn.
Low fees Invest in a low-cost passive ETF index portfolio. This will shave years off of your working life.
Patience The magic of compounding will get you there quicker than you think.

In other words…. it’s kinda boring. And that’s ok. There’s no need to be constantly checking your portfolio. Just keep saving and re-balancing your portfolio as required. This gives you more time to go outside and enjoy life. Has Avrex Money reached Financial Independence? Nope, not yet. But, I’m definitely on the last lap of this race. Before I declare my ‘Findependence Day’, there are issues that I need to explore further and refine. These include:

Projected Retirement Expenses. How do I envision my lifestyle when I’m not working? How much will this cost? Do I have enough money now?
Probability of Success. Since I will be drawing down my portfolio until death, I need to determine what probability of success is an acceptable risk, and how much money that will require. I will also need to determine how to mitigate the chance of failure (i.e. going broke).
Asset Allocation. What will my Asset Allocation look like? How will I structure my assets across my registered versus non-registered accounts to minimize taxes and maximize retirement income?
Health. Quality of Life is another important factor in trying to determine if it’s finally time to leave your full-time gig.

The reason for this post, is that I’d like declare that…“I will be writing here more often to explore these pre-retirement issues.”
I hope you join me, as I document my thoughts and steps, as I head towards the finish line. Thank you, Avrex

Tax Rate in Retirement

Avrex — Sun, 22 Feb 2015 12:27:38 +0000

Years ago, I built a spreadsheet to calculate how much money I would need to retire. I would update it regularly. One of the biggest factors in knowing ‘when you have enough to retire’ is to look at your spending habits and determine how much you want to spend in your retirement years. For example, in today’s dollars, I have estimated that I might need about $33,000 annually to retire. However, one factor in my spreadsheet that I just glossed over, was the average tax rate during retirement. During my working years, my average tax rate is about 23%. In the spreadsheet that I created years ago, I also blindly used the same 23% tax rate during retirement. That meant that during my retirement years, I would need an income of $42,850 at 23% taxation in order to obtain the $33,000 in after tax dollars that I require. But, I now realize that my average tax rate in retirement will probably look much different than it does during my working years.

Example 1: Retirement income

I pulled up the 2015 Taxtips.ca calculator for Ontario, and entered a breakdown in today’s dollars, an example of how I might receive my future retirement income. RRSP withdrawal: $10,000 Cdn dividends: $5,000 Income/interest: $17,000 (this includes $13,000 from CPP/OAS) Capital gains: $5,000 The calculator states that with 37,000, I would pay approx. $3,700 in taxes, leaving $33,300 for retirement income. This is an average tax rate of 10 %. I now see that I don’t need nearly as much money as I originally thought I needed. i.e. $42,850 @ 23% versus $37,000 @ 10%

Example 2: Early Retirement income

The news gets even better, if you are saving for early retirement. i.e. The years before you receive CPP (at age 65) and OAS (at age 67) from the government. Here at Avrex Money, to reach “Financial Independence” as soon as possible, we are maximizing our RRSP/TFSA accounts and are pouring further savings into a non-registered account. In order to bridge the time between early retirement and receiving CPP/OAS payouts from the government, I’ll need to withdraw money from my RRSP as well as selling dividend stocks from my non-registered account. Once again, using the Taxtips calculator, I entered another scenario of how I might earn income in my early retirement years. RRSP withdrawal: $15,000 Cdn dividends: $10,000 Income/interest: $5,000 Capital gains: $5,000 The calculator states that I would pay approx. $2,000 in taxes, leaving $33,000 for retirement income. This is an average tax rate of 5.7 %. In this early retirement example, I would only need $35,000 @ 5.7% tax (versus $42,850 @ 23% in the original calculation) to receive the $33,000 that I require for retirement income.

Conclusion

The Average Tax Rate in retirement can drastically affect the calculation of how much money you require in order to retire. In my examples above, I discovered that I only need to allow for 5.7% taxation in early retirement and 10% taxation during the normal retirement phase.

Canadian Companies : The Piotroski F-Score

Avrex — Sun, 22 Feb 2015 04:39:57 +0000

In a previous post, I discussed The Piotroski F-Score, as a metric to assist in determining the financial health of a company. Review the post, The Piotroski F-Score, to see how this score is calculated.

Today, let’s apply this metric to our home market: Canada.

Here are the Piotroski F-Scores for companies in the S&P/TSX Composite Index (which represents approximately 95% of Canada’s equity market capitalization). Note that Hudson’s Bay (HBC.TO) is the only company in this index with a perfect score of ‘9’.

[table id=12 datatables_fixedheader=”top” /]

The above list represents the bulk of Canada’s market capitalization.
What about smaller Canadian companies? Are there some hidden Piotroski gems among the smaller companies? Yes, there are.

[table id=13 datatables_fixedheader=”top” /]

Smaller companies such as these, also warrant further investigation.
Typically these companies don’t have as much analyst coverage, so there is the potential to uncover some hidden value.

In the future, Avrex Money will dig deeper into the valuations of both larger and smaller Canadian companies. To ensure that you don’t miss out, don’t forget to sign up for the free email updates below.

A reminder. A single method, such as The Piotroski F-Score should not be used in isolation.
Although it is a useful financial health indicator, it is just one metric to consider, when investigating a company.

(Note: This page is updated periodically with the latest F-Score data.)

2015 Option Income Goals

Avrex — Sun, 11 Jan 2015 23:13:34 +0000

In 2015, I’ve challenged myself to generate income by selling call/put options. With that said, here is the 2015 Avrex Options Income Challenge

Goal:

I would like to make a $12,000 profit in 2015. (i.e. $1,000 per month). However, the problem with options, is that the resulting returns are highly variable. There is a large range of possible outcomes. What are my past results in selling options? 2014. n/a. (I didn’t trade any options. Life was too busy.) 2013. -$2,720 (After sustaining loses early in the year, I shut things down.) 2012. +$17,940 (This was a great year. I hope to get back to this level of success.)

What is my options strategy?

1. Sell options for premium. The purpose of the above portfolio is to generate income by selling call/put options. Sometimes I will sell these options naked. Sometimes I’ll employ an option spread to protect against excessive downside losses. In all cases, I’ll be selling for a credit and a potential profit. In general, I look for options with volatility. By selling this volatility, I want to gain premium dollars. In this challenge, I will be sharing my transactions of selling these calls and puts in my non-registered portfolio. (I do buy long calls and long puts in my registered RRSP/TFSA accounts. However, that won’t be included here.) My goal is to demonstrate profits by short selling. 2. Duration. The average contract length in my opening portfolio is 6 months. By initiating contracts that are about 6 months away, I hope to be lazy and not do too much trading in the interim. I’ll just monitor and make changes as I need to . (I do also occasionally dabble in weekly options). 3. Directional bias. I select options in which I have a directional bias in the underlying. With short contract durations, I can’t necessarily expect the underlying to move in the expected direction in that time frame. However, a directional bias is still important, as I’m still playing the probability that it might move in that direction. Why do I call this a challenge? Options are a zero-sum universe. Somebody wins and somebody loses. For every transaction, there are an equal number of dollars won and dollars lost. The theoretical return on options is zero. (To take this further, the return is actually negative, due to commissions.) The second reason that this is a ‘challenge’ is because I’m openly posting this here for all to see. This is not a paper account. This is a real account. If my positions crash and burn and I lose a lot of money, you will see it documented here. Risk There is substantial risk here. Each individual option position contains a fair amount of risk and will fluctuate wildly. i.e. I could have some big winners and some big losers. Does this worry me? Not overly. I look at this like stock diversification (or in this case, options diversification). By holding many (different) options, in aggregate, I believe that my risk is reduced. For example, here’s what I expect my individual returns will look like: small win, small win, BIG LOSS, small win, small win, BIG LOSS, small win, BIG LOSS, small win, etc. Aggregated, I expect to have a positive result. Options as part of a diversified investment portfolio. I hold low-fee bond and equity index ETFs plus individual stocks in my overall investment portfolio. Options can be a good alternative investment class to add for further diversification of your portfolio. Did I mention that this was risky? I did a stress test on my opening account positions. If all of my underlying stocks crash by 30%, I will lose -$20,000. If a short term major event happens, that unhinges the market, there’s nothing I can do about it. I accept it. I’ve calculated the probabilities and believe that over the long term (years), I have a positive Expected Value. If Options are a zero-sum universe, why do you bother? I believe that options are like insurance. There are many investors that are willing to pay an insurance premium, in the form of an option, to ensure a minimum return on their associated stock positions. I believe that option buyers are paying a higher premium to protect their underlying position, than the expected value. Therefore, I believe I can be profitable, long-term, by net selling option premium / extrinsic value / volatility / time decay. Updates I hope to update the 2015 Avrex Options Income Challenge spreadsheet regularly. You can access it, by selecting the menu action “Resources – 2015 Avrex Options Income Challenge” or just click on the above hyperlink. Disclaimer: By no means am I recommending that you do what I’m doing here. Everyone has their own method of investing. The risk profile of my option subset has a particular fit in my overall portfolio. The method of this subset suits my style and I understand the risks involved.

Best Canadian Consumer Defensive Stocks

Avrex — Sun, 30 Mar 2014 19:01:52 +0000

Are you looking for stable, low-beta stocks that pay a dividend? How about the Canadian Consumer Defensive sector. Here’s a ranked list, for your further investigation. [table id=14 datatables_fixedheader=”top” /]

2014 Winter Olympics – Predicted Medal Totals – Plus 17 Key Events for Canada

Avrex — Thu, 06 Feb 2014 05:05:01 +0000

Normally at AvrexMoney, we discuss topics on Investing and Saving you money.
Today, we’ll take a little detour as I share with you one of my other passions.
The Olympics. And more specifically, Canada at the Olympics.

How will Canada perform at these Olympics?
To get the answer, let’s look and see what the bookmakers are saying. We’ve analyzed the bookmaker odds for each of the 98 Events at this year’s Olympics.

Country Medal Standings – Predicted Based on Bookmaker Odds
If everything went ‘exactly’ according to the book, here’s what the Predicted Country Medal Standings would look like. (Only countries with 10 or more medals are dislayed.)

Rank	Country	Gold	Silver	Bronze	Total
1	Norway	18	14	12	44
2	USA	17	9	12	38
3	Canada	13	13	4	30
4	Germany	8	10	7	25
5	Austria	6	6	2	14
6	South Korea	6	4	4	14
7	Netherlands	5	6	5	16
8	Switzerland	5	3	2	10
9	Russia	3	8	8	19
10	China	3	4	3	10
11	France	2	6	4	12
12	Sweden	0	3	8	11

Canada would place a very respectable 3rd place, when looking at both the total medals won and the number of gold medals. A 3rd place finish would make this Canadian blogger very proud, as we would have surpassed the totals of other strong sporting nations such as Germany and the host nation of Russia.

However, the count of 13 Gold medals, based on the bookmaker’s odds, is somewhat optimistic.

Below, I’ve listed 17 Key Events for Canada. The Bookmakers show that Canadians have a slight edge in 13 out of 17 of these events. But statistically, for many of these head-to-head matches, the outcome might be similar to a coin flip, with Canada having a slight edge (for example, 60% vs 40%) in 13 of these events. This would mean that realistically, Canada could take home 10 or 11 gold medals. Still an excellent showing for Canada.

17 Key Events for Canada at the 2014 Winter Olympics

Bobsleigh – Women : Humphries (Can) vs Meyers (USA)
Curling – Women : Canada vs Sweden and Great Britain
Curling – Men : Canada vs Sweden and Great Britain
Figure Skating – Ice Dance : Virtue/Moir (Can) vs Davis/White (USA)
Figure Skating – Men : Patrick Chan (Can) vs Yuzuru Hanyu (Japan)
Figure Skating – Team : Canada vs Russia
Freestyle Skiing – Ladies’ Moguls : Justine Dufour-Lapointe (Can) vs Hannah Kearney (USA)
Freestyle Skiing – Ladies’ Ski Slopestyle : One of these Canadians needs to step up and take the gold: Dara Howell (Can), Kaya Turski (Can)
Freestyle Skiing – Men’s Moguls: One of these Canadians needs to step up and take the gold: Mikael Kingsbury (Can), Alexandre Bilodeau (Can)
Ice Hockey – Men : Canada vs Russia
Ice Hockey – Women : Canada vs USA
Short Track – Men’s 500 m : Charles Hamelin (Can) vs Victor An (Rus)
Short Track – Men’s 1000 m : Charles Hamelin (Can) vs Victor An (Rus)
Short Track – Men’s 1500 m : Charles Hamelin (Can) vs Lee Han-Bin (South Korea)
Short Track – Men’s 5000 m Relay : Canada vs USA
Snowboard – Ladies’ Snowboard Cross : Dominique Maltais (Can) vs Lindsey Jacobellis (USA)
Snowboard – Men’s Slopestyle : One of these Canadians needs to step up and take the gold: Mark McMorris (Can), Maxence Parrot (Can)

Bonus Time

If you are big Olympic fan, I’ve included some bonus material.

Below is the full Olympic Schedule, showing starting times (in Eastern Standard Time) as well as
an indicator showing if a Canadian medal hopeful is participating in the event.

I’ve also included the entire list of Medal predictions (based on bookmaker odds) for all 98 events.

Enjoy the Olympics. Go, Canada, Go!

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If you find scrolling through these embedded frames cumbersome, you can also view these as Google Docs, here:
2014 Olympic Event Schedule
2014 Olympic Medal Prediction Odds

A Video Blog Post

admin — Wed, 01 Jan 2014 16:47:44 +0000

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