Australia Travel Blog: The Blue Mountains & The Three Sisters

Sydney Travel Blog: Part 11 – Blue Mountains’ Stunning Natural Beauty

2-Day Combo: Sydney City Tour + Sydney Harbour Lunch Cruise and Blue Mountains Day Trip

Sydney Travel Blog: Part 10 – Mountain Village Leura

When we left Leura for the Blue Mountains, we lost a couple of people. What had happened was that they failed to show up to catch the bus, the tour guide and operator waited a few more minutes, but finally left without them. I wondered how they would go back to Blue Mountains or Sydney; we were far out in the middle of nowhere.

After reaching the Blue Mountains Scenic World facility, I went inside to reach the observatory deck to have a first glimpse of the Three Sisters rock formation. The day was sunny and clear enough to see them. There are lots of paths and trails that can be explored without going too far. I noticed some huge artificial moving dinosaurs and eggs with sound simulation to make them more realistic. Kids loved those a lot.

I decided to finish lunch before going out in the mountains to get even closer to the Three Sisters. Lunch was not included and prices seemed to be not too inflated. I grabbed a chicken wrap and some water.

Once I started walking through the trails, the lush valley and lots of small creeks were some of the natural beauties I beheld. The tracks were going uphill and downhill, so it was easy to get tired after a few minutes.

The mountainous region was full of a variety of trees and shrubs, some of which were very tall. I was worried about getting lost by going too far, but I met some people from my tour and we stayed together. This helped a lot for taking pictures. I saw zipline cable cars moving through the sky; those people definitely had nicer views than those underneath.

We had to come back to our tour bus to take us to the Echo Point Lookout for a closer view of the Three Sisters, which is on the other side of the valley.

What Is An ETF (Exchange Traded Funds)?

Exchange-Traded Funds (ETF)

First Published: ADawnJournal.com March 28, 2010

What Is An ETF?

An ETF is a type of investment product that trades on an exchange like a stock. However, unlike a stock an ETF is not made of a single entity. An ETF is made of a group of investments. These groups can be a group of stock, bonds, natural resources, commodities, precious metals, etc. In most cases, an ETF follows an Index, as an Index is already made of a group of stock (or other investment products).

Advantages of ETFs

Lower Cost – The ongoing cost of holding ETFs (called Management Expenses Ratio or MER) is lower than mutual funds or index funds. For example, An ETF MER can be in the range of 0.25% – 1.00%; a mutual fund or an index fund MER can run in the range of 1.00% – 3.50%.

Flexibility – ETFs offer more flexibility as they trade on the stock exchange and can be bought or sold throughout the day during regular trading hours. Mutual funds do not offer this option, as they can be transacted using the NAV (Net Asset Value) which comes out at the end of the day.

Diversification – As ETFs are made of a basket of varieties of investments, they provide broad diversification and convenience. It would be time consuming, a lot of hassle, and almost impossible to get the same level of diversification with anything else.

You See What You Get – A major advantage of holding ETFs is that at least you get the return of the underlying index the ETF is tracking. You know what you are getting and you see what you get. With mutual funds, it is totally different. In general, regular mutual funds are made of many individual stocks (or other types of investment products) and most of the time you will have a hard time seeing what you are getting.

Tax Advantage – Tax liabilities are created when trading occurs in the fund. Active fund managers are always buying and selling securities in regular mutual funds. When you sell your mutual funds, fund managers have to sell securities to provide you with cash for your sell. However, this is not the case when you sell your ETFs. When you sell your ETFs, trading can occur between other ETF units holders (in-kind trade) – triggering no capital gain. This means ETFs do not need frequent trading to pay an investor who wants to redeem his part. Less trading creates less tax liability and thus, minimal to none capital gains. However, ETFs do need to trade occasionally. This type of trading occurs when index changes (as they are tracking index).

Easier Asset Allocation – ETFs let you easily manage asset allocation as you are able to see your entire ETFs in one place (your trading account) and thus track and manage asset allocation easily.

Low Maintenance – ETFs allow you to hold a broad range of indexes with minimal supervision. Studies show that experienced ETF investors beat most professional fund managers with a fraction of time and effort spent.

Disadvantages of ETFs

Requires Investment Knowledge – Buying ETFs is not as easy as mutual funds. You need to have a trading account and need to be some sort of investment savvy to hold ETFs.

Brokerage Fees – Buying ETFs incur brokerage commission or trading fees – just like stock, you pay fees to buy and to see. This makes buying ETFs for smaller amounts not justifiable.

No Dollar-Cost-Averaging – Since ETFs incur fees each time and buy and sell, it’s not a good vehicle for dollar cost averaging.

Market Timing – Since ETFs are easy to trade, it may tempt investors to do market timing (buy and sell to chase returns) via frequent trading and thus incurring a lots of transaction fees. ETFs work best for long time investors.

How ETFs Choose Its Holdings or Products

ETFs mainly use two methods to pick its holdings. These are called: Market-capitalization /Cap-weighted indexing and fundamental indexing.

Market-capitalization /Cap-weighted indexing replicates a market as-is. In this methodology, bigger companies have greater influence. Most common indexes such as the S&P/TSX Composite and the S&P 500 use this method. In Canada iShares and in the U.S. Vanguard use this method to operate many equity ETFs.

Fundamental indexing picks stocks by looking at fundamentals (such as earnings, book value, sales, dividends etc), not by size. Fundamental indexing proponents argue that Market-capitalization /Cap-weighted indexing overvalues larger and undervalues smaller equities. So to get true value, stocks’ fundamentals, not sizes should be looked at.

There are other methodologies such as price-weighted indexing, equal- weighted indexing, etc. If you are looking for the best indexing, there is no clear answer. You need to do a little research to find the best one that suits your needs. If you are looking for the cheapest one, Market-capitalization /Cap-weighted ETFs are usually the winner.

How to Buy or Sell ETFs

Since ETFs trade on exchanges, you need a trading account (discount brokerage account) to buy ETFs; just the same way you would buy stocks. In Invest Now, I have mentioned how to open a trading account at an ease.

Are There Any ETFs In Canada?

Canada is the country that invented ETF. |The world’s first ETF traded on the Toronto Stock Exchange in March 1990. Here are some ETF providers in Canada:

iShares Canada – The oldest and largest ETF provider in Canada.

Horizons – Horizons offers AlphaPro and betaPro ETFs. Horizons AlphaPro is the only ETF family that is actively managed ETF in Canada. Horizons BetaPro offers leveraged and inverse leveraged ETFs to profit in both bull and bear markets.

Claymore ETFs – Claymore offers various innovative intelligent investment strategies ETFs. This is the only company that offers ETFs that can do DRIPs (dividend reinvestment plan) in Canada.

BMO Exchange Traded Funds – New player in the ETF markets and the only major Canadian financial group to offer ETFs.

TMXMoney has a section on Exchange Traded Funds and I strongly encourage you to visit it.

How to Build an ETF Portfolio

I recommend you read these two articles I wrote.

How to Build an Investment Portfolio

What Is Asset Allocation?

A Dawn Portfolio (I am still working on this project and will add a link once done)

Once you are finished reading, do some more research and do some more reading from various other sources to have a good grasp of ETF. And then, if you are confident enough, construct a suitable portfolio that fits your needs. If you are not comfortable figuring out on your own, seek help from professional financial advisors.

NB – Currently, I do not have any articles giving ETF ideas, examples of Indices ETFs track and so on. I will be writing more on these in the future.

How Risky Are ETFs?

No investments come without risk (except some fixed income products like money market instruments, T – Bills, etc). However, due to the fact that ETFs provide a broad diversification with a wide variety of investments, you may be able to reduce some risk.

Last Word

As I mentioned in Invest Now, investment is an art. As such, it requires discipline, hard work and consistency. Do not blindly follow any ETF model portfolios or tools just because it looks cool. You are different than anyone else – make an educated decision based on your time horizon, risk tolerance, financial goals, and your overall financial situation.

The Great Depression

Great Depression: The Worst in Recent History

First Published: ADawnJournal.com March 26, 2010

The worst depression in recent history, and one of the defining periods of the 20th century was The Great Depression. From 1929 to 1939, many of the world’s economies suffered high unemployment and greatly decreased GDPs, putting great hardship on citizens and restricting trade between countries.

The Great Depression is the longest and deepest depression of the 20th century and it is now used as the benchmark for how bad a recession or depression is.

In the United States, unemployment rose to 25 percent, while other countries saw their unemployment rise past 30 percent. Many cities and industries were hit very hard, and international trade fell by 66 percent around the world, greatly impacting people around the world.

As well, crop prices fell by 60 percent, causing many farmers to lose their homes as record amounts of foreclosures occurred. Other industries that suffered greatly included banking, mining and logging.

Causes of the Great Depression

There is no one cause to The Great Depression, but these five are considered to have all played a part in it.

1.   The crash of the stock market in 1929 occurred on October 29, and is considered the start of The Great Depression. This event had a major impact on the economy of the United States, and within two months of the initial crash, stockholders had lost over $40 billion, causing many to lose everything they owned.

2.   The failure of banks was widespread in the United States during The Great Depression. From 1929 to 1939, over 9,000 banks failed because the deposits of the banks were not insured and when banks failed, depositors lost everything. The banks that were still around stopped giving out loans out of worry of going under themselves. This put a lot of people in difficult positions as they lost what they had and could not get money anywhere.

3.   Since people now had less money during The Great Depression, many people stopped buying things they did not need. This caused a reduction in the amount of items being made around the country, which then caused companies to go out of business. Hence, the unemployment rate rose to a record of 25 percent, which only made things worse.

4.   Another cause of The Great Depression was the Smoot-Hawley Tariff, which was created in 1930 to protect American companies from failing. This tariff charged very high taxes for imports, which caused trade between the United States and other countries to fall drastically. As a result, rather than helping the economy, it hurt it even more and further made The Great Depression worse.

5.   To make matters worse, when the economy started failing, so to did crops in the Mississippi Valley during 1930. The crop failures reached such high numbers that many farmers lost their homes as the breadbasket of the world turned into a dust bowl. This is the reason that the 1930s are often called The Dirty Thirties.

How the Great Depression Ended

Countries around the world began to move out of The Great Depression at various times throughout the 1930s. Many countries began to recover around 1933, while the United States reached its full recovery around 1940, just before the country’s entry into World War Two.

One reason for the United States coming out of The Great Depression was the New Deal created by President Roosevelt, which accelerated the recovery of the country due to aggressive spending to help create jobs for the citizens of the country.

However, for the United States, the biggest reason for recovery was the outbreak of the Second World War. When World War Two was declared, economies around the world were stimulated due to the rearmament policies of Allied countries to prepare for war. This was done to such a degree that Britain eliminated unemployment by 1939 when war was officially declared.

When the United States entered the war in 1941, the unemployment rate fell to below 10 percent, and war spending doubled the growth rate of the American economy, thereby stopping The Great Depression for good.

The Great Depression was a watershed moment in the 20th century that ranks with World War One and World War Two as the darkest times in the history of the 20th century. The Great Depression also taught the economists and policy makers in the United States how to avoid a depression and how to keep the economy of the country going. Since 1940, there have been no new depressions in the United States, partly in thanks to what was learned during The Great Depression.

Australia Travel Blog: The Blue Mountains – Stopover at Mountain Village Leura

Sydney Travel Blog: Part 10 – Blue Mountains’ Stunning Natural Beauty

2-Day Combo: Sydney City Tour + Sydney Harbour Lunch Cruise and Blue Mountains Day Trip

Once the tour bus passed Sydney City, the natural beauty of Australia started to awe everyone. I thought the 2-hour bus ride was going to be a boring one, but the scenic drive kept me busy enjoying the roadside scenes and capturing them on camera as much as possible.

The tour guide, who also happened to be the coach operator, was giving a running commentary of everything we were passing along with a lot of Australian history. So there was a lot to absorb.

Once I reached the quaint mountain village of Leura, there was a short break to get off the bus. A suburb in the City of Blue Mountains, Leura has a population of 500 and a 1000m- (3300 ft) elevation. This is actually one of the few places in Australia where you can enjoy occasional snowfall in winter and four distinctive seasons.

Although Leura is a small town, it’s full of attractions that can be explored. Fine coffee shops, restaurants, boutiques and galleries, golf courses, Fairmont Resort, Everglades Gardens, Gordon Falls Reserve, Toy and Railway Museums, Cliff Drive, bush walks, Leura Cascades, and the Mount Hay region are a few to mention.

Leura is also known as The Jewel in the Mountains Crown and The Garden Village. I walked along the streets of Leura for a bit and grabbed some coffee from a coffee shop. I love small towns and villages, but always end up living in big cities like New York City or Toronto.

The name Leura comes from the Aboriginal language and means “lava”. Leura sits on volcanic rocks and many have been found in this area.

What Is Mortgage Insurance?

Insurance On Your Mortgage – What You Need To Know

First Published: ADawnJournal.com April 2, 2010

If you have a mortgage, then the chances are that you have mortgage insurance. The principle of mortgage insurance is pretty simple. It is usually included in the mortgage when you take it out, with the value of the insurance added to the principal and other fees, and paid into monthly as part of your usual monthly payment. As with any other insurance premium, the idea is that if certain conditions are met and you are unable to make your monthly payments as normal, the insurance will cover those payments. Among the conditions that are relevant to mortgage insurance are: death, illness, unemployment. Depending on your mortgage account, you may be covered in case of all of these and more, just these, some of these or none. It is worth being aware of exactly where you stand regarding insurance on your mortgage.

The most common and all-encompassing reason for claiming on insurance is death. With other reasons for claiming, there can be arguing over the matter of what constitutes long-term illness, a pre-existing condition, the balance of fault for an employee’s sacking or renegotiated contract and so forth. With death, however, things are generally quite final – or so you would think. Having mortgage insurance that covers you for the death of yourself or a joint account holder may seem to mark the end of the argument, should one of you die. But some insurance companies are reluctant to pay out, and will go to great lengths to frustrate a claim. It is worth being very careful with regard to how the insurance was sold to you, and what the conditions are regarding payouts.

If you have filled in a form to purchase mortgage insurance – as part of an overall deal or separately – it is highly important that you read the questions carefully and answer them truthfully. Even if the answer to a certain question might increase your premium, or negate any cover, it is important to do this before you start paying the premiums. You could well find yourself some way down the line bereaved, ill or unemployed and with a claim for insurance being denied by the company for a reason you would consider to be wholly inaccurate and unfair. It is fair to assume, however, that the insurers have written the policy very carefully to favour themselves.

If you have been to the doctor for a routine check up, the chances are that they have run a routine blood pressure test. So if you are asked on the form whether you have been tested for high blood pressure, you will need to say you have. This may go against the spirit of the truth, but saying “no” may be legally considered a lie, and invalidate any claim made on the insurance. For absolute clarity, it is important to get all the terms of the insurance agreement nailed down before taking out any insurance – if it is heavily weighted against you, you will need to insure independently under the terms of an agreement that allows you to be covered fairly.