Thursday, December 8, 2016

Is Index Investing Really the Best Answer?

I've been badly burned investment-wise by financial advisers. I didn't give a lot to the pros, thankfully, but the percentage of money they lost was amazing and frightening. This is not to say all financial advisers are poor; they are not. Nor are the ones who are wrong today necessarily going to be the ones who are wrong tomorrow.

All that said, among the best bets in the investing arena is the TD Monthly Income fund. The minimum investment in a hundred bucks and the minimum you must add at one time is the same. It is an easy fund to own and in which to invest. (The Canadian one has a proven track record. I'm not as enamored with the U.S. based version.)

At one time the TD Monthly Income fund held only Canadian investments but today it has about six percent in the States and another two percent in Latin America. I'm sure the broadening of the fund's investment vision to include a little from outside Canada is a good move.

At the beginning of the year I created ten educational portfolios using TD supplied software. I wanted to track how various investment theories performed in real life. And I wanted to know if I would be better off simply putting my money into some of the popular index-fund-based portfolios pushed by some very bright people.

It is now almost a year since I started my investigation. At this point, my personal portfolio is the clear winner. I hold a lucky mix of financial stocks, REITS, ETFs, mutual funds. I've made some poor decisions, which I regret, but my portfolio is still quite a way into double digit growth for 2016 and that is after removing a big chunk of money in order to live in retirement.

The red line on the graph to the left shows how one assertive portfolio based on index investing is performing this year (2016).

The green line shows how a mix of two TD Monthly Income funds, both D-series, and a couple of ETFs representing REITs and utilities, performed.

My personal portfolio may hold the top position today, comfortably above the green line, but it has not always been that way. It has been, I believe, the most volatile of the three approaches this year. For this reason, I look at the two lines on the graph and wonder if either will prove to be a better approach to investing in retirement. Only time will tell.

And speaking of time, a year is not enough time to earn bragging rights. For this reason, I am not going to go into any detail as to the exact make up of any of the portfolios. After two full years have elapsed I am going to take a long, detailed look at my test portfolios and reveal my findings then.

At the moment it appears an index portfolio is not a bad place to park one's money for awhile but don't make the mistake of parking your brain at the same time. Stay alert. Keep thinking. You may find a better way to invest your nest egg --  like a TD Monthly Income fund.

Friday, November 11, 2016

iShares REM: Reverse Split

I was surprised today to see that my Rem shares are now worth more than $40 (US). The last time I looked those shares could be bought for something in the neighbourhood of $10 (US). Why the jump? A reverse split.

A reverse split of 1-for-4 took effect before the market opened this past November 7, 2016. Each REM share was converted to one quarter of a (New) share in the popular iShares Mortgage Real Estate Capped ETF. In other words, if you owned 800 old shares, you only own 200 new shares today.

Why the reverse split? I have no idea but with the new president-elect Donald Trump led government in the States, an increase in interest rates may be in the offing. If so, an ETF like REM, with its high 13%-plus dividend yield, will come under downward pressure. The new value gives REM room to fall. (No matter who was elected, rates will go up at some point in the future. Of that, there is no doubt.)

If REM rallies next week, I may sell. When the dust settles, after the inauguration in early 2017, I may buy back in if the price is right.

Monday, October 24, 2016

Long on D.UN

I took a long position when it comes to Dream Office REIT. That means I own the units. Yes, units. Not shares. Dream Office is a trust and not a corporation. And to be totally accurate, D.UN pays monthly distributions and not dividends. All that said, I often say I own shares in D.UN and enjoy its generous dividend.

But whether I say units or shares, or enjoy the monthly distributions or dividends in my retirement, I am living on the income and I am living well.

Have I lost money on D.UN? Yes. It has been a nasty ride and yet it has been a comfortable ride and I am staying on board. The bumpy ride only delivers a truly damaging jolt when jumping ship and selling the stock, I mean units.

D.UN is selling today for $17.02 and delivering $1.50 a year in distributions. That's a yield of 8.8%. That's good. But my average cost in my TFSA portfolio is $20.52. My yield calculated on my original investment is 7.3%. Not as good as before, but still quite a good yield. (I only need 4% to live, at the very most, that means 3.3% of the income is cycled back into my portfolio to be reinvested.)

So, despite losing a four digit sum, I am O.K. I'm not exactly happy but I am O.K. I'm retired. I need income to live. D.UN is providing that income and the business looks solid today after taking the huge hit to its value some months ago.

I am long and I am staying long. I am not selling my Dream Office REIT investments anytime in the near future. I'm in for the long haul.
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I originally became interested in D.UN when it was selling for about $29. I bought a few shares and I have purchased more as the price declined. The yield today is about 5.2% calculated on the oh-so-high value of those original units. I bought D.UN for the income and I need something in excess of 4%. Even my original units still pay their way and earn their position in my portfolio.

Saturday, September 24, 2016

Sold my OSB (Norbord) again



I have now sold my OSB (Norbord) shares for the third time. Twice I dumped them all. I am OSB free at the moment. I think Norbord may have the ability to climb even higher but I worry it will take a bit of a breather. I don't want to be caught holding the stock if a correction should appear while the stock is depressed.

In the past 12 months I have watched my TFSA grow by more than 22.5%. My posted chart does not reflect the more than $2100 removed from the plan in order to pay expenses encountered in retirement.

And I must admit that much of my wonderful return is thanks to one holding, my Norbord position. I can't say it has been easy beating the benchmark. More luck than smarts. I also have a big chunk of my savings in Dream Office REIT and it has had a terrible year. The collapse in the oil price took an awful toll on the value of its Calgary and Western Canada holdings. But D.UN pays a nice dividend which looks to be relatively secure now and so I hold on and enjoy my monthly payments.

If OSB should drop down below $31, I may consider buying in again. I believe it will have a pop in the dividend in the future. Because of this, it would not be the worst stock to get stuck holding.

Friday, September 2, 2016

Dream Office REIT

Dream Office REIT (D.UN) has had the stuffing kicked out of it. The collapse in the price of oil and the subsequent disintegration of the Calgary real estate market took a big toll on D.UN. And I have taken a big hit as well.

So, what to do. I am going to do what I have done so often in the past. I'm going to hang in there. But, I may make one change in my approach. I may try some day trading of D.UN as I have done with Norbord (OSB).

Because I like D.UN, if something goes wrong and I find myself stuck with some shares, I'll just hold. No problem. I'll sell them in the future when the time is right. In the meantime, I will enjoy the dividend.

I'm not sure that the present dividend can be trusted. The recent drop in the value of the REIT units may put the present dividend under pressure. Time will tell.

Norbord and dividend

I've been holding Norbord (OSB) off and on for more than a year. I've done nicely with the stock and I'm still quite enamored with it. Many analysts are predicting a target value far higher than today's share price. I'm not sure I see OSB hitting the highs some analysts are forecasting ($37 and $38) but I am confident that it will climb from today position with any luck at all.

What intrigues me about Norbord is its dividend potential. For many years it paid a very handsome dividend and then it began to decline. When Norbord merged its operation with Ainsworth, the dividend was cut to 40-cents a year. Well profits are now up and the synergies Norbord envisioned are all gelling. The bottom line for Norbord is solidly in the black, or so I believe.

My question today is: "How long until Norbord bumps up its dividend?" I'm beginning to see myself buying and selling Norbord for a little trading profit and then holding it for the dividend in the future. The profits made during this trading period will soften the losses, and help me ride out the lows, that will inevitably happen.

The market never climbs forever. Corrections are always lurking just around the corner.

Monday, August 15, 2016

Sold Norbord, bought Norbord, pocketed the profit

I still like Norbord but I sold my shares recently for $33.35. A friend sold some of his for, I believe, $33.75. It just seemed like a good time to take some profits and it was. The price dropped below $32 today. I bought back my shares for $32.01.

Some of the financial fortune tellers I follow have declared target prices for Norbord well above today's closing. Are they right? Maybe. I wouldn't bet on it, though. One guesstimate has Norbord hitting $37 Cdn. or more. I can't see myself holding on long enough to see that lofty value but I'm holding a few hundred shares again and I hope to ride 'em up the charts for a few weeks or more.

Who knows, maybe the dividend will increase at some point in the future and Norbord will be again a dividend-paying leader with a solid place in my portfolio. If not, I'll just keep buying and selling OSB and making a nice profit. This is the second time that I have played this sell high and buy back low game with Norbord.

Now, to look at my EWS units. I think it is time to take my profits on this one and move on. EWS is an iShares ETF tracking the Singapore stock market. I am well into four digit profits but with the increase in unit value the yield is now simply too low as a percentage for a fellow in retirement. I can do better. I must do better. My retirement income demands it.

Addendum: Today I saw this report on housing starts in the U.S. Starts are up and so are OSB prices. It looks good for Norbord in the short term. I'm feeling good about my OSB holdings.

Monday, July 25, 2016

Performance of my London Life RRSP raises many questions

Do you have a story concerning saving for retirement and receiving either good or bad advice from an expert? I'd love to hear some stories detailing my readers' experiences: both good and bad. Now, to tell my story.
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My London Life RRSP has lost more than half its value over the past 16 years.

I'm puzzled. I invested more than $4000 in a London Life managed RRSP some 16 years ago. Today that investment is worth less than $2000.

According to the inflation calculator posted online by the Bank of Canada, just to keep pace with inflation my investment should be worth $5673.25 today. But it's not. It's only worth $1841.49. I shake my head with puzzlement. How is this possible?

I'm retired. All my RRSPs have now been converted to RRIFs except for one: My London Life RRSP. All my RRSPs are now delivering a tidy income, all but one: My London Life RRSP.

If I had put the original sum in a simple monthly income fund, something like the TD Monthly Income fund (TDB622), I'd have $14,836.97 today. My money would have grown by more than 350% rather than losing more than half its value. And how much risk would I have assumed to achieve such stellar returns? Not much, actually. TDB622 is a relatively low risk investment.





I'm not an investment whiz. But even my self-managed portfolios are easily outperforming my London Life investment. My portfolio is the purple line in the graph posted below. Clearly, I am doing O.K. I am up 15.52% YTD. My London Life RRSP YTD is up 6.9%. I'll grant you that 6.9% isn't all that shabby but I must still ask why an amateur-run, self-directed account is delivering more than double the YTD growth of an investment managed by experts?

Note: Last year was a bear for me. This year's gains are erasing last year's losses.

I'm going to call my contact tomorrow at Navigator Financial Corp, which has connections to London Life Wealth Management. I'm going to ask the following questions. I'll post the answers. Stay tuned.

  1. If my original $4196.71 investment had only grown with inflation, it would now be worth $5673.25. But it's actually only worth $1841.49. How is this possible?
  2.  If I had put the original sum in the TD Monthly Income fund, I'd have $14, 836.97 today. Why didn't London Life match the simple and relatively low risk TD fund?
  3. I've called and I've driven to London Life for in-person talks. Nothing that I have done has improved this investment's growth. What do I have to do to get a little fire burning under this thing? (I say little fire because it is too late for a big fire. Too risky.)
  4. I'm not an investment whiz. But I'm up 15.52% YTD while my London Life RRSP YTD is up only 6.9%. Admittedly, this isn't bad but why is an amateur-run, self-directed account out-performing the London Life experts?
  5. How much annual income could I realize today from this investment?
  6. When can I cash this investment in and get back a minimum of 75% of my original investment? Sadly this 75% figure is calculated on a 16 year old dollar amount and not on the inflation adjusted value.

 

Called London Life


I called London Life and I had a chat with an advisor. It was not the fellow I asked for. He was in a meeting. The fellow on the other end of the line began talking about risk-free investments. I protested that no investment is risk-free.

To be fair, investments claimed to be risk-free do exist. Risk-free investments return the money originally invested plus accumulated interest. A GIC is considered a risk-free investment. I held GICs in the '70s and during two of those years inflation beat the rate of return. I know what it feels like to hold risk-free investments while watching the buying power of those investments shrink. And, as most of us know, recent historically low interest rates have resulted in GICs failing to keep abreast of inflation.

Admittedly, it is rare but GICs can lose buying power. GICs are not totally free of risk. This is a fact and when a client makes it clear that they do not consider any investment risk-free, a sensitive advisor drops the phrase and moves on.

But a few bad years is not my biggest complaint with GICs. It's the good years. They just are not good enough, at least not for me at my age. As I mentioned, back in the '70s when I started saving for retirement, I put my RRSP money into GICs. If I had continued to do so, I'd have been O.K. If one starts early and contributes regularly and generously, the GIC approach can work. But there were years that I didn't have the money on hand to make the generous contributions necessary. After decades of saving, it was clear that I was not going to have enough cash on hand at retirement. My safe, no-risk approach was going to guarantee failure.

At this point, I'd like to refer you to an article on the CPA (Chartered Professional Accountants of Canada) Website. It states that historically GICs have bested inflation by about 2.92% annually. That's not bad and, when teamed with a generous annual RRSP contribution, it is easy to see how this approach could work.

But it is not just the generous contributions that make the GIC approach work. It takes time to allow compound interest to work its magic. One needs to save a lot, save often and do so over a long period of time: decades. My London Life contribution was neither generous in size nor made early in life. I was less than nine years from retirement and I my retirement nest egg needed to grow. I needed to take on some risk.

I cannot fault London Life for making a risky bet for me but I can find fault with the chosen fund. I believe it was a fund that London Life eventually dropped from their line-up. It was a certified financial dog. What puzzles me is why after making a very poor decision at the start, my London Life investments did not recover smartly. Why did my investment not rebound from the initial early financial pounding?

I have been retired since January 2009. My wife and I need money to live and we have to live with risk. We have little choice. If I put money into GICs, I would watch my principal shrink every year. The RIF withdrawal rules would see to that.

If my wife and I put our money into an annuity paying a fixed amount each year, it is easy to see inflation shrinking the buying power of that payment by half or more during our lifetimes. During the first 30 years of my life, inflation ran at about 4% annually. Do the math. That rate if inflation is a killer when it comes to buying power.

I would be willing to look at a creative proposal when it comes to managing my retirement funds. I've talked with a number of financial advisors. Not a one has put anything down on paper. Not a one has addressed my concerns. I would not be surprised to learn that a mix of financial vehicles could meet our needs while minimizing the risks but as long as the financial advisors at banks and insurance companies come across as cousins to car salesmen rather than as experts in a complex financial mine field, I'll muddle along on my own, thank you very much.


The Last Word


I had a chat with Jim Collins, a partner at Navigator Financial Corp. He was gracious, understanding and talked like an adult. He didn't flinch when it came to discussing the problems with my account. For once, no mealy mouth phrasing. He was willing to call a spade a spade and, even better, to call a loss a loss. I feel confident that Mr. Collins is going to try to wrap up this failed investment account in a manner acceptable to all. I wish Mr. Collins good-luck.

Wednesday, July 13, 2016

These funds and ETFs have captured my interest

I am on the trail of the Holy Grail. This is a somewhat well worn path blazed by experts in investing like the fellow behind the Canadian Couch Potato blog and others of his ilk. I am following, but not in the footsteps, of some very knowledgeable investors. I am veering off the path at my peril.

That said, my portfolio is not doing badly but it does not follow the index approach as closely as it should. I have gotten burned once but that was a third degree financial burn. I was caught with minimal exposure to the American market when it soared to new heights. If I'd been following the advise of the experts, this would not have happened.

That said, I have this nagging feeling in my gut that a portfolio of index funds and index ETFs is not for me. To that end, I have been following imaginary portfolios, often created to mimic those advised by others. And these portfolios have not, for the most part, impressed me when it comes to results. They all come with impressive back stories but  . . .

Today I am taking care of grandchildren and so all I am going to do is post a graph of the investments that have caught my interest: TDB622, TDB902, CBD, XRE and XUT. More on this at a future date.

Click on the image to see a large, easy to read, graph.

Tuesday, July 5, 2016

The search for the "easy" retirement portfolio

To read, click on image to enlarge.

 Both my wife and I are retired. I have a defined benefit pension. My wife doesn't. Because I took a buyout and retired early, I was forced to accept about a 25 percent cut in my pension. I also had to file for my CPP early, as did my wife. We were desperate, we needed that money to live, and for that reason we both took double digits cuts to our CPPs.

Thankfully, we were both savers and have lived our lives relatively frugally. We both had RRSPs to supplement our retirement income. We bought banks stocks, REITs, and some oil patch companies that paid nice dividends. We also bought some ETFs and three mutual funds.

Today, our portfolio is a real dog's breakfast. When we retired, I had an allocation plan based on a mix of equity and bond ETFs. It was nicely diversified with Canadian, American and International investments. First, I lost confidence in bonds and dumped our holdings. Then the Yanks looked like they might renege on their country's debts and I sold off the bulk of my American investments. The remaining portfolio is but a shadow of its former diversified self.

I was proud of our portfolio when I retired but today I am embarrassed. I've got to do better. I've got to work out an allocation and adhere to it. To that end I set up ten research portfolios using the portfolio manager software supplied by TD Waterhouse. It comes as part of the self-directed investor package.

Today my dog's breakfast portfolio is up Year To Date (YTD) 5.93%. If it keeps this pace for the remainder of the year, I will be up 11.63% and that's after removing 4.4% of the value of our portfolio at retirement to cover living expenses. We need that annual withdrawal. The money from our portfolio is what keeps the wolf away from our door.

I must confess that I have already scrapped one of the portfolio approaches I was investigating. It was created using screener software designed to pick stocks based on your personal investment goals. The pure stock portfolio that resulted was way too volatile. There is simply no way I could own such a wild beast.

The four portfolios in which I have the most interest are the following:

  • One: composed of just three ETFs: CBD, XRE and XUT
  • Two: composed of just two TD D-series funds: TDB3085, TDB3086
  • Three: composed of just four TD e-funds: TDB909, TDB900, TDB911, TDB902
  • Four: composed of just three Vanguard ETFs: VAB, VNC, VXC

  • The first portfolio is mostly a fund of funds, also called a wrap, with its yield supplemented by a couple of traditional, income paying ETFs.
  • The second portfolio is a mix of two TD D-series monthly income funds. One is Canadian and the other U.S. The TD D-series funds have slightly lower MERs than the comparable non-D-series funds.
  • The third and fourth porfolios are based on assertive portfolios found on the Couch Potato Website. The fellow behind the Couch Potato style of investing is quite knowledgeable. I am quite in awe of this chap. He knows his stuff. Anyone looking at running their own portfolio would be wise to visit his site and read his posts.

And now, without further ado, here is how the four portfolios mentioned are doing half way through the year. And remember, I took a big chunk of money out of each portfolio, an amount in the five digits, to meet living expenses.

  1. Portfolio One is up 5.1%.
  2. Portfolio Two is up almost 1.0%.
  3. Portfolio Three is down by 3.1%.
  4. Portfolio Four is down almost 2%.

It is still too early to say much about the results but there are some interesting things going on. One, the fund-of-funds anchored portfolio is doing quite nicely. CBN, iShares Balanced Income CorePortfolio Index ETF, is an entire portfolio in one ETF. Lots of experts in the financial investment community mock the fund of funds approach and from some back testing I've done, I can understand their doubts about the strategy. Yet, it, with a little help, is besting the other test portfolios.

Two, the portfolio based on two mutual funds is in the black while the ETF based portfolio is in the red. There seems to be almost universal agreement among savvy investment advisors that one should never pay the high fees charged by mutual funds. The high MERs are portfolio killers, it is said. I have always questioned this as funds like the TD Monthly Income have enviable track records. I have always theorized that one could do a lot worse than simply investing in the TD Monthly Income fund. It's mix of bonds and equity has been a proven winner with relatively low volatility over the years that I have owned it.

The two assertive Couch Potato portfolios are both in the red. I'm sure some would argue that using assertive portfolios in this inquiry is an error and they'd be right. Assertive portfolios are not designed for the retired. But, and I see it as a big but, my own assertive portfolio, my dog's breakfast composed of almost all equities, is the leader at the moment.

My goal? I want a simple retirement portfolio that is a little on the assertive side, delivers enough in dividends to help me pay my bills, and doesn't suffer from undo volatility. I don't think I'm asking too much.

Six months into this experiment is not enough time to say much. Come back at the start of 2017 and I may post more complete information on my test portfolios. If I feel I have learned enough, I may tell you that I am selling all and reinvesting in my "easy" retirement portfolio.

Saturday, June 18, 2016

Good investment advice is often boilerplate.

Good investment advice is easy to come by. It is everywhere. My local paper often has a tip or two or carries an article on a local investment wizard. The Internet is awash with investment blogs. And all the advice is good. It must be as it so often is the same advice whether it is in the daily newspaper or on the Web. If everyone agrees, it must be right, right?

Not really. Good, dead-on accurate, investment advice is actually tough to come by. There are lots of general rules, such as keep your costs low. Everyone seems to agree these are good rules to follow.

Find enough folk saying the same thing and you can be forgiven for beginning to think that you have discovered the core rules for investing. Just remember: "Rules are made to be broken."

For instance, check out the post by Farnoosh Torabi, a well-known and well-respected personal financial expert. Read her post here: Investing Series. Torabi gives some good advice but it is boilerplate. It is good advice that can be found in numerous spots around the Web. But is it right? Absolutely right? Can you take this advice to the bank, as they say. Torabi writes:

If you want to build an income stream . . . take a look at dividend income investing [using index funds.] . . . How do you choose . . . an index fund . . . Simple. . . . Look for the one with the lowest Management Expense Ratio (MER).

Like I said, boilerplate. It is good advice but it is not the whole story. I wish I could tell you the whole story, but I can't. But I can point out that basing all your decisions on the lowest MER is not necessarily a winning strategy.

For instance, check out the graph below. See how well the TD Monthly Income fund (TDB622) performed compared to a fund I found on one of Torabi's lists. I chose the TD Managed Index Balanced Growth Portfolio-e (TDB852) for this comparison because it seemed to be the closest index fund in her list to TDB622. The fund with the higher MER, TDB622, paid out $20,000 each December as did the Torabi e-fund. But, and it is a big but, TDB622 finished with $114,365.44 more value.

The lesson here is don't let low MERs stop you from checking under the hood. There is more to investing that keeping costs low. There is also trying to ensure that income is high.

Click on image to enlarge. TD Monthly Income is green. e-fund is blue.
I'm going to end this post by confirming that I have put my money, and my wife's money, where my mouth and my blog post is -- we have a fair chunk of our retirement savings in TDB622. At least we did. I believe the new D-series monthly income fund, TDB3085, is actually the old TDB622 but with a lower D-series MER. I switched out of TDB622 and into TDB3085 some months ago.

Like I said, Torabi's advice was good. It just may not have been the whole story. Just like she advised, I chased the lower MER offered by the D-series fund. But I didn't let the still somewhat high fee stop me from investing. I'm betting my monthly income fund will deliver good growth while incurring less volatility. Time will tell if I am right.

Wednesday, June 15, 2016

Dream Office REIT

I like Dream Office REIT despite the fact that the stock has gone down considerably since originally attracting my attention. Luckily I have bought more on the big dips. Because of my recent buys, I'm not doing all that badly on the investment.

Dream Office REIT cut its dividend and the price has tumbled considerably from the highs it had reached a little more than a year ago. Today I feel the dividend is safe and the unit price, I believe, will climb at some point in the future. I don't have a crystal ball.

And what exactly is the yield today? Answer: 8.11%. That's a very nice yield. And if I'm right, and it's safe, that is a yield on which a retired person can do some living or, at least, pay some bills. If D.UN stays depressed, under $19, and I am able to assemble a little cash, for instance selling my shares of Norbord Inc. (OSB), I'm going to buying a little more D.UN.

Remember, I am not an advisor. I am just a simple retired fellow trying to make ends meet. Before buying Dream Office REIT, check with your own financial advisor and get some expert advice.

Monday, May 30, 2016

What are others saying?

Retirement 'Bucket' Portfolios for Vanguard Investors

Christine Benz, Morningstar's director of personal finance, writes in the linked article:

The bucket approach to retirement planning is straightforward and makes intuitive sense. The basic idea, as envisioned by financial-planning guru Harold Evensky, is that a retiree holds a cash component alongside a well-diversified, long-term portfolio consisting of stocks and bonds. Knowing that money for near-term spending needs (one to two years' worth of living expenses) is parked in cash helps the retiree cope with the fluctuations that will inevitably accompany the stock/bond portfolio.

I have stuff to plant, ferns and things, so I will read the Benz article carefully later. But, I am posting this link so that anyone finding this post can continue along without me.

I might add that I am doing the bucket thing to a certain extent already. I try to keep enough cash on hand in my various RIF accounts to keep my books balanced for the coming 24 months. The goal is to prevent being forced to sell equities at an inopportune time simply to meet financial demands.

Update on ongoing portfolio testing

Date: May 30th, 2016

My portfolio is up 8.07% year to date. All I can say is, "Wow!" In the years since my retirement, I have let my portfolio drift farther and farther away from my carefully designed allocation model. That said, my portfolio has performed nicely but it has done so in a manner that does not bode well for the future. I'd like to take not a little money but a little risk off the table. My portfolio has a flying-by-the-seat-of-my-pants feel. Not good even if it is working. Too much luck is in play.

So, at the beginning of the year I embarked on quest, a search for the perfect no-brainer retirement portfolio. I borrowed freely from respected sources and created ten dream portfolios using the portfolio manager software offered by TD WebBroker.

Before I reveal how my test portfolios are performing, I must warn you. This test has only been going since January 1st. That is only five months. That is not enough time to make any firm decisions. The markets are a wild ride and a good test needs to run for years and not just months. That said, the results are interesting and there is one thing that I have learned and I will get to that later. Now, to the YTD results.


  • Couch Potato assertive portfolio based on TD e-series funds . . . . . . . . . . . . . .Up 0.28 %
  • Couch Potato assertive portfolio based on Vanguard ETFs. . . . . . . . . . . . . . . .Up 1.09 %
  • My personal try at a no-brainer portfolio using iShares . . . . . . . . . . . . . . . . . . Up  5.98 %
  • My personal try at a no-brainer portfolio using Purpose ETFs . . . . . . . . . . . . . Up  4.69 %
  • My personal try at a no-brainer portfolio using TD Monthly Inc. Funds D-series .Up  3.89 %
  • My personal try at a no-brainer portfolio using TD e-series funds. . . . . . . . . . . Up 0.54 %
  • Vanguard Capped portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Down 0.32 %
  • My personal try at a no-brainer portfolio using Vanguard funds. . . . . . . . . . . . .Up 0.92 %
  • Vanguard not capped portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Up 1.57 %

I have followed the Couch Potato series for years. The chap who designs these portfolios knows what he is doing. So why have the two assertive Couch Potato portfolio done so poorly? My guess is bad luck. The timing is off. For instance, any U.S. exposure has probably fared poorly so far this year. The market in the States has been lagging the Canadian market for most of the year. These two portfolios will have their day, of that I am sure.

Still, it is interesting that the portfolio based on just two D-series monthly income funds is doing better than the Couch Potato suggestions even though the D-series funds have the burden of higher MERs.

Here is a look at my portfolio mix based on just two D-series monthly income funds.







I will disclose right now that I hold a big chunk of TDB3085 in my personal retirement portfolio. Why? It appears to be the old TD Monthly Income fund (TDB622) but with a lower MER. And I like TDB622. With its mix of stocks and bonds it has much lower risk than many of my investments. TDB622 has been a winner for decades.

Because it is still early in the year and I don't want to make too big a deal out of my so-called test at this early stage, I will only give a detailed breakdown of my best performing test portfolio. My iShares-based attempt.














I think my choice of CBD is self explanatory. It is the iShares balanced income portfolio. It is a one-stop shopping ETF. I've added the REIT exposure and utilities exposure because I have read a lot of articles that said retirees must accept more exposure to both REITs and utilities because of the need for dividend income.

I need to take a five figure amount from my portfolio annually in order to balance my books in retirement. So far the big disappointment has not been the poor overall showing of some of the portfolios but by the dividend yields. I need cash to live and most of these test portfolios are not delivering the income. I'm going to see if I can find a balanced income portfolio that doesn't inflate its yield with return of principle, mix it with some REIT and utilities exposure and pump up my yield while not sacrificing growth. When I have this figured out, I will back test it to the first of the year and compare it to the other portfolios.

Now, to the one thing I have learned. I had a test portfolio based on stocks found using the screener software. This portfolio was the wildest ride of all. During the crash in stock prices early this year, the screener-created portfolio was down in the six figures. If it had been real, I would never have gotten a wink of sleep. Since then it has recovered nicely but the volatility lesson has been learned and noted.

I have deleted the portfolio created with the screener from the test.

Thursday, April 7, 2016

Luck, opportunity and successful investing

I'm retired and doing quite nicely. But, and it is a big but, how much of my solid financial position is simply luck and how much is based on my decision making ability? I bought  a lot of my bank stock when it was in the $20s at the depths of the market crash six or seven years ago. It was a good decision made at an opportune time.

As I think about it, good luck teamed with a great opportunity may be interwoven into the fabric of my investment life. Overall the market has been good since I was born in the latter years of the 1940s. This wasn't always the case. The market has not always been good to investors. The folk who invested in 1928 got burned. I understand it may have taken some of those people some two decades to recover financially. Many would have died before the market fully recovered.

For that reason, I am loath to give out solid advice such as do this because it worked for me. As they say, "Past performance is not an indicator of future growth." Often the word used is results in place of growth but you get the idea.

Last night I stumbled upon a site, Financial Planning Association (FPA), that appears to contain a treasure trove of solid advice when it comes to managing one's finances in retirement. Today I got an e-mail linked to that site. The topic? Risks in retirement. (And yes, I signed up for the e-mail updates. It was not a spam mailing.)

The letter discussed the usual suspects when it comes to investment risk, unforeseen major expenses, etc., but it mentioned one risk that is often ignored. It is the elephant in the room, so to speak: declining cognitive ability in one's senior years.

My retirement approach, which has a complex, personally-developed , Excel spread sheet as a major tool, is in trouble if I'm out of commission for any reason. If I had a stroke and was unable to manage our retirement finances, my wife would have her financial hands full.

Maximizing my wife and my income in retirement may be taking up too large a part of my time. My goal of coming up with a stand alone, self-regulating, income strategy may be of far more importance to a successful retirement strategy than I have been willing to admit.

Sunday, April 3, 2016

Do I make a sacrifice for less volatility?

As is clear from the posted graph, my TFSA (the solid purple line) has outperformed both the S&P/TSX Comp. TR Index (broken blue line) and the S&P 500 TR Index (dotted red line) over recent months. That said, look at the volatility. My portfolio sinks to extreme lows and then soars to dizziness-inducing heights. It has been, and promises to continue to be, a wild ride.

My actual portfolio is the solid purple line.


From the above graph, it is clear my investments made a couple of big dips but almost immediately recovered. When all is said and done, it appears at first glance that after all the drama I have simply returned to the level at which I started. Not true. In late 2015 I made my annual RIF withdrawals. I removed a chunk of cash to cover living expenses in retirement. By simply not losing value, my portfolio is performing adequately.

But, and it is a big but, my portfolio doesn't simply hold its own. The balance is constantly fluctuating up and down. I have confidence my portfolio will perform well in the end but it can be tense. I confess I am bothered more by the volatility than my wife. She has nerves of steel.

I would love to find another approach to investing -- one that generates the dividends needed to live while not suffering the deep dips of my present approach. I ask myself, "Would a portfolio containing just a few index funds or ETFs work just as well but with less volatility?"

Seeking an answer, I created ten phantom portfolios last January 1st (2016). Two were based on the excellent work done by the chap behind the Canadian Couch Potato blog.


The Couch Potato TD e-Series assertive portfolio contains:

  • 25% TD Canadian Bond Index Fund - e (TDB909)
  • 25% TD Canadian Index Fund - e (TDB900)
  • 25%  TD U.S. Index Fund - e (TDB902)
  • 25%  TD International Index Fund - e (TDB911)

The Couch Potato Vanguard  ETFs assertive portfolio contains:

  • 25% Vanguard Canadian Aggregate Bond Index ETF (VAB)
  • 25% Vanguard FTSE Canada All Cap Index ETF (VCN)
  • 50% Vanguard FTSE Canada All Cap Index ETF (VXC)

The last time I compared my portfolio to the Couch Potato approach, my portfolio pulled into the lead and stayed there for years until the American market took off and my portfolio was caught completely off base. With inadequate exposure to the States, it got torched. For that reason, I am not going to allow myself to get too smug about my present winning position. Never diss Couch Potato portfolios. These portfolios have earned the in the investment community for good reason: Over time, they perform well.

As much as I admire the Couch Potato approach, there are other approaches to successful investing that I also find attractive. One of these other approaches is simply sticking money in the TD Monthly Income fund. Over time this fund has done quite well while pumping out a steady stream of monthly payments. Since I began following this fund, the annual yield has dropped but I see this as good. I believe I am seeing less return of principal hidden in the yield.

A few months ago, TD brought out a D-series version of the monthly income fund. I considered the lower MER of a D-fund a clear bonus and made the switch based on my past good experience with TDB622.

I've created a no-brainer ghost portfolio using two D-series monthly income funds:

  • 70% TDB3085 (D-series Canadian monthly income fund)
  • 30% TDB3085 (D-series U.S. monthly income fund)
In the coming weeks I will talk about my other seven ghost portfolios but today I will stop with the three I have mentioned in this post. How have these no-brainer portfolios on automatic performed? Not badly but not as well as my oh-so-messy real portfolio. Since January 1, 2016 the results are as follows:

My portfolio is up 1.4% YTD. It is important to note, in mid-January I withdrew 3.2% to cover annual living expenses. If I hadn't made that withdrawal, my portfolio would be up 4.6% YTD. With the withdrawal amount factored in, not one of the portfolios-on-automatic is in the black. Both of the assertive Couch Potato portfolios plus my D-series ghost portfolio are off the winning pace at this moment. This may change, of course.

There are a few things that must be noted. As I removed a five figure amount from my actual portfolio to cover living expenses, I have removed a similar amount from the value of the ghost portfolios. Doing this introduces a small error. When the market is up, the ghost portfolios benefit. When the market is down, the ghost portfolios suffer a little.

And two, it is too early to make any meaningful judgments. That is why I shied away from giving out any hard numbers or revealing which ghost portfolio is in second place, which is in third, etc. I will wait until the end of the year before revealing all.

At the end of December I will know which ghost portfolios delivered the yield necessary to cover my annual income shortfall. Right now, I know my actual portfolio will get me through the year. Of this, I am certain.

One last note: In mid-December, I will withdraw all the accumulated dividends from my TFSA and ask my wife to do the same. This money will help cover the extra expenses that accompany Christmas. A December TFSA withdrawal increases January TFSA deposit headroom.

Tuesday, March 29, 2016

AHF suspends its dividend

Aston Hill Financial (AHF) has suspended its dividend. Ouch.

I bought some AHF after reading a positive review posted by one of the big Canadian banks. I had an investment that was managed by AHF and it had done quite nicely over the years.

My investment started out as BTH.UN, an ETF from Barclay's, and then its ownership changed and changed again. Eventually it ended up in the AHF stable.

AHF seemed like a good company, my investment had always done well. AHF seemed to know what they were doing. I decided to invest directly in the company. I cashed in my investment managed by AHF and bought some stock in the company itself. Bad move.

AHF climbed briefly and then hit the skids. It is now but a fraction of what it was when I bought my stock. And now, the dividend has been suspended. It had already been cut. Now, the dividend is gone.

Will AHF regain its footing. I hope so. As it wilted my other investments have grown. I am still making more than four percent on my investments and I'm still able to live quite nicely on the income. But one never likes to see an investment go sour. That said, I'm not sweetening the pot by adding any more money to my AHF investment. I'll slide AHF to the side and wait patiently to see how this game unwinds.

Wednesday, March 9, 2016

Why I am in the market and not annuities

When I retired a lot of financial advisers tried to steer my wife and me towards annuities. Money for life, was their claim. Less and less money for life was my worry. Most annuities do not increase the payment with inflation. I was concerned that if my wife lived to be 90, as she well might, she might be forced to get by on an income providing half the buying power of our present income. Of course, if inflation raged during a few of those intervening years the outcome could be much, much worse.

I put my money and my faith in the stock market. I didn't see this as betting on capitalism, as one friend has accused me of doing, I saw this as having faith in the strength of our overall economy - or at least the overall direction of our economy.

I retired with a small sum of money. The sum was no where near what one is told one needs to retire but it provided a solid base for investing. As of today, I have withdrawn an amount equal to about forty percent of the funds held at retirement. I was forced to remove this money in order to live. Living in retirement presents a steady drain on one's wealth.

Today I have forty percent more money than I had in 2009 at the time of my retirement. The market carried my portfolio up and the market carried it down but I have ignored the wild gyrations and I held to my invest strategy. Let the investments themselves roll and live off the dividends, if at all possible. So far, it has been possible.

The talk is that the bull market is getting old, long in the tooth. I'm surprised. I've suffered losses that I would have placed squarely on the shoulders of a big bear but I appear to be wrong. That was no bear; that was a retreating bull that gored me, I've been told. Hmmm. It sure looked like a bear to me.

Whatever, I'm going to let my excess dividends gather, I am going to sell the stuff that no longer delivers the dividends I demand. And I will sell those low dividend delivering stocks at a profit, I might add. I'm going to try and sit on a small war chest and when the advertised bear arrives, I will rejig my portfolio and invest a little more into the stock market and the bond market.

And my next kick at the investing-can may involve no more than four or five investments -- all ETFs. I'm planning an extensive overhaul of my portfolio and I'm looking at a new allocation model. I'm leaning towards the KISS philosophy: Keep It Simple Stupid.
_______________________________________________

This is an add from just days later -- March 11th, to be exact. Moments after the market opened, my portfolio climbed into the black for the year. It is important to keep in mind that in early January I removed more than twenty-two thousand from my portfolio in order to pay the bills for much of the coming year. Despite the withdrawal, my portfolio is in positive territory.

Lobsters were on sale. My wife and I bought two for dinner.
I think of the editorial I read in my local paper about the impossibility of getting good returns today and how retirees are being adversely affected. The writer decried the low interest rates and whined about retirees being forced to consider eating pet food in retirement.

If GICs are not paying enough to cover inflation, don't put your money there. If GICs are a guaranteed losing proposition, be bold, take a gamble. I did and so far dog food is not on the menu.

Monday, March 7, 2016

Volatility: a hard mare to ride

I like to say that I can ride out volatility. I like to claim that the rises and dips mean nothing to me. But I may be overstating my position. Putting too positive a spin on the reality of my fears. Look at the following chart.



The purple line is my TFSA portfolio. In just the last month it has recovered from being down about 7.5 percent to climbing well into the black. It is now approaching a gain of 10 percent.

I confess: When my investments are down so far that I must look up to see the bottom of almost every other benchmark that I follow, I feel uneasy. It is tough holding firm while one's investments are tanking. I admit it. I don't like it.

The main reason I am able to hang on while navigating the deep troughs of my oh-so-rough financial seas is my wife. She has nerves of steel. She worked for stock brokers twice when she was young and she learned firsthand that markets go up and down. She also learned that the smart money sells a little when the market is soaring and buys a little, or maybe a lot, when the market is tanking.

One reason my portfolio is so volatile is that it is almost devoid of bonds. The only bonds I hold are contained in the monthly income funds I own. I don't own near enough bonds to cushion my falls or dampen my peaks. I'm on a wild ride and considering this is my retirement income, it is a wee bit disconcerting.

Then again, I do get a rush from hitting the peaks. But, and this is a big but, but some of the benchmarks I follow have absolutely soared by my peaking portfolio. I don't have enough exposure to the U.S. and when the market in the States takes off, I get left somewhat behind.

I've decided to give some thought to switching my investments from my oh-so-messy present portfolio to one based on a fund of funds ETF: an ETF wrap. My idea is to find a good fund of funds that approximates my personal portfolio allocation and then bring it into line with my goals by adding a little here and there. I will personalize the fund of funds.

I made a crude attempt at investigating this approach at the first of the year. I set up a faux porfolio based on the iShares Balanced Income Core Portfolio (CBD). I added some XRE and XUT and I believe I should eventually add some extra U.S. equity exposure.

As the fixed income portion of CBD is 43.81 percent today, I can let this percentage shrink as I add more ETFs to my holdings. I do not believe I'll have to shore up the fixed income exposure as I this is already more than I wish to allocate.

The CBD/XRE/XUT faut portfolio is first bar on the graph above. My portfolio is the last bar on the graph. As of today, the two bars are almost equal. The nice thing about the three-ETF-portfolio is that it not only does not exhibit the same volatility as my present portfolio but that it pumps out enough dividend income to cover my expenses in retirement without selling my income producing investments.

I even have hopes that there will be times when the faux portfolio will surpass my own portfolio. I see the fund of funds possibly being propelled forward by its larger exposure to the States and to international markets.

Thursday, March 3, 2016

Still holding Dream Office REIT plus buying on dips

Info from WebBroker states that Dream Office REIT is back on the TD Action Buy List. I'm not surprised. The bank likes the latest business plan released by the large Canadian REIT. And the market seems to like it too. The moment D.UN cut the dividend the stock bounced up and has not made any serious move to stage a retreat.

The yield is still good. I'm still paying my bills with the income. And better yet, I've got my average price down to just above $20. I'm still in the red but not by much.

If D.UN takes a tumble that I cannot explain, I'll probably buy more. The yield is attractive and the potential for a capital gain remains a strong promise.

Continuing to hold Norbord (OSB)

Norbord has made some changes since I began buying the stock on dips and selling a little on the bounce. For one thing, Norbord has grown. The company absorbed a competitor, Ainsworth Lumber, in a three quarters of a billion dollars deal. Norbord and Ainsworth both had plants spread out across North America producing the particle board panels used in building construction.

As a side note, I believe both Norbord and Ainsworth were controlled by Brookfield Asset Management and Norbord still is. It is no surprise the merger was friendly and not hostile.

With the increased debt load, Norbord cut its dividend. The double digit yield is now less than two percent. This was not unexpected and was not a cause for concern. In fact, it seemed like a sensible business decision and in keeping with past moves by the large, Canadian company. As the demand for oriented strand board increases, the increased debt will disappear from the books. The dividend may be increased.

Norbord has even changed its stock market symbol. It is now a cutesy OSB, oriented strand board, rather  NBD.

With Norbord now heading for $25, I am nicely in the black with this investment. I could sell and pocket a nice profit but I'm going to  hold. I believe Norbord could easily hit $30 in the third quarter of this year with the estimated earnings hitting 47-cents per share. The low estimate is 21-cents and the high is 67-cents.

If Norbord doesn't hit the highs, I believe a dividend increase might well be in the cards. My gut feeling is that Brookfield Asset Management likes to see cash flow from its holdings. An increased dividend will benefit the majority stockholder while not putting Norbord under any financial stress. All the little investors get to ride the profitable coattails of Brookfield.

If I did sell, what would I buy? I might look at Brookfield Asset Management.

Saturday, February 27, 2016

Finding Screeners Using WebBroker

A friend stopped by yesterday and although he too used TD WebBroker he had never used the Screeners function. He was curious as to where this software filter for investments was hiding in the maze of choices and pull-down menus.

Answer: WebBroker -> Research -> Tools -> Screeners

Now, to learn more about using Screeners. I'm near the bottom of the learning curve.




Sunday, February 21, 2016

Experimenting with portfolio management

The month of February three quarters over and it has been a month of surprises. The biggest surprise, for me, is how well my rag-tag portfolio is doing. I truly admire the Couch Potato portfolios and the man behind them. Over long periods of time, the Couch Potato (CP) portfolios have performed very well. These portfolios have earned bragging rights.

Using Portfolio Manager I set up a couple of assertive CP portfolios at the first of the year. I chose the Vanguard ETFs assertive portfolio and the TD e-series funds approach. With no money involved in setting up my dream-team portfolios, it was easy to create CP portfolios with the exact value of my own portfolio at the first of the year.

Today my personal portfolio, one that I have watched fly high and dip low, is riding the crest of success. It is outperforming both the Couch Potato portfolios. It is not surpassing them by much but it is still ahead by a nose. This may surprise you but the recent cut in the D.UN dividend translated in a boost in the share value of Dream Office REIT and that increase in value helped bump me ahead of the CP portfolios.

My worst performing experimental portfolio is one I concocted using the stock screener function. I went for high dividend yield, the highest Columbine Capital Quant Ranking, oodles of analyst interest and coverage, great EPS growth, revenue growth, EBITD margin and return on equity. This portfolio of eleven stocks has been a roller coaster straight from hell. I'm not totally surprised but the extremes reached have been greater than even I imagined.

I never thought I'd be saying this, but the bad stock picks I made in the past have wilted to the point that they have almost no affect on my portfolio. These mistakes posing as companies could go bankrupt and I'd hardly miss them. If they come back, even a little, it will be wonderful but I'm not holding my breath.

Which brings me to why I am checking out alternative investing styles like the Couch Potato: I am getting to the point where I can sell my holdings and not fret over the paper losses. I can then repurpose this money. But if I do this, I want the new portfolio to meet three criteria:

  • continued good dividend yield -- more than four percent
  • not overly volatile -- a high sleep-at-night factor
  • simple to set up
  • simple to manage

I am leaning towards ETFs for supplying the answers to my retirement demands.

I think at the six month mark, I'll drill deeper into my imaginary portfolios and how they are performing.

Friday, February 19, 2016

Dream Office REIT cuts dividend, suspends DRIP

The market seemed to like the dividend cut and cancellation of DRIP.

Dream Office REIT (D.UN) has cut its dividend by a third and suspended its DRIP program. Read the media release:

Effective with the February 2016 distribution, payable on March 15, 2016, we have revised our distribution from $2.24 per unit to $1.50 per unit, on an annualized basis, which will reflect a more conservative payout ratio of approximately 67% of 2016 analyst consensus AFFO. Concurrently, the Trust suspended the DRIP (currently at 38% participation ratio) to eliminate dilution and to preserve value.

All very reasonable and not unexpected. That said I had hoped D.UN would be able to maintain its dividend but I was also banking on the crash in the price of oil to be a short term event. Oil is down and may stay down for longer than anyone expected. Companies like D.UN, with a fair amount of exposure to the western Canada economy, must modify their outlook.

On the bright side, I don't use the DRIP and so its elimination is a plus in my biased opinion. With D.UN unit price as depressed as it has been of late, the dividend yield was well into the double digits. The DRIP was certainly diluting the value of my holdings.

A one third cut in my dividend income from D.UN is not a financial disaster for me. Oh, it will hurt but I will pay my bills in retirement using the remaining dividend income. What I won't be doing is reinvesting the bulk of my D.UN yield. Most of the fat has been cut but not all. Using the soon-to-be new yield and using today's increased unit value in the calculation, D.UN is still yielding more than eight percent.

And I noticed that the TD Action Notes this morning rates D.UN a buy on its Action List. The folk at TD Waterhouse clearly like the REIT's new Strategic Plan. The new price target is $23. If you are like me, you may have paid too much. I hope you bought a little when Dream dipped below $15 recently. It was a chance to recoup some of your losses.

All in all, life is still good. I can still sleep at night.

Friday, February 12, 2016

I could have done worse; I could have given all my money to London Life.



Whenever I begin feeling badly about my investments. Whenever I start berating myself for my lack of experience. I look at my London Life investment statement and my present approach to my retirement investments doesn't seem all that bad. I didn't give London Life all my retirement money. That, in itself, was a brilliant move.

Back in 2000, 16 years ago, I got a call from London Life telling me I should make the money that had collected in my insurance policies work harder. I could invest that money in a London Life RRSP.

I said I'd give them $4196.71 as a test. If they did wonders with that, I'd consider shifting more of my portfolio to London Life. They didn't and I didn't.

In fifteen years they have managed to whittle that original investment down by a full $2474.18. I have lost 59% of my original investment.

If I had put the money in my old standby, The TD Monthly Income fund, I'd have had $13,893.11 by now.

Oh well, when I turn 71 this RRSP must be converted or closed. At that point the 75% guarantee should kick in. I'll only lose 25% of my original investment.

I think this experience has made me wary of believing the promises made by any and all supposed experts in the saving for retirement field. (I wrote about this some years ago. The post was called: Freedom Fund down 71%; Mattress Up 345%.

Thursday, February 11, 2016

Hold on. We are in for a ride.

I've been in and out of the stock market since I was but a boy. That's good. But, I didn't really pay the market and investing the attention both deserve until progressive rounds of layoffs and buyouts hit the company at which I worked.

When a gentleman whom I considered at the very top of his profession was given his walking papers to simply save the company a salary, I knew it was time to prepare to leave. At the time, I wished I could step forward and say that I would take the buyout and my friend and better stay but I didn't have the resources to live in retirement

I went to the library and got some books on investing and others on preparing for retirement. The library was a great resource.

I prepared an investment allocation plan and I began following it. My goal was income and I never took my eyes off that goal. By the time the next round of layoffs and buyouts hit, I was ready. A young man with a stay-at-home wife and mother, the two had two little boys, was given the pink slip.

I was able to step forward and lay my head down on the chopping block. I took the buyout package and suffered about a 25 percent cut in my retirement income from my pension and CPP. I felt confident that my work had prepared me to suffer such a cut and still keep my financial head above water.

All that was some seven years ago. During the early part of that time period I did incredibly well. I earned better than ten percent per year on my investments. I earned so much that I couldn't spend all the money. I bought more stock.

Then, about three years ago, may be a little less, all began to unravel. The value of my portfolio dropped and it took a jagged up and down path to where I find myself today. I have lost an amount well into the six figures.

If I was writing this for the paper, I'd have a great story with lots of pathos. But I'm not and the story has not turned too ugly as of yet. Sure I've lost a lot but I have way more than when I retired - way more! And that is after I taken out a six figure amount in order to live. Remember: my pension plus my CPP, OAS and my wife's CPP and OAS does not give us enough money to live. We need the income from our portfolio in order to balance our books.

The way I see it, the market collapses now and then. This may be a deeper and longer lasting collapse than usual but it will come to an end as they all do. Until then my wife and I will be spending as little as possible. The renovation of our ensuite bathroom will be the last big housing expense for the foreseeable future.

We won't be buying a new car. We won't be taking any expensive trips. We will be enjoying our grandchildren. We will be enjoying a night out at fine restaurant once a month. We will be seeing more movies at the Hyland Theatre, our local movie palace specializing in smaller, independent films.

I have a budget as part of the spread sheet that tracks the ups, downs and income of our portfolio. If the spread sheet shows us moving into the red, I rejig our budget. The truth is I haven't had to do much rejigging but I am also not adding as much to our portfolio as  I was in the past.

That said, there is still a little money available for buying more stock. I'm not going to miss this buying opportunity. If all goes well, my wife and I will come out of this dip, this recession, with more income than we entered it.




Sunday, January 31, 2016

Maybe I should not write off mutual funds

Years ago I moved out of mutual funds and into ETFs and stocks. I bought into the argument that the high MER charges put most mutual funds behind the eight ball when it came to competing against ETFs. Maybe I was wrong.

At the start of the year I created ten ghost portfolios using Portfolio Manager offered by TD Waterhouse. I'm not going to go into too much detail as it is only one month into 2016 and a lot can change over the course of a year.

That said, the portfolio that is easily leading the pack is one composed of just two mutual funds:

  • TDB3085 - TD Monthly Income fund D-series
  • TDB3086 - TD U.S. Monthly Income fund D-series

With just those two funds making up the entire portfolio, this portfolio is clearly ahead of the pack. At the moment it is even well ahead of the Couch Potato portfolio that I am tracking. I'm an assertive investor and so if I were following the Couch Potato advise I would have a Vanguard ETF Assertive Couch Potato portfolio or a TD e-series Assertive Couch Potato portfolio. My D-series mutual fund portfolio is easily worth a full two percent more than either of the Couch Potato offerings.

I'm surprised but this possibility wasn't totally unexpected. The TD Monthly Income D-series is nothing more than the TDMI that has been around for years with some of the fees cut back a little. I've always like the monthly income fund, I had a good chunk of my portfolio invested in it. When the D-series came on the scene I converted from the I-series to the D. It saves me a little money.

The fund tries to invest in solid dividend paying stocks, it has a balanced approach to portfolio creation and so holds all the expected bonds and it follows a portfolio allocation plan I can appreciate. Plus, the fund does not buy and sell to an undo extent. The last time I checked the portfolio turnover was less than 10 percent annually.

Come back in a month and I'll update you then.

And oh, were there any big surprises? Yes. My personal portfolio had done better than the Couch Potato entries at this point. I don't expect this to continue as the CP has a much better mix and I continue to believe diversity is king. Still, I'm doing nicely and my dividends are piling up as they should. All is right with my world despite the crashing market.

Tuesday, January 26, 2016

Even Canadian Banks Caught in Stock Market Turmoil

Today ScotiaBank was downgraded by Moody's. A bit of a surprise but not totally unexpected. I have long wondered if the ScotiaBank's exposure to Central and South American economies might come back to bite it.

This is not a new story. Canadian banks have been heading generally down for the past two years. Google "Canadian banks downgraded" and you will have lots of hits and many are many months old.

The banks are not my only problem. Even companies that are outperforming expectations are suffering in this weakening market. This morning, when I updated my portfolio, I discovered that my portfolio is revisiting recent lows.

Looking at BNN I see the Canadian market is up in the double digits and oil is almost up a buck. I should gain a little ground by the end of today but I'm sure the turmoil will continue. I may make some new lows before the market jumps on the next passing bull.

I am going to continue to hold everything I've got and at some point add a little more. I want to come out of this with an improved annual income. I might not, but it is a goal.

Thursday, January 21, 2016

Warning: Monitor your self-directed account carefully

This is just a quick warning: Monitor your self-directed account carefully. Banks make mistakes.

At the beginning of the year, I attempted to meet the minimum withdrawal demands that apply to my wife and my RIFs. After a week without anything happening, I phoned and discovered that my order had gone off to computer limbo.

In the end another agent entered the picture and took over from the first. This person resubmitted my request and I thought all would now be fine. It wasn't. After about a week, the transfer was completed but incorrectly. This morning I discovered that my wife was now the owner of an unwanted mutual fund with a MER north of two percent.

An investment she liked was removed from her RIF and a completely different investment, and one she didn't want, was moved into in her TFSA. This is not the way an in-kind transfer is supposed to work.

I called the bank and got in touch with the second agent. The one who had handled the in-kind transfer that has gone awry. It became quickly clear that an error had been made and the agent promised me that all would be made right in three business days.

My advice:

  • Keep notes.
  • Get the agent's name with whom you dealt.
  • Get the agent's badge number or extension number.
  • Write down all relevant figures.
  • Note the time, the number of shares involved and write down all cash values.
  • Printout a copy of your account as it looked before you began buying or selling or whatever.
  • Printout a copy of your account as it looked after the error was discovered.
  • Check your account daily. This is not the first error I've seen.

The more complicated the undertaking, the more one must keep notes, etc.

Friday, January 15, 2016

Market turmoil not new. Does Vanguard provide an answer?

As I write this both the Canadian and American markets are down well into the double digits. The reports on the regular newscasts are tainted with a touch of panic. I shake my head. This has happened before and this will happen again. If you are not prepared for a slump, you should not be in the market. Relax.

Granddaughters keep market fall in perspective.
My grandchildren are here today and so I cannot write much but maybe next week This afternoon the most important thing is to build an Olaf snowman. I'm putting the tumbling market on the back burner. I'll try and have this post completed by Monday. Now, where's my Olaf snowman kit?
__________________________________________

I track my money using Excel. But Microsoft no longer supports my version. And to complicate matters, my laptop is loaded with newer Microsoft software that is not compatible with my present program. When I inquired, I discovered an upgrade to make all right again is expensive. At least this senior living on a tight budget finds the charge excessive.

I did a Google search and discovered LibreOffice freeware. I loaded LibreOffice onto my laptop and encountered no problems. I will make a donation and I may switch allegiance. I'm testing LibreOffice on my main computer as I write.

I also found a personal budget template from LibreOffice. This template provides an excellent base for building a complete personal wealth tracker.

I find there is nothing better than an up-to-date spread sheet to keep one's market fears in check. Possibly I'll find a way to post my spread sheet and share my approach with the world. Keep an eye on this post after Monday, Jan. 18th.

Thanks to my spread sheet, I not only knew how much my total portfolio was worth as the bell sounded Friday morning, I knew my total expected dividends for the coming year plus my total other income (OAS, CPP and a small pension). Because I have been keeping an Excel-based budget for years, I have a clear idea of my total expenses for the year. My spreadsheet keeps me constantly aware of how much I must collect from my investments in order to keep the wolf away from the door.

My spreadsheet confirms I still have lots of wiggle room. I can easily survive a few cuts to my dividend income. There is clearly no reason to panic. In fact, it is a good time to watch for a bottom and to pick up some stock at fire sale prices. Dividend cuts or not, I plan on buying and those purchases will, with a little luck, increase my dividend income.

It is interesting to note that if I had chucked all this at the beginning of the year and converted my portfolio to the capped portfolio strategy one can find on the Vanguard site, I'd be much better off. Of all the approaches to constructing a portfolio I am tracking, the Vanguard one is performing best. It will be interesting to see if it produces the yield I need to live. I may yet go the index root.

Wednesday, January 6, 2016

Screener portfolio holding lead.

It is only January 6th and so it is a little early to say much about the performance of my various demo portfolios. But it is interesting to note that the best performer has been the portfolio of a dozen stocks selected using the Screener function of my self directed portfolio software supplied by TD Waterhouse.

For me, what will be important is the total amount of cash delivered by each portfolio. Clearly, if the portfolio performs well enough, selling a little of the portfolio to raise money to live in retirement is not a problem. But, I much prefer a well performing portfolio churning out adequate cash to live. My present portfolio delivers enough dividends to fund my retirement but it has not held its value well in the present market. Hence, this little portfolio experiment.

I've mentioned the Couch Potato as a source of information on how to structure a portfolio to run almost on automatic pilot. I've run tests with the previous couch potato portfolios and in my most recent tests they have done quite well. Any portfolio with American market exposure has done well over the past year or so. The American market has been on a roll.

Another source of portfolio strategies is the Vanguard Group in Canada. I have used two of their strategies in structuring my ten demo portfolios.

Monday, January 4, 2016

A mock battle of recommended portfolios.

My best performer was a portfolio of stocks.
The stock market wilted today. Globally it was a bit of a blood bath but Canada was spared the worst. I was down some but nothing to lose any sleep over.

As I mentioned, I've set up ten portfolios, some mirroring portfolios recommended by well respected experts. I may be down but I wasn't at the back of the pack.

I'll consider revealing the make-up of my ten imaginary retirement portfolios when a few month have passed. Maybe a pattern will emerge. Maybe some portfolios will be consistent winners and others consistent losers. We'll see.

The blue bar represents the starting value of each portfolio. All but one left the starting gate almost at the same point. The small differences are due to the number and type of investment holdings. The TD e-funds carry no fees while the ETFs are like stocks. Each one comes with a trading fee of almost ten dollars. Luckily, these portfolios do not require a large number of ETFs.

One blue bar is noticeably shorter than the rest. This portfolio is composed of a dozen stocks. No ETFs or mutual funds here. It cost the most to build and yet at the end of the day the pure stock play was the best performer by far. (The red bar represents the value of the portfolio at the end of the trading day.)

Interesting.

Saturday, January 2, 2016

Tracking recommended portfolios

I'm a big believer in the Couch Potato theory on investing. The chap behind the Couch Potato blog is one smart dude. I wish he'd been around when I first started investing so many decades ago.

I have wandered far from my original portfolio allocation. I'm pulling in enough in dividends to stay nicely afloat but the past two years have been rough on my capital. I'd be worried but for the fact that all the benchmarks I follow have also had losses. It has been a nasty world for those of us with too much exposure to the Canadian market.

I've decided to determine whether or not I'd be better to simply rejig my portfolio to mirror the recommendations of the Couch Potato blog. To this end I've created three Couch Potato portfolios using Portfolio Manager -- a piece of software offered to TD WebBroker clients.

I've set up a total of ten portfolios and all are starting the year with essentially the same value. The reason there is any difference at all is a result of the fact that all portfolios do not contain the same number of ETFs. Some have only three ETFs while others have five or six. When purchasing an ETF there is $9.99 charge. The more ETFs in the portfolio, the more charges, and the lower the portfolio value on Monday as the ten portfolios leave the starting gate and trading commences.

Some portfolios use TD e-funds which are actually low-MER mutual funds and not ETFs. There is no charge for investing in TD e-funds as long as one stays invested for more than 30-days. (I believe it's 30-days.) With the e-funds I was able put all the money available to work. One does not encounter the odd lots problem with mutual funds as one does when buying stocks or ETFs.

Once a week, or possible more often, I will check how these portfolios are doing compared to my actual portfolio. If I get blown away, it will clearly be time to rethink my investment strategy. (It has not been a bad strategy overall. I have about 40 percent more in my portfolio today than I did when I retired in early 2009 and I have been removing money every year to live in retirement.)

Oh, one last thing. In early 2015 I set up a portfolio using Portfolio Manager that was based almost completely on stocks that came highly recommended by one of Canada's biggest banks. This portfolio was a dog. There were times when every stock in that portfolio was under water. It performed much worse than my ragtag portfolio.

This year I have one portfolio created using the stock screener provided by TD WebBroker. I looked for companies that are in the black, have solid earnings and pay a good dividend among other criteria. We'll see how this baby performs. I gave the screen I created. I gave it a name and saved it. Once a month I'll run this screener again and decide whether or not to update the portfolio.

I actually have a good feeling about this all stock portfolio as it should pump out the money I desperately need to live.

Parking Cash

Getting any meaningful returns on a little cash is awfully difficult in the present low-interest rate environment. Vanguard has posted a chart comparing interest rates paid by various financial institutions in Canada. Even though these are some of the highest yields in Canada, not a one pays even two percent.

Where do you park your excess cash? In my self-directed portfolios I like to use investment savings accounts. As a TD WebBroker client, whenever dividends appear, I immediately transfer the funds into a TD investment savings account (TDB8150). This pays .75% interest today -- Jan. 2, 2016.

There are no fees associated with a TD investment savings account. There is no minimum time period that funds must remain in the account. And there are no withdrawal fees. Other banks offer similar investment savings accounts -- I had one with Scotia iTrade (DYN1300) back when I had a self-directed account there. But be careful: the rules change from bank to bank. I keep an eye on the rules affecting the TD offering, as well. I don't want to get any nasty surprises in the form of unexpected charges.

At the encouragement of a friend last year I converted my RRSPs to a RIF. Come Monday, January 4th, I'll be withdrawing the money in order to get through the coming year. I'm planning on opening a Scotia Bank Momentum Savings Account to handle a good chunk of this money. I understand bonus interest is paid when a balance of $5000 or more sits untouched for 90 days. At the moment the interest paid can be as high as 1.5%. But there is a downside: a $5 withdrawal fee. It doesn't take many withdrawals to negate the interest earned.

I should be able to maintain more than the interest cut-off balance for the majority of the year with no more than two planned withdrawals. The interest may cover a nice dinner for my wife and me at Waldo's in Byron. It's not much but it's much better than nothing.