Monday, September 28, 2015

The stock market: Get in early, stay in and learn

Those who bought CPD some years ago have never seen a complete recovery.

 I bought my first stock before I was even a teen. Through my life I have been in and out of the market a number of times. When I retired I felt I had a good handle on investing. It may have been a good handle but it wasn't an excellent one. My units of CPD underline the holes in my knowledge.

I knew that the iShares ETF CPD (based on the Canadian Preferred Share Index) could lose value but I really had not contemplated how fast and how far it could drop. Today CPD is at $12.45 and yielding 5.4 percent. I never contemplated losing a quarter of my investment in such a relatively short length of time.

If I had stayed in the market and used that time to learn as much as possible, I might have dodged this loss. I'd like to say there's a bright side to all this, and there is, but I think I should refrain from making any firm pronouncements. It is time to stand back and drink in what has happened and to realize that more unseen problems may yet pop up. Preferred shares are not what they once were. The dividend income from CPD is more fragile than many might believe.

All that said, my CPD pumps out enough money to help me in my retirement. I will continue to hold, continue to enjoy the yield and continue to learn -- to learn stuff I should have learned forty years ago.

Here is a link to an excellent article on preferred shares in Canada: Preferred shares are not as attractive as they seem by Jin Won Choi. I could be in for a rough ride over the next few years.

One good thing, my portfolio is, for the most part, held inside a RIF. As the portfolio value drops, the minimum amount that I must remove also drops. The dividend income has held up much better than the overall portfolio value. This means I am able to live on my retirement portfolio yield while waiting for the eventual return of the bull. My portfolio will recover.

Now, I am finding myself actually rooting for some more stock prices to pullback. I've kept some money on the sidelines and I'd like to pick up some bargains, especially in the utilities sector.

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