[londoncalling]

I am looking at US banks myself right now (since early Feb). thus far I have looked at JPM BAC and WFC. Next will be to start looking at regionals. Of the 3 I currently favour JPM but not at its current valuation. I would be interested in seeing what replies you get Marina.

 

[1980z28]

I will look at Rail and Planes for next purchases
CP,CNR,AC,ONEX,CJT,

 

[marina628]

Good Morning everyone my son has $60000 TFSA(thanks mom and dad) which consists of $18000 tdb908(Nasdeq index) ,TD,CM,Telus ,FORTIS ,ENB,RY AND TDB911.I think picking US Dividend Stocks will be better long term for his RRSP.As for the US banks I do not think I want to go there as I know somebody who just bought a house with nothing down not even closing costs ,feeling deja vu .My son was very sick in 2019 ,not working for 7 months but thank God he got hired as a Visual Strategist for a big agency and literally his pay doubled from the previous job as Graphic Designer.Just wanted to say thanks to the few of you who who listened the past few months .

 

[james4beach]

I want to buy dividend stocks because I need the income but the fact that we are at the tail end of an 11 year bull market, and the market seems way overbought scares me. It would be my luck to go all in right before a major drop in the market.

I want to revisit Rusty's original post from the start of January. Rusty, you were right! It seems the market was overbought and excessively high.

You dodged a bullet by not entering right at the peak. Have you been coming up with a plan for how you are going to invest? A specific strategy?

In another thread you wrote that you want to avoid stocks because of concern of weakness, but it seems to me you are avoiding them both when they are high, and when they are low. I think if you decided on your investment strategy, you would find it easier to get your investments going.

 

[Rusty O'Toole]

james right now I am biding my time and watching the market by that I mean, the SPY or SPX meaning the overall stock market. I plan to wait until I see a bottom and the beginning of a recovery. There are certain indicators I look at. A moving average cross is about as good as anything although it is a lagging indicator. For example notice how you would have done if you bought and sold the S&P by this chart. According to Warren Buffet, if you are not into value investing, just buying a fund that mimics the S&P will beat 90% of investment professionals.

 

[Rusty O'Toole]

I don't know why the above image is so small or how to enlarge it. It is one I used before, I took it from the File Upload Manager page on this site.

 

[james4beach]

Rusty something has gone wrong with the site's image permissions. I noticed this before as well, people can't open attached images any more

 

[m3s]

When you post an image you have to uncheck the default "Retrieve remote file and reference locally"

Then it will post from the original location at a reasonable size..

VerticleScope probably doesn't want to host images anymore

 

[agent99]

When you post an image you have to uncheck the default "Retrieve remote file and reference locally"

I find best way to post an image link, is to just wrap the link in html image tags

. If I don't have a link, I put the image in a file hosting service like Dropbox or Onedrive or your favorite. Those will provide a url. Here is an example.

 

[m3s]

Yea that does the same thing. Usually that is the default for the image button..

 

[james4beach]

Rusty, curious if you have developed any plans over these last few months, on how to invest your $500,000 ?

Have you thought about what % stocks you are comfortable holding? If you hold 100% stocks then you can get really wild fluctuations, for example, the recent 37% crash would have meant seeing your 500K shrink to 315K before rebounding. And we have no idea if there's more crashing to come. Stocks could easily drop again.

Myself, I can't imagine 100% stocks (whether they pay dividends or not). The ride is just too crazy and stressful, for me.

 

[james4beach]

And I still think the best way to address the concern about chronically high equity valuations (or danger of a stock market bubble) is to reduce the % weight in equities. Consider this asset mix:

30% stocks (15% TSX index and 15% S&P 500 index)
70% bonds (50% XBB regular bonds and 20% XSH short term)

The return since 2013 was 6.5% CAGR and longer term return should theoretically be around 6% CAGR. To me that seems like a perfectly good result, pretty strong performance, without taking much equity risk.

Just repeating this from a few months ago, because I still think this could answer Rusty's original question. To generate income out of this portfolio, just sell units once in a while, perhaps twice a year on a fixed schedule. On top of that you will also get distributions from all the ETFs.

Rusty, if you had invested the 500K like in the example portfolio I have above, today you'd have 503K (total return). That's far better than what most investors have seen! Now imagine it's time to generate some cash out of the portfolio. Since you'd currently be overweight XBB, you'd sell some of that to extract cash, obeying the asset allocation target weights.

In my opinion, a conservative portfolio allocation with periodic sales to extract cash is a great way to invest when someone needs ongoing income. It's exactly what I do.

 

[Rusty O'Toole]

I've been dabbling in my old faithful TQQQ trade which I described before. It has gone from 32.27 on March 23 to 74 today. I didn't catch the whole move but I got a nice chunk of it. The only thing that held me back, was all the doom and gloom in the news made me doubt the technical indicators. Once again the technical indicators were right, the news was wrong. The more I work with this thing the more confidence I have in it.

I still want to invest in dividend stocks and go fishing but I'm still scared of losing my money. Is the market recovering or is this a typical 50% retracement leading to the next leg down? Wish I knew.

 

[james4beach]

I've been dabbling in my old faithful TQQQ trade which I described before. It has gone from 32.27 on March 23 to 74 today. I didn't catch the whole move but I got a nice chunk of it.

Congrats Rusty. I'm glad to hear that trade worked, but it will be very hard (I would say impossible) to get a reliable profit from this kind of trading, in the long term. You're trading against professionals on Wall Street. I'm just being brutally honest: you can't win in the long run.

I only learned this lesson after about 10 years of investing: you need to start investing passively, without making active trades. You can do this with the couch potato / asset allocation method (which I realize you don't like) but you can also do it with dividend investing.

I still want to invest in dividend stocks and go fishing but I'm still scared of losing my money. Is the market recovering or is this a typical 50% retracement leading to the next leg down? Wish I knew.

There's no way to know if the market is going up or down from here. This is the risk in stocks... we have no idea where they will go. There's no way around this problem. So while dividends are good passive technique, in a way, you have to "let go" of the problem of price movements because that uncertainty (and risk) will always be there.

Let's say you use dividend ETFs, like ZDY (for US) and CDZ (for Canada). The dividends will be pretty stable. Make sure you don't try trading the ETFs... you must buy & hold.

Why not gradually scale into the investment? With your 500K, you can start with: 100K dividend stocks + 400K GICs

Then, every year, buy another 100K of the dividend ETFs from the maturing GICs. Eventually you will be entirely in dividend stocks.

There is no way to avoid the fluctuation in stock prices. If you want to invest in dividend stocks, you are going to have to get comfortable with the possibility that the market plummets... there's no other way to do it. That risk comes with stocks, always.

But starting with 20% div ETFs + 80% GICs, and gradually adding to your div ETFs, will be a more comfortable way to get to the eventual goal of totally passive dividend investing.

 

[Rusty O'Toole]

duplicate post please disregard

 

[Rusty O'Toole]

Congrats Rusty. I'm glad to hear that trade worked, but it will be very hard (I would say impossible) to get a reliable profit from this kind of trading, in the long term. You're trading against professionals on Wall Street. I'm just being brutally honest: you can't win in the long run.

I only learned this lesson after about 10 years of investing: you need to start investing passively, without making active trades. You can do this with the couch potato / asset allocation method (which I realize you don't like) but you can also do it with dividend investing.



There's no way to know if the market is going up or down from here. This is the risk in stocks... we have no idea where they will go. There's no way around this problem. So while dividends are good passive technique, in a way, you have to "let go" of the problem of price movements because that uncertainty (and risk) will always be there.

Let's say you use dividend ETFs, like ZDY (for US) and CDZ (for Canada). The dividends will be pretty stable. Make sure you don't try trading the ETFs... you must buy & hold.

Why not gradually scale into the investment? With your 500K, you can start with: 100K dividend stocks + 400K GICs

Then, every year, buy another 100K of the dividend ETFs from the maturing GICs. Eventually you will be entirely in dividend stocks.

There is no way to avoid the fluctuation in stock prices. If you want to invest in dividend stocks, you are going to have to get comfortable with the possibility that the market plummets... there's no other way to do it. That risk comes with stocks, always.

But starting with 20% div ETFs + 80% GICs, and gradually adding to your div ETFs, will be a more comfortable way to get to the eventual goal of totally passive dividend investing.

James I have been following the TQQQ trade for 2 years now and the more I work it the more confidence I have in it. Would like to tell you about it but every time I post I get shot down by people who don't even bother to look at it. I could lay the whole thing out again if you were interested. But in order to see what I see you would have to download Think or Swim from Toronto Dominion (free).

I like your idea of buying dividend ETFs and legging into the position over time. It is simple and minimizes the chance of loss. Maybe I should try the training wheels first and work up to individual stocks later if at all. Do you know what the dividend return is?

 

[Rusty O'Toole]

James more on the latest TQQQ trade.
Got a signal from my technical indicators 3/20. Did NOT want to take it because all the news said the markets were crashing. But, I have learned to have confidence in the technical indicators. Gritted my teeth and took a small position (100 shares) on 3/20 @ 37.66. That went OK so with much trepidation, added 500 @ 47.835 on 3/27. Then another 100 @ 57.26 on 4/21 and finally, [email protected] 60.98 on 4/22.

Total 1000 shares, average price 51.7034 market price 75.26 so I am up $23,556.55 in less than 2 months. It could have been multiples of that if I was not a chicken hearted chicken but, I kept a tight stop and never risked more than $1000.

Speaking of being chicken I am figuring on selling out on Monday even though it is still rising and I don't have a sell signal. I feel I have done well on the trade and am afraid this might be a typical 50% retracement within a larger bear market . The 50% level would be 75.535.

If you figure I made $23,556.55 on an investment of $51,703.40 that works out to a profit of 45.56% in under 2 months. If I had gone all in the first day it would have been twice that. Do you wonder that I like this trade?

 

[james4beach]

James I have been following the TQQQ trade for 2 years now and the more I work it the more confidence I have in it.

Rusty you've really had some nice trades there, and I have no doubt you have good profits from them - congrats!

My concern is just that this kind of active trading is not sustainable in the long term. I speak from experience, because in my early years of investing I tried the same kinds of things. I had a stretch of 3-4 years where I even made pretty good money from the active trading. It seemed like a good way to make money without having to commit to "buy and hold". In fact, I even made money in 2008!

Just imagine that... why would I want to passively hold an index long, and suffer a crash, when I could be nimble and trade around it. Like I did in 2008. I gained confidence doing that and I couldn't see any reason to use a passive index portfolio.

By roughly year 5, my performance was dropping. Eventually (after a few more years) I took an honest look at my results and found that -- to my surprise -- I had actually done worse overall than a buy & hold strategy. This only became visible with the long term results and performance tracking.

This is why, even though I successfully traded through the 2008 crash, I now tell everyone that they are better off with passive couch potato-type investing. I would have made more money if I did this from the start, e.g. methods in #105 or #134.

I like your idea of buying dividend ETFs and legging into the position over time. It is simple and minimizes the chance of loss. Maybe I should try the training wheels first and work up to individual stocks later if at all. Do you know what the dividend return is?

CDZ yields around 5.3% and ZDY 3.8% so the two together will yield around 4.5% which I think is pretty good for a passive buy & hold. With CDZ+ZDY you would be pretty well diversified across many sectors, and two countries.

 

[Rusty O'Toole]

Rusty you've really had some nice trades there, and I have no doubt you have good profits from them - congrats!

My concern is just that this kind of active trading is not sustainable in the long term. I speak from experience, because in my early years of investing I tried the same kinds of things. I had a stretch of 3-4 years where I even made pretty good money from the active trading. It seemed like a good way to make money without having to commit to "buy and hold". In fact, I even made money in 2008!

Just imagine that... why would I want to passively hold an index long, and suffer a crash, when I could be nimble and trade around it. Like I did in 2008. I gained confidence doing that and I couldn't see any reason to use a passive index portfolio.

By roughly year 5, my performance was dropping. Eventually (after a few more years) I took an honest look at my results and found that -- to my surprise -- I had actually done worse overall than a buy & hold strategy. This only became visible with the long term results and performance tracking.

This is why, even though I successfully traded through the 2008 crash, I now tell everyone that they are better off with passive couch potato-type investing. I would have made more money if I did this from the start, e.g. methods in #105 or #134.




CDZ yields around 5.3% and ZDY 3.8% so the two together will yield around 4.5% which I think is pretty good for a passive buy & hold. With CDZ+ZDY you would be pretty well diversified across many sectors, and two countries.

What do you think of Morningstar ratings? Is that something you would give a lot of weight to in picking a fund?
I understand dividends are tax free up to $36000 does this go for US as well as Canadian companies or funds?

 

[james4beach]

What do you think of Morningstar ratings? Is that something you would give a lot of weight to in picking a fund?
I understand dividends are tax free up to $36000 does this go for US as well as Canadian companies or funds?

I don't know what goes into Morningstar ratings (what they consider as their criteria).

For dividend ETFs, I would look at the sector breakdown and avoid anything which is overly concentrated in a single sector. For example XDIV and XDV are too heavily weighted into financials. One reason I like CDZ is that it has great sector diversification, even better than the TSX index itself. Unfortunately the MER fee is high.

I don't know much about tax treatment, sorry. I think others on this board can help with that as we have a lot of dividend investors around.