Investing, Retirement and Expert Advice

I’ve been buying stock since I was a boy. I used to save the money earned from my paper route and, when I had enough, use it to buy a few shares of Bell Telephone.

It has been five decades since I was a youthful investor and I may have the name of the stock wrong but I sold my Ma Bell at one point to buy Pacific Pete, a junior oil stock. I did this on the urging of my uncle and against the advice of my knowledgeable stock broker.

I made a tidy profit and plowed my winnings back into Bell – the widows and orphans stock. I held that stock until my mid-twenties when I cashed out to raise the down payment on my first home.

In the early to mid-eighties I again did just fine playing in the market. It was a bull market and I read that one could simply throw darts at a stock list and make money. I think they were right.

Recalling my earlier good luck with the oil patch, I bought a stock called Britoil. It traded in the $3 to $5 range and paid a very nice dividend. I bought on the dips. I also bought Apple computer with the belief that their innovative laser printers would be profit generators for the young company. These stocks and others did very well.

I was out of the market before the infamous Black Monday crash of 1987 occurred. I partially credit an early charting program that came on a 400K disk and ran on my Mac for my prescient move to the sidelines. After the crash, I ran lots of tests of that program and it seems it was more luck than logic that had saved me.

As I have mentioned in other posts, I got back into the market when my wife retired. This move forced us to confront the idea of retirement and ask ourselves, “How do we use our RSP to fund our retirement?”

Saving for retirement had been easy. Just put in a chunk of money every year. But, spending that money is another matter. Take too big a chunk out every year, add the bad luck of living too long or suffering through a market collapse and you run out of those annual chunks of money.

I worked out a quick allocation model with about 40% of our money in bonds (XSB), 30% in Canadian stocks (XMD and BTH.UN were favoured), 12% U.S. equities, 12% International equities (taking care to steer clear of Russia), and the remaining change in cash. We had some TD Monthly Income fund but it was folded into our bond and Canadian stock investment allocations. I was back in the market.

I tried to talk with business folk at The London Free Press where I worked about BTH.UN but they had no interest. After Jim Flaherty’s Halloween Surprise all anyone would say was, “I told you so.” I had been foolish and had paid the price. I could get no one to discuss income trusts with me – it was just, “Take your lumps. Sell and move on.”

I didn’t sell. BTH.UN slowly crawled back. It even surpassed the price at which I had originally bought this Barclays ETF based on the top 100 Canadian income trusts. It had paid better than nine percent over the time I had owned it and I managed to move on without suffering a huge loss. I took no lumps.

So much for the great expertise of the business pages boys.

Which brings us to today and a little discussion of yesterday’s blog featuring my silly benchmarks. I call them silly because I don’t want anyone to be lead astray. That said, I find them curiously interesting.

If you had bought into the Canadian banks two months ago when they were at their lows, you could sell a hefty chunk of your investment and take a vacation. I bought some, but not enough for a vacation. The advice I was give by some retirees has so far performed very well. Now to see if that advice continues to succeed or if it disappoints like my old charting program.

Each one of my little fun portfolios has its roots in stuff that I have heard but which is often out of mainstream thinking. There are lots of ways to determine how the completely classic approaches are working. The two Russell funds are excellent indicators, or the Financial Post FPX benchmarks.

I openly admit that my personal portfolio is closer to the Russell approach than to the sometimes wild advice I have been given at times. But, just as my BTH.UN showed that income trusts could deliver solid profits and allow you a profitable exit – despite all the advice of the experts – maybe, just maybe, going heavily into Canadian financials a couple of months ago when they may have bottomed would have been a wonderful, dividend paying, move for an old retiree like me.

Cheers,
Rockin’ On

This is the post which inspired the above. How did your investments perform?

This is my post on asset allocation.

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How did your investments perform? Second in a series . . .

Disclaimer: I am NOT a financial adviser. What follows are just the thoughts of a man thrust into retirement by a layoff/buyout. These portfolios are NOT presented as portfolios on which to pattern one’s retirement investments.

This is the second post of what will be a monthly feature of my Rockin’ On blog. Next month I will update this post on or around June 3rd after all dividends and distributions have been announced.

Until recently, I worked at a large daily paper in Canada. About three and a half years ago my wife essentially retired and at the same time a layoff/buyout hit the paper. I was not affected but I realized that my job was tenuous.

Because of my wife’s retirement and my job worries, we began visiting banks seeking financial advice. Each person with whom we talked suggested putting our money with Frank Russell – a pension fund management company. A doubter by nature, I could not get past the mountain of advertising bumph, all printed in colour on heavy, expensive paper. I did not like thinking that my retirement money would be used to partially fund this stuff. After carefully examining their fancy graphs, I was even less impressed.

I expressed my unease to the bank adviser and he immediately suggested opening a self-directed RSP account. He said he had confidence that I would do just fine. I opened accounts at TD Canada Trust and another at the ScotiaBank.

When another layoff/buyout hit the paper in late December, 2008, I had gained a few years experience running my retirement portfolio. I knew how it had performed compared to the FPX Benchmarks in the Post and I had tracked its performance against some published Frank Russell results. I was holding my own against the benchmarks and doing well against Frank Russell as well.

I knew how much money in dividends and distributions to expect from my investments. I had years of accurate records. And I knew how much money it cost us to live, to the penny. Again, I had good records.

I took the buyout. I took about an 18% cut in my pension, I took a nearly 22% cut in CPP payments. In response to this huge drop in income I sold my car – no job, no need for a second car. As well, I dumped some camera gear on the market. And let’s not forget the buyout, as it also eased the financial pain.

For a number of reasons, at retirement I created four imaginary portfolios. At the same time, I also noted the NAV of two Frank Russell funds aimed at retirees – a Russell Retirement Essentials Fund and a Russell LifePoints Balanced Income Fund.

My four fun funds are:

The Lazy Dude Portfolio – This was inspired by a talk I had had with a group of retired individuals. Go for income, they said. Bet big on the Canadian financial sector. Don’t worry about the stock market, they said, just sit back and collect your dividends. Don’t forget to put a hefty chunk in REITs, they said. Following their advice, my imaginary portfolio is up 9.26% with $6013.39 of that being dividends.

Lazy Dude composition – 5% money market, 17.5% FIE (financials), 17.5% XDV (silly – but more financial weighting), 17.5% XMD (Cdn. equity and again more financials), 17.5% XRE (REITs), 25% XBB (bonds) – the goal here was income with a willingness to bet big on the Canadian financial sector.

The Canuck Retirement Portfolio – This was inspired by a number of books and articles on how to construct a retirement portfolio. This portfolio is up 8.21% YTD, of which only $2781.71 is cash.

Canuck Retirement composition – 5% money market, 20% XSB (bonds), 10% XIC (Cdn. equity), 10% XSP (U.S. equity), 10% XIN (intn’l equity), 25% XRB (real return bonds), 20% XRE (REITs)

Nearly a Classic ETF Portfolio – This was inspired by a number of ETF  approaches to portfolio creation. The money market percentage is a bit high and this portfolio is missing, except for the U.S., the International investments. This one is up 12.75% with $3209.35 available as cash.

Nearly a Classic has a composition of – 20% money market, 30% XSB (bonds), 35% XIC (Cdn. equity), 15% XSP (U.S. equity)

TD-e Fund Near Classic Portfolio – Another portfolio inspired by my reading and the one closest to the suggested mix. This one will have to wait until the end of December before we have a complete view of its performance. The only investment in this portfolio paying monthly distributions is the bond index. At this time we are up 12.29% with $1582.63 available as cash, but there should be more cash at the end of the year.

TD Near Classic composition – 7.52% money market, 42.5% Cdn. Bond Fund, 16.6% Cdn. Idx, 16.6% U.S. Idx Currency Neutral, 16.6% Intn’l Idx Currency Neutral

A Russell Retirement Essentials Portfolio – up 7.38%

A Russell LifePoints Balanced Income Portfolio – up 6.78%

Into this mess, I threw two Frank Russell portfolios. I noted the NAV at the start of the exercise and I update my figures every month. If you owned the Russell offerings with their approximately 7% increases, you would probably be happy.

In an earlier post I talked about my own portfolio allocation.

Now, to look at the results as of April 30, 2009.

Portfolio	% Up/Down
Lazy Dude	9.26%
Canuck Retirement	8.21%
Nearly a Classic ETF	12.75%
TD-e Near Classic	12.29%
A Russell Ret. Ess.	7.38%
A Russell LifePts Bal Inc	6.78%

As I said at the beginning, I am not a financial adviser. Take from this exercise what you will.

It tells me three things: one I should be happy with my present portfolio. It has done as well as my benchmarks but with a risk-spreading traditional allocation. Even taking a big risk, as in the first portfolio example, I would not have been rewarded with a great gain in income over my present actual portfolio.

In fact, some of my investments are now in the black when compared, not to the start of the year, but to their book values. Note: I did not buy any of these when they were at their highs. These solid performers are my ScotiaBank shares, the CIBC Monthly Income Fund, my Crescent Point Resources shares, Inter Pipeline units, Polaris Minerals shares and an ETF tracking China.

If you bought Polaris a year ago, you would not be as impressed. You would have watched it sink like the proverbial stone. (If I see Polaris around $1.20, I may buy a little more.)

Two: My cash income is not as high as planned but it will suffice. As dividends and distributions have been slashed or eliminated by many companies, my payouts have suffered. But so far, I still have adequate cash to get by without selling any actual shares or units.

Three: I continue to be happy that I did not go with Frank Russell when I had the chance. A Russell adviser asked my wife and me if we were comfortable losing up to 30% of our investments. I flippantly said I could lose 30% of our money and do it for free – no fees. And I was good to my word. Now, we are bouncing back. It may be nothing more than a bear market rally, so I’ll enjoy it while it lasts!

To educate yourself on benchmarks, use the following links:

Croft Financial Group article on value of benchmarks. To find some very useful benchmarks designed by Richard Croft and Eric Kirzner go to FPX Indices.

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How did your investments perform?

O.K. This is the first post of what will be a monthly feature of Rockin’ On. Next month it will appear on May 4th. This will ensure that all distributions will have been announced to allow accurate factoring into the portfolios.

When I retired, I created four imaginary portfolios. More on these, in a moment. I also noted the NAV of two Frank Russell funds aimed at retired folk – a Russell Retirement Essentials Fund and a Russell LifePoints Balanced Income Fund.

Portfolio Performance: March 31/2009

Portfolio	Return
Lazy Dude	3.81%
Canuck Retirement	4.96%
Nearly a Classic ETF	7.2%
TD-e Near Classic	6.54%
A Russell Ret. Ess.	4.48%
A Russell LifePts Bal Inc	4.29%

My four fun funds are:

The Lazy Dude Portfolio – up 3.81% but has paid $5283 in distributions

LDP make-up – 5% money market, 17.5% FIE (financials), 17.5% XDV (silly – but more financial weighting), 17.5% XMD (Cdn. equity), 17.5% XRE (REITs), 25% XBB (bonds) – the goal here was income with a willingness to bet big on Can. financials

The Canuck Retirement Portfolio – up 4.96% and only paid $2764.37 cash

CRP make-up – 5% money market, 20% XSB (bonds), 10% XIC (Cdn. equity), 10% XSP (U.S. equity), 10% XIN (intn’l equity), 25% XRB (real return bonds), 20% XRE (Reits)

Nearly a Classic ETF Portfolio – up 7.2% with $3030.44 paid in cash

ACEP make-up – 20% money market, 30% XSB (bonds), 35% XIC (Cdn. equity), 15% XSP (U.S. equity)

Because the above was designed to meet my needs in retirement, I eliminated the international equity exposure and increased the bonds and the money market percentage. I expect to see this portfolio suffer in the coming months or years as interest rates climb.

TD-e Fund Near Classic Portfolio – up a minimum of 6.54% – Cash TBA

TDNCP make-up – 7.52% money market, 42.5% Cdn. Bond Fund, 16.6% Cdn. Idx, 16.6% U.S. Idx Currency Neutral, 16.6% Intn’l Idx Currency Neutral

A Russell Retirement Essentials Portfolio – up 4.48%

A Russell LifePoints Balanced Income Portfolio – up 4.29%

I am not a financial adviser. I am not suggesting anything here. But there is food for thought.

It tells me two things: one I am happy with my present porfolio. It has done as well as my benchmarks but with a risk-spreading traditional allocation mix. In fact, my Chinese investments are down the least of everything I own.

And two: I am still happy that I did not go with Frank Russell when I had the chance. A Russell adviser asked my wife and me if we were confortable losing up to 30% of our investments. I flippantly said I could lose 30% of our money and do it for free – no fees. And I have been good to my word.

To educate yourself on benchmarks, use the following links:

Croft Financial Group article on value of benchmarks. To find some very useful benchmarks designed by Richard Croft and Eric Kirzner go to FPX Indices.

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Benchmarks at end of March

Hi!

When I first started blogging I got stuck blogging about financial stuff. I was getting hits but I didn’t want to run a financial site for retirees or for those looking to retire. Hey, I’m not a financial adviser.

That said, there was one thing that peaked a lot of interest and I have decided to re-introduce that feature in a limited manner in this new blog. Let’s call it the Monthly Goofy Benchmark Update. (I say goofy to make clear that these are not serious boy-I-should-invest-like-that suggestions. On the other hand, if you do not beat these benchmarks over the long run, something is wrong with your portfolio.)

Recently, I took a buyout. Heading into retirement, I passed on giving my money to a company like Frank Russell Canada to manage. I wondered if I did the right thing. So I started tracking a couple of the appropriate Frank Russell funds in order to compare them to my own personal portfolio.

I also created some imaginary benchmark portfolios. These are the goofy benchmarks of which I spoke earlier. Many of these imaginary investments pay a dividend at the end March. So, tomorrow I will reveal how my benchmark portfolios have performed, compete with distribution gains.

I know already that my Hi-Yield Lazy Dude Portfolio has returned more than $5000 in cash distributions and not all the income has arrived. This baby is allowing one to draw more than 4% a year without touching the principal. Considering the present economic climate, this seems nice. (4%, of course, is the classic safe withdrawl figure sited in a lot of the retirement literature.)

Along with the figures for my fun benchmarks, they are not meant to be taken too seriously, in the same post I will mention what percent my own portfolio, designed for retirement, has delivered year to date. (Has all my careful thinking about investing paid off?)

If you have a company, such as Frank Russell, managing your retirement funds, I would love to hear from you and hear what returns you are seeing.

Cheers

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