I did some math concerning our ESP...

[KAG]

so I spent 4 hours making a very detailed investment/retirement plan, and this was the end result...

Amount Percentage length totals MTHLY @ 5%
$1,135,488 5% 10 years $1,849,590.3 $7,233.45 / Month
$1,135,488 8% 10 $2,451,433.43 $9,587.16 / Month
$1,135,488 10% 10 $2,945,163.44 $11,518.06 / Month



$1,135,488 was the amount I'd have by May 1st 2023 in ESP doing the full 20%, Assuming no gain/loss in stock price (or average 0 gain/loss through dollar cost averaging). taking it out every quarter and investing it with an average return of 8% a year. In 12 years I should have $1,135,488. I’ll be 47, and I can stop doing ESP at this point - unlikely.
Then I take that amount and invest it for another 10 years and I figured 3 different strategies showing 3 different outcomes.

The MTHLY amounts are derived from taking each calculated amount and investing it at something guaranteed at 5% (might be high) and that is my monthly pre tax retirement "paycheck". I could retire at 57.

These figures exclude stock options/RSU and profit share. Based on 77.5 hours a month, no overtime, or training outside the blocking window.

After doing hours of compound calculations, I have a new found respect for what it can do.
For anyone interested in doing their own calculations here's a great online tool.
http://math.about.com/library/blcompoundinterest.htm

PS, I know the graph is hard to read, I cant get it lined up right

[shankdown]

KAG was doing math? Well, there's a first time for everything! I thought smelled the smoke from a brain short circuiting.

[KAG]

[Red1]

This is the beauty of the ESP that many fail to realize. In the long run it can be very profitable, and thanks to the wonders of dollar cost averaging almost impossible to loose. Unless the company disappears, at which point you have a lot more problems ( however your investment loss can be mitigated, so long as you sell your shares every know and then.. think average price). The other great thing about the ESP is that you control it. Unlike a pension plan which it tailored for the middle ( and as we have witnessed in the last few years was too risky), you can manage the money how you or your investment advisor see fit.

[skyhigh]

The problem with the ESP is this, I'm in my 3rd year and still have not been able to sell a single share. Simply because when I started the stock was really high and the ESP purchases have now made my "average" breakeven price of $14.40. As you all know the stock hasn't changed much in the last 6-8 months hovering around $10. Good thing I didn't take the advise of others and borrowed money from a bank to supplement income in the first year in order to purchase full ESP. Would be really hooped right about now. Some people even figured out that the stock would have to devalue more than 50% in order for you to lose money but don't forget that you have already paid your taxes to the government so depending on your tax bracket, it would be closer to 30% for you to lose money.

[sarg]

The problem with the ESP is this, I'm in my 3rd year and still have not been able to sell a single share. Simply because when I started the stock was really high and the ESP purchases have now made my "average" breakeven price of $14.40. As you all know the stock hasn't changed much in the last 6-8 months hovering around $10. Good thing I didn't take the advise of others and borrowed money from a bank to supplement income in the first year in order to purchase full ESP. Would be really hooped right about now. Some people even figured out that the stock would have to devalue more than 50% in order for you to lose money but don't forget that you have already paid your taxes to the government so depending on your tax bracket, it would be closer to 30% for you to lose money.

6 months ago you could had sold your stock at a "loss", which is a capital loss for tax purposes. If you had done so and reinvested in RBC which was about $26/share at the time, now its about $49, you would have a dividend paying stock and a potential capital gain. When or if you sold the RBC stock the "loss" on your Westjet could be used to offset the gain on your RBC saving you tax on the capital gains.

The only time selling below your average cost is total loss is if you take the cash to spend.

[skyhigh]

Good tip Sarg. Thanks

[complexintentions]

Or, you could buy a Lotto 6/49 ticket and plan on winning. That way, the money you make by winning the lottery would help make up for the money you lost on the ESP stock.

Just another tip!

Sheesh.

Don't get me wrong, using a loss to offset tax on capital gains is an obvious solution but if it were that easy to pick winning stocks I guess you wouldn't have lost money in the first place...?

[North Shore]

KAG, can you actually realise 8% return, though..

[Red1]

Sky high you haven't really lost anything yet. Every share you buy today drives your average cost down even further. So yes the stock is hovering around $10 right know, it just means you are buying a lot more shares. If the stock stayed around $10 for eternity, your average price will also hit $10. You will break even in the long run. WestJet stock is not a buy and hold stock, it's way to volatile. It's a stock in play, a roller coaster so to speak. Take advantage of the highs( like the one it hit this spring where it flirted with $14-15), and remember you are buying a lot of cheap shares in the troughs. ride the wave dude.

[KAG]

North shore, I quess thats the million dollar question. The few books I've read mention 10% as a target, but I think that could be hard. I've also read about ETF's (index traded fundes) that are lower risk, have considerable less fee's and have a 30 year average of 9%, so I low balled it. As with everything, time will tell.

[sarg]

Or, you could buy a Lotto 6/49 ticket and plan on winning. That way, the money you make by winning the lottery would help make up for the money you lost on the ESP stock.

Just another tip!

Sheesh.

Don't get me wrong, using a loss to offset tax on capital gains is an obvious solution but if it were that easy to pick winning stocks I guess you wouldn't have lost money in the first place...?

Complexintentions, it wasn't a stock tip it was a suggestion to look at the market as a whole not just 1 stock. Westjet's ESP makes it easy to pick the stock that you're going to buy, there's only one choice.

To make it simple for you to understand here's the math for market close March 11th, if Sky high move the value of 1,000 shares of WJA:

1,000 WJA X $14.40 (cost)=$14,400
1,000 WJA X $10.70 = $10,700
$10,700 / $26.11 RY = 409 shares
Market close this Friday
409 RY X $46.74 = $19,116.66
1,000 WJA X $10.37 = $10,370

Sky high would have a "loss" of $3,700 on his sale of WJA, if the sale took place on market close price Friday that gain on RY(Royal Bank) would have beeen $8,416.66 for a net gain of $4,716. The return on the Bank of Montreal would have been about $2,800 more.

Do you think it was that hard to realize 6 months ago when the major Canadian Banks were trade at 1/3 to 1/2 their 52 week high that there were some bargains to be had? The Canadian Banks were not in as bad a situation as the US banks, once doom and gloom passed they returned to realistic value.

Here's a real tip for you, lots of risk still but the potential for bigger return or a total loss. Look at Citigroup, their trading at 1/6 their 52 week high, if they get out from under TARP they'll take off. By the way on March 11th Sky high could have bought 6,948 shares of them, sold 4,000 on April 15th for $15,880 and still have 2,948 shares worth $8,165.96 as of market close Friday.

As Red1 said WJA is not buy and hold stock you need to look to see if their is better places to put the money to work for youself.

[Red1]

I couldn't agree more Sarg. There are way too many people at this company holding on to their shares looking for that big score.. you might as well let it ride on black. I would love to see it hit big again, I just think there is a lot more valuable plays out there at this time.. and some of them pay you to wait.

[KAG]

The one thing i'm going to do is adjust the percentage I buy when the stock price is high, I'll buy less if, if/when it's low like it is now, I'll buy more - full 20%, and hopefully top up rest with profit share.

[sarg]

The one thing i'm going to do is adjust the percentage I buy when the stock price is high, I'll buy less if, if/when it's low like it is now, I'll buy more - full 20%, and hopefully top up rest with profit share.

Hey KAG,

What are you going to use to determine that the stock price is high?

[Mustard]

KAG has got it all figured out. The stock market has been around for a while,I'm surprised nobody has thought of that before........just buy when the price is low.

Tell us the truth now. Do you still write a letter to Santa Claus every year?

[KAG]

Sarg,
I'm a conservative investor. Anything over $20 in my mind is a high price. That will change as we grow, quarterly reports, what state the economy is and so on.
Right now our price is low (as proven by the $10.00 ish floor our stock hit), great time to buy. It's hard to pass up on a low price and 100% return on investment. Then again I bet I said the same thing at $23.00.
Time will tell.

As for having it figured out, hardly. I can only guess as well as the next guy (and usually not even that). I'm just starting to learn about the markets, stocks and how to best play them as a low to moderate risk investor.

Mustard,
Yes I do write to santa each year. This year I'll be asking for a higher class of contributions from my peers on AvCanada.

[The Raven]

KAG,

It's been two and a half years since you did your retirement plan. How's it working out so far? Are you still buying shares at these depressed prices?

I'm not trying to stir the pot. Financial planning is a bit of a hobby of mine. I'm truly interested to know if you are still on track.

The Raven

[Bede]

I made an Excel spreadsheet that calculates all this stuff, when you can retire, and accounts for inflation, cost of living, etc. I had it as a google spreadsheet open to everyone and all the YYZ porters got a link for it. Unfortunately, some people couldn't grasp the "don't change the fields" and I got tired of fixing it everyday.

I wanted to upload the spreadsheet to AvCanada, but it won't allow that extension. Any suggestions?

[bandaid]

I made an Excel spreadsheet that calculates all this stuff, when you can retire, and accounts for inflation, cost of living, etc. I had it as a google spreadsheet open to everyone and all the YYZ porters got a link for it. Unfortunately, some people couldn't grasp the "don't change the fields" and I got tired of fixing it everyday.

I wanted to upload the spreadsheet to AvCanada, but it won't allow that extension. Any suggestions?

Send a message to Joe and see if he is interested.

[New Flyer]

This one is pretty good.

https://www.vancity.com/Planning/Retire ... ntPlanner/

[watermeth]

bede check your pm

[KAG]

It would be going great if only I could keep my hands out of the cookie Jar
I had actually gotten out of the ESP for about a year ( I needed the take home pay) then I used a bunch to pay for wedding and such. So ive been regretting Not contributing as I'm 6 months doing all in again. This time it's easier to handle as I'm bringing in more net. In June it comes on line. I have a new plan using a fixed mortgage deduction and investing the rest. Assume 0 stock growth and 5% dividend I should retire very well.

As for our stock price IMO it's going to be flat if not sliding a bit with the rest of the markets for some time. To be honest I'm not worried- I'd be much more concerned if I was buying at $20+ right now.
Ask me again In a few years, hopefully I'm further ahead

Merry Christmas

[The Raven]

"It would be going great if only I could keep my hands out of the cookie Jar"

I suppose that is one advantage of a pension plan. It won't allow you to raid the cookie jar.

Hope you get it back on track. I will check back in 2 years.

The Raven

[KAG]

Yeah, it's hard not to the first few years, that's why I recommend to new hires to only do what you can afford till the higher pay scales.