Week-End Reading Apr 26 2015

 

    During the past week, I added a new link on the top of the blog.  The 'Resources' link has some of the books that I have read over the years. These books have all helped me on my journey to financial independence.  My only regret was that I didn't take immediate action right after reading the books.  I basically woke up one day and decided I didn't wanted something more out of life, and started applying some of the concepts in these books.  One of the most important concepts is Paying Myself First which is first discussed in Richest Man in Babylon.  Although I wish I would of started on my journey earlier in life, I am thankful to be able to start the journey and life gets easier and easier every time I make an investment. I am still in the rat race, but I am way better off now than I was 5 years ago.

   During the past week, some of the articles I enjoyed reading or podcasts that I listened to are listed below.

Reaching Financial Independence  The Dividend Mantra Way

      Kraig Mathias at createmyindependence.com talks with Jason Fieber, aka Dividend Mantra, about what he has been up that last while. Dividend Mantra has been writing for about a year full time after leaving his full time job at a car dealership.  Dividend Mantra talks about his past and dividend growth investing in this podcast and it was good to listen to the hour long podcast.

The Dividend Mantra Way

Last Sunday, Dividend Mantra wrote a post about publishing his first book. It is an e-book which can be purchased on Amazon for $4.99 US.  The book is already listed as a best seller in the Investing category.

 Recent Buys by Dividend Hustler

Dividend Hustler recently published a post about his recent buys. I am a shareholder in 2 of the 3 companies he bought shares in.  I believe all three of these companies will do well over time.

 2015 Federal Budget in Canada

Liquid Independence recently wrote about the 2015 federal budget.  Some of the politicians outside of the government believe the increase in TFSA contribution limit to $10000 a year from the $5500 a year will only benefit the rich.  With the increase limit, it might benefit people to save and invest more into this vehicle when they realize the actual benefits of investments that will grow tax free. People will come to realize when they take money out of the TFSA, it is tax free also.

 Sharpe Trade : Money Management Series Post

Dan, aka Aileron Trading, wrote a post in his money management series about forms of risk. This post is on the Sharpe Trade website, in which Dan is apart of.  This post also has a video component to it also.

Photo Credit : www.cafepress.com

DISCLAIMER

     I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.  Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk

Saving Options

    We are in a low interest rate environment. The interest of high interest savings accounts is under 1.25%.  This is what the banks consider high interest LOL. So basically an everyday bank account should have 0% or very close to it.  With inflation, you are actually losing money as inflation is around 3%.  Guaranteed Investment Certificates, or GICs, pay very low interest as well. The interest rates on GICs is pretty similar to high interest savings accounts.  GICs is the canadian equivalent of CDs in the United States.  Also, the interest paid by these accounts or investments are taxed at marginal rate in Canada which is equivalent to ordinary (earned ) income in the United States.

 What Other Options Do Savers Have?

  First of all, I do believe an individual should save an adequate emergency fund by having easy access to this money. Then a saver has to look for more options to get a little return on their money.

After the emergency fund is completely funded, an investor has some options which are as follows:

1. Purchase an dividend ETF
2. Purchase a bond ETF
3.  Buy physical gold or silver
4. sell deep out of the money put options

     Option 1 is to purchase a dividend ETF. This is most beneficial if you have commission free ETFs with your broker.  A regular dividend ETF, that is not exposed to leverage, can pay a distribution greater than 3%.  The distribution will be more tax advantageous than an interest payment as the distribution should consist of dividends and return of capital. So, if savers can buy ETFs exposed to stocks commission free , this will be a way to get a yield.  Please note that the ETF stock price can move up or down just like regular stocks.
      
     Option 2 involves purchasing a bond ETF.  Like I mentioned above, purchasing a bond ETF is most beneficial when it is commission free. Some brokers have commission ETFs while other brokers don't. The distribution payment would consist of mostly interest and return of capital. The disadvantage of the bond  ETF as compared to a dividend based ETF, is the interest from a bond ETF would be taxed at a higher rate.  The advantage of a bond ETF is that price of the ETF remains relatively flat over long periods of time.  Currently I am doing something in my TFSA with a bond ETF, whose ticker symbol is CBO.

      Option 3 consists of buying precious metals like silver and gold. These two assets are physical assets and do not provide income.  An investor, or saver has to hope the price of the asset goes up from when they brought it. An investor, or saver, could also buy an ETF that is exposed to silver or gold which doesn't have a leverage component to it.

       Option 4 involve selling deep out of the money put options.  The investor will be paid up front a premium. Although the premium will be small, it is still cash flow that will likely be greater than what you get in interest form a savings account. In order to  this without having debt, an investor should build up enough money besides the emergency fund to to able to do this.  There is always a chance that the option could be assigned and you do not want to have to be in debt to do this effectively.

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Dividend Update - March 2015

      The month of March is another month of dividend income landing in my accounts. This money is used to help pay my expenses if it is needed. If the money is not needed, it is ALL used to purchase new investments to further increase my cash flow.

        The price of a barrel of crude oil remains near the $50.00 a barrel. As the energy sector is struggling with the price, other industries are benefit from the lower price of barrel of crude oil.  A company such as Delta Airlines can hedge themselves against the price of oil by buying a call option on the price of oil. Delta Airlines would pay a premium for the right, but not the obligation to purchase crude oil at a giving price within a certain time frame.  So if the price of crude oil rises during this time, Delta can exercise their option and pick it up at the lower price.  Jet Fuel is derived from crude oil, so there price of crude oil and jet fuel are nearly correlated.

     With this energy industry struggling, I am putting my money in other areas. Some industry professionals believe that oil prices could remain like this to up to 3 years.


Non-registered Account

• Enbridge (ENB) - $3.27
• Enerplus (ERF)  -$ 46.80
• Just Energy (JE) - $90.13
• Killam Properties (KMP)  - $5.75
• Shaw Communications (SJR.B)    - $19.75

TFSA

• Boston Pizza  Royalties Fund (BPF.UN)   - $23.87
• Claymore 1-5 yr Laddered Corporate Bond (ETF) - $0.91
• Cominar REIT (CUF.UN ) - $5.39 
• Dream Office REIT   (D.UN)  - $ 16.61
• Enbridge (ENB) - $15.35
• Killam Properties (KMP) - $  14.50 

Total = $242.33

     This total represents a 7.95% decrease from 3 months ago and 8.86% increase  year over year.  One of my positions, Bombardier Inc Class B, did not pay a dividend in March as the suspended their dividend. The company is going through a management position and has pushed the date out for the CSeries delivery (Source: www.financialpost.com).

   I also received another distribution payment of $56.00 for my swing trade in Dream Office REIT in my non-registered account. This is not listed above since it is a trade, so I keep the money in the account and do not pay myself first with this payment. I have received $1155.47 in distributions so far on this trade.

     I will update my dividend income tab with the new amount. It is great to see money from passive income sources deposited into my brokerage account every single month.

Disclosure : Long all securities above.

Photo Credit: www.mipaq,co.za

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Portfolio Update - Mar 2015

      The end of the first quarter of 2015 is now behind us.  The price of WTI crude oil remains below $50 a barrel.  With the price of oil remain low, layoffs in the energy sector are continuing.  As the economy deals with the low oil prices, it will have drastic effects on provinces, states or countries that have oil revenue as a large percentage of government revenues.
     During the month of March, I did not make any long term investments. I did acquire more shares through DRIPs.

  Shares added due to drip

0.056 shares of ENB @ $58.39 for a total of $3.27
4 shares of ERF @ $11.61 for a total of $46.44
1 share of KMP @ $10.92 for a total of $10.92
15 shares of JE @ $5.87  for a total of $88.05 

    My covered call for TD bank did not get assignment due to the price of the stock being below the  strike price of $56 at expiration date. I still get to keep the premium of this trade, even though the option was not exercised. A covered call is a good way to earn some more income on an investment. Before making a covered call, one has to be comfortable with selling the stock at the strike price.
     In the early part of March, I entered a trade in Sherritt International at $2.35. I have traded this stock in the past and had positive returns. Although past performance does not guarantee future results, they are predictions by various analysts that the stock could reach over $4.00 a share in about a year's time.  As my limit order has not been filled yet, I now qualify for their dividend. The dividend will not be very big at it is only $0.01 a share. 
   Toward the end of the month, I bought a call option in TD inside my TFSA which you can read out here. On April 2, the sell to close order was filled, which you can read about here.

       As of Apr 3, 2015, the value of my portfolio stands at $78497.15. This is an increase of 0.502% over last month. I will update my investing account tab above

Disclosure: Long KMP, ERF, JE, ENB

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should be NOT taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk

Recent Sale - Trade Closing

I recently wrote about a trade in which I purchased 2 contracts of TD in Canada at $54 strike price.  I paid a premium of $0.85 per contract with a May 18, 2015 expiration date.

On Friday, the stock showed a little strength and this was enough to push the value of the option upwards. My limit order (Sell to Close) was filled at $1.25 per contract.

Summary:

Initial Investment : 2 contracts *$0.85/contract*100 shares +$11.95
                              = $181.95

Proceeds of Sale = 2*1.25*100-$11.95
                            = $238.05

ROI = Profit/Initial Investment
        = ($238.05-$181.95)/$181.95
        =  30.83%

Click to Enlarge

This trade was in my TFSA, so I pay no taxes ever on this profit.

DISCLAIMER:
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.