Another quarter has gone by and it’s already time for
a brand new DIY Portfolio report. For quite a while now, we’ve been doing these
about every 12 weeks.
You can access earlier portfolio updates here:
We tried to avoid as
much as possible talking about the main thing in all our lives right now. We
hear or read too much about it every day. Despite our strong intentions, you’ll
see that it won’t be possible to ignore it. At this point, let’s just say that
luckily, all our family is doing ok, and we hope yours can also remain safe and
well.
So today, after sone
comments about the current state of this unparalleled situation, we’ll talk
about how our DIY Portfolio
fared in these trying circumstances and how we’ve managed it so far during that
wild ride. Surprisingly, our portfolio is only down about 3% year to date but
the worst of it may still be coming.
You’ll see that despite
being well prepared, we probably could have done better buying wise. We’ll also
report on our new and recent experience with bonds.
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.
An Unprecedented Test to Our Resolve
So far, the last few
months have been a great test to our resolve. This is a tragic crisis and
despite too many losses, Humanity’s resolve is still holding on so far. We are
seeing numerous real-life examples of people that have the courage to fight not
only for themselves but more importantly, for others. Let’s remain strong and
continue combating because we may not see the end of it for another year or
more.
We also have to salute
the authorities in all their relentless efforts. They are doing their best in
these overwhelming situations. Let’s hope it can be enough to minimize human
tragedies.
Some of our leaders responded
swiftly and made some tough early calls not really knowing what was coming. But
once again, we are profoundly worried about the reaction of some of them. Not
to name just the one that remains in an unreal state of denial, multiplying bogus
statements and selfish acts in the so-called interest of the country.
Propagating misinformation on top of it does not help.
We hope our leaders
would seek more cooperation. In the long run, being aggressive and cutting ties
with others is not the answer. This is not a time for puny political fights as
in the end, we are all in this together and the only way to truly get thru this
is to stick together.
It is a giving that the
survival of Humanity is crucial and much more essential than investing. But
we’ll remark that in these trying tines, our resolve as investors is also
getting put to an unmatched test.
As experienced
investors, we were prepared for an eventual downfall. But, to be frank, nothing
could prepare you to what is happening right now. It’s unreal and somewhat
insane for everyone. As usual, panic is usually never a good avenue to take. It
could be disastrous especially now. As investors, patience and maybe some bold
buying should help you triumph.
As humans, let’s hope
basic decency, support and collaboration can prevail!
Some Wild Ride
Some Wild Ride
The last few months
were certainly wild! And, despite what some think, it may not be the end of the
ride. That kind of ride can be exhilarating but can certainly make many feel
iffy.
Markets, after being up
15-20% at the start of the year, swiftly went down as much as 40%. It is never
a good sigh when we pile up record daily gyrations, in one direction or the
other.
Russian comrades sure
were of no help as their manipulation of oil prices was an accelerating factor
in the initial market downfall. Oil prices quickly going down sure fueled panic
and volatility in markets already starting to fear that vicious virus-thing.
In French,
rollercoasters are not called Russian mountains (montagnes russes) for
nothing. Coasters can be fun but too wild ones can turn your stomach upside
down. That may be why we prefer the Disney-family-friendly type. Funny enough,
it also tells a lot about our cozy character as investors.
These days, we are
seeing gyrations that could literally take you out of your seat. Strong safety
belts may not even be enough to hold you down. They also must be fastened and
secured properly.
Volatile market
conditions like the current ones amplify variations. That’s why it may be a
good idea to choose smother attractions (stocks) to start with, unless you like
extreme sensations.
Remember that when your
own hard-earned money is involved, your level of tolerance may be much lower.
Maybe all this can make you realize how much boring steady growth can be your
friend.
Lower oil prices also
greatly affected the Canadian loonie. In the coming months, on top of the
pandemic, this could continue to slow down our economy, especially for
oil-dependant provinces like many out in western Canada.
Despite that, our DIY Portfolio
managed to do well because of a big chunk of US content. Before the crisis, we
were at about 60-40% in favour of Canadian holdings. We are almost even at 50%
each now. So, expect us to transfer some of our cash to the Canadian side of
the portfolio in the next few months. Canadian stocks are cheaper, time to buy
some.
The most surprising aspect
of the whole situation was how quickly markets recuperated. They bounded right
back up at the bottom. We have to say that the absence of a pause at or near
the bottom raises doubts about the persistence of the recovery. Markets usually
think things over before they get in another direction for good. It was not the
case this time around.
That instant rebound
complicated buying. We know it’s always next to impossible to catch the bottom.
It was even more difficult in this occurrence. We know better than to try to do
that, but we usually manage to still acquire our stocks at very attractive
levels, normally closer to near-bottom prices.
So far, we stuck to our
good investing reflexes and only bought after things went down. With just the
little retrospect we have now, we may have been a little timid in our buying.
We had to resist panic
buying when things quickly went back up. But because it may not be the end of
it, our reserves could allow us the buy in phases.
We still managed to buy
quite a lot and at some point, tried to concentrate on steady dividend income
providers.
The first wave of our
orders triggered while we were on vacation after the early tumbles of the
market. Our buy orders were pre-set at very low prices for 5 stocks.
Transactions went through for 4 of them, all newcomers to our DIY Portfolio,
Automatic Data Processing (ADP) and Visa (V) on the US side plus
Alimentation Couche-Tard (ATD.B) and Canadian National Railway (CNR) from Canada.
More stable dividend
payments and steadier growth made us replace American Express (AXP) with Visa.
CNR had been on our radar for quite long. The railroad stock was already
battered by protestations and blockades in the last few months before the
crisis. We were sad to just miss acquiring additional shares of one our
favorites, Metro (MRU). Our 5th pre-set order did not
materialize as the grocery chain stock initially fell with the markets but
quickly turned back up being in one of the rare businesses effervescent in the
crisis. You could note that Costco’s stock (COST) reacted similarly.
We could have been more
aggressive in our buying after that. We still managed to nicely boost our
positions in Fortis (FTS), Telus (T), Toronto-Dominion Bank (TD) and Johnson & Johnson (JNJ).
Canadian big banks are taking a huge beating in the current turmoil, so we feel
it’s a great time to stock up on them. JNJ looks to be in a wonderful position
for the future.
We continued another
phase of buying with Colgate-Palmolive (CL), some more Alimentation
Couche-Tard (ATD.B) and United Technologies (UTX). In a spinoff,
our UTX position partially transformed into Raytheon Technologies (RTX).
You will note we cashed out the other two stocks involved in that spinoff.
We still have a few
stocks on our radar. For instance, we are looking at getting more of Procter
& Gamble (PG) and Canadian National Railway (CNR). You’ll note the Canadian side of our portfolio needs a little
love.
Bonds Scary Report
To conclude, let’s talk
about our not so great experience with bonds. Bonds investing is still new to
us and we kind of learned some lessons the hard way.
A couple of months
back, we decided to park some of our cash in bonds via bond ETFs. We’ve always
been skeptical about bond ETFs, bond funds and the likes. And our apprehension
was probably confirmed.
We were careful to
choose so-called short-term bond ETFs. Our research let us to believe that if
the markets happened to tank, those bond funds would appreciate or at least
keep their value. In a similar matter, we were let to believe that those bond
ETFs would go up if interest rates went down. At that while giving us some
distributions, small but better that nothing we figured.
We did it in part for
cash flow purposes but also to have some of that cash available in the event of
the downturn.
We our recent
experience, we learned things were not that simple. The downturn hit stocks
hard. It was quick and swift! The problem is that many bond ETFs also went
down. The panic was so omnipresent on the markets that it made many sell below
the net adjusted value (NAV) of most bond ETFs.
On top of it all, those
bond ETFs did not go up that much went interest rates got lower.
We were still lucky
because some of our bond ETFs purchases were in US dollars and the American
greenback surged in the crisis compared to the frail Canadian loonie.
We also have to tell
you about a small but nagging problem we had with iTrade. After selliing a bond
ETF, we wanted to convert those funds to buy some stocks in another currency.
No specific form or interface exists at iTrade to do that. We had to do it by
sending them a message. It would also have been possible over the phone.
It also took several
days for the selling transaction to settle and it was not possible to convert
that money right away because of it. By the time all this was said and done,
the price of the stocks we wanted to buy had went up quite a bit. The same kind
of transaction and currency exchange was much smoother with Questrade.
Questrade offered easy and clear forms to fill and converted cash was almost
accessible right away for acquiring our cherished stocks near rock-bottom
prices.
In the end, you have to
remember that the secret to not lose money with bonds is to hold them to
maturity. And identifying bond ETFs maturity is far from obvious. We did not
lose that much but that risk was unnecessary. It was a hassle to deal with all
of it and try to get just a little extra benefit. Trying to time the market is
never a good idea, even with bonds. Our money would have been much more
accessible and just fine remaining in cash.
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