Blog – Page 10 – SparxTrading

Posted on December 7, 2012January 30, 2021 by user — Leave a comment

Special Series: J.D. Power & Associates – Discount Brokerage Rankings Explained Part 2

If you missed the first part of our J.D. Power & Associates Discount Brokerage Rankings series, read it here.

The two main objectives of this section are to provide readers with:

A look at the overall discount brokerage marketplace to see what, if any trends in investor satisfaction there are that matter to consumers
A detailed look at the company results in the survey to see how each company has performed over time so that consumers get an idea of the responsiveness of a particular discount brokerage to the needs of investors

When choosing a discount brokerage, you can either “go it alone” and find out for yourself what a discount brokerage is like or you can turn to the opinions of other self-directed investors to help you decide. Even though both approaches exist, surveys of Canadian investors have shown that many of them like to do research, turning to friends or family for recommendations, as well as third party reviews and research, before making a choice to go with a particular discount broker. While external opinions are valuable sources of information to help avoid potentially costly or unpleasant experiences they can also help to find a service provider that can hopefully keep you a satisfied customer.

Looking at what thousands of other self-directed investors have said about their experiences can certainly shed light on what you’re likely to encounter with a particular discount brokerage and at the very least help to provide some context around informal discussions with friends or family. There are some questions, however, you may want to consider when looking to these sources. Questions such as:

How well does the source I’m looking at consider and describe my needs?
If they are a friend, family member or opinion in a forum, how long has this person been a client with the company and
What, if any, issues have they encountered with the service/experience along the way?

Also, because numbers and statistics often get presented to support marketing and sales, we thought it prudent to state several “qualifiers” readers need to consider about such numbers up front instead of at the end. First, it’s worth stating that the range of data this section references covers four years of results of the investor satisfaction survey. This four year time period is a small time frame, especially since the interval that the survey is conducted on is annual. Second, the number of companies in the ‘pool’ is fairly small so we must be cautious about inferring too much about the performance numbers and possible trends of the industry as a whole. Instead, looking at a particular company’s change in performance over time is probably more reliable an approach than comparing companies to one another. Lastly, not every year had the same number of discount brokerages covered. In 2009 and 2010 for example, the number of discount brokerages covered by this survey was 6 and 8 respectively. Smaller or newer discount brokerages, therefore, are less likely to appear on the survey and so the inferences made about “the industry” actually apply to the discount brokerages covered in this list.

Investor satisfaction with the overall discount brokerage industry in Canada

Over the four years the investor satisfaction survey has been conducted, more than eleven and a half thousand individuals have been consulted about discount brokerage services in Canada.

Canadian Discount Brokerage Industry - Investor Satisfaction Scores 2009-2012 — Figure 1: Canadian Discount Brokerage Investor Satisfaction Scores from 2009-2012

When looking at the four year picture, the average industry satisfaction scores have fluctuated year over year, bouncing between a low of 679 in 2011 and a high of 707 in 2010. The four year average score for the industry is 696 (out of 1000) with an average standard deviation of 27.5 points. When graphed, it is clear that as a group no clear industry-wide trends in the satisfaction of Canadian discount brokerage investors are visible.

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Posted on November 29, 2012 by user — Leave a comment

Special Series: J.D. Power & Associates – Discount Brokerage Rankings Explained Part 1

Introduction

In the first part of our special series on discount brokerage rankings and reviews, we take a look at one of the most popular consumer research organizations, J.D. Power and Associates, and their annual survey of self-directed investors’ impressions of Canadian discount brokerages known as the Investor Satisfaction survey. The results from this survey form the basis for the highly coveted J.D. Power and Associates award for the Canadian discount brokerage industry. As such, both consumers and the discount brokers pay close attention to the results of these surveys.

For consumers trying to choose between the many options in the discount brokerage market, using reviews and data from actual customers is a popular strategy to help make a decision. With several ratings systems now being provided to self-directed investors, there seems to be some confusing and potentially conflicting messages being communicated about different discount brokerages. Not all reviews are created equally, however, nor do they measure identical features, which is why sometimes the results can seem confusing.

To help demystify the ratings and to give Canadian self-directed investors a better understanding of J.D. Power’s rankings, we’ve taken a look at the following four questions:

Who is J.D. Power and Associates?
What does the Investor Satisfaction survey measure?
How is Investor Satisfaction measured?
What does this survey and its ratings mean for consumers?

1. Who is J.D. Power and Associates?

J.D. Power and Associates is a professional consumer research firm. They are among the most widely recognized names in marketing research and have a solid reputation for conducting thorough research on the experiences of consumers with brands or products. Although they are well-known for their work in the auto sector, J.D. Power and Associates (J.D. Power) also conducts surveys across a number of different sectors, including the banking and financial services sectors. Of particular interest to Canadians looking for a discount brokerage, J.D. Power has been conducting surveys of investor satisfaction with Canadian discount brokerages since 2009. Over that period of time, they have surveyed over 11,500 clients of Canadian discount brokerages asking them about various components of their experience with discount brokerage account providers. J.D. Power makes their money by selling the detailed results and analysis of their research to major brands so that these brands can better understand the needs and experiences of their customers and, in theory, work to improve those experiences.

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Posted on November 29, 2012 by user — Leave a comment

Special Series: A comparison of the Canadian Discount Brokerage Comparisons

As part of a special series on the comparison of Canadian discount brokerages, we’re taking a look at some of the major providers of this information so that self-directed investors and those interested in researching Canadian discount brokerages can gain a better understanding of the types of research that is done, what the results of that research mean and some of the important perspectives of those involved with the research as well as those who are featured in it.

The first part of this series starts by looking more closely at one of the major sources of consumer experiences with discount brokerages, the J.D. Power and Associates Investor Satisfaction survey. We begin by looking at the survey itself and what it measures, then we’ll look at the historical results and lastly we’ll provide important perspectives from both J.D. Power and Associates as well as from Disnat, the discount brokerage that has managed to place first in the survey for the past four years.

Posted on November 22, 2012 by user — Leave a comment

Tax Loss Selling – Bargain Hunting for Stocks

For bargain hunters, “Black Friday” has become synonymous with big crowds and massive deals. Retailers, forever trying to get an edge on one another, have also bought into (and fed) the mania that has now come to be known as the biggest pre-Christmas shopping bonanza of the year. Is there an equivalent “discount season” for bargain hunters in the stock market? There is…almost.

Canadian stocks are sometimes subject to a seasonal occurrence called “tax loss” selling, which tends to put stocks, especially those who’ve had a rough go during the year, on sale. Tax loss selling typically starts taking place in November and December and can be a chance to pick up some bargains if you’re willing to do a bit of homework and planning.

The reason behind tax loss selling season is fairly straightforward. Individuals, especially savvy investors, want to minimize their tax exposure (i.e. pay as little tax as possible). Taxes are a part of investing. If you make money on an investment outside of a registered account, a portion of that money gets taxed (either as a capital gain or business income). Because gains are taxable, if you have no gains then you aren’t taxed. One strategy to minimize gains is to offset them with losses. But why would anyone take a loss just to avoid taxes?

The crux of the strategy rests on the idea that if there are losers in your portfolio that aren’t really going to do anything for you or that might represent “dead money”, it may be better to realize the loss than to keep “hanging in there”. It becomes even more compelling to do so if you’ve realized a gain during the year for which you’re going to have to pay taxes on. So, either way you take a hit – sell an asset at a loss or keep a losing asset, but pay tax on a winning one (assuming you have winners). The bottom line is that if the losing asset is just going to be a loser, the smarter hit to take is to get out of the loser and use the loss against any actual or potential gains.

There are a couple of rules that investors have to keep in mind when employing this kind of strategy. The first rule to know is called the “superficial loss” rule. For most investors, if you sell a stock at a loss and buy the same stock back within 30 days (regardless of the account you do so in), the Canada Revenue Agency (CRA) considers this to be “superficial loss” (see this link for the CRA article “What is a superficial loss?”). A capital loss cannot be claimed if the loss is considered a “superficial loss”. Instead, if a stock is sold at a loss and bought back within 30 days, the adjusted cost base will need to be calculated. The second rule to keep in mind is the deadline date in the calendar year for a sale to be considered for that tax year. It can take up to three business days from the date a stock is sold for the actual trade to settle. Because of statutory holidays in December (Christmas and Boxing Day) and weekends, the last day to execute the sale and have it count for this year (2012) would be December 24^th.

When individuals start to sell en masse, the overall effect is depressed prices. Typically, the underperformers are the ones on the chopping block and sometimes the selling is more enthusiastic than justified taking prices down below what the “market value” would be under “regular” conditions, thereby setting up the potential for bargains to be found. For more experienced investors, they typically prune their portfolios ahead of the year end selling in preparation for any bargains that might present themselves.

Getting to know the effect that investors can have on the market can give you a bit of an edge when looking for opportunities to invest. A cautionary note to take heed of is that often stocks that are either “cheap” or underperforming are doing so for a reason. If much of the market has given up on the stock then going against the crowd can be a dangerous strategy. As such, savvy investors typically do their homework in advance on who they are watching and wait for a good opportunity to step in. To learn more about tax loss selling, here are three extra resources to read.

Globe and Mail – Investor’s almanac: How to harvest tax losses – (2011) – John Heinzl

Financial Post – Time to take your losses – (2011) – David Pett

The Blunt Bean Counter – Tax Loss Selling The 2012 Version – (2012) – Mark Goodfield

Posted on November 21, 2012 by user — Leave a comment

The Mindless Investor Chapter 1: You Can Beat the Market – Chapter Review

Highlights of Chapter 1 – The Mindless Investor

In the introductory chapter of The Mindless Investor, Tyler Bollhorn sets up several important ideas and goes through some common pitfalls of most self-directed investors. Here are three key points from chapter 1.

Key Point #1: Most Stocks Don’t Beat the Market

The first and most important theme of the first chapter is about overcoming being average. According to Tyler, realizing that most of the stocks don’t beat the market most of the time is essential to getting beyond average returns. Getting away from being average means doing things that may seem to go against the “common wisdom”. It is exactly that conventional wisdom, however, that Tyler puts forward as the enemy to most individual traders. Despite what many think, smaller traders have several advantages compared to the larger participants. The key is to understand how to use their size appropriately.

Key Point #2: Don’t Get Emotionally Attached

A second important theme of this chapter is being in the right frame of mind to be a successful trader. Successful traders are those who don’t get emotionally attached to the stocks they trade, they simply focus on what matters most – whether they have managed their risk and whether the stock is performing as it should. Learning how to win and lose correctly are critical skills. They start with understanding that winners have to be allowed to run, and that losing is part of trading.

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Posted on November 10, 2012 by user

Discount Brokerage Weekly Roundup – Nov. 9th 2012

The big news from the Canadian discount brokerage industry this week was the huge announcement that OptionsXpress will no longer be available in Canada. Virtual Brokers will be acquiring all of the OptionsXpress Canada accounts as of December 1^st pending regulatory approval. This now narrows the number of Canadian discount brokerages that provide a powerful and easy to use options trading platform along with great stock market education resources down by one. According to an apparent notice sent to clients (which we found posted here but cannot confirm its authenticity) from OptionsXpress Canada, individuals who wish to transfer to another discount brokerage must let OptionsXpress Canada know in writing before November 23^rd otherwise the account will be passed along to Virtual Brokers. Be sure to contact OptionsXpress Canada directly for any questions.

Questrade announced this week that they are serving as market maker on behalf of Foran Mining Corporation (FOM on the TSX Venture Exchange). The one year agreement will take effect November 12^th and Questrade will receive $5,500/month for these services. Questrade has been somewhat active in adding companies to its market making segment adding American Vanadium, Red Tiger Mining and Destiny Media earlier this year. To see the TSX market makers list, click here.

When National Bank Direct Brokerage announced via twitter that they have a LinkedIn page we got a little excited as they’re currently not really around on the social media scene except via their parent National Bank’s twitter feed (to see who which discount brokerages are active on social media, click here). Unfortunately, when we stopped by to have a look around there wasn’t a lot of content on there yet.

Don’t forget, November is Financial Literacy Month. We’ll be posting all sorts of interesting gems for self-directed investors to help them enhance their knowledge of investing and finance. For more information on Financial Literacy Month activities, check out this page here.

Best Canadian Discount Brokerage Tweet of the Week

Even though the LinkedIn tweet left us scratching our heads a little, National Bank managed to score another tweet of the week for their Clearfacts newsletter on the difference between investing and trading. You can read the article via their tweet here.

Event Horizon

This upcoming week has a couple of presentations for self-directed investors that are likely to be interesting. Tyler Bollhorn’s new book, The Mindless Investor, is launching so he’s running a couple of free sessions to explain some of the principles from his book and how do-it-yourself investors can use these to help them with their trading. Sessions will be held in Calgary (Nov. 12^th) and Vancouver (Nov. 13^th).

The People Have Spoken

Sometimes matching stock orders between buyers and sellers takes time. It’s usually why discount brokerages give themselves a few days to get things settled behind the scenes. Usually it’s a three day (known as T+3 as in Time + 3 days) window between the transaction date and the settlement date (for a great explanation, see this link). This week, redflagdeals.com forum poster raxdax10 wanted to know why the money didn’t appear on their TD Waterhouse discount brokerage account after selling a stock. Read what some helpful folks had to say here.

Posted on November 6, 2012 by user — 1 Comment

OptionsXpress Canada officially exiting the Canadian Discount Brokerage market

The Canadian discount brokerage market this week saw one of the players officially exit by selling their Canadian operations. Virtual Brokers announced today that they will be buying out OptionsXpress Canada effectively signaling the end of OptionsXpress in Canada and shrinking the number of big discount brokerages by one. The business agreement is set to take effect on December 1^st pending regulatory approval.

OptionsXpress Canada, which is owned by American discount brokerage Charles Schwab, had put their Canadian business under review in September and halted accepting new Canadian clients. The fact that Canada’s discount brokerage industry is shrinking in not entirely a surprise given the size of the Canadian market and the number of competitors battling for their share of the investor pie. With investor sentiment keeping many out of the markets as well, discount brokerages have faced some major headwinds in trying to gain new business.

For Virtual Brokers, the additional accounts will provide a lift to their business, assuming they can hold on to the new accounts. Those used to the OptionsXpress platform and suite of services may be on the hunt for something similar. Also, Virtual Brokers is already working through the recently announced decision to move the back office functions of trade clearing away from Penson and bring it in-house. While they may be busier than usual, the official statement from Virtual Brokers (which can be found in the following news release) suggests this is another big stride in their race to deliver a competitive experience for consumers.

Posted on November 2, 2012 by user — Leave a comment

Discount Brokerage Weekly Roundup – Nov. 2, 2012

Discount Brokerage Weekly Roundup

There were a couple of really big events that took place this past week including the impact of Hurricane Sandy, TD Waterhouse Discount Brokerage’s Direct Investing Expo and Tyler Bollhorn’s soft launch of his new book, “The Mindless Investor”. Also November is Financial Literacy Month, be sure to pay extra attention to a lot of the great resources and events for self-directed investors that we’re mentioning this month.

Hurricane Sandy Shuts Down Markets

Hurricane Sand shut down US markets for 2 days this past week marking the first time the NYSE has been closed because of weather since 1888. The ripple effect for discount brokerage clients was obviously that they could not trade US markets but for some even trading on Canadian markets was impaired because datafeeds at some Canadian discount brokerages went down. Even though on the whole market data is fairly reliable, there are times when data feeds do go down, which is something you need to factor in to your type of trading especially if you are more active. Usually the best response is to call your discount brokerage directly to properly respond – just be prepared for higher wait times when there are platform outages.

An alternative to getting answers is to go on twitter because chances are that there are other more active traders who will report on the status of their trading platforms. Luckily we’ve put together a handy twitter channel for you to monitor all the discount brokerages that are on twitter in order to monitor announcements. As a case in point, BMO took to twitter to announce an outage it had on its banking networks, tactfully managing a difficult customer service issue by keeping customers informed with progress reports.

Direct Investing Expo Review

We also reported a two part review of the TD Waterhouse Discount Brokerage Direct Investing Expo. This full day event was a great educational opportunity for self-directed investors to learn about macro-economic trends from Bob Gorman, as well as to learn about technical analysis and options trading from TD Ameritrade and Investools. Click here to read the full review.

The Mindless Investor

This week in both Calgary and Vancouver, Tyler Bollhorn released signed copies of his book to audiences of Michael Campbell’s session with Tyler. We managed to land a copy of it and will be putting up a review shortly. In the meantime, you can read a preview of it here.

Financial Literacy Month

As part of Financial Literacy Month, SparxTrading.com is happy to share some of the great materials we’ve come across that can help self-directed investors better understand investing concepts that are important to learn about. This week we put together a list of the best stock market education videos we found on the TD Ameritrade website. Click here to access these videos.

Best Canadian Discount Brokerage Tweet of the Week:

This week’s discount brokerage tweet of the week was a tie between @virtual_brokers for their In Brief newsletter piece on understanding income statements and @nationalbank where they linked out to a great article from their newsletter Clearfacts on easing into investing and using a TFSA. To read more about TFSAs check out our article here.

Event Horizon

The Small-Cap Conference happening in Vancouver on November 6th is just about here. This will be a great opportunity to learn how to approach investing in smaller companies as speakers Ryan Irvine and Brent Todd are very good at laying out how to spot good opportunities. Anyone who per-registers via SparxTrading.com, and attends this free conference will get a great bonus gift courtesy of SparxTrading! For registration details, click here.

The People Have Spoken

This week there was an interesting forum thread on the redflagdeals personal finance section. Forum member “Squadz” felt a little overwhelmed with TFSAs, Stocks & mutual funds. To read what everyone had to say to help squadz get through the maze of financial products, click here.

Posted on November 1, 2012 by user

November is Financial Literacy Month

Fall is the time of year across Canada where we get to see leaves change from green to red. In order to avoid your going in the same direction as the leaves, enhancing your financial literacy is something all Canadians can benefit from. November is financial literacy month and through it we will be posting content and passing along small and easy ways to enhance and promote your own financial literacy. There are numerous financial literacy events going on across the country which we highly encourage all Sparx visitors to support and attend.

One of the first places we’d like to mention is the sponsoring agency for financial literacy month – The Financial Consumer Agency of Canada. On their website, there is lots of information for consumers on:

banking
budgeting and money management
credit cards
payment options and money transfers
mortgages
credit and loans
savings and investments
insurance
fraud

Stay tuned to sparxtrading.com in the coming days for more exciting content on getting to know more about finance!

Posted on October 31, 2012 by user — Leave a comment

Event Review – TD Waterhouse Discount Brokerage Direct Investing Expo – Vancouver 2012 – Part 1

The Vancouver Direct Investing Expo organized by TD Waterhouse provided self-directed investors the chance to learn about macroeconomic trends and issues coming in 2013, tips on technical analysis, exchange traded funds and several options trading strategies. This day-long event featured top-tier speakers such as Bob Gorman, TD’s Chief Portfolio Strategist, as well as a line-up of speakers from Investools, Horizons Exchange Traded Funds and from TD’s Wealth Management division.

Even though it was a typical rainy Vancouver day, the Direct Investing Expo launched on a bright note with a great breakfast spread. The TD Waterhouse Discount Brokerage booths surrounding the foyer area had demo stations for several of the major tools of interest to self-directed investors including the TD mobile trading app, the thinkorswim platform, web broker and global trading. Horizons Exchange Traded Funds and the Montreal Exchange also had booths providing investors with information on their products and services. Like most discount brokerage sponsored events, TD Waterhouse Discount Brokerage took the opportunity to showcase their products to the audience as well as try and land some new clients. To that end, one interesting incentive they offered was a refund of the $100 price of admission for non-TD clients who wanted to sign up for a TD Waterhouse account on the day. Overall, however, the balance of the day was decidedly on education rather than sales.

The World in 2013 According to Bob Gorman

The first speaker to take the stage was Chief Portfolio Strategist for TD, Bob Gorman. Investors listened attentively as he outlined his case (impressively without notes) for the economic and investing climate for 2013. In his view, Bob Gorman believes that 2013 won’t be as dire as some market observers are currently forecasting. His arguments on the US fiscal cliff being more of a fiscal drag, the recovery of the US auto and housing sectors and an overall soft landing in China mean that on a valuation basis, 2013 could be a positive year for certain sectors. The tactical approach on where to invest included advising investors to tread carefully with fixed income investments, favouring large cap companies to smaller cap companies and to focus on what he calls ‘dividend-growth stocks’. For those looking for something more adventurous, the emerging markets may hold promise in the “MIST” countries (Mexico, Indonesia, South Korea and Turkey) over the traditional “BRIC” (Brazil, Russia, India, China). The mix of economic news and concrete picks made this session a very valuable one for investors looking for some investing themes and companies.

Getting Technical

There was a split in the schedule with two sessions running concurrently. One was on “The Art and Science of Analyzing Charts” i.e. technical analysis (which I attended) and the second was “ETF Trading: Income Investing Using ETFs” presented by Horizons Exchange Traded Funds. The technical analysis session was led by Ryan Lewenza, V.P. & U.S. Equity Strategist at TD Wealth Management. Ryan walked the crowd through some of the basics of support, resistance and chart reading. While technical analysis isn’t everyone’s cup of tea, there were some interesting points made on being able to better time entries and exits on ‘fundamentally good’ companies, with the bottom line (no pun intended) being that stocks are not things investors should ever fall in love with. Of course, while some folks were writing notes during this one, others who felt a little out of their depth with “Relative Strength Indicators” and ‘on balance volumes’ were fortunate enough to have brought their knitting. Trying to get the basics of technical analysis down in a one hour session is a tricky undertaking, so this session was a understandably tough to follow for most beginners

Check out part two of this review where we describe the sessions with Investools and provide some tips for attending these kinds of investor seminars.