Friday, January 18, 2013

Preparing for the correction

No, I am not predicting a correction. A correction is coming, and that is just a fact. When it comes is anyone's guess but it will come. That is just the way the stock market works. Some up days and some down.

So far, this year has been a time of climbing values. I am up almost a percent and a half since the year began. I can remove enough money from my portfolio to keep bread on my table and heat in my home and still have a portfolio balance larger than I started with at the beginning of January.

So, why the talk of a correction? Because, a correction will occur and when it does you want to be in a mindset to suffer the temporary setback. My portfolio spreadsheet sees seven percent growth every year as my goal. It factors in a reduction in value of based on my estimated RSP withdrawals which I must make in order to pay my bills in retirement. It then tells me what my portfolio would be worth at the end of the year in a perfect world.

Well, in recent years the world has been meta perfect. I'm up just more than 40 percent over my stated goal. This means that I am prepared for a 40 percent correction. This would simply bring my portfolio value in line with my oh-so-positive predicted value.

If I can play the market well, selling before I bottom, all well and good but I know that historically I have not been good at recognizing bottoms. I tend to buy in a falling market and not sell. I'm always thinking that today is the bottom.

It is funny. I never think that today is the top. There is always more to come. I guess I'm the eternal optimist who believes in the occasional correction. It is a good mindset if one is going to put all their retirement funds into the market.

DPF.UN as a possible investment


Now, is there anything that I am looking at as a potential place to stash a little cash? Yes: DPF.UN on the Toronto exchange. This is a closed end fund selling at $3.77. This is quite a drop from its IPO price of $10. Plus, it often sells for less than its NAV.

So, what attracted me? Well, I saw an article in the Globe and Mail that alerted me to its existence. I've had it on my watch list every since. With DPF.UN offering a yield of 13.8 percent, and with me having some dividend cash available, DPF.UN is looking more and more like a fun little play. I won't put too much in, so I can't lose my shirt (I might lose a button or two), but it promises to give a small but nice boost to my dividend income.

DPF India Opportunities Ord can be found on the Morningstar site.

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