Bankrupt Nortel, Mutual Funds, and Invest Now

Stocks, Mutual Funds, and Your Financial Goals

First Published Date : January 22, 2009

In my book Invest Now I mentioned that mutual funds are a less risky investment product than stocks and really suit those who are looking to keep risks at a minimum. I always come across financial gurus and regular investors complaining about the cost of mutual funds. However, they always fail to mention that stock investors may lose all their money if they pick the wrong stocks, but mutual fund investors are very unlikely to lose everything even if they pick the wrong mutual funds.

Just look at what happened to recently bankrupt Nortel. At the peak of the tech bubble, this superhero was trading at $1,231. And now its stocks are worthless. Let’s say you put in $100,000 in Nortel stock a week ago, or a year ago. How much is your $100,000 worth now? Nothing. How about the same $100,000 invested in a mutual fund a week or a year ago? It’s hard to say how much it would have been worth now (based on what you bought); but you can say in confidence that you would not have lost all your money—although you may have paid $2000 fees. Which one do you think is better? Paying a few thousand dollars in fees and keeping your money, or losing all your money without paying any fees?

The problem with stock is that it is extremely hard to pick winning individual stocks. On the other hand, mutual funds are designed for average investors; as a result, it’s not that hard to pick a mutual fund with a moderate rate of return. However, you need to be careful so you don’t end up paying hefty fees. In Invest Now, I discussed how you can invest in mutual funds without paying lots of fees. Also, I emphasized low-cost index funds. Index funds are not actively managed funds: no portfolio managers run the fund. Index funds mirror the market performance of an index by buying stocks or other instruments that match the underlying index’s composition.

In order to be a successful investor and realise your financial goals, you need to avoid unnecessary risks and paying sky-rocketed fees. Mutual funds, especially index funds, can offer all these with minimal effort and time. Even when everything goes wrong, it is unlikely that you will lose all your money with mutual funds. However, such is not the case with stocks. Just ask investors across the globe that were holding Nortel in their portfolio; they will be glad to tell you, had they known it before, they would have held mutual funds. Even the riskiest fund on earth with the highest fees would not have wiped out all their money in one day like Nortel did.

Ten Common Bankruptcy Questions Answered

Information On Bankruptcies

First Published: Fab 11, 2009

The following article is for information purposes only. It is not intended to render professional and/or legal advice. Bankruptcy is a complex process. If you are having difficulty paying your debts and/or considering bankruptcy, I suggest you contact a Canadian Bankruptcy Trustee licensed by the federal government to discuss your situation. To find a trustee in your area, search on Google or Yahoo using these keywords: Bankruptcy, Trustees, Your Area.

What Is Bankruptcy?
Bankruptcy is a legal process that can provide you relief from unsecured creditors. When you file for bankruptcy, you surrender everything you own to a trustee in bankruptcy. In return, all your unsecured debts are discharged and you get a chance to start a new life.

How Do I Declare Bankruptcy?
A bankruptcy can be filed through a trustee in bankruptcy. A trustee in bankruptcy is a licensed individual to administer the bankruptcy process. The Office of the Superintendent of Bankruptcy (OSB) licenses and regulates trustees.

What Happens To My Debts When I Declare Bankruptcy?
Bankruptcy discharges you from unsecured debts. However, there are some debts that stay.

What Unsecured Debts Go Away?
Here are some examples:

– Payday Loans
– Credit Card Balances
– Unsecured Line of Credits
– Unsecured Personal Loans
– Unpaid Utility Bills
– Retail Store Credit Card Balances

What Debts Are Not Discharged?
Here are some debts that are not discharged:

Alimony Payments and Child Support
Student Loans (various rules and regulations apply, consult a bankruptcy trustee for more info)
Fines and Most Court Ordered Restitution Payments
Certain Government Overpayments
Debts That Arose as A Result of Fraud or Theft

Please note that whether or not a debt is discharged can be complicated. Rules can change anytime as a result of court rulings. Also, The Court has the right to refuse a discharge. Consult a bankruptcy trustee for more information.

What Happens To My Secured Debts?
Secured debts, debts secured by properties or assets, such as mortgages and car loans, are not discharged.

How Long Bankruptcy Lasts In Canada?
In general, your bankruptcy ends when you receive a discharge. Discharge cancels your debts, and it could take minimum nine months to get a discharge. However, bankruptcy court can order to extend your bankruptcy under certain circumstances.

How Long Bankruptcy Stays On My credit Report?
It depends on various factors. In general, it will remain on your credit report for six years. A second bankruptcy will remain on your credit report up to 14 years.

What Can I Keep In Bankruptcy?
You will be able to keep some assets. These are called “Bankruptcy Exemptions.” Bankruptcy is governed by federal law, but The Bankruptcy Exemptions (what you can keep) is legislated by the provinces and territories. In Ontario, you can keep the following:

– Clothing, jewelry etc up to a value of $5,650.00
– Household goods up to a value of $11,300.00
– Tools you use to earn your living up to a value of $11,300.00
– Motor Vehicle up to a value of $5,650.00

Check with your own province or a bankruptcy trustee to find out what you can keep in your province.

Does My Bankruptcy Affect My Spouse?
Contrary to popular belief, it does not affect your spouse. You are responsible for your own debts; your spouse is responsible for her/his debts. However, if your spouse co-signed for a loan or joint on your accounts, she/he may be affected. These issues can be complicated. Consult a bankruptcy trustee for further clarification.

Bonus Question

What Happens To My House When I File For Bankruptcy
If your mortgage is paid off, or if you still have mortgage but you have a lot of equity in your house, you cannot keep your house.

If your home has no or little equity, and you are able to keep up with your mortgage, you may be able to keep your house after filing bankruptcy.

Again, these issues can be complicated. Consult a licensed professional for further clarification.

NB – In Canada, Office of the Superintendent of Bankruptcy (OSB) protects the integrity of the bankruptcy and insolvency system and ensures public confidence in the marketplace. Visit their website for more information.

How to ride out market volatility

How to ride out market volatility

First Published: Aug 7, 2008

Unless you are living under a rock these days, you're concerned about the recent market turmoil. Investors all over the world have been losing chunks of their portfolios every day. I remember that I stopped looking at my portfolio at some point and since then I have been checking it very infrequently. Poll after poll shows that the majority of investors are pessimistic about the future and they are making changes in their portfolios based on emotion and fear, not based on a calculated decision.

The most common action they are taking? Switching out of equities and parking money into money market products. Equities are at their lowest at this time and switching out of equities may cost you a lot more than you can possibly handle. It is never recommended to get rid of equities when they are at a heavy loss. Now, naturally, you are going to ask, "If we're not to get rid of equities, what could we do to ride out market volatility?" My number one suggestion would be: do nothing. Yes, indeed – do nothing. Just sit back, relax, fasten your seatbelt, and ride out the market volatility.

If you are not convinced yet, consider the following points:

  • Diversification is the key to achieving stable returns throughout the good and bad times. A well-diversified portfolio should not fluctuate to the same degree as stock markets.
  • Volatility is a normal part of investing. There will always be ups and downs in the market. Do not let market volatility divert your focus away from your goal. Stay invested, keep adding more money, and you will be fine in the long run.
  • Investment is a discipline. Do not make decisions based on emotions. Research has shown that the stock market has averaged an annual 11% rate of return over the last 120 years. Stay invested for the long run – through good and bad times.

I would like to end today's article with a quote by legendary investor John Templeton. John Templeton recently died at the age of 95. He was famous for this quote: "Buy at the point of maximum pessimism." Templeton's quote makes perfect sense—whenever there were declines in the market, the market eventually recovered with greater gains. Investors who acted emotionally lost the most. That's why my advice is: Do Nothing. The market will recover and you will be in good shape again. Just be patient and ride out the volatility.

Beta And Standard Deviation

Beta and Standard Deviation

Today I am going to discuss Beta and Standard Deviation in terms of mutual funds and stocks. Both are statistical terms, but they take a whole new meaning when you put them into investment perspective. I am discussing these in bulleted lists to make it simple and easy to understand.


  • Beta is a statistical term that shows volatility with respect to the market or index as a whole.
  • Beta does not measure a product’s unique volatility.
  • Beta measures volatility based on the whole market.
  • Higher beta means greater volatility.
  • A product with beta 1 means it moves with the market. A product with beta 0 means it does not move with the market, e.g., cash.
  • A product with beta more than 1 moves ahead of the market, and thus translates into greater volatility than the whole market or index.
  • A product with beta less than 1 moves less than the market, and thus translates into lesser volatility than the whole market or index.

Standard Deviation

  • Standard Deviation is a statistical term that shows volatility.
  • It measures the range of performance.
  • It shows how widely performances (or returns or values) are dispersed from the average.
  • The greater the standard deviation , the greater the volatility.
  • A volatile product is considered a high risk product.

First Published: June 27, 2008

No One Cares About Your Money

Care About Your Money

No one cares about your money but you. Only you know how hard it is to earn a dollar, and even harder to save a dollar - that’s why self-interest is the best interest. The funny thing about money is that everyone can give advice about your money, but they are not nearly so casual with their own money. You are the one who earned it, and only you know the value of each dollar. Why give your money someone else to invest? Do you think that someone else will treat your money the same way as you do - of course not. That someone else will not act his/her best to protect your interests. He/she will act best to protect his/her own interests. You will not do frequent trading to earn commissions. However, that someone else might. That’s why I believe you should be your own money manager. I don’t believe you need to hire a financial advisor to start investing. But if you never invested before, how you can start on your own?

My first book Invest Now assumes you never invested before and teaches you how to start investing for the first time. It is written in simple and plain English, and you will never need a financial dictionary. You don’t have to be a financial guru to develop a consistent saving plan and accumulate wealth. Invest Now offers all the tools and motivation you need to start building a safe and secure financial future now for you and your family.

Award-winning book Invest Now is jam-packed with timely information and timeless advice for the beginning Canadian investor. To purchase a copy, visit Chapters Indigo or buy online - Invest Now: A Canadian's Guide to Investing

First Published:
Apr 15, 2008