- Joined
- Oct 22, 2007
- Messages
- 1,191
Just to let you know that, although quiet, I am still around and have not forgotten about REIN. It is just that I don`t have much news to say about investing.
Basically, I nibble in both the stock and real estate market. I just bought another property in my favorite old fogey complex for a truly attractive price. On top of that, I used a line of credit created a year or two ago on my own home to finance it. If there is right now a reason to own a home larger and more expensive than you really need for your lifestyle, the line-of-credit is it! At 2.25% per month and no principal repayment required it is the ultimate cashflow booster.
Simultaneously, I keep on nibbling in the stock market. I am writing call options on shares that I own with mixed results. The market is so volatile while call option prices are not high enough to realy make an imact. 90% of the time I write an option, it gets assigned or called because the market is so volatile that even when you put the strike price 15% above the current share price it gets often called. I now buy some shares along with the writing of call options, or I wait until the price of shares that have been called fall back to below the original strike price and repurchase them. This helps but takes up a lot of cash, time and the results are not fabulous. Overall, I think I make a bit of money.
Also, I keep on buying income producing shares, in particular preferred shares or convertible debt whose dividends are linked to the prime rate and trade far below par while they are issued by respectible companies. The yield is modest but it is inflation protected and I am concerned about the possibility of having higher inflation over the coming five years. Also, because the shares trade below par and far below their normal trading prices, there is significant opportunity for appreciation. An example would be buying preferreds of corporations like the banks, or Shaw, Telus, BCE or Power Corp or Brookfield at $17 rather than their normal market pricing of $25. They pay typically dividends not far from prime on their par value say currently at 2%. My yield would be 2% x par ($25) divided by the purchase price ($17) = 2%x25/17 = 2.94% yield plus cap appreciation. Say we`re back into `normal credit and stockmarket territory` 4 years from now and the shares are trading around $24, then they appreciated $24 - $17 = $7 or $1.75 and my total annual return on investment would be 2%x$25+1.75 = $2.25 or 13.2% per year. Considering that this is a combination of cap gains (1.75) and divididends(0.5) this would be equivalent to interest income of close to $4.14 per share or 4.14/17 approx 24% per year On top of that, my dividends will increase with prime and thus inflation. - WOW!!!
For the rest, I do nothing and wait out the now abating economic storm. The secret to succesfull investing is buying investments at the right price NOT the right time. Timing of markets is risky and near impossible, especially when you try to hit the highs and the lows. However, buying when for your goals the price is right is relatively easy.
I just got the CDs of the last Calgary REIN meeting, and I can say this not often enough, Don`s explanations of how markets and the economy work are just great. Actively listening to Don and his expert friends will pay for your REIN membership many times over and it will provide an excellent anchor in these times of economic turmoil.
Not to brag, but to show you how my ideas work overtime, from the peak of the stock market some 12 months ago, my overall portfolio is down 12%, the TSX is down 28%. Diversification works!
Basically, I nibble in both the stock and real estate market. I just bought another property in my favorite old fogey complex for a truly attractive price. On top of that, I used a line of credit created a year or two ago on my own home to finance it. If there is right now a reason to own a home larger and more expensive than you really need for your lifestyle, the line-of-credit is it! At 2.25% per month and no principal repayment required it is the ultimate cashflow booster.
Simultaneously, I keep on nibbling in the stock market. I am writing call options on shares that I own with mixed results. The market is so volatile while call option prices are not high enough to realy make an imact. 90% of the time I write an option, it gets assigned or called because the market is so volatile that even when you put the strike price 15% above the current share price it gets often called. I now buy some shares along with the writing of call options, or I wait until the price of shares that have been called fall back to below the original strike price and repurchase them. This helps but takes up a lot of cash, time and the results are not fabulous. Overall, I think I make a bit of money.
Also, I keep on buying income producing shares, in particular preferred shares or convertible debt whose dividends are linked to the prime rate and trade far below par while they are issued by respectible companies. The yield is modest but it is inflation protected and I am concerned about the possibility of having higher inflation over the coming five years. Also, because the shares trade below par and far below their normal trading prices, there is significant opportunity for appreciation. An example would be buying preferreds of corporations like the banks, or Shaw, Telus, BCE or Power Corp or Brookfield at $17 rather than their normal market pricing of $25. They pay typically dividends not far from prime on their par value say currently at 2%. My yield would be 2% x par ($25) divided by the purchase price ($17) = 2%x25/17 = 2.94% yield plus cap appreciation. Say we`re back into `normal credit and stockmarket territory` 4 years from now and the shares are trading around $24, then they appreciated $24 - $17 = $7 or $1.75 and my total annual return on investment would be 2%x$25+1.75 = $2.25 or 13.2% per year. Considering that this is a combination of cap gains (1.75) and divididends(0.5) this would be equivalent to interest income of close to $4.14 per share or 4.14/17 approx 24% per year On top of that, my dividends will increase with prime and thus inflation. - WOW!!!
For the rest, I do nothing and wait out the now abating economic storm. The secret to succesfull investing is buying investments at the right price NOT the right time. Timing of markets is risky and near impossible, especially when you try to hit the highs and the lows. However, buying when for your goals the price is right is relatively easy.
I just got the CDs of the last Calgary REIN meeting, and I can say this not often enough, Don`s explanations of how markets and the economy work are just great. Actively listening to Don and his expert friends will pay for your REIN membership many times over and it will provide an excellent anchor in these times of economic turmoil.
Not to brag, but to show you how my ideas work overtime, from the peak of the stock market some 12 months ago, my overall portfolio is down 12%, the TSX is down 28%. Diversification works!
