Saturday, February 22, 2014

Parking investment cash: High-interest savings accounts

Until I attended the TD Waterhouse investment seminar, I had never heard of a high interest daily cash savings mutual fund. Specifically, I'm speaking of TDB8150. This is the mutual fund recommended by the speaker at seminar speaker.

Paying 1.25 percent today, it is better to park your excess cash in this mutual fund that to let it sit idle in your self-directed investment account. The speaker said that an investor could open a TDB8250 mutual fund with as little as $100 dollars. Is this true? I'm not sure. The online info says an initial investment of $1000 is required. Subsequent investments can be as little as $100. Here is a link: TD Investment Savings Account.

Here is the nicest part of parking your money in TDB8150: Buy a stock and the system knows you have the funds tucked away in the mutual fund savings account. The system also knows that you can withdraw the money in as little as 24 hours. Certainly quickly enough to cover any stock purchase as it take three days for such a transaction to clear.

Simply buy the stock and then turn around and sell enough units of TDB8150 to cover your purchase. It is that easy. (This link to the Canadian Money Forum agrees.) One caveat: This may work only when one has a TD WebBroker account. Stay within the TD family and all should be fine but check that all this info is up-to-date before parking any money in TDB8150.

With my TD WebBroker accounts, I've begun parking all the free cash in my wife and my self-directed RSP portfolios in TDB8150. It feels good to be making at least a little money. It is almost enough to protect my cash from inflation shrinkage.

But, I have an RSP portfolio at another bank. I do not have just TD Waterhouse accounts. A little searching on the Web returned the following links with information on similar accounts offered at other Canadian financial institutions. Follow the links and learn all about parking your investment cash.

I learned about a similar fund offered by Scotia Online investing: DYN1300. I have begun parking the free cash in my iTrade account in DYN1300.

Canadian Capitalist: High Interest Savings Accounts at Discount Brokers
Canadian Couch Potato: Parking Cash in Your Portfolio
Educators Financial Group: Investment Savings Account
finiki, the Canadian financial wiki: High-interest savings accounts (HISA)

One last bit of advice. Both the Canadian Capitalist and the Canadian Couch Potato are excellent sites for investment information.

If I find I am leaving the cash parked too long in these funds, I may consider a GIC paying a little more interest.

Wednesday, February 19, 2014

Barbell portfolio up 11.03% YTD

I no longer own any REM, the mREITs ETF offered by iShares in the States. It is my wife who now has an investment in the five digits in REM. With her in, I was out. I disposed of my holdings. No sense both of us getting into an investment neither of us completely understands.

At the beginning of the year, I set up a faux barbell portfolio anchored by MORL at one end and cash held in a high yielding cash account (TDB8150) anchoring the other. That faux portfolio is up 11.03 percent for the year and it is spewing cash at a phenomenal rate. If I had put my retirement funds into my admittedly goofy barbell portfolio, I could sell all today and have enough profit to last three years in retirement.

What surprises me is how all the highly paid advisers with whom I have spoken about mREIT investments have, for the most part, known nothing about them. Absolutely nothing. Some of these advisers handle accounts of a million dollars or more. Try approaching them with anything less and they walk.

An investor with a million dollar portfolio would be up more than $111,000 since January 1, 2014. If these we-have-our-finger-on-the-pulse-of-the-financial-world experts had put their clients into my barbell portfolio, they would be heroes today. Heck, they could rebalance for safety and lock in the accolades.

Of course, I'm not all that good at telling the future either. The difference is that I don't hold seminars telling folk what will happen in the financial world in the coming months. Remember, I'm the fellow who bought Labrador Iron Mines (LIM) and now has pennies left from his original investment. I fully expects even those pennies to evaporate unless there is a miracle. No, I cannot tell the future.

I am also the fellow who bought B2 Gold Corp and has watched it climb. My BTO gains are erasing some of my losses. I put a big chunk of my wife's tax free savings plan funds into Dundee REIT (D.UN). Her profits have climbed into the four digits in just a few weeks. Very nice. (The experts told me to stay away from REITs.)

Do you have an adviser? If you do, you should be up at least 2.08 percent for the year. Why do I say that? Well, I track a faux portfolio that I call the Lazy Dude porfolio. It contains: XBB, XRE, FIE, XDV, XMD and a big wollop of cash sitting in TDB8150. The Lazy Dude is up 2.08 percent.

Some day I may structure my own portfolio along the lines of a Lazy Dude portfolio. The Lazy Dude would never get caught up in the excitement of buying Labrador Iron Mines. If you want a goofy investment, why hang the badge on REM when the market offers the likes of LIM?

Saturday, February 1, 2014

Link to article on MORL

When I used the screener function offered by my self-directed investment software, I discovered MORL, an ETN leveraged product with a yield of about 24 percent. Talk about warning bells going off in one's head. It was a genuine "Danger, Will Robinson" moment.

If you're curious about MORL and would like to know more, here is a link:
MORL: Stupid Income Investment of the Week.

I confess that I own what very well might be simply a more conservative version of the MORL ETN: REM from iShares in the States. I've lightened my investment in REM recently as the American Fed appears to pulling back from its recent monthly buybacks of mortgage backed securities.

Just how risky is MORL? I took this question to an investing seminar at our local TD Waterhouse branch. The TD rep had no experience with either REM or MORL. He did not see REM as particularly frightening in the short term. But, he made it clear, his understanding of the workings of either investment was essentially nil.

At the end of the month, a rep from iShares is going to be speaking at the TD Waterhouse office. I am going to be there. By then I will have almost two full months of tracking a barbell based portfolio using MORL and REM as one side of this extreme investment approach. Today my imaginary barbell portfolio, 15% MORL, 30% REM, 50% XMI and 5% cash is up 6.73%. That means this portfolio of just more than $800,000 now sports $48,400 in unrealized gains and about $5840 in cash income.

If one had really put their portfolio into this oh-so-dicey portfolio, what would be the safe thing to do at this point? Should I rebalance at the first of each month and put any growth above inflation into a far safer investment? Should I try and bring a modicum of risk-aversion to the table? I'm going to stay the course until I collect the yield from another payday and then I think I will rebalance.

It is interesting to note that my solid TD Monthly Income portfolio paid about $1300 and I reinvested that income back into the fund. In reality this would be preformed as a DRIP. Backward testing has shown that removing the money needed to live every December is the best approach when one has a portfolio composed of only the TD Monthly Income fund.

My TD Rocking Chair portfolio, composed of a mess of TD e-funds, also delivered some dividends. The Canadian Bond Index-e paid out almost $1300, which was reinvested in the fund. I have not backtested the following but I am going to let the yield accumulate over the year and remove an amount to live in December.