Portfolio Update February 2019

Time flies as we are already due for another DIY Portfolio update. As usual, you can expect our subsequent update in about 12 weeks, in May 2019.

You can also access our earlier portfolio updates here:

All Portfolio Updates

Portfolio Update November 2017

Portfolio Update February 2018

Portfolio Update May 2018

Portfolio Update August 2018

Portfolio Update November 2018

There sure was a lot of action on the markets since our last update. We even got a scary wild ride around the end of last year. The US government shutdown and all political uncertainty surrounding it sure don’t help. Are we now getting accustomed to it? One thing for sure, it’s probably not the end of it and more turbulence can be expected. But don’t worry, that’s life on the markets and what we must endure to benefit from greater long-term returns. A small price to pay if you think about it.

All that volatility sure provided plenty of attractive opportunities. Today, we’ll elaborate about some of that buying including that we finally pulled the trigger on Colgate-Palmolive (CL).

We’ll also talk about how in the last few weeks, we got a little deeper in our retirement planning. We found out everything retirement related sure can get complicated.

Once more, I’ll remind you that I am not an investment or tax professional of any kind. The intent of this blog is not to give specific investing advice. Before investing yourself, we suggest you do all necessary research and consult a licensed financial professional if need be. 

Patience Pays Off After Wild Ride

As usual, we tried to stay calm during the storm. We sometimes get a little discouraged by all of it but fortunately, it almost never influences our investing decisions. Or at least, we like to think it doesn’t. We are lucky to have to ability to keep our emotions in check as it is one of the pre-requisites of being or becoming a successful DIY investor. Most people don’t possess that essential quality but it’s a good thing that everyone can develop it.

If you have too much difficulty keeping your cool during inevitable market turbulences, you could still invest effectively by limiting your access or interactions to your investing accounts. Stock picking or DIY investing are not necessarily possible and good for everyone. You could always do very well using a simple more automatic index investing strategy. For most, always looking at investment balance, following economical news or tracking daily fluctuations can be terrible ideas.

But setting up a sensible long-term investing plan and sticking to it is still mostly accessible to everyone. You just have to let it be. If you still can’t sleep at night because of market volatility, maybe stock investing is simply not for you. Find another way to save money that you are more comfortable with.     

Getting back to our recent investing experiences, our patience paid off again. Selling in panic, especially during the latter part of 2018, could have been a huge mistake because, after many doubtful moments, most stocks already bounced back up in the last few weeks into 2019. We barely got a positive return during 2018 but compared to others, we did relatively well. Markets and our DIY Portfolio have been on an amazing run for about a decade, so an off year was expectable and is just normal. We can even consider it business as usual. Cashing in healthy dividends sure helps ease the pain and stay poised during those rougher episodes.

We in fact were so composed during the latest downpour that we even managed to squeeze in quite a few buys. Staying that composed for real could be essential as many storms, possibly even more violent, may be coming.

Recent Transactions

With our DIY Portfolio now quite mature, adding to existing positions has become more and more frequent. That’s mainly what we did, especially with our favorite bank stocks, in the last few months.

By the way, Canadian banks and utilities still represent good buying opportunities as of this day. Our utility stock supplies remain quite high as we replenished them earlier in 2018. Utility stocks are still battered down, primarily by raising interest rates perspectives. We have faith they will continue to do very well in the long run.   

Because we’ve already talked about them several times before, we won’t get into the details of why we chose these specific bank stocks. Let’s just remind you that we like Bank of Montreal (BMO), Royal Bank (RY) and Toronto-Dominion Bank (TD) primarily because they provide both robustness and growth. Bank of Nova Scotia (BNS) is perhaps the safest Canadian of these and is quite dull. We usually like safe and dull but BNS may be too dull and doesn’t provide as much growth. BNS still provides a very solid steady base to our DIY Portfolio but we decided not to purchase additional stakes in it for now.

In that context, in separate occasions, we recently bought a couple extra dozen shares of both BMO and RY. We acquired a much more substantial stake in TD to make it even with these other two.

As usual, we didn’t manage to exactly buy them at their bottom. That’s all right because you could get burned fishing for stocks at the bottom (I know, getting burned in water doesn’t seem possible) and possibly completely miss out interesting opportunities. We were content of buying them with a Dip Factor around 3.5. Our Dip-Factor technique is not infallible as we sometimes still miss appealing opportunities or pay a little too much. Nonetheless, we feel like it’s a good compromise to effectively buy stocks at depreciated prices with an adequate margin of safety.

To continue our transaction report, let’s mentioned we bought some Canadian Tire (CTC.A) shares and tinkered with our Disney (DIS) and Canadian Pacific (CP) positions. You’ll note we are presently looking at Canadian National Railway (CNR) as a potential candidate.

A rare sell is in our books as we departed from a small portion of our McDonald’s (MCD) shares near their high. MCD representation as a single stock was proportionally too important in our DIY Portfolio. The next candidate for that type of preventive selling will probably be Pepsi (PEP).

We missed the boat for now regarding Procter & Gamble (PG) and we were looking to acquire additional shares buy didn’t have enough funds in the proper accounts when to timing was right.

As a consolation prize but not because we’d missed PG, we finally decided to pull the trigger on Colgate-Palmolive (CL) and bought some shares at an interesting level. You can refer to our Last Portfolio Update to know more about our CL dilemma. Let’s just say that in the end, its successful history and rock-solid brands convinced us.

We have been due for a while for some encouraging news especially on the Canadian markets and we got a nice meaningful rebound over the last month and a half.  Despite that upswing, many stocks are still at attractive price levels to acquire them, particularly on the retail and US sides of things.  

Complex Retirement Considerations

For some time now, we have been considering postponing my early retirement. A renewed atmosphere at work entices me to stay a little longer. So, instead of completely stopping at 55, I will try to last till 60, on a greatly reduced part-time schedule.

With that in mind, it was time to take another look at our retirement planning. From the get-go, we knew we would have more than enough money to retire. We still were looking for the optimal solution to give and leave as much money as possible.

We’ll briefly talk about it here but can already say that an in-depth post on the matter will be coming soon.

At first glance, we simply thought of transferring funds from our RRSPs to our TFSAs to resolve potential tax issues both in retirement and at death.

We quickly ran into two main problems. First, it looks like we won’t have enough TFSA contribution room to implement the full-pledged transfer. Second, where would we hold our US dividend stocks? US dividends are fully exempt in RRSPs. It is not the case in TFSAs, where a 15% withholding tax applies. The whole balance of our DIY Portfolio could be in jeopardy if we were required to hold a bigger proportion of Canadian stocks. We know, having too much RRSP is still a good problem to have and paying more tax would not be the end of the world. We’ll keep you posted on what avenue we’ll eventually choose to take.

After that, we looked at Canadian public retirement programs and were surprised once more. The Canadian Pension Plan (CPP) and Old Age Security (OAS) now come with a ton of options and we quickly kind of got lost into all of it. For instance, both retirement programs can be anticipated or deferred. Probable benefits are almost impossible to calculate. We could only conservatively approximate them. Things are already tricky, and we didn’t even get into any OAS clawback considerations.

Hold on! We are fairly comfortable with personal finance topics but still find the whole Canadian retirement process rather complex. We can imagine what it’s like for most people that don’t have our financial background. It’s good that Canadians now have more retirement options, especially those with no work pension plan. But are these options too much? Can the common Canadian make sense of it all and make the best of these crucial retirement decisions? We kind of get worried about how financial institutions and their so-called advisors could feast on that.

We probably analyze too much as it’s not necessary to understand all these details to enjoy happy retirement days. We’ll let you know how our retirement research goes and how it will influence our decisions. We already have a hunch that, as usual, some form of balanced compromise will win the contest.

We’ll finish on a side note. Like Questrade, our iTrade RRSP now has a US side to it. Before that recent option was offered, all US transactions were automatically converted into Canadian dollars in our iTrade RRSP. It will now make us save a little on currency conversion.

Be good and have fun till next time!

Photo Credit