IRESS Market Data - A Great Premium Product

In a previous post I was complaining about the fact that IRESS no longer supported international quotes and suggested that you may want to use some other market data service if you invested heavily in overseas markets.  It struck me that I hadn't outlined why it was such a great paid product in the first place so here is a brief summary of IRESS.

Note that (as I cover below), IRESS is once again supporting international quotes so my previous complaint is no longer valid.

A quick overview of what you can use IRESS for

IRESS is a full trading interface in the same way that Bloomberg is. This is quite an expensive subscription however. For individual investors you are probably most interested in the data streaming functionality available through IRESS. Below are some of the features I use most often

1. News and company reports
• IRESS constantly streams news and company releases for all Australian companies. This means that you do not need to go to the ASX website or company website to get their reports. You can download pdf's straight from IRESS
2. Shares quotes with no delays
• ALL free data services have a delay in the share price and you never know exactly what you are going to pay. IRESS you can see every bid and ask in the market so you can see EXACTLY what price you want to enter your trade at
3. Option pricing functionality
• The easiest way to work out what an option should be priced at is to use IRESS's option pricing formula. You can vary all inputs easily to work out what the black scholes price of an option should be
4. Charting functionality
• I confess I put NO faith in techincal analysis so don't make full use of the charting functionality but it is always interesting to see comparative performances

These are just the functions I use most commonly. There are so many others that it can do as well. One of the biggest drawbacks is the lack of financial data available but if you have a look at the BusinessWeek link I have posted about before you can use this free product (which uses the same data as the premium CapIQ service) to fill this gap.

IRESS International Quotes are back online!

As mentioned above my previous post noted that IRESS was no longer supporting price quotes from some international markets and suggested that if you were using IRESS and had need of international quotes you may consider moving to a free service (such as Google Finance) or some other provider.  I am happy to report that they once again seem to be quoting these stocks.

A premium product really shouldn't have glitches like that...
 

What is TPD Insurance?

With all the different types of insurance out there it is hard to know one from the other.  In my last post I outlined what life insurance was, the different types and whether you should think about getting it or not.  In this post I will be focusing on Total and Permanent Disability Insurance.

What is Total and Permanent Disability (TPD) Insurance?

TPD Insurance is designed for those situations where a persona is completely disabled and unable to work again.  It usually provides a lump sum payment or annuity to take care of you for the rest of your life. 

Note that TPD insurance is not income protection insurance - it does not protect you in the event that you can do some job (even if you are not trained for it).  For example if you are a tradesman or a chef and are injured and are unable to return to your profession but are able to do administration work sitting at a desk (even if you have never done it before) then typically TPD Insurance will not cover this. 

Note that policies are not completely standardised and you need to read a policy very carefully before you sign it.  For example

• A clause saying that the loss needs to be 'total physical loss' means that the loss has to be in pairs (e.g. both eyes, both limbs or one eye and one limb). 
• The 'inability to earn' clause is a fairly common clause in TPD policies and means that you are not able to do ANY job at all (see the example above)

Do I really need TPD Insurance?

In my post on life insurance I outlined those situations in which you really should have life insurance and those where it probably is unnecessary.  The answer basically came down to whether you had dependents who needed you to work or your income to survive or not struggle. 

TPD is different - I think all people should have some form of TPD insurance.  This is because when you are injured in such a way that you are never able to support yourself again you need to find a way to live for the rest of your life.  If you have dependents this is even more important because not only will they struggle without your income, you become a liability. TPD Insurance provides cover for you.

Note that I think you should get it even if you do not have dependents or family because you do need to find a way to look after yourself for the rest of your life and unless you are wealthy enough to stop working today and never work another day in your life, the chances are that you will need the money to survive.

If your employer offers TPD Insurance through your superannuation you should take it

Many employers offer TPD Insurance through superannuation plans at no cost to the employee.  I think you should always take this up because it provides you with a cost free fall back.  Of course

Setting up a business: Get the help you need

This post is one in a series which is following my progress in setting up a small business.  In my last post I outlined how much longer it was taking me to actually set up my business compared to what I had originally expected.  Two weeks down the track and this has not changed at all. 

One of the mistakes I have made until this point is to try and do it all myself.  I have extremely limited skills in web development and programming and as outlined in my last post this was taking me much longer than expected.  Worse the website was not looking at all professional or to the standard that I would expect.  I realise with the benefit of hindsight that it really would have been better to ask for help much earlier.

One of my good friends is a web developer by profession however I, like I assume many others who try their hand at business, do not want to impose on their friends an family. For the same reason I did not want impose on my friend.  I did ask him for some advice though and when we met up he told me that what I wanted was actually fairly basic and could probably be done with a few hours of solid work if you knew what you were doing (keep in mind that I have been building this thing for a month and it looked terrible).  He offered his help and I realised that I would be mad not to accept it.

The website is still in progress however I admit that I am much more relaxed now that I know that I have someone who knows what they are doing to compliment my skills.  I also realise now that I probably should have done this even if I had to pay for it.

What I will take from this experience into the future

In most areas of my business I believe that I am capable:

• I am quite an organised person and actually like doing the administration side of the business
• The product I am developing is what I do every day and I believe I have a real comparative advantage in doing it

However I will most definitely seek help in those areas where I have limited capabilities and where I

Trading in illiquid shares

I have recently found myself investing in smaller capitalisation companies for several reasons

1. The risky nature of these businesses and the current 'risk off' environment means that many are trading very cheaply and (in my view) a discount to long run valuations
2. They are not as well covered by institutions and large shareholders so the level of sophistication of the investors and their ability to evaluate news in a timely manner is less than for large capitalisation companies which gives an added advantage

Buying illiquid stocks

I have found that if you can be disciplined with your price and set your buy orders as limit orders then there is no real problem in getting into these stocks.  It may take you longer than you hope or expect but you will get there in the end.  A couple of tips when buying illiquid stocks:

• Always set your order as a limit order even if it looks like there are enough shares at the price you want to buy them at to justify a market order - these markets are so illiquid that if you set a market order you can end up spending much more than you intended}
• Other buyers & sellers will often check the depth (see the orders in the market) to gauge whether they should buy a sell.  If the market allows for it I put my limit order in a little below where I actually want to buy it.  As long as you are top of the list you are still first in the queue

Selling illiquid stocks

One of the bigger problems I have found however is selling out of these positions.  This is because once the stock gets to a level where you have an acceptable return then you want to lock in this return.  However while it is possible to be disciplined about buying these stocks, waiting for sellers to come down to your price the converse is quite hard when you are selling.

Why your home insurance premium has increased so much and how to get it down

I have previously done posts on making sure that you negotiate your car insurance down as insurance companies often try and gouge customers around renewal time and offer much better deals to those who are actively shopping around.  The same is true for home insurance In fact they often have different pricing schedules for those that are existing customers and those that are new customers.

This post will deal with home insurance and why your insurance premium may have increased by so much in the past year.  If you have asked the question 'Why is my home insurance so much more expensive this year?' then this post could be for you.

What is your home insurance based on

Insurance premiums are statistical equations with a price attached to every piece of information that the insurer can get off you.  This is why those online quotes require so much information from you - it is so that the insurer can estimate the probability of loss on your account and thus price your policy so they can make a profit.  Thus with home insurance it is influenced by the following factors

• The area the house is in (is it subject to flooding, fires, high theft area etc)
• The owners themselves - how likely are they to claim, what is their history like
• The security precautions the house has in place
• The amount the house is insured for
• The amount the contents are insured for

There are lots of other factors beside these and insurance companies have statistical models for all of them  (e.g. their models will tell them whether houses in courts more or less likely to get robbed than those on busy streets etc.)

Nothing has changed since last year - so why has my home insurance premium increased by so much?

This is the thing that puzzles most of us out there who buy insurance.  We didn't claim over the year, our circumstances haven't changed nor has the area we lived in changed substantially - so why has my premium increased by 20 - 30% over the year?

The answer comes down to a few factors which I have listed below:

• Natural inflation type factors
• Prices naturally increase from year to year so there should always be some element of price increase between years
• This should be around the rate of inflation but will often run at wage inflation as insurance companies probably figure that if people are paying the same proportion of their income in insurance they will not object too much
• Thus an increase of 2 - 3% should be expected
• The amount your property is covered for
• This is a sneaky thing that the insurance companies do although they state it very clearly but most of us ignore it
• On your insurance renewal form you will notice that every year the suggested coverage increases significantly.  For a house it really should not increase more than inflation or slightly above that (i.e. by about ~4% per year) but if you get out your old policy renewal documents you will see that insurers try and increase the coverage by a lot more than that every year
• My insurer over the last 2 years has increased my coverage by 12% per year.  2 years ago I did a detailed estimate of what it would cost to fully replace my house and I estimated that it would cost $250,000.  The insurer is suggesting that 2 years later that this has increased to $311,000.  I do not think that the cost of replacing my house has changed that much
• If the insurer has made large losses in some areas they may seek to recover the cost across their whole book
• You will notice this particularly if there has been a natural disaster in one part of the country, insurers will increase the prices for all homes etc across the country to try and compensate
• Unfortunately there is not a lot you can do about this.

Can I do anything to keep my premium down?

Yes there are a few things you can do to keep it down but you should keep in mind that you will never be able to keep it at the same price.  Things you can do include:

Should I get a be a guarantor for my children so they can enter the property market?

A lot of parents wonder if they should go guarantor for their children so they can enter the property market.  This is not a decision that should be taken lightly as it links you and your financial future to your child for very long time.  The advice below is generic only and this is one time you really should have independent legal advice before you enter any financial decision.

One of the hard things about making this decision is that it is not a purely financial one.  Emotional factors are so much more influential than they normally are and I do not think it is possible to completely objective.  You should definitely have objective advice and this should not come from anyone that has a stake in the process (i.e. NOT your children, their spouses, other relatives, the bank or their attorneys).

The one thing you should realise up front is that you get no benefit from this arrangement.  It is your children that get the complete benefit and you are stuck with any downside.  With this in mind here are a few high level pros and cons for guaranteeing your children's debt so that they can enter the property market.

Benefits of going guarantor / having a guarantee

1. It allows your children to enter the property market
• In many countries property is still a very expensive proposition and many people struggle to save the deposit required to enter the market
• Going guarantor means that you are using your credit worthiness and what you have worked for to enable your children to enter the market and get a foothold
2. They avoid onerous costs such as lenders' mortgage insurance
• In Australia if you borrow more than 80% of the property's value then you are due for Lenders' mortgage insurance which costs ~$10,000 and you never get this back in any form - it is a straight outflow
• Lenders' mortgage insurance exists in some form in almost all jurisdictions
• By going guarantor and using your own credit worthiness it implicitly reduces the LVR (assuming you have your own property) which means they do not have to pay this insurance cost
3. Oftentimes the lower implied LVR will also mean lower borrowing costs
• Interest rates are often tiered meaning that with the lower LVR your children will be paying a lower interest cost than they would otherwise be paying

Risks and downsides of going guarantor

1. If for any reason they are unable to pay the loan you are 100% liable
• If for any reason your children decide not to pay the loan (for example if you have a falling out, they lose their jobs, are taken ill etc) then you are completely liable for that loan
• Everything you have worked for can evaporate very soon and you have absolutely no control over it
2. Saving up for a deposit is a good indicator of your children being able to be financial mature and pay down their debt
• The reality is that if your children cannot save up enough money to put down a deposit on a house (either because they do not earn enough or they are not sensible with their spending) then how on earth are they going to manage the responsibility of having a  home loan
• You should encourage your children to save this deposit so they can do it themselves and give them any advice and lessons you learned along the way
3. You are responsible for any increase in borrowings under the facility

Weekend warrior: A new relationship will always blow out your savings plan

This is just a quick pre-weekend post from me which will touch on the topic of relationships and your savings plan.  If you are already in a relationship it is more than likely that your savings plan has taken this into account, however, if like me you have been single for a while and then starts dating, this tends to blow all budgets and other financial plans out of the water.

Let me say upfront that I would never base my decision to enter into a relationship on whether or not it would impact my savings or investing goal HOWEVER I think it is something that you need to acknowledge and adjust for.

What are the typical expenses? These are just some of the expenses that come with a new relationship:

• Paying for all the dinners initially 
• I know there are different views on this but generally speaking almost every relationship I have been in there is the expectation that the man will pay early on for dates.  I am comfortable with this but it probably is the biggest expense that is unaccounted for
 
• Additional gifts such as birthday presents. 
• Note that I have not yet heard of what consensus is on this topic.  Some people suggest that no matter how long you have been going out with a person that the expectation is there for good gifts early on while others suggest that this is only the case a fair while into the relationship
 
• Other expenses such as fuel costs:
• Do not underestimate the impact of these higher costs.  I have tripled the amount I drive since starting to date which comes with higher fuel costs and car maintenance charges

If I'm trying to save should I try and date 'on the cheap'?

This is one question where everyone is likely to have a different opinion. Personally I believe that:

• Being too cheap can backfire quite badly as no one wants to date a miser
• At the same time all things in life are about expectations and I think that if you are overly extravagant early on that you are setting yourself up for problems later on
• There are plenty of things that you can do which do not require an great deal of money which are just as good.  For example going for something like a romantic picnic instead of a fancy dinner may have the same desired outcome without the associated cost

I think it is a balancing act where you need to adhere to social norms and conventions but realise that if you go overboard you are going to get into trouble later.

Overall

Overall in think that you need to accept that being in an relationship costs more than being single (assuming that you are not living together and saving costs on things like accommodation). 

Obviously I believe the non monetary benefits far outweigh the costs and this is what living is about.

I would love to hear your opinion on this topic.  I would especially like to hear about the female perspective (especially around expectations) and experience so please comment below.