Saturday, March 31, 2018

Investing Performance Q1 2018



It's been a brutal start to the year with the S&P TSX down -5% so far and only up a scant 6.7% in the last 5 years. The US S&P 500 is down -1,1%. Having a portfolio made up of only Canadian Bacon stocks has NOT been the place to be.

Well, it hasn't for me so far, but I have another 9 years before I will tap this fund for retirement income.


I currently collect $2300 a month in pension income and am fully retired. This account is a supplement to that.

You should be invested in a portfolio that is globally diversified in index funds in my opinion like I have in my wife's RRSP and LIRA. This will help you sleep at night and remain balanced. I am 100% Canadian Bacon individual dividend paying stocks.

Let's see how we all did compared to the index and also her funds overall performance.


My Account

Started the year with $89,656 and ended the quarter with $83,888. That's a loss of -6.4%. That is also more than 1.5% of what the index lost. Looks like so far in 2018 I am not smarter than the index.

I also contributed 3K in cash to the fund as my annual RSP contribution. This brings my realized loss to -10%. I still have 10K in room but I didn't have enough cash to fund the limit. Maybe next year.

My stock holdings are; AQN, BCE, BMO, BNS, CM, ECI, EMA, ENB, FTS, NA, POW, RY, TD & TRP.

Cash = $241.40

The account distributes $3,869 in dividends annually. That is another $322.41 every month I can add to my income when the time comes. That monthly will grow in the next 9 years as the companies I own increase their dividends. That is why I'm invested here. I plan on keeping an income producing portfolio now and continuing when I turn 71 and convert to a RRIF.

Total Dividend Yield is 4.83%

Her RRSP Account

Started the year with $99,161 then added 3K in cash to total $ 102,161. Her RRSP is now at $103,234 which represents a gain of $1,073 or 1%.

This globally diversified portfolio of index funds beat the index by 6%.

It consists of XAW, (40%) XIC, (20%)  XQB (20%) & ZPR (20%)

I have split her portfolio into a traditional 60/40 balanced portfolio (except for the addition of a preffered ETF). Boring as hell YES. She wants it that way and doesn't want me to take any unnecessary investment risk with her retirement savings. I can't really blame her as it seems to me I suck at picking stocks. Not really, I just leave her money alone and watch it grow. So far so good as she is way ahead of the TSX in the first quarter of 2018.

Cash = $7,597. 94

Her PF throws off $2,564 dividends annually.

Total Yield = 3%

I have modelled her PF after heeding the advice of Garth Turner over at greaterfool.ca

You would do well to become a regular reader of his blog IMO.

So far it's working out. We just take what the market gives us.


Her LIRA (Locked In Retirement Account)

This is a hybrid portfolio which I'm going to change to a complete Greater Fool PF as mentioned above.

Started the year with $72,874. Her portfolio now stands at $71,330. This is a cash loss of $1,544 or -2.1% in percentage terms. We can't contribute to this account, all I can do is reinvest the dividends it throws off. 


I have screwed with this account during the quarter after the volatility in February and March. I wanted to bring some fixed income into her account after also investing 100% in Canadian Bacon dividend paying stocks. To do this I sold off EMA, FTS, ECI, T, KDX and ENB.

It was tough letting go of these dividend payers but necessary to bring her PF to balance. The biggest loser was one of my worst investments ever. It figures it would be a gold stock. It is being sold to Hecla Mining and I don't want to own any gold companies in the frightened states of america. So I dumped it for a total loss of about 50%. Ouch!

Right now the portfolio components are; BNS, CM, NA, RY, TD, ZAG (20%) & XPF (20%)
It is still too Canadian bank heavy. I have also decided to sell all her individual stocks and buy index funds with a target date of May 1 2018 to implement that.

That again would bring this account to a 60/40 balanced portfolio as recommended by Garth Turner. With 20% of the fixed income component coming from prefered shares to juice the return a bit.


My wife still works PT so the goal here is to preserve what she has and invest in a low risk PF. I am still screwing with the mix and really need to stop and leave it alone. Once she has a PF of index funds I won't ever touch this account again except to re-balance once a year.

Cash = $9,020.91

She earns $2,278 in annual dividends

Total Yield = 4.49%

My Q1 Takeaway

I'm the biggest loser and my wife's accounts in total are basically flat. When compared to the index it is best to get the fack out of Canada eh!

At least look at some index funds to help you accomplish that and make some money. My goal is just to grow my dividend income and not to stress over minor short term losses. It really means nothing to me as I am an income investor. Growing the income in retirement is the ultimate goal. If my yield goes down then I have to revisit what stocks I own.

Until that happens I will continue to hold what I have.

I also hold an emergency cash fund with close to 25K in it.

It's fun and necessary to look at short term performance but this is a long term plan.

I also have an open investment account that is 100% to the nuts invested with borrowed money. It is funded by a HELOC. I will be winding it down by by May 1 because I don't want these high interest payments in retirement and my wife is not on board investing with leveraged money.

Lessons and Looming Changes 

  • I am NOT smarter than the market
  • to become more of an investor in 2018
  • implement a PF re-balance in May 2018
  • with a small amount of money these index funds give greater exposure to the rest of the world
  • Canadian Bacon tastes great but sucks as an investment
  • only in a stock market meltdown do you learn the best lessons
  • I need to add more fixed income to my retirement portfolio
How are you doing so far in 2018? Has the latest market action caused you to make any changes to your PF?


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Thursday, March 29, 2018

Protecting Canada's Seniors



The Ontario Securities Commission has unveiled a new strategy to protect senior investors.

This makes me shake my head because I have to ask myself, why does the government need to step in and save seniors?

Are they that dumb after living a lifetime of working, saving and investing?

Can't be.


Over 1,000 people a day are turning 65 years old in Canada. These are the fortunate ones who won the birth lottery. They had awesome and unfettered access to the best jobs, benefits and great pension plans. They have been entitled their whole life and now they need protecting.

In my opinion I don't think so and I'm on the cusp of turning 62. I don't want to bash my fellow retirees but c'mon, we've had it pretty good if you compare us to the millenials who are facing shrinking benefits, low wages and stiff competition to the job market.

When I was a teenager we had the pick of any job you wanted. If you didn't like it you quit and moved on until the next. Getting a summer job was easy, easy as sunday mornin'.

The OSC calls this new initiative the Seniors Strategy.


What's Under the Hood

It bills this as;
 "a stronger and more secure financial future for all Ontario Seniors"



It seems that the commish needs to ensure that the needs of older Ontarians'  are appropriately met, that's why the policy is necessary.

What is the Strategy?

  • to continue the ongoing effort to sort through confusing titles the investing industry uses
  • investors will be asked to name a 'trusted contact' in cases of abuse
  • investment firms have asked for legal protection
  • new regulatory guidance for firms dealing with senior specific issues
  • strengthen the dispute resolution process so it works better for seniors 
I have no idea why all these new regs would be necessary to save older investors from themselves. If you are 65 and can't detect a scam or know when you've been taken then you must believe Trump is the greatest president in history.

I get it there are some unscrupulous people hiding in the weeds to take your life savings if you're not careful.

I also can't feel a little suspicious when I hear that the Mutual Fund Dealer's Association is strongly backing the new strategy.

Everybody it seems wants to help protect seniors. Education will be stepped up and that more research is needed in how to take care of seniors.

It seems you need a babysitter to change your Investing Depends too.

My Takeaway

To say I'm skeptical about a new initiative backed by the Mutual Fund Dealers and proposed by the government is an understatement.

Yes laws and guidelines should be set up to combat criminal fraudsters, but they exist in all walks of our life. Somebody is always trying to separate us from our money and coming up with unique ways of doing so all the time.

The Bernie Madoffs of the world are few and far between in my opinion. Know who you are handing over your money to. Better yet, learn how to do this yourself. You need to work on your financial IQ as much as you worked on your kids, job and marriage.

Finally DO NOT invest in mutual funds. They are way too expensive and there are cheaper alternatives like ETFs.

We need more government intervention in areas like increasing the TFSA contribution limit so we can take care of our own retirement. Also, how about lowering the mandatory withdrawal rates from our RRIFs so we have more money in retirement. The percentages are too high.

Those are two great places to start to help seniors take care of themselves instead of more nanny state laws and protections.

Related Post:

Using ETFs for Dividend Investing - Should You?


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Wednesday, March 28, 2018

Dividend Stocks - The Gift That Keeps On Giving


Once you buy your first dividend growth stock, all that is left to do is sit back and watch the money get automatically deposited into your account. It really is that easy.

This is like getting a paid holiday every month. I mean where else can you get paid without doing any work or sleeping in every morning. You're getting paid for virtually doing nothing but by owning a big mature company, like the one that provides your data and cell phone service.

For the average Joe investor/retiree like me it is the fastest way out there to build wealth and my retirement nest egg. 

Most investment studies out there also report that over the long term investing horizon you will enjoy a higher rate of return than any other investment.

It is further reported that in the last 40 years, over 70% of the stock market's total return have come from dividends. You can buy stocks that don't pay any but why would you?

Why exactly, is right. Given enough time I believe you can become wealthy adopting this dividend growth strategy for yourself. Here are some other reasons to become a dividend growth and income investor.


How to Stimulate Returns


I am a fan of Tom Connolly over at dividendgrowth.ca as mentioned in earlier posts and also John Heinzl who runs the Yield Hog portfolio over at the Globe and Mail newspaper.

I strongly recommend subscribing to both as a matter of hand holding you through the dividend investing process. You will find reading what they have to offer of great value.


Returns are stimulated by letting them grow over time. Benign neglect after purchasing your stocks is the way to go. Stick to banks, telcos, utilities and others you know like grocers and railways. It's what I do.

Don't Become A Mercenary

You don't want to chase dog stocks with high yields. If you salivate when you see stocks paying you 10% or more, go get some fresh air. Don't buy them it's a sign of danger.The reason for the high yield is the stock price is tanking. The company is most likely in deep debt and the market doesn't believe it will make money and grow.


What if The Market Wrecks?

When the market drops as a whole like it did this past week there can seem to be nowhere to hide. The question becomes, what comes back the fastest? Selling is the worse thing you can do on those down days so just hang in there. After the crash of 2008/9 dividend investors got crushed. This ended up being a huge buying opportunity and not a time for selling. The market is up over 120% since then. However, those invested in a 60/40 portfolio recovered losses in 50% less time than a straight dividend equity portfolio. There still is a place for balance and bonds in a portfolio. Everyone panics in a sell-off. They say they won't but we all do.

Hunt for Rising Dividends


Hunt for stocks that have increased their dividends at least for the last 5-10 years. This tells you that the company is profitable and has more cash available to pass on to investors. This is our safety net and will allow as to stay ahead of inflation every year.

With the cost of living always on the rise it is important to hunt for those companies that also raise their dividend year after year. I personally like to buy stocks with a 10 year growth record. In 2007 Telus paid a dividend of 75 cents. Last year it paid $1.95. It yields 4.33%, perfect!

Get Rich The Lazy Way 


If you like the dividend growth strategy and only have a small amount of money to get started then why not look at an ETF?

You can look at the Vanguard family and an ETF like VDY or iShares two offerings of XDV and CDZ. There is an on-going cost to ownership so check the website and the fact sheet for each specific fund and how the manager invests the money.

You can also check out this previous post; Using ETFs for Dividend Investing for more info.


Pick The Home Team


I don't pick individual US or International stocks. I stick to large cap Canadian companies so I can also harvest dividends and in a non-registered account benefit from the dividend tax credit.

Dividend stocks also do better than bonds when you invest this way. Check with your province of residence for applicable rates. If you use Turbo Tax or UFile these rates are calculated automatically. You mean there are people out there that still use a pencil?



Keep Taxes in Mind


Canadian domiciled ETFs have a definite tax advantage over US ones. The downside of these funds is they are more expensive than their US cousins.

They also carry fewer stocks when compared to the US family. The other problem is exposure to certain sectors. Canadian dividend ETFs like CDZ and XDV are heavy on financials, telcos and utilities. They are also taxed more favorably by the government, so there is that.

Become A Stock Picker


If you have finally decided that going the DIY investing journey is where you want to go then I would also suggest doing what I did. Stick to the big companies who have b
een around forever. Stocks like BCE or BMO as an example. Pick at least 5-10 stocks to get going. If you still want to get going but don't have enough money to buy at least 100 shares of each then you might want to stick to ETFs.

A Starter Portfolio


Always make sure you do your own research and are very comfortable with this strategy. You are not going to get wealthy overnight investing in dividend stocks.
Matter of fact it is pretty boring but sometimes just leaving these stock picks alone and watching them grow over time is excitement enough. Kind of like watching your kids grow through life.

BCE - telco
EMA - utility
TRP - pipeline
T - media
ENB - utility
CNR - industrial
BNS - bank
TD - bank
IFC - insurance
CU - utility

Total Yield = 4.36%

I would stick with stocks yielding at least 2% and in the 4-5% range. Anything above 6% in this environment would be taking on too much risk for me. 


I own all the stocks mentioned above except IFC. This is a great starting point but you can go look at all the ETFs mentioned previously and simply buy the top ten holdings they list.


Related Post: Dividends Power Portfolio Returns

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Monday, March 26, 2018

What Really Happens At A Real Estate and Wealth Expo?


This a blog about my 30 years experience of investing and living in the personal finance space of Canada. One of my experiences included an afternoon at a Real Estate Expo. Nothing has changed in decades. If you've been to one you've been to them all.


All that changes are the hucksters trying to take your money away from you. The pitch is the same. You can make a fortune buying and selling real estate with NO money down! Total bullshit. These people are vultures, nothing more.

If you like entertainment then it is that. If you are going to learn how to make money in Real Estate then just stay the hell away!


You won't learn any such thing. Many people go to these glitzy promotions and get sucked into paying for expensive courses hoping to get rich buying and selling real estate.

It's all staged and an attractive way of upselling you on higher priced products. Go to Youtube and plug in Tom Vu. He was the original real estate con artist of the 1980's. Well he was in Southern Ontario anyways.

Lots of hype, music, cheerleader type girls and fancy cars all adorned his promotional materials and boiler room videos. I attended one of his seminars in 1985 in Toronto. It was a night out and highly entertaining. Room was packed, I left and bought nothing else.

This is what you do. Look but never spend and buy. It doesn't work and won't work for you. Just ask the thousands who dropped 35K on a course at Trump University. It's the same thing with the latest Real Estate and Wealth Expo being promoted right now in Toronto. This time they are dragging Rocky back into the real estate ring to hype up the crowd.

Let's look at what's happening to real estate right now and why this is a terrible place to go to learn a lesson in investing.

Prices are High 

All that you hear on the news these days is how high housing prices are in Toronto and Vancouver. Wealth taxes are being added to purchase prices to stem the flood of foreign buyers into the RE market. Even an empty dwelling tax is being introduced. Do you think these topics will be covered between sets of deafening music at the expo?

Why would you buy real estate now? Prices are at historical highs and interest rates are on the rise. That's the double whammy and at this time prices are too high to make any money.

Tough Environment

Another hurdle to jump through here in Canada is called the stress test. This is to stop people putting in a down payment from the bank of MOM (BOM). Another 5% will be added to the amount you qualify for to see if you can handle the stress of buying in a rising interest rate environment. Gee, I wonder if the celebrity sharks will cover that topic. You not only have to carry the mortgage on your own but also have the money for a down payment plus more on paper.

This stops all the previous 5% down people and even worse for seminar sheep from buying houses with NO money down. It's all bullshit!

The Celebrity Pitch

Sharks, Dragons, Hollywood Hasbins and washed up disgraced sports steroid junkies are what will be hitting the stage soon.

What more could you ask for when you are itching to get into the RE market.

They will all be here explaining to you with sound and pictures how easy this is. It's so easy we had to hold a special event with pre-registration absolutely necessary.

What background does Stallone have in Real Estate? How much has he made buying and selling houses with NO money down? It's all bullshit, just my experience and all this for a measly $67. Will they stop there? Who knows.

Bitcoin

Just as an added bonus they are going to jump on the bitcoin promotional train. Why not flog an asset that is trending up and people have no idea how in the fack it works.

I'm sure they will all give you an education on Bitcoin and again how you can get rich selling houses and now what a great investment bitcoin is. Is this really happening?

You can buy Bitcoin now trading at 7K a coin (digital) but down from 20K just a few months ago. The best part is you can buy this through an app with a credit card.


Now there's an investment strategy. Buy digital fairy dust that has already blown up and pay 23% credit card interest rates to secure your purchase.

Please, just stay away from digital currencies even if Rocky tells you to do it.

The Hype of Easy Money

That's what this is all about, selling the sizzle and NOT the steak. Telling you through celebrity mouth pieces that you can get into the real estate game with no money down and buy and sell houses like real pros.

Don't get fooled by the glitz and hype. If it was that easy, they would teach it in high school or even have RE college courses as personal interest only. It's not easy and best left to professionals only. This can be said of a lot of investments people end up buying and have no clue how they work.

Creating wealth for you by buying houses, becoming a landlord and then invest the proceeds in bitcoin. It's pure snake oil sales pitches.


My Last Takeaway

My mechanic says he only needs two things and he can fix anything.

Time and money.

Take your time building wealth and let your money build slowly with compound interest and growth.

If you want an education on the Real Estate market in Canada just start reading what Garth Turner has to say over at greaterfool.ca. He is the foremost guru on all things RE and I'm also a big fan of his globally diversified portfolio approach to investing.

Never get sucked into taking shortcuts by attending seminars or wealth expos that tell you different. It's not different and you will not gain value for your ticket which is $67 for the VIP rate.


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Sunday, March 25, 2018

What To Do When Everything Drops?

I usually go for a walk and try not to obsess about my portfolio on days like yesterday and also the pullback in February. It's all Trump's fault anyway. Never before has one person wreaked havoc on the stock market as he's done lately.

All that BS about the biggest and best tax cut in history has vanished into the fog of tariffs and a trade war with China.

The problem in today's environment for investors is where do I park my money so it grows for a future date? 

The President declares war on China and everything you own blows up. Is it likely to continue or will we see a rebound. I mean 700 points of the Dow is no small cheese but can this get worse?

I'm not buying anything but instead increasing my exposure to bonds in my wife's account. In my own account I'm holding everything (I mean why sell on a down day?).

My utility stocks and a bond ETF are the only ones in the green.

What about everything else going on here in these exciting and frightening times we live in?

I am fortunate enough to have lived and was invested in the markets during the financial crisis of 2008/9. Most millenials invested with a robo or worse yet bank mutual funds have never experienced down days like Thursday and Friday of this week or February of 2018.

Historically, this is a big yawn. A 3% down day is something you have to stomach and a 10% loss on the week is something you have to hold through.


You would never sell your house when it's value drops. No, you know over time it will rise in price and when and if you decide to sell or downsize it will make money. Nobody I know of has ever complained that they sold their house for less money than they paid.

The same applies with your investment and retirement portfolios. 


The Noise

Another thing that bothers me is when I hear people talk about alternative investments like gold in trying and the end of days scenarios. They think gold is going to explode on days like Thursday and Friday.

The price went up a couple bucks but most of the stocks went down and did nothing. Why didn't they skyrocket when Trump declared war on China?

This is bullshit. There was nowhere to hide but to sell and go to cash. Nobody does that but pros who need to generate commissions.

It's just a major distraction and us little guys should never jump in and out of our stocks or ETFs.

The point and question is, what do you do?
  • ignorance is bliss, don't look
  • some days everything in the world drops, it happens
  • never react to day to day noise
  • it's all temporary
  • the stock market always recovers and moves higher
  • there is nowhere to hide so stop trying
  • nobody will have a good reason for you
  • it's all out of your control
  • gold does go down in bad times too

Active ETFs

These were created by the mutual fund companies to combat redemptions from their high priced funds. Instead of buying a globally diversified basket of ETFs you can purchase one that has an active manager in charge of trading in and out of positions to minimize losses. 

Are they any good? I dunno, never bought one either.

DXC which is Dynamic iShares Active Canadian Dividend Fund has a MER of 0.75 (expensive).

That's a lot higher than the broad based passive Canadian ETF XIC by iShares. It clocks in at a paltry .06% and is invested in the whole Canadian market.

DXC only holds 44 stocks, XIC 212.

You are paying for that active management and whether it reduces your risk remains to be seen. That's the whole point of active management or so I've heard.

iShares is just betting on the mutual fund customers who are fed up paying 2.5% for a Canadian Index Mutual Fund will be attracted to these new offers.

Cash is Still King

If you are tired of seeing profits erode with steep stock market declines, then hold a lot of cash. Anything that let's you sleep at night you should do. Matter of fact construct your whole portfolio that way.

I personally never hold a lot of cash because I think retirees still need a lot of growth in their portfolios so they don't run out of money when they need it the most.

I just take my lumps along the way and hold on for the inevitable market rise.

Whatever you do, don't believe the myth that there are better places to be invested when the whole market goes for a dump like Feb and March of this year.

It's the Trump factor in play, I just hope the game is over soon.



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Saturday, March 24, 2018

Never Invest With Your Bank


Whether it's good advice or not I tell my kids that the bank is a great place to get money but the absolute worst place to leave your money.

Banks are all staffed by kids these days and full of turnover. On the rare occasion I step into my home branch the faces are constantly changing.

I mean nothing against the young but what do they know about money, working, saving and investing.

These are salespeople just pushing products that the bank needs them to sell. Once your account is opened it needs to keep selling you credit cards, lines of credits, education savings plans and mutual funds. Need a mortgage?  Got that too.

Nothing wrong with any of this, just be advised that you are not getting good advice on any of this wealth building stuff. Banks charge some of the highest rates on investment products on the planet.

I use a bank to get money I don't have and to open a direct investing online account. That's it.

I never buy anything from the bank. NOTHING!


I own bank stock but you can't buy that from them. Want to purchase an ETF because it's cheaper? No can do, only expensive bank specific mutual funds.


The Deception

  • banks employ salespeople NOT advisors
  • their needs are different than yours
  • conflict of interest sales practices
  • not enough training and experience of sales staff
  • they are a front for institutional products only
  • they are in the business of making money and NOT making it for you
If you want to take advice from people who work at a bank on what investments are good for you, go ahead. You have been warned. They just sell high priced stuff and make commissions. Know the difference. Just because it's your bank don't be blinded by years of loyalty that they really care and are looking out for your best interests. They are NOT!

Mutual Funds are yesterdays DoDo bird.


Where Should You Go?

If you're looking to invest in a TFSA, RESP or RRSP just stay out of the bank. Seek out a fee-based financial advisor. One that is going to give you unbiased investment advice who is NOT compensated by company specific products.

Find somewhere you can also get some retirement planning advice and tax advice as it applies to your family situation.

Start asking friends and co-workers for recommendations. Just research who and how much they charge. Keep costs low.

If you want to go it alone as I do then you need to read and research starting with all of the books I recommend or have recommended.

Stay away from mutual fund companies and accounting services who also sell insurance products you don't understand. Your downtown is probably full of these store fronts. Don't go inside or they will skin you.


My Experience

I went from mutual funds sales guy friend to DIY investor. I just feel better doing it on my own. I just never had enough money for any of them to take me on.

For the majority of us small people the advisor landscape doesn't take on small accounts so it's buy a balanced mutual fund or ETFs on our own. This is easy to do.

I also buy individual stocks in another account which I find is also fun to do. I like to research stocks and find companies to invest in.

It is also exhilarating to receive monthly/quarterly dividends.

So I invest money in a variety of ways. I index in a balanced portfolio for my wife (still working) and individual stocks in my own RRSP (now retired). This is the lowest cost way of investing that I know.

It's NOT for everyone and may not be for you.

Do your research, read books and use Google. There is so much free advice out there. You can do this, just stay out of your bank.

Related Post:

The 60/40 Balanced Portfolio - Is It Best For You?


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Friday, March 23, 2018

Do You Need a Financial Advisor?



My first financial advisor was just some random sales guy from a mutual fund company. I really thought he was a legit advisor and that I was an investor. I was seduced by a workplace seminar on investing for retirement, so I went in and later signed on for a one on one appointment.

I really was an investor but he was no advisor. He got paid to flog company specific mutual funds to unsuspecting noobs like me and my wife.

Nice guy sure but only concerned with the commish he was making on peddling high cost funds and then settling back until I called with more cash to put to work.

I suspect a lot of people in the 80's and 90's got their start investing this way. The problem with mutual funds is cost. Way too high and you can buy cheaper just like anything out there in the world if you want to take he time to look.

It always pays to shop around, but we inherently trust these salespeople and end up handing over our money only to lose a lot by way of the slow drip of high fees via MERs.



The Problem With Mutual Funds

  • employ sales people
  • they are NOT advisors
  • limited training and experience discerning client needs
  • always represent the institution NOT you
  • we are TOO trusting with sales gurus
  • highest cost products out there
  • compensated by trailer fees and DSC (deferred sales charges)
  • takes 7 years before you can sell with no penalty
I ended up selling all of our mutual funds once I did the math and found out just how much was getting siphoned off in fees per year. The average Canadian Equity Mutual Fund charges 2.5% per year is fees. On a $100,000 portfolio that is $2,500.Way too much when you can buy an ETF that covers the whole Canadian market place for 0.06%. That's a saving of $2,440 a year. Pay $60 a year or $2,500?

ETFs are far and away cheaper and a big reason why mutual funds are becoming obsolete. Only the sales guys/gals win at this game.

Financial Planners

  • usually called fee-only planners
  • they charge an hourly fee
  • will map out a plan for you to follow
  • one time event after consultation
  • you are responsible to buy the investment products
  • you are in charge of the day to day portfolio management
I've never used one but doing some cursory due diligence throughout the years they can charge anywhere from $2,500-$3,000 to set up a one time plan for you.

The tough slogging of building and managing the portfolio is left up to you anyway. If you feel you need a push in the back via a plan first then this is better than using a sales person. It's time consuming and expensive to get started in my opinion.

Financial Advisors

  • draws up a plan and implements it
  • gives tax advice
  • plans for your retirement
  • gives kid's education advice (RESP)
  • helps with real estate financing if required
  • charges a percentage of AUM (Assets Under Management) 1% or less
A financial advisor in my opinion is the best of the three choices if you need someone to hold your hand. If you have the money to pay someone to do this for you then do it.

I am my own advisor. I save the 1% they charge and do my own investing. Another thing to keep in mind is you still pay for your ETF fees on top of the management fees. It could add up to 1.5% total per year every year. 

I see nothing wrong with developing a relationship with an advisor and getting all of the other help you need with planning for retirement and your future. They are tough to find and now as a retiree I am comfortable with doing it myself.


Having said that, I follow Garth Turner's blog greaterfool.ca and he also runs a financial advisory firm over at Turner Investments. I believe they would help improve your financial health if this is all too complicated for you.

I receive no financial compensation from anyone mentioned here.

Do you use an advisor? Are you happy with the results so far?

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Thursday, March 22, 2018

Facebook Stock - Is It A Buy?



I don't own any Facebook stock. A few years ago when it was trading at $60 a portfolio manager was singing it's praises on the nightly business news. As usual I don't listen to the TV talking heads so I had no interest in buying the stock. Looking back it might have been worth a punt.

Currenty FB is trading at around $155 down from a 52 week high of $195.

The other main reason I don't own FB is it doesn't pay a dividend and you have to pay up for all that growth at 33X forward earnings. If I was a betting man I would say with the recent controversy surrounding it's data breach, that user numbers will now stall out and restrictions and regulations will become a new norm. That is probably a good thing.

I have no idea what the future holds but as a growth story I think FB has peaked and along with revenue from ads.

The irony for me is that I closed my FB account back in December well before Christmas. I just got tired of the endless pissing contests and as a blogger have never seen any conversions from the content I posted there. I just use my blog and post to my Google+ profile. That's it. Goodbye FB!


Is It a Buy Here?

I don't buy any individual US stocks period. If I did I would use the 'Dogs of the Dow' list. It holds dividend payers with the highest yielders trading at the lowest price.

This is how I like to buy individual stocks.

FB has a ROE of 23 which is great. A profit margin of 43%, no debt and just prints cash like crazy. It also sports a beta of less than 1, which is also a major positive. 

I still wouldn't buy FB even if I wanted to until the latest news is cleared up and they have gained back user trust and implemented new protocols to screen trolls, criminals and fraudsters from breaching the data banks of all who use their platform.

At the present time I don't trust FB or Zuckerberg. I don't have an account, I don't need one or want one. I would never buy the stock unless they instituted a dividend and even then I doubt it makes my buy list.

I purchase Canadian dividend growers so I can enjoy the dividend tax credit which I don't get with US stocks.


I also believe as a growth stock, you can stick a fork in this pig. It's done!


What Happened?

Lost trust is what happened. Investors are punishing the stock because they no longer trust what the company stands for and also believes that the growth of it's user base and ad revenue is over.

We have reached peak FaceBook in other words. When it comes to investing in individual companies, you can have a great company but a lousy stock. In the case of FB I believe the tables have turned. This will slowly turn into a lousy company because they simply don't trust FB. I know I don't. I haven't for awhile.

I have hated all those ads that appear on your newsfeed just because you liked a post or joined a group.

The CEO has vowed to do better. To protect the FB platform from abuse. That's a huge job but he is a smart guy and an outstanding engineer so maybe he pulls this off. Time will tell.

I wouldn't own FB stock and if I had an account, I'd close it. My opinion but I can't stand when big companies with 2 Billion users/customers using their service act so smug with nothing but lip service in response.

I also think this stock will move sideways to down in the coming weeks. I would hold off on buying as you may get it cheaper. Right now it's still a go to stock for advertisers. This is what ultimately saves this company as there is nowhere else to go for a lot of advertisers.

They have been hiding the breach of user data for a long time. I have no facts that they are, just judging. Sometimes, that's just what I do.

The fallout continues...

Now trading @ $159

Related Post: Random Investing Lessons

Recommended Reading:



Wednesday, March 21, 2018

Chasing Shiny Objects



Everything I do in investing my money has my long term retirement plans in mind. I try hard as hell to not get distracted off the beaten path.

I never borrow to invest. To do that I would have to open a margin account. The ability to invest more than one has on a bet has never really appealed to me. Sure, you might be able to make more but the thought of losing more scares me away.

I never suffer from the fear of missing out on something or FOMO as it's called. Right now, the distractions are all around you in the form of these temptations.

Tie yourself to the ship's mast and put some wax in your ears for fear you'll hear the siren song and wreck yourself on the rocks.

Shiny Objects to Avoid

  •  crypto-currencies
  •  bitcoin
  •  ethereum
  •  blockchain
  •  pot stocks
  •  lithium and cobalt
  • junior mining stocks
  • real estate flipping


There is always something distracting investors away from their index or dividend growth strategy. Warren Buffett put it this way,


"Why would you want to risk what you have and need for something you don't need?"

Long term dividend growth investors win because they focus on yield combined with dividend growth to grow their nest egg. Y + DG = Return. When you combine that with the compounded time value of money it's a very powerful combination.

What it's not is quick and sexy. Investing is boring and should stay that way. Go see a movie and have dinner with your SO if you want excitement.

Index investors also win because they just want to capture the average total return that the market gives them. They never speculate in junior gold stocks and acting like they are smarter than the rest of the people trading stocks for a living.

Do some make money? Oh sure they do because they got lucky. Eventually luck runs out, margin calls are made and you never hear from them again.

This is what makes a market. A buyer and seller on both sides of the trade. We again win because with retirement years away we don't sell very often, if at all.

Just because your next door neighbour knows a guy who knows a gal who made a fortunate in bitcoin doesn't mean it's a good investment for you. Chances are the minute you invest it starts to dive bomb down or blow up altogether.

None of these investments pay a dividend. Numero #1 reason for me to stay away. Everything I own has to pay me to own it. EVERYTHING!

I really do think the main reason investors start chasing all the shiny objects in the investing marketplace is because they are constantly looking at their portfolio and then doubting themselves that they are doing the right thing.

Even worse, they are thinking about trying to do better by jumping into a hot trend and then jumping out.

A really good way to help you through that is to read and up your game from some of the masters and icons of investing. Your investing library should include some or all of these texts. Your local library might have them, start there. The search is worth it.

The Intelligent Investor - Ben Graham
Winning the Loser's Game - Charles Ellis
A Primer on Money, Banking and Gold - Peter Bernstein
The Investment Zoo - Stephen Jarislowsky
Berkshire Hathaway, Letters to Shareholders - Warren Buffett

Related Posts: 


7 Reasons Why I Love Dividend Investing

Dividend Growth and Your Retirement


Recommended Reading:

Tuesday, March 20, 2018

Investing and Finance by Bill Ackman - Review


On the weekend I watched Bill Ackman on Youtube give a 45 minute talk called

'Everything You Need to Know About Investing and Finance in Under An Hour' 


If You're So Smart, Why Aren't You Rich?

I found it fantastic. I have heard of Bill Ackman before but only as a news maker and popular hedge fund manager.


All I really knew about the guy was that he used to be an investor in CP Rail and up until a few weeks ago was $500 million short Herbalife stock, through which he had a very public ongoing dispute with Carl Icahn. He always looked arrogant and a bit of a smartass to me. He is Harvard educated and very passionate about investing.

Forgetting all that hedge manager stuff for now, the guy gave a very simple and more importantly great lesson on how to invest and how to better understand the process behind investing. I thoroughly enjoyed his lesson and would urge anyone struggling to understand basic business and company fundamentals to look it up on Youtube.

For those without access or who just want the highlights and my review, this is the short form version and what he covers and has to say;


On The Keys to Successful Investing

  • Invest in public companies
  • know how the company makes it's money
  • make sure you pay a reasonable price
  • try to pick companies that will be around forever
  • look at companies with little or no debt
  • look for high barriers to entry
  • invest where there the company is immune to outside market forces
  • invest in companies with low reinvestment costs
  • avoid a business with controlling shareholders

In this section he focuses on buying cheap, low debt, hard to replicate, wide moat businesses that will be around forever. Think Coca-Cola, McDonald's, Royal Bank, Bell Telephone, CN Railway. Nobody creates or starts a new railroad these days (hard barrier to entry) and nobody is going to come up with a Coke recipe. These are the types of companies you want to invest in when the price is right. 

On When to Invest

  • when you have money you don't require for at least 5-10 years
  • only when you have a zero credit card balance
  • when you have paid off your student loans
  • after you have accumulated and can set aside 6-12 months of emergency funds
He briefly covers timing of your investing life to saving money, being debt free and after setting aside an emergency fund.

On How to Withstand Market Volatility

  • become secure financially
  • ensure what happens in the market day to day does not scare you into selling
  • do your own due diligence on companies
  • make sure you pay a reasonable price
You will be more likely to stay invested in the companies you bought if you are secure and don't need the money you invested. Make sure you bought in cheaply and know intimately what the company does and how it makes money.


On How Mutual Funds Work

Pros;

  • even with a small investment you can achieve portfolio diversity
  • your money is managed by a professional investor


Cons;

  • thousands of funds to choose from make it difficult to decide
  • you have to spend a lot of time researching what manager has a good fund


On What Is A Good Money Manager

  • someone who can very simply explain their investment strategy
  • well respected within the industry
  • picks investment from a value approach
  • has been around at least 5 years
  • consistency of style and philosophy
  • has invested their own money in the fund
If you are going to let someone else handle your finances then checking off these boxes will help you find the right person and can be helpful while you interview someone.

On Investing in Your Future

You are going to make money while you work. How you invest that money will affect the quality of your future and that of your kids and family. It will decide what kind of house you will be able to buy and even the type of retirement you will have.

"Investing is going to be important to you whether you like it or not"


My Takeaway

The video is 5 years old and has over 2.5 million views. Bill explains business and finance in very simple terms and in under an hour. I wish I would have seen this video years ago to help me better understand and just how important it is to check out a company's financial statements.


It isn't everything you need to know about finance and investing BUT the basics are covered.

Well done Bill!

Related Post: Index Funds and The Quest for Simple

Recommended Reading: When Bill was 22 years old he read The Intelligent Investor by Benjamin Graham. He credits the book for getting him started on the road to investing it it has transformed his life in a positive way. It is a great place to start your journey too.