Thursday, December 8, 2016

Is Index Investing Really the Best Answer?

I've been badly burned investment-wise by financial advisers. I didn't give a lot to the pros, thankfully, but the percentage of money they lost was amazing and frightening. This is not to say all financial advisers are poor; they are not. Nor are the ones who are wrong today necessarily going to be the ones who are wrong tomorrow.

All that said, among the best bets in the investing arena is the TD Monthly Income fund. The minimum investment in a hundred bucks and the minimum you must add at one time is the same. It is an easy fund to own and in which to invest. (The Canadian one has a proven track record. I'm not as enamored with the U.S. based version.)

At one time the TD Monthly Income fund held only Canadian investments but today it has about six percent in the States and another two percent in Latin America. I'm sure the broadening of the fund's investment vision to include a little from outside Canada is a good move.

At the beginning of the year I created ten educational portfolios using TD supplied software. I wanted to track how various investment theories performed in real life. And I wanted to know if I would be better off simply putting my money into some of the popular index-fund-based portfolios pushed by some very bright people.

It is now almost a year since I started my investigation. At this point, my personal portfolio is the clear winner. I hold a lucky mix of financial stocks, REITS, ETFs, mutual funds. I've made some poor decisions, which I regret, but my portfolio is still quite a way into double digit growth for 2016 and that is after removing a big chunk of money in order to live in retirement.

The red line on the graph to the left shows how one assertive portfolio based on index investing is performing this year (2016).

The green line shows how a mix of two TD Monthly Income funds, both D-series, and a couple of ETFs representing REITs and utilities, performed.

My personal portfolio may hold the top position today, comfortably above the green line, but it has not always been that way. It has been, I believe, the most volatile of the three approaches this year. For this reason, I look at the two lines on the graph and wonder if either will prove to be a better approach to investing in retirement. Only time will tell.

And speaking of time, a year is not enough time to earn bragging rights. For this reason, I am not going to go into any detail as to the exact make up of any of the portfolios. After two full years have elapsed I am going to take a long, detailed look at my test portfolios and reveal my findings then.

At the moment it appears an index portfolio is not a bad place to park one's money for awhile but don't make the mistake of parking your brain at the same time. Stay alert. Keep thinking. You may find a better way to invest your nest egg --  like a TD Monthly Income fund.

Friday, November 11, 2016

iShares REM: Reverse Split

I was surprised today to see that my Rem shares are now worth more than $40 (US). The last time I looked those shares could be bought for something in the neighbourhood of $10 (US). Why the jump? A reverse split.

A reverse split of 1-for-4 took effect before the market opened this past November 7, 2016. Each REM share was converted to one quarter of a (New) share in the popular iShares Mortgage Real Estate Capped ETF. In other words, if you owned 800 old shares, you only own 200 new shares today.

Why the reverse split? I have no idea but with the new president-elect Donald Trump led government in the States, an increase in interest rates may be in the offing. If so, an ETF like REM, with its high 13%-plus dividend yield, will come under downward pressure. The new value gives REM room to fall. (No matter who was elected, rates will go up at some point in the future. Of that, there is no doubt.)

If REM rallies next week, I may sell. When the dust settles, after the inauguration in early 2017, I may buy back in if the price is right.

Monday, October 24, 2016

Long on D.UN

I took a long position when it comes to Dream Office REIT. That means I own the units. Yes, units. Not shares. Dream Office is a trust and not a corporation. And to be totally accurate, D.UN pays monthly distributions and not dividends. All that said, I often say I own shares in D.UN and enjoy its generous dividend.

But whether I say units or shares, or enjoy the monthly distributions or dividends in my retirement, I am living on the income and I am living well.

Have I lost money on D.UN? Yes. It has been a nasty ride and yet it has been a comfortable ride and I am staying on board. The bumpy ride only delivers a truly damaging jolt when jumping ship and selling the stock, I mean units.

D.UN is selling today for $17.02 and delivering $1.50 a year in distributions. That's a yield of 8.8%. That's good. But my average cost in my TFSA portfolio is $20.52. My yield calculated on my original investment is 7.3%. Not as good as before, but still quite a good yield. (I only need 4% to live, at the very most, that means 3.3% of the income is cycled back into my portfolio to be reinvested.)

So, despite losing a four digit sum, I am O.K. I'm not exactly happy but I am O.K. I'm retired. I need income to live. D.UN is providing that income and the business looks solid today after taking the huge hit to its value some months ago.

I am long and I am staying long. I am not selling my Dream Office REIT investments anytime in the near future. I'm in for the long haul.

I originally became interested in D.UN when it was selling for about $29. I bought a few shares and I have purchased more as the price declined. The yield today is about 5.2% calculated on the oh-so-high value of those original units. I bought D.UN for the income and I need something in excess of 4%. Even my original units still pay their way and earn their position in my portfolio.

Saturday, September 24, 2016

Sold my OSB (Norbord) again

I have now sold my OSB (Norbord) shares for the third time. Twice I dumped them all. I am OSB free at the moment. I think Norbord may have the ability to climb even higher but I worry it will take a bit of a breather. I don't want to be caught holding the stock if a correction should appear while the stock is depressed.

In the past 12 months I have watched my TFSA grow by more than 22.5%. My posted chart does not reflect the more than $2100 removed from the plan in order to pay expenses encountered in retirement.

And I must admit that much of my wonderful return is thanks to one holding, my Norbord position. I can't say it has been easy beating the benchmark. More luck than smarts. I also have a big chunk of my savings in Dream Office REIT and it has had a terrible year. The collapse in the oil price took an awful toll on the value of its Calgary and Western Canada holdings. But D.UN pays a nice dividend which looks to be relatively secure now and so I hold on and enjoy my monthly payments.

If OSB should drop down below $31, I may consider buying in again. I believe it will have a pop in the dividend in the future. Because of this, it would not be the worst stock to get stuck holding.

Friday, September 2, 2016

Dream Office REIT

Dream Office REIT (D.UN) has had the stuffing kicked out of it. The collapse in the price of oil and the subsequent disintegration of the Calgary real estate market took a big toll on D.UN. And I have taken a big hit as well.

So, what to do. I am going to do what I have done so often in the past. I'm going to hang in there. But, I may make one change in my approach. I may try some day trading of D.UN as I have done with Norbord (OSB).

Because I like D.UN, if something goes wrong and I find myself stuck with some shares, I'll just hold. No problem. I'll sell them in the future when the time is right. In the meantime, I will enjoy the dividend.

I'm not sure that the present dividend can be trusted. The recent drop in the value of the REIT units may put the present dividend under pressure. Time will tell.

Norbord and dividend

I've been holding Norbord (OSB) off and on for more than a year. I've done nicely with the stock and I'm still quite enamored with it. Many analysts are predicting a target value far higher than today's share price. I'm not sure I see OSB hitting the highs some analysts are forecasting ($37 and $38) but I am confident that it will climb from today position with any luck at all.

What intrigues me about Norbord is its dividend potential. For many years it paid a very handsome dividend and then it began to decline. When Norbord merged its operation with Ainsworth, the dividend was cut to 40-cents a year. Well profits are now up and the synergies Norbord envisioned are all gelling. The bottom line for Norbord is solidly in the black, or so I believe.

My question today is: "How long until Norbord bumps up its dividend?" I'm beginning to see myself buying and selling Norbord for a little trading profit and then holding it for the dividend in the future. The profits made during this trading period will soften the losses, and help me ride out the lows, that will inevitably happen.

The market never climbs forever. Corrections are always lurking just around the corner.

Monday, August 15, 2016

Sold Norbord, bought Norbord, pocketed the profit

I still like Norbord but I sold my shares recently for $33.35. A friend sold some of his for, I believe, $33.75. It just seemed like a good time to take some profits and it was. The price dropped below $32 today. I bought back my shares for $32.01.

Some of the financial fortune tellers I follow have declared target prices for Norbord well above today's closing. Are they right? Maybe. I wouldn't bet on it, though. One guesstimate has Norbord hitting $37 Cdn. or more. I can't see myself holding on long enough to see that lofty value but I'm holding a few hundred shares again and I hope to ride 'em up the charts for a few weeks or more.

Who knows, maybe the dividend will increase at some point in the future and Norbord will be again a dividend-paying leader with a solid place in my portfolio. If not, I'll just keep buying and selling OSB and making a nice profit. This is the second time that I have played this sell high and buy back low game with Norbord.

Now, to look at my EWS units. I think it is time to take my profits on this one and move on. EWS is an iShares ETF tracking the Singapore stock market. I am well into four digit profits but with the increase in unit value the yield is now simply too low as a percentage for a fellow in retirement. I can do better. I must do better. My retirement income demands it.

Addendum: Today I saw this report on housing starts in the U.S. Starts are up and so are OSB prices. It looks good for Norbord in the short term. I'm feeling good about my OSB holdings.