Attention nieces, nephews and other family members

When we got together in the late summer, I heard a lot of talk about getting into the stock market to make money for retirement or future education or simply to get wealthy. The market had been on a record setting bull run and optimism was running rampant with the bulls.

Well, the bulls have halted their stampede. The bears have come out of hibernation and holding onto one's gains seems to be the name of the game today. And its a tough game. And it may be the wrong one. I don't know. I'm holding on. I'm resigned to losing a lot. I celebrated my wins over the years and now I must take my inevitable licking.

So far I have sold one stock: Hydro One. And that was not a sale based purely on the recent market weakness. Hydro One, H, is showing of decline based on its close connection to and control by the provincial government in Ontario under the guidance of Doug Ford.

There are other stocks I might jettison if there is a good rebound, one big enough to get me back into the black. But, there has to be a rebound. I'm not prepared to take the large cut in income that accompanies the sale of a lot of my stock holdings.

That said, I am not going to simply sit tight and wait. I'm going to watch my holdings carefully in the coming year. If I see a good exit opportunity, a chance to re-jig my portfolio to  put it more inline with my present thinking, I'm going to jump at it.

For instance, I've owned mostly XIC for years but I've also held a much smaller position in XMD. I have not seen much advantage to this strategy. XIC has generally performed better than XMD and it has paid a larger dividend. Every so often XMD outperforms XIC and when this happens at some point in the future, I'm selling my XMD and switching the funds into a better performing investment. I might even put the money into XIC. I'll make more in dividend income and my portfolio will be a little simpler.

I'm also looking at my bank holdings. In the coming year, there may be a chance to diversify my exposure to the Canadian banks. With the banks, I'd like to hold more banks not less. I'm mostly into the Royal, the ScotiaBank and the TD. I'd like to spread this investment out a bit, to diversify my holdings, by buying some Bank of Montreal and some CIBC at the very least.

But I won't be dumping any bank stock without a matching purchase anytime soon. The banks have a history of resisting the temptation to cut dividends during tough times. I'm going to bet the Canadian banks will hold to that tradition and continue to pay me quarterly come whatever in the market. And nothing, short of a recovery, lessens the pain of a bear market like money, like dividend income.

So, my advice to all my relatives looking to get into the market is "have a plan". Develop an allocation model based on your own personal needs and bolstered by your personal financial beliefs. And then, stick to it. When the time looks right, buy the good stuff, build your portfolio and do it with the confidence that comes from having a plan.

Stay in touch and have a happy new year!

What's black and what's red

What is black, in positive territory, and what is red, losing ground, in my portfolio? That's easy. Anything I bought back when I retired has climbed massively and is still up nicely from when I bought in. A market downturn of 50% would not drive these holdings into negative territory.

My recent buys are mostly a different story. Almost uniformly down. In the red. Emera and Fortis are about the only recent buys that are showing a profit. IPL, PPL, SJR.B . . .  and the list goes on, are all down. Some are now down in the four figures. Ouch!

Oh well - sigh - tomorrow is another day and, shortly, another year. And it may get a lot worse before it gets better. I'll sell a little on the pops -- if there are any pops in the near future.

Cheers,
Rockinon!

Battening Down the FInancial Hatches

Since the beginning of last year, Judy and my portfolio has dropped some 7.9% in overall value. That sounds bad but remember, we're retired and we take out some 3.5% annually, or a bit more, to live. Still, in a good year, we remove some and the market goes up even more. In a good year we make money. This year we lost it.

I bought some stock late in the year and much of it wilted. Bad move. Yet, my Emera and Judy's Fortis both climbed very nicely. Those two were the standouts. My TD Bank is down in the four digits and sadly it is par for this course at the moment.

It looks as if the correction is almost here. (A correction is a drop of 10% or more and a bear market kicks in when the losses hit 20% and more.) I'm looking about to raise some cash for future buying opportunities. It's tough letting go of stuff at a loss. I'm very poor at it. My Hydro One was perfect for dumping, it was up and between the labour problems and Premier Ford, it looked like it may take a quick trip to the mat. If it drops below $18.99, I may come off the sidelines and buy back in.

I've been pitting our actual present portfolio against a portfolio based on an allocation model that I calculated would be good for an aging geezer with a bad heart and against another portfolio called the Couch Potato. So far, all three are jockeying for the lead position. That said, our present portfolio is pumping out the most dividend cash. This lets me sleep at night despite the recent losses.

I'm working on a new, allocation model portfolio. It will be a bit more diversified than our present portfolio. If Judy thinks it looks good, I may make the leap to a full re-balancing in the coming year.

And what must the new portfolio offer in order to win our hearts? More dividend cash -- but without taking bigger risks. Too big a dividend is a dividend that almost certainly will be cut. One should not be greedy.

Cheers folk!

Freedom Fifty-five failed to deliver; it lost more than 25% of my money!

Look carefully at the posted bar graph.  I invested almost $4200 in March of 2000 with Freedom Fifty-five. It was an investment in my future retirement. After 15 years, only 41% of my original investment remained. The London insurance company running Freedom Fifty-five had lost 59% of my investment.

As bad as this was, I was assured that on turning 71 a 75% guarantee would kick in. I'd get back 75% of my original investment or $3147.53. This was guaranteed.

Well, I turned 71 and I didn't even walk away with my guaranteed amount. After contacting London Life in July, an investment expert appeared at my door. He was only involved for a brief time but between then and December 5.6% of my guaranteed amount vaporized. Amazing.

While the experts were investing my retirement fund, I was buying Fortis shares. I see Fortis as a solid investment for a retiree. It goes up and down in value but it always delivers a decent dividend. My Fortis grew by more than 10% in the time that my Freedom Fifty-Five fund shrunk 5.6%.

My Fortis pays 4.4% on my original investment. If my guaranteed funds had been put into Fortis, I'd already have been sent about $35. Granted, that's not much but it's still $35 more than I got from my Freedom Fifty-five investment. I was invested for almost 19 years and received not one penny of retirement income.

I'm going to let London Life and Freedom Fifty-five know about this post. If anyone at the London firm wants to explain how their whiz-bang investment experts lost not only a lot of my original funds but under their guidance continued to lose big chunks of retirement funds, they are more than welcome to post a comment.

A late add: I never heard a peep from them. Not one word.

The Market’s Been Falling. I’m Putting My Money in Stocks Anyway.

The title to this post is straight from a New York Times story of the same name: The Market's Been Falling. I'm Putting My Money in Stocks Anyway.

This an excellent article. It says what I feel but am afraid to say. I find it hard to lose money in the market but I feel downright guilty when friends and relatives enter the market at my encouragement and then lose five or ten percent of their investment.

The article tells us: "Some persuasive analysts marshal strong arguments that the main trend for stocks at the moment is downward. “There’s a good chance that the bull market is already over, that it ended in September, and that a bear market has begun,” said Doug Ramsey, the chief investment officer of the Leuthold Group in Minneapolis."

But read on: "Mr. Ramsey said, the American market is still overvalued. He calculated that stocks need to fall 25 percent below their Oct. 31 levels in order to reach their median valuations since 1970. Stocks outside the United States are about 10 percent underpriced compared with their historical valuations, he said, so there are better opportunities in market niches around the world."

If any of this is grabbing your attention, click the link and read the article. By the way, the NYT isn't all that expensive. You might consider a subscription.

Volatility is rocking the market

Yesterday was a down day. All my bank stocks lost more than a buck a share. Today the Royal Bank is up about $2.70. That's simply non-nonsensical. The bank's true value has not fluctuated that wildly over the past 24-hours.

I'm watching my stocks and considering lightening up when move up and into the black. Why lighten up? Because I see more dips in the future. I could be wrong, I've been wrong before, but I know I'll be more comfortable being a little less exposed in the coming months.

But I will keep a big presence in the market. I must. I need the income from the dividends. There is a limit to how much of my investment portfolio I can afford to jettison.

The following was added two days after this post was originally written. The day after this piece was posted, the bank lost value. Oh, it didn't lose even a buck but it lost a fair amount. And the next day it was down for much of the day and then headed up and into the black before the close. It gained 12-cents for the day. As I said, volatility is rocking the market.

Buying stock should not be gambling but business.

The market crashed again today. It has been heading generally down for months. Late last summer a fellow I admire asked my advice when it comes to investing. I put him off. At the time, I had a bad feeling when it came to the market and I feared he would lose money in the short term. I was right. Late summer was a poor time to enter the market.

About a month ago, I learned some of my relatives are considering putting some money in the market. I tried to encourage them to learn a bit more before putting too much money into stocks, mutual funds and ETFs. Again, I wasn't convinced that it was a good time to start investing. (Novice investors don't accept losses well.)

Why didn't I just tell all these folk not to invest as a correction was coming? Because I  didn't know. I don't have a crystal ball. Plus, my advice would have been contrary to one of the axioms of investing: Never try to time the market.

At least, never try to time the market as if it were a game and one is placing bets. Think of the market as place selling small slivers of ownership in numerous businesses. These slivers are stocks. If you have some money you don't need at the moment, some money that can be tied up for a number of months, possibly even years, and there is a business in which you'd like to have a sliver of ownership, it may be the right time to buy the stock.

The above is a screen grab of my top movers of the day. All moved down. And the banks all lost more than a dollar a share. That's a lot in one day. Think about it. If one owned a mix made up of a thousand bank shares, one lost more than a thousand dollars in just a matter of hours. And that is just today.

This year, the Royal Bank hit a high of $108.52. It closed today at $93.62. That's a loss of $14.90 per share. The TD is down $9.60 from its 2018 high and the Scotia Bank has lost $15.83. It is easy to see someone holding a thousand shares being down more than $12,500 or more from this year's highs.

If you are a gambler, you are upset. You bet on some losers. Nags. But, if you are an investor you own some small slices of three banks. That cannot be all that bad. Banks are good businesses to own. The Scotia Bank has a $3.40 dividend, the Royal yields $3.92 and the TD delivers $2.68 annually. The investor sees his bank stock as a solid source of income -- possibly as much as $3300 or more annually.

And the investor who is in for the long term, believes bank stocks will recover. The investor has confidence in the system. The investor will follow the financial numbers and if the bank ones are good or, even better, show improvement, the investor will buy more stock if possible. They might even buy that extra stock in a fourth bank, spreading the risk.

One never truly knows the future.

Retirement thesis being tested

When I retired I made a bet. I bet that putting all my money into the market would yield the best income for me and my wife. So far, my thesis has worked. Oh, I've modified my holdings over the years, I've jettisoned my bond funds and bond ETFs and made other changes, but I'm still guiding my retirement portfolio and it is heavily into Canadian income-producing stocks.

This year the market has not been good to me. Come January 1st, I can envision being down 10% or more from where I was just one year earlier. This sounds bad but it is not as bad as it sounds. I will still be up something like 55% from where my holdings stood at the time of my retirement in early 2009.

The big test of my retirement plan will be my dividend income. If my revenue drops substantially, making it impossible for me to pay my bills, my thesis will have failed. If I get through the market down time with my finances intact, I will count this as a win.

But win or lose, I will be reallocating my money, I will be making changes to my holdings yet again. I may get back into bonds. I will definitely take on more exposure to the States, at least in my RIFs. I will spread my bank investments among more financial institutions and not be so concentrated in just three banks and one insurance company. I'll take some time to carefully increase my exposure to utilities. I will again consider ETFs and possibly cut back on my direct ownership of specific stocks.

Stay tuned.

I'm liking Morguard North American Residential Real Estate Investment Trust MRG.UN

I'm liking Morguard North American Residential Real Estate Investment Trust  MRG.UN

I've been playing with the screener software supplied with the TD WebBroker self-directed account. One stock that keeps appearing on my screens is Morguard North American Residential Real Estate Investment Trust (MRG.UN).

I began looking deeper into this REIT. I'm liking what I'm finding. I  discovered that the TD analyst believes the present and future growth is not being reflected completely in the current share price. MRG.UN is rated a BUY with a Target Price of $18.50, up from $18.00.

Morningstar calculates a Fair Market Value for this stock of $18.32. I always like to pay less than the fair market value, if possible. At this moment, MRG.UN is selling for $17.43. Despite today being a down day, MRG.UN is up .81% .

The profit margin is 95.84%, well above the industry average. The ROE is 25.23%, more than twice the industry average. And despite yielding almost 4%, the payout ratio is only 10.35%.

As usual, all the numbers are not as good as those mentioned but reading the figures leaves me with confidence. It this stock takes a dip, I'll try and buy a few hundred shares. What would it take to make me a buyer? I'd like a yield of 4%. I'm retired, I need the cash flow to live.

Note: I am talking about Morguard North American Residential Real Estate Investment Trust (MRG.UN). I am NOT referring to Morguard Real Estate Investment Trust (MRT.UN). The one is MRG and the other is MRT.

EMA: Yup. Buy EMA on the dips.

EMA (Emera), a utility, is one of the few really bright lights in my portfolio at the moment. I'm up more than two thousand in just a very few months. My portfolio desperately needs that boost.

This morning I read that Emera his a price target of $48 at BMO Capital. The utility has been doing well and is rated by many analysts as an Outperform. I took another look at its numbers. All is not perfect, then again, that rarely happens. But a lot of the usual signs of financial health are there. For instance, the ROE (Return on Equity) is 9.06%. This is well above the industry average of 3.8%.

ROA (Return on Assets) is also good. The ROA of Emera at 2.07% is greater than that of many of its peers. The industry average is 1.28%.

If you go down the list of posted numbers, you will find some to give one pause but stop, take an in-depth look, and all seems reasonable. I won't be buying more, I have filled my quoted for this stock, but, if I  did not have any holdings, I'd be watching the dips for a buying opportunity. Heck, with a big enough dip, even I might pick up another 100 shares to make a quick profit.

For my kin: I own both stocks but I only like one.

I put the thoughts below to 'paper' this morning. Then, as the day unfolded, I watched Inter Pipeline (IPL) lose 2.83% or 66-cents. A stock, highly recommended by a number of 'expert stock pickers', was shrinking when it came to stock price and I was writing it off because of its high dividend payout ratio. Is this really the best way to play this, I wondered. (The dividend is now yielding 7.55% annually with a payout ratio of almost 109%.)

Should I be looking more deeply into IPL's financial strengths? One wants to buy on the dips. Here was a dip. Should I be adding to my position? If this leaves me overweight, I can always sell as the stock climbs, if it climbs.

I've decided to find a book I read some years ago on evaluating companies and the balance sheets. Tomorrow, or the next day, I may rewrite the following post. Who knows, maybe IPL is worth buying. Let's learn together.

Stay tuned, kin.
____________________________________________________________________________


When you have a self-directed investment account you have a wealth of information available to help with your stock picking. I like to check out the Action Notes Summary from TD WebBroker every morning. An Action Pick is worth a look, a Buy is a hold, a Hold is iffy and a Sell is run-away-fast.

Today two of my holdings appeared on the equity research list: Emera (EMA) and Inter Pipeline (IPL). Emera can be picked up for just less than $43 today. I paid something close to $40. TD has a target price of $48, up from $47. Inter Pipeline is now selling above $23 and heading for $31, if you believe TD. I paid a couple of bucks more and I'm in the red on the purchase at the moment and it got redder as I wrote this.

On the plus, IPL pays $342 annually and EMA delivers $1410 annually. Why the big difference? I own three times as many shares of EMA as I do of IPL.

It is not only TD that likes EMA. Morningstar has EMA on its Canada Core Picks list. It is a four star rated stock with a Morningstar fair value of $46.

Would I advise others to buy these stocks? Would I increase my holdings? No, to the last question. EMA has a dividend payout ratio of 92.5%. That's a bit high. I'll hold. That said, if you don't own any EMA, buy a little on the dips. In a serious correction, EMA will drop but it will bounce back and pay you for your patience.

IPL may be a personal favourite but I would hesitate to recommend it. It has a dividend payout ratio of 109%. I've seen worse, much worse, but such a high ratio gives me reason to pause. I only hold 200 shares and I won't be buying more any time soon.

For my kin: Only buy with confidence

Look at the big picture. If overall you're up, don't let a few losses get you down.

Some months ago I started amassing cash. I was sure a correction (10% drop), or even a bear market (20% drop or more), was coming. It didn't and I finally tired of watching stocks climb while I sat on the sidelines. I bought. And the correction arrived. I'm down on a lot of money on my recent buys.

In the past, I've done very well buying Canadian banks. I felt very confident when I bought 300 shares of TD. I have now lost hundreds and I may lose even more in the coming weeks. One bright thought among the gloom: Canadian banks don't tend to cut their dividends -- ever. If the dividend isn't cut, I can hold on indefinitely. I support my wife and me in retirement thanks to the dividends.

I  owned Inter Pipeline, IPL, in the past and I was well rewarded for buying and holding it. After more than tripling my money, I sold. A big mistake. I should have taken my original investment, plus a bit of a profit, off the table and left the remainder to ride. It would have made a very nice core holding.

When IPL dropped about a third from its recent highs, I bought back in at the lower share price. I had confidence thanks to my past success with this stock. I even paid a little less per share to buy back in compared to what I was paid when selling out. I only bought a fewer shares and considered this correcting the mistake I made when I jettisoned all my IPL holdings.

IPL continued to drop. I had caught a falling knife, as they say. I am now down hundreds of dollars. Some say the dividend is safe but others are not quite so sure.

Did I buy anything else? Yes: Ontario Hydro (H), Pembina Pipeline (PPL), Shaw Communications (SJR.B), Emera (EMA) and Fortis (FTS).

I had confidence in all the stocks mentioned. Yet, all but EMA and FTS are down. Am I concerned? No. My earnings on Emera on Fortis are doing very nicely at balancing my losses suffered on my other buys. Both EMA and FTS are up in the four digits. When you look at the big picture, all is not so bleak.

But I haven't mentioned one purchase: Altagas (ALA).

I wasn't all that confident in Altagas. I had unanswered questions. I bought despite my misgivings and I got whacked. It is down massively, about $10 per share. Luckily, I didn't buy that many shares. My exposure is light even though my percentage losses are heavy.

I  expect ALA to slash its dividend by something in order of 60% and I expect it to liquidate a lot of stuff to bring its books more  inline with market demands. Will I be selling soon? No, I doubt it. After the dividend cut, I should be seeing a yield of about 4% and that new yield should be safe.

The word is that the dividend cut has already been priced in but I'm not so sure. It may drop in value again but I thing that that price may well establish a floor. I can foresee some bad endings to this story; forinstance, a buyout at much less than originally paid.

One stock picker, has ALA with a target price of $18. That's about three dollars higher than today's market price. But, I don't have a lot of faith in published target prices. The stock-picking experts miss the target all too often.

If something comes along promising a secure 4% yield paired with a promise of good future growth in stock price, I'll sell and move on. It may take some time to recoup my loss but I have confidence. (Note: there is always the chance that ALA will be that future stock. I bought Norbord in the $20s and then it dropped deep into the teens. I bought more and sold all in the mid $30s. Never lose heart.)

There's always tomorrow. In that, I have complete confidence.
_____________________________________________________
In a future post, let's examine what it is that gives one confidence.

For my kin: a final word on mutual funds

As you may have gathered from the tone and direction of my comments in the previous posts, I am not a big fan of mutual funds. I believe mutual funds are overpriced and under-performing. That said, some folk need hand-holding and a good mix of mutual funds will do that while putting some money in your pocket.

So, if you insist on investing in one or more mutual funds, watch the following:

• Pay as little MER as possible
• Do BUY no-load funds
• Do NOT buy front-end loaded funds
• Do NOT buy back-end loaded funds
• Do NOT buy a fund based on its name
• Do check a fund's past performance
• Do BUY a mix of funds: Canadian, U.S., International equities plus bonds

Check how the TD Dividend Growth fund has performed compared to the TD U.S. Equity Portfolio fund (TDB3092). Canadian Dividend is green line and U.S. Equity Portfolio is purple.

Having some exposure to U.S. equities is highly recommended, as is some international exposure as well.

An expert on investing, whom I have admired for years, writes a blog called: The Canadian Couch Potato. Click the previous link and read what he has to say about creating a couch potato portfolio using TD e-series mutual funds. To see a suggested portfolio mix click this link: Model Portfolio using TD e-series funds. The Couch Potato portfolio is an excellent guide to creating your own well balanced portfolio. One will not go far wrong just following the advice found on the Couch Potato site verbatim.

Still, I shy away from mutual funds. In my experience ETFs are a better bet than mutual funds. In my next post we will look at ETFs.

For my kin: what have we learned?

What have we learned thus far?

Well, we think we've learned that simply paying more for a mutual fund, in the form of a higher MER, does not guarantee better performance. We've learned that the name of a fund may not reflect how it has performed in the past nor how it will do in the future. Just because it claims to be comfortable guarantee that it will be. We've learned that sometimes owning two funds is better than owning just one.

Now, to throw a monkey wrench into all of it. How a fund has performed is based on the time frame under discussion. Nothing is certain in life and the stock market follows this maxim. All we know for sure is how our five funds performed over the time we've operated our sham portfolios. Let's take a look at a longer time frame. We'll only go back three years as one or two of our funds are quite new.

Over the last three years, the Dividend Growth fund (dark blue line) has outperformed all the others after getting past the hurdle of January 2016 when it dove to the bottom of the pack. That was a stressful time for some of those holding this fund but in the end the fund performed as expected. But, let's admit that stress comes with owning this fund. It gyrates up and down more than any of the others. It's a great ride, and in the end worth it, but many would be unable to hold on through the down times.

The Comfort fund comes in second but it's often bested by the Monthly Income and not because the Monthly Income has been such a stellar performer. No, the Comfort fund was simply not all that comfortable to hold. It was a bit volatile. In the end the Comfort fund and the Monthly Income finished in almost a dead heat.

Whatever happened back in January 2016 allowed the Retirement fund to shine. But note, it did so  only because all the other funds did so poorly. The moment the others gained their footings, they pulled ahead of the Retirement fund and never looked back. Today an investor in the Retirement fund has little more than what they originally invested. Is this the performance retirees want from an investment? If this is what makes them happy, maybe they should simply buy a  GICs.

Before ending this post, let's take a quick look at one other time frame: one year.

In this scenario, the Retirement fund is in first place. What I think is important to note is that it is in the red. Yes, the retiree investor would have been better off with a GIC. Heck, in the past year, they'd have done better putting their money under their mattress.

The Dividend fund is at the bottom. Hmmm. Every year I put money aside for my granddaughters' education. I usually stick it in the TD Monthly Income. Maybe I should consider putting a little in the Dividend Growth fund, too. I will definitely buy some units of the Dividend fund for my granddaughters when the next bear market hits.

In the past year, the Comfort has both lead the pack and trailed it. When one inspects its holdings, one can see the logic behind this fund. It is not a dog but it is certainly not comfortable. Aggressive? Yes. Comfortable? No. At one year it is being outperformed by the Monthly Income, a far more comfortable investment.

But do notice that all funds are down after one year. Not one of the funds being tracked is in the black. Trust me. If this were real money and it was yours, you'd be uneasy. Losing money is not easy. And the near future promises to be just as difficult, if not worse. The drop you see is not even a correction, which is a 10% drop. When the bear market eventually roars in bringing a drop of 20% or more in market value, the air will be thick with panic. If one is caught holding the wrong mutual fund, you may never get your money back.

This is what happened to my $4200 that I invested with Freedom Fifty about twenty years ago. The investment went down to $1700 and never fully recovered. I am still waiting for my $3150 guaranteed payout. If I had put the money in the TD Monthly Income fund instead, I'd have better than $14,000 today and it would be immediately available to boot.

For my kin: Volatility, Risk and Marketing

I'm going to post two images. Both show five funds I am following. The first was a screen grab from a few days ago. The second is a screen grab from today, after a sizable drop in the market.

All five funds started with an initial deposit of $10,000. And all have gained value since being opened. But note what two days of crashing market values have done to each fund.

The TD Comfort Aggressive Growth Portfolio - I is marketed as a fund with great growth potential. How a fund can by both aggressively seeking growth stocks while providing comfort is beyond me. Aggressive growth means risk and risk does NOT mean comfort. And if it can go up smartly, it can come down equally quickly. And it did. In the past two days it lost 26.5% of all its gains.

The TD Dividend Growth - D series holds a lot of solid, dividend paying stocks. It is not a great mix but it does aim for good quality. It can be volatile but still it only lost 14.8% of its accumulated gains.

The TD Dividend Growth - I series charges less MER and so collected more gains. The drop affected both the D-series and the I-series similarly but because the I-series had a smaller gain, the percentage of the gain lost was a little greater. It lost 16.7% of all its gains.

The TD Monthly Income is one of my favourite funds. It doesn't set the world on fire when the market is hot but it doesn't fall through the floor when the bottom falls out of the market. You can expect to lose a lot but this will be a lot less than many other funds. In the past two days it has only lost 10.75% of its gains. One can still sleep at night.

And lastly, the Retirement Portfolio is proving to be a dog. It only had a meager $527.36 in gains and yet it lost 27.65% of these in just two days. Its gains dropped to $381.50.

Before I let you go, note the final value of each fund. This is the Market Value column second from the left.

The two dividend funds are in the lead with the Monthly Income fund in third place. The TD Comfort Aggressive Growth Portfolio has dropped well back and is now in fourth place. The fifth place fund, the Retirement Portfolio, is not yet in the red but it is looking like it could be a big loser in a bear market. And this is what the bank sells retirees? Huh?

One last add: I talk a good line but I hate too much volatility. I can handle the ups but the downs kill me. I begin to panic when I lose more than 40% of my investment. For this reason, I try to buy safe stuff - like utilities. Banks can be good in that they almost never cut the dividend. If it is the dividend you need, then up market or down market, your day will unfold as it should.

I'm embarrassed to admit it, but along with my stocks, I own TD Monthly Income. I mix it owning it with a lot of pure equity plays. The TD Monthly Income, with all the bonds it holds, softens the landing when my portfolio crashes.

As you may have already surmised from the above two images, if one mixed the TD Monthly Income - D series with a carefully selected amount of the TD Dividend Growth - D series you keep your risk manageable, increase your gains when times are good, get a fair dividend to help tide you over during down times and keep the worst bears away from your financial door. You shouldn't lose more than 25% in a crash  -- with a little luck, probably a lot less. This is better than losing 50%. Honest.

Cheers,
Ken

For my kin: MER and other mutual fund fees.

When buying mutual funds always check the MER. Now, what is MER and why should you care?

According to RBC Global Asset Management: The MER is the total of the management fee, operating expenses (or administration fee) and GST/HST charged to a fund each year. It is expressed as a percentage of a fund’s average net assets for that year. All mutual funds and ETFs have an MER.

If a fund gained 4% last year but paid a MER of 3%, you, the investor in the fund, would realize a return of only 1%. If two funds are identical except for the MER, the one with the lower MER returns more to the investor.

D-series TDB3088 has a MER of 1.19 while TDB972 has a 2.02 MER.

TD offers some funds as both investor series funds and as D-series funds. The D-series funds are only available to investors with self-directed investment accounts. Funds in the D-series have lower MER charges compared to the comparative I-series version.

Recently, I compared five funds. All funds opened with an original investment of  $10,000. Note: the two Dividend Growth funds are identical except for the series. One is an investor series while the other is a D-series.

The D-series fund has a MER about 0.8% less than the very similar I-series fund shown.

The D-series fund returned $285.48 more to the investor than its I-series counterpart. That's a nice reward for buying and selling your funds directly without the aid of a middle man at the bank.

TD Dividend Growth Funds compared: fund with lowest MER performs best.

A general rule: always pay as little MER as possible.

What else should one watch for when buying mutual funds? Answer: sales commissions, known as loads. Try and only buy no-load funds which have no sales commissions added when being purchased or sold. I try to stay clear of both front-end load and back-end load funds as both increase costs.

Is that it? No. Generally, mutual funds are not sold for quick trading. If mutual fund units are sold too soon after purchase, a short-term trading fee is charged. This fee deters quick and frequent trading of funds and the associated trading fees a fund would accrue. How soon is too soon? Usually, one must hold a mutual fund for a minimum of thirty days to avoid short-term trading fees but check this and confirm with each individual fund.

Lastly, there are a few funds designed for short-term investing. An example would be money market funds. Such funds are often excluded from the short-term trading charges. I park free cash in a money market fund, TDB8150, a TD Investment Savings Account. Today TDB8150 is paying 1.35% daily. That's not much but it's better than earning zilch.

You may lose in the short term, so be prepared.

Back in August TD was calling H&R REIT a Buy. I liked reading that as I have held that stock for quite some time. It has gone up and it has come down, but while oscillating up and down it has never reached its target price. I read the August prediction and felt my faith in this stock was well placed. I'd soon be in the black.

What is H&R at today (Oct. 1, 2018)? Would you believe $19.71. Heck, it was at $20.36 back in August. (And it is dropping even more as I write this post)

My point? Buying stock is not without risk. No matter what analysts are saying, their predictions can be wide of the mark. If you are getting into the market, be prepared to lose money as well as make it.

Do your homework and if you bought quality with a nice, safe dividend as part of the deal, hold on. You will eventually come out O.K. and you will get paid nicely for your patience.

I like to think that my investment in HR.UN pays me a 7% yield. I don't dwell on the loss. And, if it drops 10% or more from its recommended price, I'll re-evaluate the stock and, if it checks all the correct boxes, I'll possibly buy some more. I'll have averaged down. I'll sell the shares that push me over my allocation when the stock climbs out of the cellar. I don't like to hold more than my allocation for any stock. I aim for diversity.

And how long do I anticipate holding on to a disappointing stock purchase. Answer: from eight months to two years but it can be longer. With H&R REIT yielding more than 7% annually, I can hold on to it indefinitely. In retirement, I need the income to live and it is delivering. To that extent, my investment in H&R REIT is a success.

(I has another stock that performed very much like H&R REIT. That was Suncor. It went up and it went down but never hit its target. After years of holding it, it climbed above my purchase price and I bailed with a little profit and all the dividends paid over the years, of course. Free of the stock, I sat on the sidelines and watched it climb to about twenty percent above my original price. I didn't mourn my selling. I was happy to be free of it.)

Markets don't just go up

Since I retired in early 2009, the stock market has generally been a damn fine place to have one's money. Oh, there have been downturns but they didn't last and they left few financial scars. Now, it is 2018 and the party is getting a little long in the tooth. I've been betting the correction would not arrive until 2020 but since expanding my portfolio recently, the market has been retracing its steps almost daily.

I had been sitting on a pile of cash. I was certain a 10% correction was in the cards. I waited and waited and waited. With every passing month I sacrificed dividend income. Finally, in the last month or so, I decided I was wrong. I should not be on the sidelines. I started buying.

I bought the following:

• ALA (Altagas)
• EMA (Emera)
• FTS (Fortis)
• H (Hydro)
• IPL (Inter Pipeline)
• PPL (Pembina Pipeline)
• SJR.B (Shaw Communication)
• TD (TD Bank)
• TCN (Tricon Capital Group)

And how have I done? I'm down. I've lost $1551.89. Oh, Emera, Fortis and TD are up but all the rest are down in varying amounts. Altagas is down a full 7 percent and Pembina Pipeline is following close behind with a 5.93 percent loss. One could argue that Pembina is a greater loss as I invested more in the pipeline and so have now suffered a three digit decline.

Am I kicking myself for making my recent stock buys? A little. But I'm kicking myself for not having simply stayed in the market. If I had, I'd have paid less for many of the stocks that I bought and I'd have collected a year's worth of dividends to cushion today's pullback. Investors are warned not to try and time the market. It is advise I usually follow.

There were no withdrawals, simply losses.

I turned 71 this summer. This milestone had a little extra meaning for me. It meant that London Life would finally be returning what's left in my Freedom Fifty retirement account. I invested about $4200 almost twenty years ago.

If I'd simply put that money in the TD Monthly Income Fund and reinvested the dividends, today I'd have about $14,000. Instead, I entrusted the money to London Life and today I only have about $2100. The only ray of sunshine brightening this whole story is that at 71 a guarantee kicked. London Life guaranteed if I waited until the age of 71 to ask for my money, it would send me at least seventy-five percent of my original investment. I'm hoping to have about $3150 returned. I say hoping because lately I have found getting London Life to put this in writing has proven difficult.

That said, I submitted a form last Tuesday. I should see the remnants of my investment soon and, when I do, I'll post the news.

The point of this post is to say, don't put all your bets on one horse when it comes to investing. If I'd have given my entire RRSP to  London Life, as was suggested by its rep, I'd have lost a massive amount of money. I'd been in financial trouble today and I'm not because I didn't.

If I were young and just starting out, and I knew what I know now, I'd take a big chunk of my money and invest it following the advice found on the Canadian Couch Potato investment blog. I'd hold a little money back to invest directly in stocks I really liked. Why would I do that? For fun. Investing can be, and should be, fun.

The last thing that I'd do is give my money to an investment advisor. I have seen two recently and both only made one solid promise: they would charge me to manage my money. One admitted to a fee of three percent of the value of my portfolio annually the other fudged their answer.

And I believe them. They will take out their fees without fail. London Life took out their fees annually. Their fees were part of the problem. Those fees made it very hard to earn enough money to replace the money that Freedom Fifty Five lost in the first year or two.

Finally, as I got older and got more and more comfortable with investing, I'd carefully prepare an allocation goal. I'd create a portfolio based on this allocation using the software supplied by whichever bank I was using to manage my actual portfolio. The practice portfolio would be based on my actual portfolio and then I'd sit back and see which approach delivered the best results.

And, I am actually taking my own advice even though I am now 71. I am tracking three portfolios: one my actual portfolio and two practice portfolios.

If my actual portfolio is worth X today. My allocation-based portfolio is up .14 percent and my Couch Potato Portfolio is down .08 percent. But there is one big difference between my present portfolio and the other two. My portfolio, structured for income, is paying thousands of dollars more than either of the other two portfolios.

Dividend-paying stocks can ease the pain of a decline

Don't buy just for the dividend. This is a good rule. Stocks with crashing values often path through a phase where the dividend yield is great on paper. The dividend has held while the stock price has dropped. This is not a buying opportunity. Sadly, but not unexpectedly, the dividend is often cut and both the stock price and the dividend tumble into the dumpster. As the rule says, don't buy just for the dividend. It can be ephemeral.

That said, a good stock with a good dividend has the dividend as an ally, a backstop to loss. Bank stocks rise and fall but the Canadian bank stocks have a history of retaining dividend payouts throughout each cycle. I own Royal, Scotiabank and TD. My BNS is down at the moment but its dividend looks secure.

Recently I bought Pembina Pipeline. Today my investment is down $405. Ouch. That said, my 400 shares will yield $912 in the coming year in dividends. With today's loss factored in, I am still $507 to the good. At the price I paid to buy this stock, the dividend is still delivering 2.76% on my investment.

Yes, I know, the stock may yet fall farther. Today's numbers are just a snap shot of how the math performs at the moment. It may not be as good tomorrow. But, and this is more likely, at some point in the relatively near future the math will be better, much better. If I had wanted to avoid volatility, I would have bought a GIC. But then I might have had to settle for as little as one percent on my money. Even with a $405 loss, I am still doing better than if I had bought a GIC to keep for a year.

End of Day Add: At market close today my total PPL loss stood at $368.99. Pembina made a gain today despite the overall market suffering a very small loss. I will try and remember to come back in a month and tell how my PPL purchase is working out.

An allocation plan for my retirement portfolio

I've been retired since 2009. My pension was inadequate and I needed dividend income from my investments to live. Sadly, I don't have enough invested, or so the bank tells me. I've got a problem and yet I've lived well for the past nine years. How? I've put my money to work in solid companies paying decent dividends.

A TD Waterhouse estimate of my dividend income for next 12 months. Click on image to enlarge.

It has been easy being an investor during the past nine years. The market has been very forgiving. According to one trusted source, the present party should continue until 2020. Then we may see a correction. That's a market drop of ten percent. If we see a bear market, that means a drop of twenty percent or more. And a bear is always a possibility.

So, I've decided to get my financial house in order, to batten down the financial hatches so to speak. I'm using the intervening months to assemble a solid portfolio of resilient companies plus some decent ETFs to take my wife and me through the coming downturn and there will be a downturn. There always is. On the bright side, they don't tend to last long. Eight months would be normal and two years would be an exceedingly long lasting bear market.

I thought of going the Couch Potato route but for a number of reasons I have decided to borrow some Couch Potato ideas but not anywhere near all. You might feel differently. I highly advise checking out the Couch Potato. You could do much worse.

In my next post, I will talk about one of the sectors I am putting front and centre in my retirement portfolio: Utilities.

Posts temporarily down for editing.

I've taken my previous posts down for updating and editing. Since starting this blog, I've grown and my views have changed somewhat. It is time for a careful reboot.

Cheers!