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.

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