Tuesday, February 15, 2011

Open letter to a friend on getting out of the market, dated Feb. 15, 2011

Dear D****:

I'm very, very torn when it comes to the market. Since we talked in late December I am up about 7.4 percent. Oh, it has not been a direct line up, it has rarely crashed a lot but rather it has gone into a bit of a holding pattern before taking off again. My mix is working well and my income is now well above my goal of four percent of my retirement RSP stash. If we had a pull-back as large as even 20 percent I would be well ahead of my projections made immediately after I retired.

All that said, if the market continues to climb, I am with you in that I am taking, as they say, some of my money off the table.

I'm going to speak to a couple of bankers that I like because at my age and in my position I cannot see why I cannot put all my money into a mix of the TD and CIBC monthly income funds, a few Cdn., U.S. and International ETFs paying good cash dividends, a good chunk of real estate stuff should be included and when interest rates climb above four percent a few bonds should be added. This should give me a cash return between 4.75% and 5.5% --- almost all of which I would spend. With luck, this income would not diminish during a short correction and over the coming years it should increase as companies increase their dividends. This would help to alleviate the problem of inflation eating away at the true value of my income.

Well, I've got my granddaughter on my lap and must stop. (Lucky you!)

Cheers,
Ken

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