Friday, August 1, 2014

My investments allow me to live

My portfolio is down today. I don't care. Stocks, ETFs and mutual funds are volatile places to put one's money. If you can't take the ride don't get on a financial roller coaster.

I know some really bright people who stay completely clear of the market. If they got up today, as I did, and found they had lost more than five thousand dollars in the market overnight, they would freak.

I can't say I don't pay any attention to the ups and downs of the market but I can say I pay more attention to my dividend earnings. For instance, last month my largest portfolio returned $1566.59 in cash. I haven't checked my other accounts but I assume they performed similarly.

I'm retired and so is my wife. We need money to live. Unfortunately, we both retired early and we took a financial bath because of that fact. My company pension was cut and it wasn't all the good to begin with. Both our CPP payouts took big hits. Without substantial RSP income, we would be in deep trouble.

If I didn't have the dividend income to balance our books, I would not sleep at night. Heck, I'd have a hard time affording the bed and the roof over our head would most certainly change. But, I do have the dividend income. When the market goes down, my wealth diminishes but my income stays essentially the same.

As my dividends pile up, and as I sell under performing investments, I reinvest in more stocks and ETFs that I feel stand a good chance of appreciating over time and will pay me a nice dividend while I wait.

I try not to but too many eggs in one basket; I don't put too much of my retirement funds in any one investment. I can't tell the future. Good companies today can become the bad companies of tomorrow. Never forget the lesson of Nortel.

That said, almost all my investments go up and down. Down times are expected even when they are unexpected. Which brings me to Norbord. NBD is on a downward spiral. Where it will stop I haven't a clue. But, if it drops below $20, I'll buy a little more. Not a lot but a little. I'm not fully invested in NBD at the moment. I thought it was a little expensive and I was concerned about the its recent continuing loss of share value.

On the other hand NBD pays a handsome dividend today and promises to keep it at its present level for the rest of the year. Unlike some other investors, I like the fact that Norbord is willing to cut its dividend if the payout ratio gets too high. I want a healthy company and I see dividends that are set too high as unhealthy.

Norbord shares have lost money but they have not lost their place in my portfolio.

2 comments:

  1. I thought the bleeding was gonna stop for a while after the earnings release. NBD is now my biggest holding and I am not sure if I should load up more if this spiral continues...

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    1. I just found your comment. I had to spend some time in the hospital recovering from emergency surgery and have been unable to get onto a computer.

      Let me start out by saying this is the personal blog of a retired newspaper photographer. I do NOT give financial advice. I simply share my thoughts. If you need advice from a professional, you must look elsewhere.

      Now, I too own a chunk of NBD. My investment began shrinking almost from the day I first bought the stock. It seems to have found a bottom at $20.50 and has now climbed to more than $23. I am still in the red but the pain has eased considerably. (If it should start dropping again, I will consider purchasing more only if it drops below $20.)

      As a retired fellow, I never put too big a chunk of retirement portfolio all into one stock. It is simply too risky for a man of my age and in my position. Never risk what you cannot afford to lose is my rule.

      And never buy something that you have doubt about. Unless something about a stock pick has changed dramatically, I stay with my initial decision to buy and simply hold on for the ride. Sometimes it is bumpy but in almost all cases I have found the stock eventually recovers, rewarding me for my patience with both dividends and capital gains.

      That said, there may be a reason that a stock value has plummeted and for that reason I try not to load up on a crashing stock. I have averaged down but it is certainly not a rule I follow.

      Overall, since the start of the month my portfolio is up nicely despite the NBD losses. I always like to keep the big picture in view. Unless you are too highly invested in one stock, the losses, even large, will not stop you from sleeping at night.

      So, if you are like me, you'll hold on and wait for the coming building boom and the soaring price of the NBD stock. I've got years to wait (if I am lucky). And while waiting you'll pocket a nice dividend which should be safe for at least the next six months or so.

      Cheers and good luck.

      (Around the same time that I bought NBD, I also bought some Aston Hill Financial. AHF has now climbed nicely and the gain there is off-setting the loss incurred with NBD. This is why it is good to hold lots of stuff in various areas of the market. It gives your portfolio balance and increases its resilience.)

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