Take a Deep Breath

Take a deep breath, and think things through before you take any actions.

No seriously, before you take any action on stock market news, step back, inhale deeply, and clear your mind. It will help you see the big picture, and enable you to make better decisions about your investments.

It is very easy to get caught up in what's on TV, or what is in the newspaper.

The Last Month

May 22, 2013: S&P closes down 35 handles from intraday peak. -14 points from previous day's close

May 28, 2013: S&P 500 rallies 25 pts intraday before closing up only 11 pts

May 31, 2013: S&P 500 closes down 24 pts, with most of that (13 pts) coming in the last 30 minutes of trading

Dividend Growth Portfolio, May 2013

A bit delayed, but better late than never right?

Every time I go on vacation, I get reminded of how my brain seems to be wired to think about investing. Even when I'm vacationing, I can't help but think of things I observe in a financial sense. I guess the phrase 'Money never sleeps' really is true.

Here is a couple of sample pictures from my trip. The first is part way through my 6 hour hike down the South Kaibab Trail into the Grand Canyon.

The second picture is a tail shot of the Space Shuttle Endeavor at the California Science Center.

A few things I noticed or thought about on this trip:

1. Americans love American cars: Here in the Greater Toronto Area, German and Japanese import cars like Benz, BMW, Audi, Toyota/Lexus, Honda/Acura, Nissan/Infiniti are everywhere. During my 2000+ mile drive thru Las Vegas, Grand Canyon, Death Valley, and Los Angeles, these import car brands were extremely rare. I almost want to say I see more of them in 1 day in Toronto/Markham, than I did in my entire 10 day 2000+ miles trip. What did I see a lot of? Dodge, Chevy, Ford, Cadillac, Lincoln, etc. 
2. South Korean cars are really poorly made, American cars are not bad: The crappy quality of both Hyundai cars I got as rentals (Santa Fe and Elantra) astounded me. Poor sound proofing, inconvenient placement of controls, and weak engine were 3 of many things that I did not like on the Hyundai vehicles. The Dodge Charger I drove from Vegas to LA via Death Valley was much more enjoyable, and not to mention very fuel efficient!! This reinforces my belief that Hyundai cars are overrated. 
3. Freeways in LA really suck: I couldn't believe how TERRIBLE the freeways in LA were in terms of road quality. I felt like I was driving over speed bumps at 75mph! I still can't get the ka-thump ka-thump ka-thump out of my head. Infrastructure investment is truly important. America needs to repair its roads and bridges!
4. US McDonalds has a lot more variety than Canadian McDonalds: Egg White McMuffin! I hope they bring it to Canada. It was delicious, the same price as normal McMuffin, and in theory healthier for you. McDonalds is truly an innovation leader when it comes to quick serve food. They also have more burger selections (Deluxe, BLT, etc) than we do up here. I saw a lot of customers having breakfast and coffee at the various McD I visited throughout the trip. It looks like McDonalds is really having a lot of success at getting into the breakfast and coffee markets
5. Americans really do eat A LOT: I swear American sized portions are even too big for me. No wonder I saw so many obese (not just mildly, but to the point their tummies flop on the tables) people on this trip. Made me think of investing more in healthcare businesses. 

now, onto regular business :)

Dividend Growth Portfolio, April 2013

The stock market is soaring to new highs. Chasing yield is the new fad, like dotcoms around the turn of the century, and housing in 2005-2007. People are buying dividend paying equities without adequate research, believing that getting paid 10% somehow is a good return for low risk. On top of this, good securities are getting bid up, thus driving yields broadly lower. REITs are yielding where utilities used to be. Utilities are yielding where out-of-favor stocks used to be, etc.

As a dividend growth investor, I do invest in higher yielding assets, but my strategy does not revolve around absolute yield. Historical data shows the highest yielding equities do not even have average performance, let alone best. At best, yield chasing yields mediocre returns. At worst, its odds are not much better than roulette.

Where do I see the best value at the moment? I've mentioned these in the past, but I still continue to see good value in the defense and health care insurance industries. To add to those, now I also see attractive value propositions in energy and financials.

At these levels, be careful when committing new money. Buy in increments, and keep some cash on hand, continue to look for opportunities.

Portfolio for Beginners

The hardest step of doing anything is getting started.

When I talk to various people (friends, co-workers, people on the internet), they often say 'I would love to invest and grow my wealth, but I have no idea how or where to start!'. Its true. While the concept of investing or why you should invest, is not a hard one to grasp, or a hard one to accept, many people get stuck on how to begin doing it. To an outsider, the world of investments often looks at best confusing, and at worst, scary. So many investments to choose from, where do I start?  What makes the process of getting started even more difficult, is that beginner investors often have a fear of seeing paper losses.

Today's your lucky day. I'm going to help you get started with a portfolio for beginners. I will even track it over time to see how you would have done, had you actually followed through on it.

First, let's set some rules, or guidelines, regarding portfolio management.