Monday, September 16, 2013

An ETF and a stock: Both have my interest

Note: This is simply a blog covering the thoughts of a retired photojournalist trying to make ends meet. This is not financial advice. For financial advice see a financial adviser.
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Recently the U.S. ETF REM hit a low of $11.60. REM has been popular of late with income investors because of its yield: better than 15%. I picked up a few more shares.

REM is not an investment for the faint of heart. This American iShares ETF is composed of companies involved in the U.S. mREITS business. The 'm' stands for mortgage. These companies borrow funds at a low rate and then loan out the money at higher rates. They profit from the spread. As REITS they pass something in the neighbourhood of 90% of this money on to their investors.

With quantitative easing coming to an end there is some question how this change will affect the bottom of line of companies involved in the mREITS business. I admit I haven't a clue. For this reason I haven't put a lot of money into REM. But I have held this ETF for some time now and as I pocket the yield I am building up a cushion from any envisioned financial pain.

Buying at $11.60 has lowered my average cost per unit. This makes me happy. This morning REM was selling for $12.51. This makes me even happier. A little REM, bought at the right price, can do wonders for one's portfolio income.

With REM purchased and climbing out of the buy-me range, I am turning my interest toward Pinecrest Energy.  PRY is selling in the 40-cent range. Clearly PRY has fallen on some difficult times. The question is: Are the difficult times coming to an end? Is a turn-around in the cards . . . or in the business plan?

The thinking of many of the analysts is "yes." The new target price for PRY ranges from a low of about to 55- cents to as high as a dollar. I'm getting my funds ready and if PRY takes another dip, say to 37-cents or lower, I'm in.

I like to think of myself as an ETF investor but the truth is my few stock holdings have given my portfolio a nice, and much appreciated, boost. Still, what will I do with my earnings if PRY should perform? I'll buy an ETF, XUT, the iShares utilities-based ETF, if it is still selling for less than $19.

If  I can get my income up during the good times, I am in a better position to weather the downturns. A few dividend cuts in the future will be of no consequence. I'll still be paying my bills.

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