One of the trickiest aspects of investing is know which assets to choose. This can be a daunting task, since if you pick wrong, you end up losing money.
There’s always a risk that you will lose money when you decide to invest. However, you can reduce your likelihood of loss by carefully choosing solid investments. Whether you want to put investments into your TFSA, or whether you are just looking for a way to grow your wealth, the right assets can be a great help to your portfolio.
If you want help picking assets most likely to offer decent returns over time, you can use fundamental analysis.
What is Fundamental Analysis?
Basically, fundamental analysis is a method of looking at the basic underpinnings of an investment. It takes a look at the factors that are most likely to influence the “big picture” of an asset. Often, fundamental analysis involves paying attention to factors like:
- P/E ratio (particularly in terms of stock)
- The way management runs the company
- Profit margins
- Where the company fits in relation to competition
- Supply and demand (especially in terms of commodities)
- Political issues that can affect an asset
- Economic factors influencing an asset (especially in terms of currencies)
Consider the “bottom line” issues that are most likely to influence an asset. Fundamental analysis can be used whether you are trading currencies, investing in individual stocks, trading commodity futures, or investing in funds.
How Fundamental Analysis Can Help
Unlike technical analysis, which deals strictly with price action, fundamental analysis takes a look at qualitative factors that offer insights into an asset’s potential. Technical analysis looks for trends in prices, tries to identify patterns, and then predict which investments will do well based solely on the patterns seen in past price action. Fundamental analysis is about identifying the items that give an asset staying power over time.
If a stock has an attractive P/E ratio, competent management, and reasonable profit margins, as well as potential for growth in its industry, chances are that it is a fundamentally sound investment. If conditions in a country are such that there is stability, and a potential for modest and sustained economic growth, a currency might be expected to perform well.
Assets with strong fundamentals are more likely to do well than their counterparts with shaky fundamentals. If an investment is supported by a solid base, it makes sense to think that it will do well in the future. Choosing investments with good fundamentals can be a way to help your portfolio perform well over time. You might not see amazing returns, but you are likely to see modest and consistent gains over time. This can be especially true with dividend stocks.
There’s no way to guarantee that your investment choices will be winners all the time. An element of risk always exists, and you could lose money no matter how careful you are. However, fundamental analysis gives you something to go on, and you can use it to help you find assets that are likely to be good long-term bets.
Here at Sustainable Personal Finance, we’re all hippies who love the environment, but there are just certain things that we’re not going to give up. Rather than giving up our cars, let’s just focus on driving them less and getting maximum gas mileage. This both lowers the cost of operating the car and prevents a few pounds of CO2 from being released into the atmosphere. You save a few bucks, and the environment becomes slightly cleaner. Everybody wins. Go ahead and have a steak, champ.
If you want to take your environmental passion to the next level, you can buy a used car. One less new car gets produced, and we often overvalue reliability. Newsflash folks: a car with 100,000km on it is about 95% as reliable as a brand new car, and you’re paying at least double for a new car. You have to make a lot of $500 repairs before you get close to making up that gap.
But we’re not talking about cars, we’re talking appliances. Specifically, washers and dryers.
My washer is approximately 5 years old. It’s a front loading washer, since apparently front loaders use less water and cut down on drying time. That’s all fine and good, so I bought it. It was a $300 premium over the plain top loading model, but I went ahead and bought the premium brand because that’s what frugal people are supposed to do, right?
About a year ago, it started making a loud low-pitched whine as it went through the final rinse cycle. It’s slowly gotten worse, so I called the appliance repair guy. He came over, had a look, and told me the bearings were close to worn out. Okay, how much would it cost to fix it?
He quoted approximately $400. I was looking at $250 for parts and $150 for his time to put it in. Oh, and I paid $50 to have him show up and diagnose the problem.
In the meantime, the price of front loading washers have gone down. I can buy a basic unit for $500. There’s no way I’m going to spend $400 on repairs when I can buy a similar machine for $100 more.
I complained that parts were expensive. It’s almost like they don’t want you to fix it. He confirmed that and took it one step further: retailers are putting pressure on the manufacturers to do exactly that so people just throw up their hands and buy a new one every five years. They’ve intentionally brought the quality and the price down and jacked up the price on parts, just to discourage people from getting their appliances fixed.
This makes sense for the company too, since they don’t have to keep producing parts for machines that are years old. There are companies that make generic parts, and they’re happy to come in and produce these parts. But why would they discount their prices when there’s no competition?
He then came up with an interesting suggestion. New machines aren’t worth fixing, he said, but old ones are. Parts are considerably cheaper, since it isn’t a tiny computer running the thing. They were made using better quality materials. They were much simpler machines back then, meaning there are less things that can break. A well-maintained machine from the 1970s or 1980s will last forever.
My Dad has a Maytag washer/dryer combination that he bought in 1979. In the past ten years, he’s put a little over $200 into repairing both machines, once each. Yeah, they’re an ugly off-white color, and they’re probably not very energy efficient, but they are a significantly cheaper option than buying new.
As for me? I went on Kijiji, looking for a replacement machine. I quickly found an ad from somebody who had upgraded their washer to a front loader unit, and wanted the old one to go away. I went over and had a look. It was a Maytag, it looked about 20 years old, and it worked. I paid $50 for the machine and paid my buddy pizza for letting me borrow his truck and his lifting power. Total investment, $50. My backup machine can suck power faster than a 400 watt space heater and I’ll still be hundreds of dollars ahead of an energy efficient machine that isn’t going to last a decade.
Sometimes, when it comes to saving money, you’ve got to look outside the box a little. I got a washer that still has plenty of life left. It’ll still be going long after my front loading machine has started rusting away in a landfill somewhere.
Did you know that close to 40% of adults in North America do not have insurance? If these statistics demonstrate something, it probably is that many people think life insurance is not really important. This is understandable: making monthly payments for a protection that will come into effect after you pass away can easily appear contradictory. However, life insurance is, in many cases, an essential safety measure to take. In fact, although you may not personally benefit from it financially, there is a certain peace of mind that comes with knowing that your loved ones are protected against a potential tragedy in which you could be involved.
Who should feel concerned?
Among the many North Americans who do not possess life insurance, some are probably right not to invest in such a protection. In effect, single individuals who do not have dependants or people whose personal income only represent a trivial proportion of their household’s total income probably do not have much interest in contracting such a policy. The primary purpose of life insurance, it has to be remembered, is to cover the costs that one’s family could not afford upon his or her death. These costs do not only include the immediate expenses such as the funerals, but also the common expenses the household has to pay: the mortgage, the loans, the bills, etc.
Therefore, if you are part of a family unit within which a partner, a child or another person partially or totally depends on you, getting life insurance guarantees that the ones you love will still be able to afford the same lifestyle after your death. This certitude may not be financially profitable for those who invest in it, but there nonetheless is something in it for them: knowing that the life of the people they leave behind will go on no matter what happens is not only reassuring for their beneficiaries. It is also reassuring for them, policy holders, in the sense that they do not need to accumulate impossible amounts of savings in order to get their family ready for the worst-case scenario. The insurance premium will provide that safety net. Continue reading Life Insurance: What’s in it for Me?
As you improve your efforts to go green, it can help to think about your landscaping situation, and take steps to ensure that your are following sustainable principles.
Here are 5 tips that can help you improve the sustainability of your landscaping:
1. Start with a Plan
Think about the purpose of your landscaping efforts. Are you trying to create beauty? Do you want a safe place for your kids to play? Are you planning on growing food? Perhaps you have a number of uses in mind for your landscaping.
If you have a good idea of what you want to accomplish with your yard, you will be able to make decisions that help you accomplish your purpose, as well as improve your home’s overall sustainability.
2. Use Native Plants
One of the best things you can do for sustainable landscaping is to use native plants. Also, pay attention to the sun and shade on your property, and the types of plants that are more likely to thrive in the natural conditions surrounding your house.
Native plants are best suited to your area, and they will need less intensive care. You won’t need to worry as much about watering them, or about using special fertilizers and pesticides to encourage them to grow properly.
3. Select Grass with Care
While xeriscaping your yard so that you don’t have to use much water can be a great idea, it doesn’t leave much room for the kids to play. It’s true that a lawn can be a huge drain on your resources — especially water. So, if you want some type of lawn, consider choosing grasses that are less thirsty. There are drought tolerant grasses that can be a little more sustainable than others.
You can also consider using sedges instead of more traditional grass. There are also some ground covers that provide an attractive look for a yard while still being appropriate for play.
4. Go Organic
When possible, use organic options for fertilization and pesticides. There are natural ways to control pests, including making your yard inviting for birds, as well as using ladybugs to keep down aphids. You can also use methods of preparing the soil that are a little more natural, including introducing earthworms to help build the soil, and engaging in composting and mulching.
Organic solutions reduce pollution, and can result in a healthier yard altogether.
5. Be Smart about Watering
At some point, you will probably have to water your plants. The best time to water is in the morning, before 10 am, and in the evening, after 4 pm. These times prevent much of your water being lost to evaporation. Additionally, avoid watering during times of high winds.
Understand how much water your plants really need. You can accomplish more with a deep soak that encourages roots to grow deep and strong so that you need less water over time. A drip system can be a great alternative. Make sure to check for leaks and problems with your lines so that you don’t waste water that way.
With a little planning and preparation, it’s possible to make your landscape more sustainable.