Monday, March 31, 2014

Looking to simplify my portfolio

How do I best simplify my portfolio? I have followed the so-called lazy portfolios, mixes of ETFs or index funds. These supposedly do great and do it effortlessly. Until recently, my portfolio always beat those no-brainer portfolios. Sadly, for me, since late 2013 my portfolio has lost steam and has fallen behind almost every benchmark that I have been following.

In chatting with another retiree, I discovered that I am not alone in longing to have one of those almost mythical no-brainer portfolios. I want one of those couch thingee-majigs where you stuff your money in, sit back and reap the profits. Nice, if it works. But is this goal realistic?

To find out I created a ghost portfolio composed of 30% XIC, 40% XBB, 20% XSP and 10% XIN. I picked this mix as it was an ETF mix that was being suggested as a good no-brainer ETF-based portfolio ten years ago. I then compared this ghost portfolio to the TD Monthly Income.

$500,000 sitting in the TD Monthly Income would have grown to just shy of a million dollars in the intervening ten years. I don't believe the ghost portfolio came anywhere close to matching the TD mutual fund. This is not the outcome expected. I'd give the exact numbers but for a number of reasons I will just say, "Do the math. Thanks." I'm confident in my mutual fund number. I calculated it two ways using two different sources of historical numbers. The results were within a couple of hundred dollars.

What killed my ghost portfolio was the poor showing of the two hedged ETFs -- XSP and XIN. I've noticed this in the past and have come to believe that these hedged investments do not make the grade.

If you enlarge the following chart, you will see how much better the unhedged XUS has done over the past six months compared to the hedged XSP. Yes, I know that the Canadian dollar has been dying lately and that this is the perfect time for an unhedged U.S. fund to shine, but from studies that I have read, when oodles of time are calculated into the equation, XPS still wilts thanks to the hedging.

O.K. The original ETF mix did not perform well. I was lucky to have struck out on my own. Still, I cannot shake the feeling that what I enjoyed was luck. I don't know if I feel that my luck will continue. I'm going to keep looking for the holy grail of investing. The no-brainer portfolio that sets the benchmark for success.

Wednesday, March 5, 2014

Two investments and a possible third

I've been following Dundee Real Estate Investment Trust (D.UN) and H&R Real Estate Investment Trust (HR.UN) for some while. I like both as do a number of analysts. Both REITs support dividends big enough to help dig themselves out of any dips in the market that may appear in the future. D.UN has a yield of 7.76 percent and D.UN yields 6.13 percent.

I already own quite a number of D.UN units. If I add at this time, I will dump some of my early holdings as soon as they climb back into the black. Having pocketed a nice yield, I will walk away from those first shares with a smile on my face.

The third investment I have been watching is Surge Energy Inc. (SGY) This one is a toughie. The biggest negative is I understand that this is not a profitable company at this time. I tend to steer clear of companies operating in the red.

So why am I watching Surge? Two reasons: one, a number of respected (by me) analysts like Surge and are rating it a "Strong Buy." The other reason is the yield. SGY is delivering 9 percent today. This is one of those do-you-feel-lucky-punk investments. I wouldn't put money that can't be lost into Surge but I have a little wild money sitting on the sidelines. It may be time to put that money in the game.

Of course, the wild card today is Ukraine. If tensions continue to mount in the euro-asia country, markets may hit a rough patch. If they do and if one or more of these  three becomes a bargain, I'll be in with both feet.