WHAT IS A CORPORATION?

[Reef_Geek]

should probably mention, we have different investment horizons.

I am still in my wealth accrual phase trying to ensure a retirement, whereas you're already there and have no need for debt.

[Reef Pilot]

Originally Posted by Reef_Geek

Thanks.

I think it's about using leverage (debt) with good business sense. Leverage is a very powerful tool. There's bad debt and good debt.

For example, I can't afford to buy my home out right, so I have a mortgage. I buy a property valued appropriately and at the right time/price. I'm not stretching to buy more than what I need, so my mortgage is affordable, and I have enough savings/investments that can handle a rate hike at refinancing. It is forced savings compared to rent.

Another example, I need a car, I could buy it out right... or, I could take advantage of low interest rates. At 2.5% APR... (sometimes zero for other brands), well, I could make more return on investment than 2.5% by keeping my investments rather than cashing them out to pay off the car.

Taking out a line of credit against a property's equity to wisely re-invest... for example to add a bathroom or finish a basement... not to build a pool or buy a Jacuzzi... so long as it can be justified in increase in property value, or additional loan payments and interest is recoverable proportionately (cap rate) in rental income. (and no, in wall aquariums do not increase property value)

Of course, I stay away from bad debt... carrying a credit card balance is a horrendous waste of money. I don't think there's value in leasing vehicles unless it can be a tax write off item for a business... etc.

But yes, I am looking forward to a day long into the future when 40% of my monthly cash flow doesn't get sucked into mortgage payments! It's far far away, but it's a heaven I've heard of!

Yes, for sure using debt (as with a secured line of credit) for investment can be good, and I have done that, too. But just don't get yourself in a position where if the markets fall, you are forced to sell low. Or your house/condo goes underwater (as what happened in the US to so many). Remember the ultimate objective, buy low, sell high, not the other way around.

Real estate is generally a good asset (does go up and down), but you have to live somewhere, and rent is for sure wasted. I have bought and sold many homes over the years. Some for less than what I bought them for (80's was a tough time), too. But I did learn that with real estate, you don't get ahead with your sells, but with your buys. It is much easier to get a good buy (with good market research) than a good sell (not up to you, but the buyers). And of course it is all about location, location, location.

But I do draw the line with borrowing money for a car. I can say that I never did that. Although, to be fair, interest rates were much higher many years ago. Problem with a car, as with boats, LED lights, etc, is they depreciate rapidly, and when you are ready to buy another one, you are no further ahead. Instead, I initially bought junkers, and amazingly, I actually sold some for what I bought them for and more. Later, when I finally had some money, I did buy new, but more because of vanity, and not smart personal finance.

Low interest rates are not a good thing, IMO. Sort of like taking drugs and hope that you don't get addicted.

Being in finance, I'm sure you know that cash is king. When the markets or real estate fall (and they always do), have cash available to take advantage of the low price opportunities. That's one way that I have got ahead.

And don't run with the herd...

[reefermadness]

My previous employer (one of the largest private corporations in Canada) decided to restructure my position and gave me a 30% pay decrease. Is that working for my interest? Lets not get it twisted Corporations work for their won interest and that is to make money. If a side effect is improving your quality of life that is great but believe me when I say that if they could pay you less to make more profit generally they would. We can see this happening in the global economy with outsourcing. Lets not forget the corporations who are responsible for polluting our shared resources (water,air,dirt) and even putting peoples lives at risk. You dont have to look to far to see corporations responsible for the death of inocent people. The bandledash garment factory was just one instance where 1,800 died. http://www.cbc.ca/news/business/bang...blaw-1.2223499 I would say the corporation did not work in favor of those people.

Anyway we are still lucky to live in Canada (for now) and thankfully I didnt stay with my old employer and and actually found a better job. Not everyone is so lucky though as good jobs seem harder to find.

So yes if your lucky corporations can improve your life.....invest in a good one and watch your money grow. But its not so plan and simple as we can leave that statement and say that is that......there is a flip side to that coin.

[Reef Pilot]

Originally Posted by Reef_Geek

should probably mention, we have different investment horizons.

I am still in my wealth accrual phase trying to ensure a retirement, whereas you're already there and have no need for debt.

Yeah, the big advantage you have is you can be aggressive with your investments (just don't be foolish), and can even afford a major mistake or two.

I still remember well the day, I lost more money in a single stock (very bad earnings surprise) than my house was worth at the time. That was painful. But I had it coming, as I was getting far too aggressive with my investing and putting all my eggs in single baskets, because of past successes. Needless to say, I became a lot more conservative (and disciplined) after that and diversified more. Amazingly, though, I still came out ahead that year, despite that big loss. I have had many losses since (not big ones, though), but none have hurt more than that one.

Anyway, I am very much the opposite now, and more of an opportunist if something looks really good. Plus I day trade a bit, just playing momentum. I worked too hard for what I have now, to risk losing it...

[Reef Pilot]

Originally Posted by reefermadness

So yes if your lucky corporations can improve your life.....invest in a good one and watch your money grow. But its not so plan and simple as we can leave that statement and say that is that......there is a flip side to that coin.

Yes, there are definitely good and bad corporations, just as there are individuals. And remember corps are just groups of one or more people. The culture is determined mostly by the founders and leaders, and can be very difficult to change. So do your research before you decide where you want to work, it is not all about the money...

I will say, too, that in my career, I worked for two large corporations (multi billion) and one smaller one. The two larger ones were absolutely clean with their ethics and practices (employees were considered as their #1 asset, customers #2), and I was very proud to be a part of them. The smaller one, though, did have a few questionable practices (not illegal) that I did not like, and I did leave them because of that.

[ReefHero]

Originally Posted by Reef_Geek

money enables society

love it or hate it, it is a thing that is inert. It is neither good nor bad. It enables civilizations to advance in complexity for better or worse.

Here's a prize winning book about it, if you seek truth.

Ascent of Money. Ferguson, Niall.

http://www.niallferguson.com/publica...scent-of-money

Personally, I hate it when people talk about money as if it can think and make decisions.....money is nothing more than a possession. It is whatever we (as people) want it to be. Money is only worth what we make it.
To quote the NIN...."money is not one to choose."
We (as society) have made money the highest possession available.....we did that! If money could think then I'm sure it would value itself on par with the value of the paper it is printed on.... In all fairness, would it be wrong for a person to value money in the same regard....I would say no because in a way everyone already does value money differently....some save it, others spend it....
I try not to think about it too much.....sad really, that a piece of paper marked $5 is **** poor but yet the same one with different colours marked $1000 would have people killing each other over. We made it this way and now we live this way.

[ReefHero]

Originally Posted by reefermadness

My previous employer (one of the largest private corporations in Canada) decided to restructure my position and gave me a 30% pay decrease. Is that working for my interest? Lets not get it twisted Corporations work for their won interest and that is to make money. If a side effect is improving your quality of life that is great but believe me when I say that if they could pay you less to make more profit generally they would. We can see this happening in the global economy with outsourcing. Lets not forget the corporations who are responsible for polluting our shared resources (water,air,dirt) and even putting peoples lives at risk. You dont have to look to far to see corporations responsible for the death of inocent people. The bandledash garment factory was just one instance where 1,800 died. http://www.cbc.ca/news/business/bang...blaw-1.2223499 I would say the corporation did not work in favor of those people.

Anyway we are still lucky to live in Canada (for now) and thankfully I didnt stay with my old employer and and actually found a better job. Not everyone is so lucky though as good jobs seem harder to find.

So yes if your lucky corporations can improve your life.....invest in a good one and watch your money grow. But its not so plan and simple as we can leave that statement and say that is that......there is a flip side to that coin.

I agree. Very few corporations would sacrifice their company (profit) for their employers. You don't have to look around the globe for this....happens in different degrees worldwide. As far as outsourcing and the profit thing....so many corporations and companies are doing this because they just will not compete and therefore make significantly less profit margin (living conditions considered) that they really have no other option than to go poor....
My brother works as a tool and die tradesman other the last 5 years and has seen **** go down.....then again who hasn't! What's that old saying....the rich get poorer and the poor get richer...? No, wait that can't be right....

[Reef_Geek]

Originally Posted by Reef Pilot

Yes, there are definitely good and bad corporations, just as there are individuals. And remember corps are just groups of one or more people.

I will say, too, that in my career, I worked for two large corporations (multi billion) and one smaller one. The two larger ones were absolutely clean with their ethics and practices (employees were considered as their #1 asset, customers #2), and I was very proud to be a part of them. The smaller one, though, did have a few questionable practices (not illegal) that I did not like, and I did leave them because of that.

+1

I have worked for private businesses and public companies. With public companies, there is requirement to follow SEC regulations so that they are accountable to shareholders. Everything is subject to routinely scheduled internal & external audits to ensure that checks and balances (business controls) exist to protect compliance, and audits ensures the company is doing what it said it would do. Private companies, on the other hand, are (mostly) only accountable to its owners, and there is no board of directors that second guess the president on behalf of the shareholders. Only when private businesses come into issues with laws... do they then get investigated. This is over simplified... yes. As a company gets bigger and hits certain size thresholds set by regulation, they must then take on more compliance practices.

Given the choice, I like working for public companies, and specifically, those that show strong "corporate social responsibility" (there are entire courses in business schools on this topic)...

Originally Posted by ReefHero

Personally, I hate it when people talk about money as if it can think and make decisions.....money is nothing more than a possession. It is whatever we (as people) want it to be. Money is only worth what we make it.
To quote the NIN...."money is not one to choose."
We (as society) have made money the highest possession available.....we did that! If money could think then I'm sure it would value itself on par with the value of the paper it is printed on.... In all fairness, would it be wrong for a person to value money in the same regard....I would say no because in a way everyone already does value money differently....some save it, others spend it....
I try not to think about it too much.....sad really, that a piece of paper marked $5 is **** poor but yet the same one with different colours marked $1000 would have people killing each other over. We made it this way and now we live this way.

This reminds me of a saying. Money doesn't change a person... it exaggerates who they are. It is like all those horror stories of sudden millionaire lotto winners that fall victim to bad temptations. If a person is giving and kind, they will have more of it to give/ a charity to manage. If a person is irresponsible with money then there's more of it to be irresponsible with. If a person likes to save and invest money, then the person has more of it to work with. etc etc

Originally Posted by Reef Pilot

Real estate is generally a good asset (does go up and down), but you have to live somewhere, and rent is for sure wasted. I have bought and sold many homes over the years. Some for less than what I bought them for (80's was a tough time), too. But I did learn that with real estate, you don't get ahead with your sells, but with your buys. It is much easier to get a good buy (with good market research) than a good sell (not up to you, but the buyers). And of course it is all about location, location, location.

This is very good advice. Thanks. I only have my current first home... and I keep looking back, I can't help but keep thinking how lucky I got with the deal that I got, and a lot of it was in timing... looking for that one posting that had been on the market for months, been conceding on the asking price, and facing tenant vacancy and a winter (not realty season) around the corner.

Originally Posted by Reef Pilot

But I do draw the line with borrowing money for a car. I can say that I never did that. Although, to be fair, interest rates were much higher many years ago. Problem with a car, as with boats, LED lights, etc, is they depreciate rapidly, and when you are ready to buy another one, you are no further ahead. Instead, I initially bought junkers, and amazingly, I actually sold some for what I bought them for and more. Later, when I finally had some money, I did buy new, but more because of vanity, and not smart personal finance.

Yup, rates for financing cars wouldn't be this low if it wasn't for the economic downturn. The other thing to watch out for... is the total price of the car. Some deals are 0% or $1000 off... so you have to do the math in time-value of money and figure out if they are just jacking up the price on the 0% deal.

You are right though, cars are depreciating assets. The best deals taught in personal finance books are those cars that are used but only a few years old. The reward is in having a car and no payments, while it still runs. But then again, some times you have to have a nice car. I do have a problem with cars... I am on my forth one in 12 years. Guilty. At the end of the day, it's not about not-enjoying your money, it's about living within our own means. If I made $300K (I wish) a year, it would be within my means to lease two brand new Porsches every 2 years... even if not the most efficient allocation of assets...

Originally Posted by Reef Pilot

And don't run with the herd...

this is one of the best investment advice I ever received... always think of the contrarian perspective.

[Slick Fork]

I think one thing people often overlook, is the power of consumers and the role they play in influencing the decision of corporations.

As an example, how often do people rush out and buy the cheap, made in china crap instead of something built locally? Than they wonder why North American manufacturing outsources and disappears and I don't think a lot of the social justice types really understand the cause and effect of it.

I know a person who is extraordinarily vocal about the need for higher wages for workers and the tragedy of corporate greed which outsources jobs. Yet this person shops at Wal-Mart and doesn't consider where the goods they purchase come from. When I asked why, they simply responded they were tired of paying "too much". They had no answer when asked why corporations should pay their workers more when people won't pay for North American made products.

It's easy to blame big business, but if they could make profits selling Canadian made items to Canadians, jobs wouldn't be outsourced.

[Slick Fork]

Also wanted to mention that it's really nice that a topic that could be so divisive has NOT degenerated into a name calling fest and that everyone is, instead, having a thoughtful civilised discussion.

Which I believe was the goal of the OP in the first place!