Tuesday, May 6, 2014

Mark McQueen takes another look at O'Leary Funds

For an interesting look at Kevin O'Leary and his foray into the mutual fund business, read:

Do O’Leary’s “Low Risk” retail investors know they’re long junk bonds? by Mark McQueen of Wellington Financial.

Maybe CBC's investigative journalists can look into this.

Do ETFs deliver as promised?

There are a number of sites promoting index investing using ETFs or low MER mutual funds. One site claims that a good portfolio can be assembled with just four TD e-funds.


I used to subscribe to the ETF-based portfolio approach and I am uneasy having strayed quite far from the index investing philosophy. Still, using this Graphing Tool found on the TD Asset Management website, I calculated how the above mix would have worked for me if I had used the approach for my portfolio in retirement. 

I easily beat the above no-brainer portfolio. Easily. And by a very wide margin.

I'm going to stay with my present approach. I watch for stocks recommended by analysts I respect. When the stock being discussed meets my needs, for instance it pays a handsome dividend, I buy a chunk of the action. 

Once I buy, I tend to hold. The stocks that I have sold have, as often as not, continued to climb. Some of the stuff I have bought burned me but the injuries were manageable. One has to cut one's losses, sell and move on. 

So far I am riding more winners than losers. This will change, there is no question, but the bull will stop and the bear will step into the spotlight for the index funds as well. As long as my investments don't wilt more than the ETFs tracking an index, I'll be O.K.

For instance, I bought some D.UN at just above $28 some months ago. It yields almost a hundred dollars every month. It has climbed almost a dollar since my purchase. The dividend amounts to more than 7 percent. Very nice. I really don't care where D.UN goes in the coming months, up would be nice but I can live with down. I'm in for the long haul and the dividend that looks solid at this time.

Name an ETF that delivers such a fine dividend. There are some but not many and most of these high flying ETFs are not on the no-brainer portfolio lists. For instance, I have a small holding of REM, an mREIT out of the States. It has been yielding about 15 percent. 

I don't believe that REM is on anyone's list of  no-brainer ETFs to be used in the building of a proper portfolio. Well, come to think of it, it is on one: Mine.

Saturday, May 3, 2014

The bull roars on!

 I wrote this a few weeks ago (Today is May 3rd, 2014.) and then didn't get around to posting it. It is a little stale-dated but the ideas are still valid. The retirement portfolio I manage, a mix of both my wife's and my savings, is up 5.54% YTD. I am beating almost every benchmark I follow and I am well ahead of almost all the no-brainer portfolios I follow as well.

What I find interesting is that if I had simply put all our savings into the TD Monthly Income I would be up approximately the same amount and I'd be holding a much less volatile investment. I believe there are other balanced funds and ETFs that are performing as well as the TD one. I'm going to have a look in the coming weeks.
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Although I am not going to tell you how to create your personal no-brainer portfolio, I will tell you how some of the ETFs, which are commonly used as building blocks in such portfolios, have faired this year.

XSB: $28.53 on Jan. 2/1014 closed Apr. 17 at $28.66. It is up .35% with a yield of 2.547%.
XSB is used to give a portfolio some bond exposure. The short term of the bonds in this ETF cuts the yield but should increase resistants to a rapid drop in value should interest rates climb quickly.

XIC: $21.23 on Jan. 2/1014 closed Apr. 17 at $22.91. It is up 7.91% with a yield of 2.532%.
XIC is a capped version of an index ETF tracking the Toronto Stock Exchange. I like this capped ETF as opposed to XIU. Why? Think Nortel.

XSP: $21.12 on Jan. 2/1014 closed Apr. 17 at $21.47 It is up 1.66% with a yield of 1.397%.
XSP is often used in no-brainer portfolios to add the exposure to American equities. Personally, I don't like the fact that it is hedged to the Canadian dollar. I'd rather just take my chances with the exchange rate fluctuations. Note how poorly XSP has performed YTD despite the fantastic growth in the American market.

FIE: $7.11 on Jan. 2/1014 closed Apr. 17 at $7.22 It is up 1.547% with a yield of 6.648%. My Royal Bank stock (RY) is up 2.973% and the yield is only 3.868%. How does FIE manage to pay such a large dividend? asy. There is an ROC (return of capital) component in the FIE distributions. I'm not saying this is bad but you should be aware.

My gut feeling is to buy the financial stocks found on action buy lists or are widely believed to be ready to outperform. I haven't back tested this idea but I'm thinking it may be a better course of action that buying a financial ETF and riding the index. I own three financial stocks (RY, BNS, SLF and may add a fourth, FN).

XDV: $24.40 on Jan. 2/1014 closed Apr. 17 at $25.04 It is up 2.623% with a yield of 3.834%.
My RY stock pays a higher yield than this ETF. Throw in some of my other dividend paying stocks and a blend of my personal portfolio picks delivers a lot more bang for the buck than XDV. I own some Crescent Point, I like Inter Pipeline and I have bought Cathedral Energy on dips. All my dividend paying stocks have better yields than XDV and many have out performed it YTD as well.

XRE: $15.38 on Jan. 2/1014 closed Apr. 17 at $16.39 It is up 6.567% with a yield of 4.637%.
I confess I rather like XRE but I have always wondered if I'd be better off just buying the best and leaving the rest when it comes to REITs. To that end, I have not added to my XRE holdings but have instead been buying Dundee REIT (D.UN). Dundee is only up 2.671% YTD but I have hopes. Where Dundee shines is the dividend; It's yield is 7.568% and looks solid. Such a nice dividend is very important in retirement.

Late last year I advised my wife to invest her tax free savings plan in D.UN. Her plan is now up 7.736%. She gets a nice cheque once a month which goes into an investment savings plan paying 1.25%. The cash adds stability to her investment and gives her an immediate source of emergency funds.

I am also watching HR.UN as another good REIT play. I wish I'd have jumped in sooner but it still looks attractive. I plan on buying a few hundred shares on dips.