If analysts are right, the future is bright. A big "if".

I am surprised by my losses. Oh, I saw some of the losses coming but I was blind-sided by others such as Telus. I had great faith in Telus. Very foolish. Never put too much faith in any stock. Stocks are fickle. Stocks are famous for constantly going up and then down and surprising us with both moves. It is the reason why many folk steer clear of the stock market. 

If you are like me and have recently suffered massive paper losses and are realizing that these losses could double before the market turns around, you need some cheering up. I found a bright light shining in the dark shadow of the falling market - the analysts featured on TD WebBroker.

Take Quebecor. Its high for the past year was $35.61. Today it is at $28.25. If you check the Analysts page for the stock, you will find the analysts see an upside price of $39.33. There is one fly in the ointment; analysts are known to be wrong a lot of the time. Few are right even 70% of the time. Flipping a coin is often as good an indicator of future stock prices as the musings of a professional analyst. Sadly, three of the seven analysts were not even able to best a flipped coin.

But, hope burns eternal. My portfolio doesn't need the 38% upside the TD WebBroker-picked analysts see for Quebecor, nor does my portfolio need the 37% forecast for Telus. A 15% gain will be more than adequate. Such a modest dream may well be fulfilled.

One final caveat when it comes to analysts. As a group, their forecasts are as volatile as the stocks they follow. One day a stock will be forecast to hit $60 but a month later the same analyst may see the stock only reaching $50. To err is to be an analyst.

I'm told that this is not a bear market; oh?

The Canada Stock Market Index (TSX) reached an all time high of 22,213.07 in April of 2022. Right now, as I write, the TSX is at 18986.60. It is off it high by 3226.47 or 14.5%. This is a correction. It must suffer a dip of 20% or more before a bear market is declared. It is not unreasonable to imagine the TSX dropping to 17770 or even less. But even if it doesn't, this is a nasty pullback.

My portfolio is down a little more than the market. I'm down about 15% and it hurts. Downturns like this are not unexpected but that fact does not soothe the financial pain. The losses may be paper losses but the accent is on losses and not paper.

The worst part of this moment is that I did not see it coming. I thought the market had bottomed and was turning around. I bought some Telus, some TC Energy, some TD Bank and Bank of Montreal. All these recent purchases have lost money. Now, I must guard my remaining cash and dole it out carefully.

On the bright side, thanks to the crashing stock values, the yield on my RIF has grown to 5.85%. With RIFs the government sets the annual mandated withdrawal rate. This is a rate increases with each passing year. For instance, at retirement at 65 the withdrawal rate is 4%. Ten years later, at 75, the rate is 5.82%. My rather high dividend income means I will not have to sell any stock at fire-sale prices to meet the government withdrawal demands. See the withdrawal rate table here: RRIF Minimum Withdrawal.

The value of my stock holdings may be down but I feel confident that my dividend income will not shrink to anywhere near the same extent. For instance, income from the big Canadian banks should be safe. The Bank of Montreal has an impeccable dividend history. It has gone almost two hundred years with nary a dividend reduction. The TD Bank can make almost as remarkable a claim.

Hugo Ste-Marie, a strategist at Scotia Capital, wrote in a report published last Wednesday: "Despite a challenging environment, keep in mind that over the long run, dividends matter a lot, accounting for the lion’s share of equity returns."

To underline that point, the Scotia Capital report broke down the growth of a $100 investment in the Toronto Stock Exchange benchmark from 1956 to today. With dividends, it would have grown to $29,000. Without dividends, it would be only $3,600.

Dividends contributed nearly 90 per cent of total returns over the past seven decades. In other words, it pays to stay invested. Buy and hold pays over time.

Few investors know when a correction or a bear market will appear but both tend to only stay for a short, but painful, visit. The average bear market in Canada lasts just under a year. That said, a two year bear market is not unheard of. Bear markets are difficult to call and far more frequent that most investors believe.

But bear markets tend to be shorter than bull markets and not as frequent as corrections. The average bull market roars along for more than five years and can last much, much longer. A rule of thumb, based on the U.S. market, says a third of time the bear rules and two thirds of the time the bull runs free. Ride out the bear and ride the bull.

For a good take on bear markets, read the linked article from The Motley Fool: What is a Bear Market? In writing this piece, I found the following post very interesting and worth a read: Statistics and facts about the stock market in 2023.

Quebecor (QBR.B) may be a buy

I picked up a little Quebecor (QBR.B) some months ago. It immediately climbed into the black and never looked back until now. Late last week, my QBR.B holdings dropped into the red. By Friday close my Quebecor shares were back in the black but the Quebec-based telecom had my attention.

In an ideal world, I would own a bit more Quebecor than I do. My telecom investments are not as diversified as I would like. For instance, I have more Telus than I am comfortable owning. The excess shares will be sold when the Telus share price recovers. I look forward to the sale. I may invest for dividends but everyone benefits from pocketing some capital gains now and then.

My ideal portfolio has about 350 additional Quebecor shares. At $29.11 I can afford the purchase. The price is good but it could be better. The Morningstar Analyst Report rates QBR.B a four star stock. This means Morningstar believes appreciation beyond a fair risk-ad-
justed return is likely.

And speaking of Morningstar, the respected investment authority believes one should consider holding Quebecor as a core holding in a portfolio based on Canadian stocks. It isn't among the first tier "consider buying recommendations" but it is still listed as a stock worth holding.

The dividend yield of 4.12% is not great but it is adequate. With a payout ratio of 45.14% the dividend should be solid with very little chance of being cut in the near future. The quick ratio of 0.6X also adds to one's confidence in the company.

So, what is holding me back? QBR.B recorded a low of $23.845 in the past year. I worry that QBR.B could drop if the market were to continue to weaken. Am I being greedy? Maybe. (Oh, just to be clear, this post refers to QBR,B. Note the B. It is important.)

Retirement Income Portfolio at end of September

Three months ago, at the end of June, I posted a quickly assembled million dollar retirement portfolio with the goal of realizing an income of $40,000 annually at the outset. 

It was quite a success in its first few weeks but lately it has been losing money at a very fast rate. It is ending the month of Sept. down $32,244.54.

Am I panicked? No. The market is volatile. There are no surprises here. Heck, in a correcting market one would expect to see a loss of $100,000 or more. And if a bear market were to appear, a loss of double that would be reasonable: $200,000.

As I have no reason to sell, the losses are all on paper. On the other hand, the dividend income is real and on October first I will be withdrawing $3,333.33 just as a retired senior would. This will leave more than $2300 towards the November payment.

You might not agree but in my estimation this portfolio is a success. To see the complete portfolio, click this LINK.

Why do I invest in the market?

With the market looking as if it could lose another one percent in value today, it is a good time to examine why I invest. It is not complicated. One, I need income to live in retirement and two I would like my personal worth to increase in value over time.

To illustrate what happens to a retirement portfolio over time, I created and posted a portfolio based on my investment beliefs. In the few months it has existed, it has lost almost $22,500. Ouch!

That my seem like a lot, and it is, the loss is not the whole story. At one time, this portfolio was up a little more than $50,000. That means one could argue that this portfolio is down about $75,000 from its recent highs. Looked at like this, it kinda takes your breath away, right?

On the other hand, we are taking a full four percent out of this fund annually in twelve monthly payments of $3,333.33. So, even though the portfolio may be shrinking in value, it is still able to meet the demands for monthly cash payments. In the real world a portfolio like the one posted would have only lost value on paper. Paper losses have a way of disappearing over time.

So, the example of a retirement portfolio posted in late June is meeting one of my two goals. It is delivering monthly income. As for delivering capital gain, the voting is still out. As the market tends to grow more than it shrinks, it grows approximately 65-70% of the time, if we continue to hold, eventually we should come out on top. This period of racking up loses should come to an end shortly.

Stay tuned to see how this unfolds.

Retirement Portfolio Dips Into Red

How easy is it to generate a steady income from a fully-investment retirement portfolio? Well, if you follow this blog, soon we will both know as I have posted my own take at creating such a portfolio.

It has been a bumpy ride. I was up more than $50,000 at one point but I have an updated balance this week which is slightly in the red. Ouch! But, it is not as bad as it looks. I believe I will be able to withdraw a full $3,333.33 at the beginning of this and every month, emulating the withdrawals that must be made in retirement.

So, how much am I down? Approximately $10,000 or one percent. This is hardly worth concern. Come back in a week to get updated. The portfolio might be in the black by then. One can only hope. Cheers!

My retirement portfolio is holding in there

It is halfway through September and the portfolio I posted showing how easy it is to design a successful retirement portfolio was up $17,889.73 at the close.

I should note that I removed $3,333.33 at the first of September. If this were an actual income portfolio in its first year, it would have had to stand up to the stress of having four percent of its value deducted spread out over 12 monthly withdrawals.

Click on My latest crack at a "Retirement Portfolio" to see the entire portfolio. Come back at the end of the month for an update.