I was just checking my trading accounts today, and I noticed that US dividends (I hold in my Canadian US Dollar investment account) are subject to a 15% withholding tax by the US government.

Foreign (including U.S.) dividend-paying equities are not eligible for the dividend tax credit, so the RRSP is a good place to put these investments. This would also be a good place to hold bonds for the same reason.

Of course, you get a credit when you file your taxes in Canada.

But if you hold these stocks in your RRSP, they are not subject to the same rules.  See this post.

It makes sense as a trader for me also, because I end to keep more "buy-and-hold" and high paying safer dividend stocks in my RRSP (which I trade much less often), and in my non-registered account, I go after more growth stocks and do much more swing trading.

A good rule of thumb when looking at your stock portfolio is to ask yourself, would you buy this stock (that you currently own) at the current market price?

If not, why are you holding it?

Many investors rationalize why they are holding a stock, often dependent on their own buy price, which to the market is completely irrelevant.  If you wouldn’t buy it again today, sell it!

A zero-sum game is a concept based on game theory.

Basically a zero-sum game is one in which a participant's gains or losses are directly balanced out by another participant's gains or losses. In other words, for every "win" there is an equivalent "loss."

One of the things I really like about entreprenurship is that entrepreneurs create value out of nothing. This is the opposite of of a zero-sum game, and one of the reasons I hold the belief that entrepreneurs are the drivers of a society.

A zero-sum game is all about probability. And in any game worth playing, you can find an edge, or learn more to produce greater results. That's what education is.

I've been taking the stock market more seriously over the last couple of months. I opened an account with Questrade.  Questrade is for Canadians only, and one of the cool things is that you keep USD and physical gold in your self-directed RSP.  It's been quite a learning experience. I've had some silly losses and some good gains. And I have no doubt that I'll master how to make money in the markets. But in some of the books I've read, it's clear that the feeling of zero-sum is there in the marketplace. That's why people panic and sell at the wrong time, and rationalize their bad decisions to themselves. And as I've been buying and selling, it's become more clear that there are buyers and sellers who profit or lose based on how they react to the market.

Now investing isn't a zero-sum game exactly. It would be if there were not innovations in business. For example, in the very short-term, it is almost a zero-sum game. And in flat markets, it is also essentially a zero-sum game. In bull markets it is not. I've read that the stock market grows an average of 10% per year. (Now that does not count for inflation, nor does it suggest that those gains are steady year in year out.) But over time it tends to grow.

The key to the stock market is just to increase your probability of a winning trade. (And of course to understand risk management.) But that's about all. If you can do that, you can win BIG even in a zero-sum game.

This is different from the FOREX market, which as far as can tell, really is a zero-sum game. Because currencies are priced in relation to one another (or the USD), there is not innovation that really makes this market any better odds than a zero-sum game.

And lastly, I thought about lottery tickets. Personally, I think lottery tickets are a voluntary tax. But they are WORSE than a zero-sum game. If every dollar that went in got paid out it would be an even zero-sum game based wholly on chance. (And there is no way to increase your probability, so in some ways it's worse than gambling.) But it's NOT. It's a huge money-maker for the government at the state or federal level. And nobody complains about paying too much tax in lottery tickets.

So, how do you feel about investing? The lottery? Zero-Sum Games? Feel free to disagree.

It’s funny, looking back, how some things lead you to where you are right now.

And for me, Phil Town is kinda like that.

I wonder if you have any experiences like that.  I’ll let you in on one of mine so you know what I mean.

As Marie and I were wrapping up selling our houses in Toronto, we popped into Chapters one day.  (Chapters is the Canadian version of Barnes & Noble.)  And I remember I bought Seth Godin’s new book, All Marketers Are Liars.  (Which by the way is about how to tell authentic stories.)

And as we were leaving, I kept getting drawn back to a white book with a big blue title across the whole page.  Now the reason this was strange was that I had never bought a new book on investing in stocks — and I had never read one of the used ones I had picked up previously.  And I kept putting it down, then circling back to it, reading a bit more, and repeating.

Needless to say, I bought the book and it started a whole new path in my life.

And the book was Rule 1 by Phil Town.

It was one of those books that I both savoured and devoured simultaneously.  Really, really great book.

And 6 months later, I saw Phil Town live…. but that’s another story.

So Rule 1 promises to show you how to an annualized compounded 15% return by spending only 15 minutes a day.  That’s the premise.  And it delivers.  And from what I’ve learned since, it has been the perfect starting point.  And hey, if you’re going to be successful you’ll absolutely NEED to learn how to invest your money at some point in the game.  There’s simply no way around it.  It’s one of those skills that everyone needs and few people choose to develop.

Now the math scared me a little bit.  He talks in the book about doubling numbers in your head as he goes through examples.  Yeah right. That was my only hangup, but I chose to pay for a service that gives me clear information rather using the free sites like MSN Finance that he talks about in his book.

As you may or may not know, Marie and I are really great learners.  When we want to learn something, we know how to find and learn the information.  We dig into it obsessively and passionately, and we quickly put it into practice so we internalize the information.  (Right there is a big key to being successful as the economy changes moving forward.)

You need to be careful who you get information from.  Especially on the internet, there are lots of people who give information and advice without really knowing what they are talking about.  And you need to read between the lines to see if you should trust their advice or leave it.  This is why Amazon allows all users to easily RATE if a reviewers comments are useful or not.  But many people are highly skeptical of things like 15% returns, and you need to be aware that given the proper education, it is achieveable.  In fact, you could do even better than that.  I know this is kind of a long point, but be very careful taking advice from people who are only giving an opinion OR have said they have “tried” something.  If you’re going to be successful in anything there is a whole lot more than try.

If you think you can read Rule 1 by Phil Town, and stop there, you’re chances of success are slim.

But if you are an active learner, then this is a wonderful place to start.

By the way, see if you can read through the comments over at Amazon and see if you can pick out some people who you should listen to and some people who you should not.  It will help you make these distinction quicker in the future.

That’s all for now!