Monday, April 27, 2015

Mr. Taxman, Mr Market and Mr. Index Fund

Hey Financial Freaks,

It's been a few days since I posted something new on Monsieur Dividende.

Things have been quite hectics on the contracts front, which is good news. I have been very busy working.

More work equals more money, more money means more taxes to pay, and the wheels keep turning...

Did you catch a slight bitterness towards our tax system? I guess so.

I just had some bad news from Mr Taxman. I had to reimbursed roughly 7 K$ to them. I knew I had to pay some taxes at some point, but I was wrong for about 2-3K$ of it. Hence the major disappointment. This is less money to invest.

I want to earn more money to buy more dividend growth stocks, not pay taxes! I guess you have to become an entrepreneur to really feel the sting of those insane tax policies.

Freelance people really have to work harder to retire with the same safety net as say a public servant, no doubt about it. I'm ready, whenever you want to take it up to the streets! Give me a shout.

At least I take comfort in the fact that I've got a strategy. No way I'm counting solely on the government for my old days. I much prefer lending the money to Johnson and Johnson (JNJ) or ATCO (ACO.X).

The problem : Mr. Market isn't co-operating at the moment. I have close to 50K$ sleeping in various accounts. This money is waiting to get to work. But I won't let it if it means eroding its power from the get-go.

And I'm not to keen on those Monetary Funds... The choice is pretty simple : either you invest it and pay the high price for an overvalued stock or you wait on the sideline and you pray for a market correction. I pick the latter. Other option : putting your money in a boring saving accounts at 1.35% with interests on which you will have tax to pay at the end of the fiscal year.

I guess dividend growth investors with my strategy are left waiting at this point. Don't get me wrong, I think all my companies would still do well at their current price level. But, like Benjamin Graham was preaching, I'm trying to minimize my error margin as much as possible by buying at the right price.

Hence the long wait.

I have to say though -- to be completely honest -- that with my periodic investment plan I am regularly buying shares of my RBC American Index Fund every two weeks at a pace of 100 $.  That's 2 600$ a year. By doing so I avoid buying too high (and too low, I guess). And there is no commissions. The MER is 0.72%, which is decent.

If you take a look at my portfolio, you will notice I have collected quite a sum in that fund. More than 5K$. And it did pretty well so far with a yield over 20%. Not bad at all. even for a fund with fees.

Check out some of its major holdings:



How about you guys? Are you sitting this bull market out? Or are you still buying? How about fixing yourself up with a periodic investment plan program like me? Would a similar plan suit your style?

7 comments:

  1. Don't have liquidity right now to purchase so no tax problems this year! But I'd rather have more money to invest that's for sure. We're just focusing on our big RV trip project right now, leaving no more liquidity for extra investments.

    Cheers,

    Mike

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    1. Hey DivGuy,

      Yeah, having money to invest is indeed a nice problem. But your travel project seems very appealing too. This is memory you will create for your old days. And you might come back just in time for a market correction. Bon voyage !

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  2. Hey bud. Markets are just so expensive right now. Patience, we'll get a correction sooner or later and when that comes , I'll deploy whatever cash I have which is 50 k as well. Sit tight and build up till then. What's the rush. We have our whole life to invest. Take care my friend.

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    Replies
    1. Hey Dividend Hustler,

      I know, we shouldn't rush. But I hate to see money doing nothing. But your are 100% right. Patience is key. And I will sit tight and wait for a correction. Always stick to our strategy, right? Thanks for coming here.

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  3. MD,

    Don't worry too much about the expensive markets - they'll come down or they'll continue their march upward. I'm counting on the latter over the long-run. That's why I continue investing every single month and not have too much money on the sidelines.

    People have been saying a correction is imminent for the past two years, yet those who followed that advice have missed out on huge gains already. Don't try to time the market too much! ;)

    Best wishes,
    NMW

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  4. Yeah, you are spot on NMW. I won't try to time the market. But for expensive buys, say 5000$ or more, I will at least wait for a little price fallout. My strategy is to wait for a 10% correction. But for my periodic small investing it's business as usual. I keep buying every two weeks. Thanks for coming by. ;-)

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Thanks a lot for your comment.