Saturday, October 18, 2014

Do you feel lucky, punk?

It is not quite the quote from Dirty Harry but it does capture the feel. And sometimes, I feel that this somewhat addled version of Harry Callahan's question can be applied quite nicely to investing in the stock market.

A friend, who I can only describe as wise, told me he didn't see this recent market correction coming. He was blind-sided. I have nothing to add other than I didn't see Thursday's and Friday's pop in my portfolio value coming either. I may yet end the year in the black, even after my withdrawals to supplement my retirement income.

Which brings me to the subject of today's post: Barbell portfolios.

A barbell approach to investing puts a whack of one's money in something risky and balances that risk with a whack of money in something with a more solid financial footing. At the start of the year I devised what I felt might very well prove to be a great portfolio for 2014. My imaginary portfolio looked like this:

  • 10% MORL
  • 20% REM
  • 40% XMI
  • 10% XSB
  • 10% VSX
  • 5% XRB 
  • 5% cash placed in TDB8150 earning 1.25%

My imaginary portfolio opened the year with $800,000. Today this has grown to $896,507.30. Very nice and this is after the recent correction put many of my other imaginary portfolios into the red. Many of those others were index-based portfolios using ETFs and came highly recommended by financial bloggers.

I checked the Barbell portfolio figures and they are slightly in error. In reality such a portfolio would be worth a little bit more. The interest paid by the TD Investment Savings Account did not enter into the portfolio software calculations. 


Click on image to enlarge. Five percent cash would not fit on screen grab.

What make this portfolio interesting is that I attended a number of investing lunch-time seminars at the main TD Canada Trust branch in downtown London. Some of these seminars examined ETFs and how to determine which ones gave indications of being winners. 

I tried to question the speakers on REM and MORL, mostly focusing on REM. I've owned REM for years and it has rewarded me handsomely. Not one of the investment experts knew anything about REM or about MORL. I find it difficult to believe they knew nothing about mREITs. Heck, mREITs are discussed on the Business News Network (BNN). Both REM and MORL are based on mREITs. REM is an ETF amd MORL is an ETN. An ETN is an exchange-traded note. ETFs are exchange-traded funds.

Come January, I'm going to rejig this portfolio. It will be interesting to see how the 2015 portfolio performs. Being imaginary, I will take another bold approach. And, if REM every takes a dive, I may pick up some on the dip. REM is said to be a low risk ETF and slowly I am beginning to believe this just might be true despite the lack of a blessing from the financial high priesthood.

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