Monday, July 28, 2014

Boldness plus diversity makes my portfolio successful

I own REM, the iShares Mortgage Real Estate Capped ETF. It has been a solid investment. My present holdings are up 11.91% and I'm enjoying a 13.38% dividend. Yet, I have never spoke with a financial adviser who knew anything about REM. When told it was a play on American mREITS, all immediately advised me not to have anything to do with REM.

My own personal digging convinced me that REM was an ETF on which I was willing to gamble despite having only a one star rating. I've now owned REM off and on for years. Each time I have sold, I have got out with a small profit. I figure, between dividends and the profitable sale of units, I have gotten more than 60 percent of my original investment back.

I don't have too much money in REM. A little more than one percent of my portfolio sits in the little ETF. It was a small gamble that has paid off handsomely. More than three percent of my dividend income comes from REM.

I have far more of my portfolio in conservative investments like the Canadian banks for example. My Royal Bank stock and Bank of Nova Scotia shares have performed very nicely and are paying dividends that one can bank on. I'd say about twenty percent of my dividend income comes from Canadian Banks.

Then there's the oil patch. Sunoco, Crescent Point and other companies involved in gas and oil extraction and transport. More than ten percent of my dividend income from this group of companies.

I also have a couple of mutual funds. One from TD and one from CIBC and both are monthly income funds. Almost a full thirty percent of my dividend income is supplied by these two funds alone. I hate paying the MERs  but they are relatively light hits for Canadian mutual funds. Another nice feature of these two funds is that they don't tend to dip all that much during periods of severe market correction.

And then there are REITs. I read a piece by a very well known and very well respected retirement fund manager who said own REITs -- lots of REITs. Retirement funds need income and REITs are cash cows. Another big chunk of my dividend income comes from Canadian REITSs.

If the above doesn't look all that well diversified, you are right. Oh, I have some utilities and some insurance companies and ETFs that invest in foreign markets but I really need more diversity. For that reason I have bought some Norbord. The dividend is too high for my liking but even if cut it will be a nice addition to my dividend income.

Since buying Norbord, it has wilted. I have lost oodles on this one. It happens. All investments don't immediately head for the stars. Am I going to sell? No, I don't think so. I have a very small investment in NBD. I would be comfortable with even more money sitting in the OSB producer. If it drops a full twenty precent from my entry point, I'll consider buying more.

I didn't just buy NBD. I bought diversity. I believe it is an investment that will eventually reward my patience. In the meantime, Norbord will pay me a nice dividend in return for my willingness to wait.

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