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Posts Tagged ‘Investing’

Do it. The rewards of this program offered by the government are astounding. As a twenty-something investor this is where you should hold your more aggressive positions.  Unfortunately, most Canadians think the TFSA is simply a savings account (probably because of its horrible name) and have their money tied up in high interest savings such as ING or Ally where they are getting around 2% in return on their savings. This is crap.

While this message is more geared towards the young investor, this is something everyone should know; the TFSA is another tool the Canadian government has provided us with in order to avoid tax on capital gains.  In contrast, the RRSP is a tax deferral strategy.  In my opinion, every avid twenty-something investor/saver should be attempting to max out their TFSA before contributing to an RRSP. Additionally, your TFSA should be made up of 3-4 holdings in highly aggressive stocks (remember this is for the twenty-somethings) because at this age you are capable of sustaining short-term loss for long-term gain.

Your first step is to open a TFSA trading account with a company that offers low commission trades such as Questrade or Q-trade. Right now, you are allowed to contribute up to $15,000 to your TFSA for 2011 (or $30,000 per couple).

Next, do some research and purchase some stocks or ETFs that you are comfortable with, ideally in an industry/sector in which you have the most exposure.  This is an excellent way to start learning how to trade.

If you don’t have $15,000 to contribute yet, as I’m sure most of us don’t, then you should deposit as much as you can and make fewer trades, a good starting point might be in high-yield dividend stocks.  Remember, your objective here is to obtain the best return possible (within your level of risk tolerance), so if you were to purchase 5+ stocks with less than $5000 you could easily see a large percentage of your gains get eaten up by commissions and fees.

Another tip. If you are capable of making continuous contributions each month then you should borrow the money from your parents now and pay them back each month instead. This is an excellent strategy to maximizing your TFSA at the start of the year so that you can complete your trades now. You can then repay this money month to month interest free (I should hope).  As a side note, when money is borrowed to contribute to a TFSA the interest is not tax deductible.  Therefore, if your parents are willing to support your in this manner, then take advantage of it now.

This strategy has worked for me for several years, it introduced me to trading and saved me a lot of money in commissions by being able to make fewer trades throughout the year.

And remember, if you do need to withdraw money from your TFSA, you are allowed to recontribute that amount the following year in addition to your increased $5000 contribution allowance.  For example, if you contribute $15,000 this year, you are a great investor and make $5000, you can could withdraw $5000 in December for your Christmas holiday and would then be allowed to contribute $10,000 in 2012.

For more information on the TFSA, Realized Returns recently made an excellent post: 10 Facts on Tax Free Savings Accounts.

Happy investing!

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A quick update on my 2011 stock picks.

Proud Member of Yakezie

I increased my position mid-month in both REL and CIN. Assay results have been expected from CIN for quite some time now and rumors are starting to fly that we should see them this week. Should these results be positive (and I think they will be) CIN should move up nicely. This week a neighboring property, Bolero Resources (BRU), released some excellent results and of course their other neighbor, Spectrum Mining Corp, has already proved to be a major REE discovery.

As of market close February 1, 2011:

1. Canadian International Minerals (TSX.V:CIN):  0.00%

2. Powertech Uranium Corp. (TSX.V:PWE):  +73.77%

3. Fortune Minerals Ltd. (TSX:FT):  -6.98%

4. Reliable Energy Ltd. (TSX.V:REL):  +20.59%

Of course I am very happy thus far but all things considered, these results don’t mean much as it’s only been a month. I don’t have alot of confidence in our market at the moment so with 11 months to go anything could happen.

Always to your own research and do diligence 🙂

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Rare Earth Elements, as defined by the IUPAC, are a collection of seventeen chemical elements in the periodic table, specifically the fifteen lanthanides plus scandium and yttrium (source: Wikipedia). As any good geologist would tell you, REEs are in fact not that rare at all. The earths crust is abundant with these minerals and they can be found in all regions of the globe. What makes them rare is their abundance in concentration, most Rare Earth deposits are highly disseminated, or dispersed, within the crust. Therefore, finding and locating an economical concentration of these elements can be highly profitable.

TVs, laptops, cell phones, ipads. All of these hot tech devices require REEs. Moreover, Rare Earths actually play a fundamental role in the development of renewable energy, hybrid vehicles, clean air and carbon emissions control. We utilize these elements in the development of batteries, motor magnets, hydrogen storage, infrared lasers, computer memory, ceramic materials, and countless other applications. Up until now, China has largely controlled the distribution of these elements.

I find it ironic that REEs are what is driving the renewable energy movement. In essence, we must mine the surface of the earth to develop more efficient motors and electric lights. Wind turbines, solar panels, hybrid car batteries and fiber optics all seem “green” to the consumer but the reality is all of these technologies require an increase in mining for REEs.

What’s important about all this is that just this week China announced that it will be limiting its Rare Earth exports to the US and Europe and thereby setting off alarms in the manufacturing sector, an industry that heavily relies on REEs.  (See also: China to Tighten Limits on Rare Earth Exports).

In light of this news, this week I have chosen to highlight a Canadian Rare Earth company that I believe has some excellent prospects and the potential to do very well in 2011.

Canadian International Minerals (TSX.V:CIN) is a mineral exploration company focused on the development of Rare Earth Elements (REEs) primarily in British Columbia but also in other regions across Canada.

Some things I like about CIN:

  • Canadian International Minerals is awaiting rare earth assay results for the recently completed drilling on its Carbo Property in British Columbia.
  • Trenching is underway on the Dead Horse Creek rare earth property in Ontario.
  • The Copper Mountain property is in a copper camp that produced 1.42 billion pounds of copper, 8.5 million ounces of silver and 499.5 thousand ounces of gold between the years 1908 to 1996.

Right now Michael Schuss, President and CEO of CIN is in Norway discussing a deal with a major silicon producer called Elkem. Look for news in the next few weeks on assay results, likely to be out before the 21st of January, just in time for the next major mineral symposium in Canada: Roundup.

Disclaimer: I hold shares in CIN.

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The explosion and subsequent fire at Canadian Natural Resources Limited’s (TSE:CNQ) Horizon oil sands operation this week was sensationalized by the Alberta and the Canadian press, but look around the US and international news networks and you will find little if any information about this.  Even CBC tried to make a story out of this.

But does this really come as a surprise to anyone? Before the accident CNRLs Horizon Oil Sands was producing around 90,000 bbl/d, roughly 6% of the surface minable oil sands in the region and about 10% of the countries synthetic crude oil.  Since news of this explosion oil has risen by about 1.2%, a change that many in the Canadian press attributed to this disaster. Is it possible though that oil merely rose because of a leak in the Trans-Alaska Pipeline? Or because Obama is continuing to push offshore drilling reform?

Oil is going up. At the time of writing this article oil is $91.20. While I don’t believe oil will reach $150 by late 2012, I do think we will see strong growth from the energy sector this year. As one of my favorite bloggers, Mitch at BeatingTheIndex, puts it: “oil is on the path of growth for the next decade” and I just so happen to agree.

Today CNRL released a statement indicating its upgrader may work at half capacity by operating two of its four coke drums.

So…did you get in at $40? Even now CNRL (TSE:CNQ) is trading at $42.25, still a bargain in my opinion.  CNRL is a diversified oil company with operations throughout AB and BC as well as strong assets in the North Sea and offshore Africa. I would consider CNRL a strong buy and I would not be surprised to see it topple $50 by the end of the year.

Disclaimer: I do not own shares of CNQ.

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