Stocks vs. Bonds the Portfolio Question

For an investor many crucial differences exist between stocks and bonds. Stocks typically have higher returns while bonds have more security. Stocks dividends are usually partially tax deductable for an individual investor and completely tax deductable for a corporation. The lower returns of the bond may well be worth the reduced risk that an individual investor is under although the gains in terms of interest in zero-coupon bonds or any coupon bonds are taxed at the individuals current marginal tax rate.

Controversial so called "junk bonds" provide high returns in exchange for more risk of default. Millions of dollars have been made buying these bonds with low S&P ratings and achieving higher returns. The question to ask would be if these higher returns compensate the investor appropriately for their risk. Many bonds have a built in feature of corporations not being allowed to default on payments unless they go bankrupt. This causes the bonds to have less risk then equity in the same firm. Bond holders also only have the opportunity to achieve limited gains as dictated by the bond contracts coupon rate, while shareholders have the opportunity to make unlimited gains.

I beleive that in a well balanced portfolio and individual should include both stocks and bonds. If the risk side of my portfolio consisted of stocks then I would balance that out with lower risk bonds. Meanwhile if I was participating in the higher risk junk bond market I would balance that out with stocks that have lower risks. It is my belief that a strong portfolio should consist of approximately 10% risky equity, 40% moderate equity, 20% low risk equity, 20% of varying degrees of bonds and 10% of risk-free's such as treasury bills (T-bills).

The whole portfolio diversification is dependent on an individuals risk tolerance though. I am have been working on a financial theory of mine which would produce maximum returns over years while minimizing riks. If successful my investment portfolio would drastically change to hold the mixture of securities I beleive I can create that would achieve above most fund managers returns. Fund managers who tell you they can acheive above average returns are lying and you should not beleive them. The best you can do is earn what the market earns, any attempt to earn more then the market can just as easily provide you with low or negative returns. More on this topic in the future.

Entrepreneurial Pastimes

As my first post I will outline some of the entrepreneurial activities I have taken part in to date. As a note though this blog over time will include financial insights, finance topics, corporate newsworthy events and various other business topics other then those of my entrepreneurial undertakings.

It all started at a young age, not out of greed but out of feelings of accomplishment and a sense of something to call my own. The first every entrepreneurial activity I took part is probably one that many people may have begun their careers doing, mowing lawns. It wasn't simply mowing my parent's lawn for allowance or just mowing the neighbour's lawn. It was advertising on local bulletin boards and mowing multiple lawns. The venture was too big for myself so I had some friends help me out. This all happened when I was 12 years old.

After a successful summer and some money in the pocket I then grew an attachment towards doing things myself. On a later summer when I was 15 when the entrepreneurial itch stuck again I started a recycling company. The venture consisted of a five-foot high well visible plastic recycling box down at the beach to collect recyclables. Unfortunately at that point I didn't have any contacts to turn the recyclables into money. Fortunately though the local beach was a popular place to drink beer. That meant that we returned the beer bottles and cans for 10 cents a piece at the local beer vendor and then dropped off the recycling at the local recycling station. To my partner and I it meant some cash in the pocket and helping out the environment.

One day I was sitting around with my friends who worked as marketers and had excess product left over, which in this case was candy. While any 16-year-old would typically just eat the candy, I thought up the idea to sell it out of our locker at school. Here gave birth to the organisation that I formally named, "The Locker Store." What started off selling small packs of lemon gum and blueberry twizzlers soon began to grow into a legacy. We sold many varieties of chocolate bars, candy, chips, drinks and our very own custom made Locker Store pens. We generated sales in the thousands of dollars all out of our locker at school. We even had the privilege of running the concessions at one of our schools battle of the bands events. I will leave the Locker Store topic though because it was the broadest initial entrepreneurial experience of my life to date and will probably require more posts in order for me to give it due credit.

After graduating from high school and going into university my enterprising took a break. Only in second year university did I get what I call "the itch" again and bought a piece of rental property. It is a duplex that needs some renovation before it can start generating some revenue for me. This is an ongoing topic as it is my latest implemented entrepreneurial activity.

Ideas come to me all the time and it makes me want to get them out there. Unfortunately I need capital to be able to undertake some of my larger ideas. That is the phase I am in now, gaining capital in order to implement some of my bigger ideas. I am under 20 years old and own a duplex and many investments, all with my own steam. I view what I am doing now as an adventure since I am trying to build up to something great with my own smaller entrepreneurial activities leading to larger ones that will hopefully someday lead to my full time job.