I see that you don’t have any positions in the telecom industry. Comparing to the XDV ishares etf, they hold MBT that pays out a pretty good div rate. What are your thoughts?

what’s the reasoning behind being so financial sector heavy for your SM portfolio? I realize that the financial sector is high dividend yielding but right now it might be the best place to be in. Why isn’t there any investment in alternative energy via an ETF or some such? Are the yields not high enough?

pr

The biggest thing I’ve noticed is I have this tendency to invest my money AS SOON AS I GET IT, to avoid missing out on gains, but sometimes that causes me to buy an investment too soon and at too high a price… Sometimes it’s best to put a low ball limit order out there, and let it sit for a few weeks. You’d be surprised how much extra gains you will get in the long-run (or how much lower your losses may be). Even on days when the stock does go higher, it may trade up and down all day long, so the closing price isn’t necessarily the lowest price you can buy the stock for! So why pay the sticker price? The only reason is fear that the price will increase… and I’m slowly learning patience is a very useful thing… there are plenty of opportunities and if you miss one, there’s always another one around the corner – so NEVER overpay and NEVER pay the sticker price. I can’t underline how important a lesson this has been.

I now put out low ball bids on companies I like, and let it sit there for a week or so, and then I re-evaluate my limit price if the trade wasn’t executed. Example, even shaving $1 off a $20 stock might end up saving you 5% (or making you 5% depending on how you look at it, and that can be half a years profit based on the common expectation of 10% rate of return per year)… and even if that stock never closed below $20, I might be buy it at $19… I’ve been able to make my low ball bids at a big discount due to the massive ups and downs our current markets are experiencing at much higher discounts than 5%! So I’m hoping for much bigger gains on my newly invested money – maybe that will offset some of my losses? Oh well, I think my losses won’t be losses forever, so I’m not worried.

Thanks for the post. I, too, wish I hadn’t plunged into the market as quickly as I did but I take some solace in the fact that I’ve seen the experts on CNBC and BNN say that they couldn’t have predicted this. I’m sure that even now many are buying when the markets tank (typically on Monday’s) but still not convinced that the bottom has been hit.

However, there are some signs which suggest we may be in the process. We tested certain lows and managed to fight back quite nicely. Secondly, I’ve begun to notice that in spite of bad news, the markets still go up (e.g. look at the energy stocks today in spite of the price of oil; look at the Dow and S&P despite the GDP and consumer confidence numbers this week).

Your choice of Teck wasn’t one that I had considered before. According to 14 analysts, 1 rates it a strong sell, 1 a sell, 3 a hold, 5 a buy and 4 a strong buy. And, the biannual dividend will be paying out in January – assuming there is no disruption to it.

My portfolio is still at a 4.44% overall yield but the cost to service has gone down quite a bit (with LIBOR and the Bank prime rate). Not even considering tax advantages, the cost to service is 3.62%. By the time the interest rates start rising, I’m sure that the stocks, and the dividends, will also have risen. However, I’m expecting that the dividends will rise more slowly than the stock prices since these yields are unusually high.

So, although my stocks are 12% below book value, at least my dividends will more than pay me to wait… and wait… and wait…

What are you going to do as you feel comfortable to put more $ into investments? Buy some new stocks or invest in some of the worst performers (e.g. AGF)?

Buy low — sell to your grandchildren.

DAvid

I’ve always viewed capital gains investing with a bit of skepticism. I think it’s better left to pros. That doesn’t mean I don’t ever invest for a capital gain, but I don’t think you should borrow money to do it – especially against your house!

I usually pick up stocks when they’re selling lower and their yield has increased. I never sell (except for one time) so you can see why I dislike investing in something for capital growth only.

Withdrawing capital gains decreases tax deductibility of the HELOC. You can use the capital gains to pay the interest on the HELOC, however.

My feeling with the Smith Maneuver is to simply take out HELOC and use ANY proceeds from it (i.e. both capital gains and dividend income) and use both to pay down mortgage debt. The idea that the dividend income alone will cover your mortgage payments entirely I feel can easily throw one a curve when any one of the following occur (dividend cut, increase in lending rates including prime interest rate increases.) If the idea of the Smith Maneuver is simply to choose investments that have higher yields than your borrowing costs…You may be left with a handful of income trusts or abnormally high yielding stocks that are ripe for a dividend cut. I feel one would eventually face a losing battle with certain interest rate hikes. Call it what you want but using the proceeds from a HELOC to buy stock and diligently using the proceeds from your HELOC investments to pay down your mortgage is what I think makes most sense. That includes the obvious benefit of claiming your interest costs and using that refund also to pay down mortgage debt. I use a HELOC but I don’t limit myself to just nose bleed high yields for it to work.

Why were these added to the portfolio when they’re not generating a significant yield compared to other securities you own? I know they’re expected to grow and all (both capital and dividend growth), but wouldn’t it be better to start out high (like you have with BMO and Teck Cominco)?