Practice Makes Perfect Even with Investments

Photo by Timisu / CC0 Creative Commons

The following is a Peco medija contribution

Spending time on your investments isn’t all you have to do to succeed.

You know how the old saying goes; practice makes perfect. And while this is certainly true for artists, athletes, and musicians, is it the same for those of us with investment portfolios? The answer is a resounding yes, and here’s why.

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Annual Update – 2018 Review

Welcome to the annual 2018 update. This is part of  a series where I track our financial progress on a regular basis. I present three parts in this series: (i) Investment & Portfolio Update, (ii) Passive Income Update, and (iii) Goals Update.

1. Investment & Portfolio Update

2018 was quite an interesting year. The broad equity markets performed very well for the first 9 months of the year, but ended the year poorly with the S&P 500 returning -4.4% for 2018. Regular readers of this blog may be aware that I have been defensively positioned with lots of gold equities, utilities and almost no allocation to the tech sector. As a result, my portfolio did pretty well for the year. I finished the year with a return of +4.86%, a difference of 9.26% compared to S&P 500 returns.

Changes to our portfolio are summarized below.

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Passive Income Update – Dec 2018

Welcome to our monthly passive income update for December 2018. This is part of the scorecard series where we track our dividends and other sources of passive income. We also include changes and updates related to our investments during the month – showing the overall progress.

Passive Income  Update

Passive income for the month of December 2018 was CAD$1,098.59, which comprised of US$147.37 and CAD$898.17 (exchange rate is US$1 = CAD$1.36).

The change for the month is 96.16% QoQ and -27.5% YoY. I would’ve received a bigger annual dividend in December had I not sold some of my index funds in August, but I have no regret for doing that since the timing worked out great before the Q4 2018 correction started and I would’ve lost a lot more capital by staying invested.

This brings our passive income to $9,238.40 for the year of 2018 and achieves 83.99% of our annual goal of earning $11K, well below the target.

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Outlook for 2019

Happy New Year! 2018 is in the books and the recent turn in markets made it a year to forget for most investors. Q4 saw the much-expected & needed correction in US equities. While the investors seem to be breathing a sigh of relief and jumping back into the market, I am not convinced that this is the end of the correction and expect the downtrend to continue.

Here are the reasons why I continue to be bearish:

The US economy just went through 9 consecutive quarters of growth and the rate of growth is now tapering off. More importantly, most companies had record operating margins when they were hitting their respective all-time high stock prices. So, when you simply look at a short-hand financial number like P/E ratio, keep in mind that the margins are baked into the numbers — which is why you cannot base your full investment decision simply based on one number. Add to that revenue growth has plateaued for companies in this cycle and wage growth has consistently increasing month after month. Even though the Fed doesn’t see a recession coming (they never do), that recipe smells like a upcoming recession to anyone looking at the data objectively.

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Top Investment Picks for 2019

As the new year rolls out, its time to share the annual investment pick contest that I run. This is the 4th year in the running. This is merely meant to be a fun experiment to run and collect top investment picks for 2019 from a community of investors I regularly interact with. There are still some great picks from the 2016, 2017 & 2018 top picks, and I invite you to check them for ideas. Remember that investing is a long game — so, focusing on short intervals like a year is not prudent — even though this contest focuses on one year return. Plenty of older picks may present long term value.

The rules were simple: Pick one investment (stock, bond, fund, currency, commodity, cryptoasset or any other form of investment security), and present a short & quick investment reason behind the pick. I will track this progress over the year and provide quarterly updates on this blog.

Top Investment Picks for 2019

Before I present the picks, I would like to remind the readers that these are simply picks based on current outlook and each investor should not take this as investment advice. If you decide to pursue these investments, please do your due diligence before investing in any of the securities mentioned.

Without further ado, here are the top picks from the investing community for 2019.

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