Thursday, August 11, 2011

Tracking your investments and more


I'm retired. My wife is sorta retired; She works the lunch hour at a neighbourhood daycare centre.

We both have RRSPs and when my wife retired she was given control of the retirement fund her employer operated for her. When I was bought out, I had two retirement plans shifted to my control. That's a total of five plans we must track, if you're counting.

Now, some of these plans are quite small. One given to me by Sun Media is worth about $250. Other plans hold our main retirement investments in retirement. Tracking five plans could be complex but it isn't. I have a Globe and Mail "My Portfolio" account.

I played with the Sun Media/Canoe portfolio tracker but was not impressed. The Globe and Mail got it right. For instance, dividend income and DRIPs are automatically calculated and added to "My Portfolio". Maybe this is now being done by SM/Canoe, I don't know, I haven't played with their portfolio tracker in years. (Maybe someone from SM/Canoe would like to comment on the strengths of their product?)

The Globe's "Watchlist" feature is a really handy. It will update while you watch, if the markets are open. I used the list to follow some ETFs for weeks before committing to invest. Click on the name of an investment and it brings up a screen showing a rich summary of everything related to the stock, ETF or mutual fund in question. Again, the quote shown is updated frequently, although it is delayed 15 minutes. Of course, this does not apply to mutual funds which are updated daily after the close of the markets.

I've been getting some assistance with managing my retirement money from a financial adviser at the ScotiaBank. I simply print out "My Portfolio" and bring it to the bank. One sheet details all our investments, my wife's and mine.

And best of all, the basic "My Portfolio" is free.




Wednesday, August 10, 2011

If you can be an adult, charge everything

Surfing the Web I came across some advice from P.J. Harston, at one point the national editor-in-chief of 24 hours and the former Sun Media national business editor. I love how so many financial writers at daily papers have made their careers from bundling widely accepted ideas and presenting them as insights.

When it comes to managing your money, P.J. advises his readers to "get rid of those high-interest department-store credit cards." Use a pay-as-you-go card that you pre-load with cash, he says. For this advise I'm supposed to buy a newspaper? If I followed P.J.'s advice, it would cost me a minimum of a couple of of dollars a year. This is money I cannot afford to remove from my budget.

Flooring: planks and installation on card
You see, I'm retired. I don't have a lot of money. I squeeze every penny. I have discovered that charging almost everything is an easy way to increase the limited buying power of my pension. I charge my telephone bill, my groceries, my car costs. I'm having my roof replaced and I'm charging that. When I had hard wood flooring installed, replacing the worn wall-to-wall carpet, I charged that.

What card do I use? Well, at the moment it is a Canadian Tire Master Card Options Elite. You can't apply for a CTC elite card; you have to be invited. If you charge enough using the CTC card, I think it is about $20,000 annually, CTC contacts you to tell you you've been declared an elite card holder. Your membership is assessed regularly and if your card usage drops, CTC may drop you from the program.

Before this I used a GM Visa card but GM put limits on how much reward cash could be used in the purchase of a small GM car. It was a great piece of plastic when you could save a decent down payment for a GM vehicle. Since this is no longer possible, I have shelved the card.

There are, of course, other cards offering rewards. Look around. You may find one that better answers you specific needs.

Charging everything makes budgeting very easy. One monthly bill details the vast majority of my purchases. My bills peak each December and January with Christmas expenses and there are smaller blips on the months that I must make home and car insurance payments.

I track my expenses using Excel and a spreadsheet downloaded for free from the Web. The sheet is designed specifically for tracking and budgeting income and expenses. I've been using this approach for a few years now. Today there are few surprises. I know where my money goes.

Since you are only charging stuff that you would buy anyway, your costs don't go up but go down thanks to the rewards.

To make this approach work there is only one thing you must do. You must act like an adult. If you can't afford it, you don't buy it. A credit card is not for running up debts. Put big items on the card for a few weeks, when the bill arrives you pay the piper. To pay off a roof or a floor installation you may have to take out  a low interest bank loan but you'll enjoy a few weeks of interest free money and earn some rewards for doing so. Never carry an unpaid balance on a credit card. That is not something that adults do.


Tuesday, August 9, 2011

On buying low or timing the market

I try to buy low but one look at my portfolio makes it clear that I often don't. This should come as no surprise as it is impossible to know the future.

They say, "Don't try to time the market." That sounds like downright foolish advice. One has to try. Just don't be too upset when you fail. And don't try too hard.

Surely, you were not surprised when the market corrected. There have been signs for months that the market was losing momentum. I took the weakness as a time to dump almost all my mutual funds. They were not doing all that well and they were not delivering the dividends I need in retirement.

I kept only two mutual funds: the TD Monthly Income fund and the CIBC Monthly Income fund. I have approximately 15 percent of my portfolio in each one. Both these funds hold their value rather well in a severe down market. This is not surprising as both are nicely balanced funds with a good chunk of bonds in each. (The CIBC fund pays a better monthly dividend while historically the TD fund has performed a little better overall.)

Today I tried to time the market; I bought on the bounce. I bought the following:

  • AUSE WisdomTree Trust Austrailia Dividend Fund --- Dividend 6.84% --- Average Risk
  • CPD Claymore S&P/TSX CDN Pref Share (ETF) Units --- Dividend 4.84% --- Low Risk --- 5 Star (Performs more like a bond investment than an equity one.)
  • REM iShares TR FTSE NAReit MTG Plus Capped Index Fund --- Dividend 10.46% --- Low Risk --- 5 Star
  • TD Monthly Income Fund --- Dividend 3.12% --- Low Risk --- 5 Star (I buy this for safety.)
  • XRE iShares S&P/TSX Capped Reit Index Fund --- Dividend 5.32% --- Average Risk --- 4 Star
  • ZUT BMO Equal Weight Utilities Index ETF  --- Dividend 5.54% --- new ETF but has been in the 1st/2nd Quartile

I've been watching these investments for sometime.  I liked them all for a variety of reasons for my retirement portfolio. Today they all were priced for sale, for sale to me.

Tomorrow they may be even better priced. I may have bought early. I know they cost more today than they did yesterday. So, I bought 'em at a price I wanted, for a price I've been waiting for, and I'm not going to worry.

Hey, you can't time the market.

Do I feel lucky?

Dirty Harry's famous line can be said to more than just wrong doers looking down the barrel of Harry Callahan's Magnum .44. It's also a good warning to those looking to invest in mutual funds. Both situations are fraught-with-danger. This is not always clear to young, naive investors.

I had a chance to think about this this past weekend. I was at a family reunion and a young woman told me how she had just put aside some money in an RRSP. She was encouraged to buy a growth fund as she was in her thirties and needed to play financial catch-up, according to her adviser.

Now, I am not a financial adviser. I'm just a retired photographer. But, to the suggestion that she needed to buy a volatile growth fund, especially at this time in this market, I say: "Balderdash!"

The money had only been invested a few days and already the young investor was down in three digit, red territory. Yesterday may have doubled her losses. I'm sure she is feeling very uneasy about her investment right now. She wasn't told that what can grow can also shrink. She bought a growth fund because she was promised growth. Instead, she got instant shrinkage.

What's in a name? If it's "growth", it's a warning and not a promise. During the big downturn of 2008/2009 some growth funds lost 60 percent or more of their value. This not the scale of loss that young investors expect from a fund carrying the "growth" label.

So, what investment would I have suggested to the young woman? Answer: the TD Monthly Income Fund. Play with the calculator posted on the TD Asset Management website, as I did, and see what results when you punch in your own numbers.

For my example, I invested a hypothetical $15000 in the TD Monthly Income in January of 2008. I made no further contributions. I picked that date as it is before The Big Crash. I compared this investment to a similar investment of the same amount made at the same time and placed in the TD FundSmart Managed Aggressive Growth mutual fund. As you can see, aggressive growth translated into aggressive shrinkage.


Click or double click on the graph for an enlarged view.
FYI, my personal portfolio has earned better than 15 percent annually since I retired in January of 2009. That takes into consideration both The Big Crash and the recent global correction. I do not consider my portfolio to be growth oriented but rather it is centred on dividend producing investments.