# 100K for 1000



## JackJac (Mar 13, 2017)

Let's say you've got 100K sitting around collecting dust in a traditional savings account and you want to consistently generate $1000 per month with that 100K. What would you invest in to start getting those returns immediately?


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## mordko (Jan 23, 2016)

Nothing. No investment can "consistently" generate ~12%.


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## like_to_retire (Oct 9, 2016)

JackJac said:


> Let's say you've got 100K sitting around collecting dust in a traditional savings account and you want to consistently generate $1000 per month with that 100K. What would you invest in to start getting those returns immediately?



Consistently generate 12%?

Crazy talk.

ltr


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## JackJac (Mar 13, 2017)

Alright let's change that 100K to 300K.


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## TomB16 (Jun 8, 2014)

Change it to $150K and you could do it with a basket of REITs.

By the way, you forgot to add the specification of having zero risk. lol!


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## like_to_retire (Oct 9, 2016)

JackJac said:


> Alright let's change that 100K to 300K.



Why don't you just ask the question you want to ask?

ltr


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## JackJac (Mar 13, 2017)

like_to_retire said:


> Why don't you just ask the question you want to ask?
> 
> ltr


Both questions are questions I want to ask.


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## JackJac (Mar 13, 2017)

TomB16 said:


> By the way, you forgot to add the specification of having zero risk. lol!


Well duh!


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## TomB16 (Jun 8, 2014)

Yeah, stop jacking us around.


Just kidding. Had to. lol!


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## My Own Advisor (Sep 24, 2012)

$300K should provide easily $12K or _$1,000 per month, cash for life._ Own a bunch of 3-5 banks, 2-3 pipelines, 3-5 REITs and 2-3 telcos. None of them should go out of business, at least not all at the same time. 

Problem solved!


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## JackJac (Mar 13, 2017)

TomB16 said:


> Yeah, stop jacking us around.
> 
> 
> Just kidding. Had to. lol!


Good one! Haha


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## JackJac (Mar 13, 2017)

My Own Advisor said:


> $300K should provide easily $12K or _$1,000 per month, cash for life._ Own a bunch of 3-5 banks, 2-3 pipelines, 3-5 REITs and 2-3 telcos. None of them should go out of business, at least not all at the same time.
> 
> Problem solved!


I would do that but some those sorts of stocks seem overvalued atm from what I've seen.


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## TomB16 (Jun 8, 2014)

If you can value stocks, what are you doing on CMF asking us about generating $1K/mo with a $100K investment?


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## JackJac (Mar 13, 2017)

TomB16 said:


> If you can value stocks, what are you doing on CMF asking us about generating $1K/mo with a $100K investment?


To see if you guys know something I don't. Also a bit of trolling always keeps things exciting -- for me at least.


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## My Own Advisor (Sep 24, 2012)

TomB16 said:


> If you can value stocks, what are you doing on CMF asking us about generating $1K/mo with a $100K investment?


This is my thinking. If you can predict the future, all joking aside, you don't need anyone. For the most part, the best price is likely today's price but keep cash on hand if/when the market tanks 10%, 20% or more. Otherwise plant your tree now and sit in the shade years from now.

Just my philosophy of course but Tom has far more investing experience than I do


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## TomB16 (Jun 8, 2014)

I can predict the future. I do it all the time.

The only issue is that I'm rarely correct.


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## JackJac (Mar 13, 2017)

My Own Advisor said:


> This is my thinking. If you can predict the future, all joking aside, you don't need anyone. For the most part, the best price is likely today's price *but keep cash on hand if/when the market tanks 10%, 20% or more*. Otherwise plant your tree now and sit in the shade years from now.
> 
> Just my philosophy of course but Tom has far more investing experience than I do


Amen to the bold.


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## GreatLaker (Mar 23, 2014)

JackJac said:


> I would do that but some those sorts of stocks seem overvalued atm from what I've seen.





TomB16 said:


> If you can value stocks, what are you doing on CMF asking us about generating $1K/mo with a $100K investment?


Ha Ha! Yeah

If he could do that he would be writing investment books and selling a monthly investment newsletter. "The JackJac Report"


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## RBull (Jan 20, 2013)

I'm disappointed no one could provide the magical 12% solution so I could use some of this cash collecting dust around here! 

Thanks for the chuckles everyone.


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## TomB16 (Jun 8, 2014)

RBull said:


> I'm disappointed no one could provide the magical 12% solution so I could use some of this cash collecting dust around here!


... and double your money in 6 years.

We shall call this investment strategy, "Freedom 35".


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## Rusty O'Toole (Feb 1, 2012)

I've been doing rather better than this for the past 6 weeks or so. Started a new investment program based on Nicolas Darvas' methods. Suggested reading How I Made $2,000,000 In The Stock Market. You can download it for free.


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## JackJac (Mar 13, 2017)

Rusty O'Toole said:


> I've been doing rather better than this for the past 6 weeks or so. Started a new investment program based on Nicolas Darvas' methods. Suggested reading How I Made $2,000,000 In The Stock Market. You can download it for free.


Well that's a rather unexpected and refreshing comment. I'll check it out. Thanks.


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## OnlyMyOpinion (Sep 1, 2013)

... and after you too profit from a market wave like 1958-59, let us know when your book comes out.


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## tygrus (Mar 13, 2012)

JackJac said:


> Let's say you've got 100K sitting around collecting dust in a traditional savings account and you want to consistently generate $1000 per month with that 100K. What would you invest in to start getting those returns immediately?


FTN.TO

Yer welcome


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## Just a Guy (Mar 27, 2012)

Well, even though I see a pattern in jackjac's postings, you could use 20k as a down payment on a $100k rental, buy five properties which you rent for $1000/month and generate $5000/month before expenses. Realistically, you should be able to earn more than 12% on your original money ($450 mortgage, $50 insurance, $150 property taxes, $100 maintenance leaves about $250/month or $1250 ROI). Of course it comes with work, the first trick is finding rentable places you can buy for $100k.


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## OnlyMyOpinion (Sep 1, 2013)

Rusty O'Toole said:


> I've been doing rather better than this for the past 6 weeks or so. Started a new investment program based on Nicolas Darvas' methods. Suggested reading How I Made $2,000,000 In The Stock Market. You can download it for free.


Thanks Rusty, he was a fascinating read. 
A dispassionate techno-fundamentailst, riding a few rockets upward, racheting up his stops to cover the downside, using massive leverage, and ending up wealthy.
https://vantagepointtrading.com/wp-content/uploads/2010/05/How-I-Made-2000000-in-the-Stock-Market.pdf


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## Rusty O'Toole (Feb 1, 2012)

I have been getting help from this guy as well.

http://www.darvastraderpro.com/

Unfortunately we do not seem to have the kind of market Darvas had in 1958 where stocks double or triple in a few months. These days they seem to chug steadily upward at 10% a month or so. If you pick the right ones.

Right now my portfolio contains MCHP, MOMO, BABA, UCTT and VEEV


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## JackJac (Mar 13, 2017)

tygrus said:


> FTN.TO
> 
> Yer welcome


Hmmm...yes, yes thank you....


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## JackJac (Mar 13, 2017)

Rusty O'Toole said:


> I have been getting help from this guy as well.
> 
> http://www.darvastraderpro.com/
> 
> ...


Great, thanks for that.


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## JackJac (Mar 13, 2017)

Just a Guy said:


> Well, even though I see a pattern in jackjac's postings, you could use 20k as a down payment on a $100k rental, buy five properties which you rent for $1000/month and generate $5000/month before expenses. Realistically, you should be able to earn more than 12% on your original money ($450 mortgage, $50 insurance, $150 property taxes, $100 maintenance leaves about $250/month or $1250 ROI). Of course it comes with work, the first trick is finding rentable places you can buy for $100k.


I see patterns in everything too man. I take meds for it though.


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## Rusty O'Toole (Feb 1, 2012)

For those interested in Darvas' books and method, I recommend this commentary by Dr. Scott Brown.

https://www.youtube.com/watch?v=O4uaeGNmkKE&t=920s

It's best to read the book first then listen to the Youtube comments. I added my own comments under his vids as Mr Danforth 374.


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## james4beach (Nov 15, 2012)

cameron_poe said:


> all in on HGU, then ...


cameron_poe, I removed your post due to inappropriate language.

Please watch your language


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## Rusty O'Toole (Feb 1, 2012)

Have been watching PI (Impinj Inc) for a breakout above the all time high at 42. This came last Friday but so far has not closed above 42. Getting set to make a small buy with a tight stop.


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## james4beach (Nov 15, 2012)

JackJac said:


> Let's say you've got ( changed to ) 300K sitting around collecting dust in a traditional savings account and you want to consistently generate $1000 per month with that ( changed to ) 300K. What would you invest in to start getting those returns immediately?


There have been mathematical studies on this problem and it's a well studied field, called SWR studies (sustainable withdrawal rate) and they phrase them like this: 12K (4%) initial withdraw, and annual withdrawals that increase with inflation.

The general approach is actually much more boring than you might think. All you do is build a diversified investment portfolio, containing a mix of stocks & bonds, and draw money out of it every year. I've listed some tangible ways to do this at the end of my post.

Whether or not you want the annually generated amount to increase with inflation makes a big difference. If you're generating a constant 12K per year from 300K (4% withdrawal rate) without inflation adjustment, the portfolio will generate 12K per year, forever. However if you annually increase that amount with inflation, you can probably generate the withdrawals for about 20-30 years, but not "forever". Simulations show that the money could be depleted in 20-30 years. It could also last longer if you get lucky.

The math on portfolio sustainability shows that you'll need something in the ballpark of 30% to 70% fixed income and the complement (70%-30%) in stocks. That points to the "one size fits all" balanced fund approach, which is a 50/50 or 60/40 allocation of stocks and bonds. The reason these are so popular is that, mathematically, this is the kind of allocation that makes a pool of money last the longest under the steady-widthdrawal scenario. You withdraw the fixed amount from it every year.

Ways you can do this are:
- global couch potato balanced fund allocation. Just 3 ETFs: *VAB, XIC, XAW*
- Mawer Balanced Fund
- any other good balanced fund, e.g. RBC Monthly Income fund

You sound like you are a bit conservative as far as stock exposure you want to take on. You can take on more fixed income (and a bit less in stocks) without changing the outcome to any significant degree.

For example, perhaps you put 250K in Mawer Balanced/another balanced fund and 50K in a 5-year GIC ladder. This makes your overall allocation 50/50 stocks and fixed income and as mentioned above, you can do a constant annual 12K withdrawal without inflation adjustment forever -- the money will never run out.

Some people will tell you to put all the money in dividend stocks. The "dividend" part is a red herring, and this still just means 100% stock allocation. The simulations of this strategy show that, with the amounts you wrote (4% initial withdraw), your money will not last as long. To maximize how long your capital lasts, you need both stocks and fixed income.

Another variation is the "variable withdrawal" method where you generally withdraw 12K a year, but vary it and withdraw less in years with poor performance. This definitely makes the money last longer, so you could generate 12K with inflation adjustment... as long as you're willing to generate less during bad stretches.

In any case, put the money in a 60/40 or 50/50 balanced fund.


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## Eder (Feb 16, 2011)

JackJac said:


> I would do that but some those sorts of stocks seem overvalued atm from what I've seen.


How do you know? You want income then you look at dividend payout,ability to raise dividends through future growth and company debt...considering whether RBC is 10% high or low to true value is not as relevant as you will never sell.


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## Eder (Feb 16, 2011)

GreatLaker said:


> Ha Ha! Yeah
> 
> If he could do that he would be writing investment books and selling a monthly investment newsletter. "The JackJac Report"


If he could do that he wouldn't bother writing books as he would already have infinite money no?


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## JackJac (Mar 13, 2017)

james4beach said:


> There have been mathematical studies on this problem and it's a well studied field, called SWR studies (sustainable withdrawal rate) and they phrase them like this: 12K (4%) initial withdraw, and annual withdrawals that increase with inflation.
> 
> The general approach is actually much more boring than you might think. All you do is build a diversified investment portfolio, containing a mix of stocks & bonds, and draw money out of it every year. I've listed some tangible ways to do this at the end of my post.
> 
> ...


James: Many thanks to you! Despite my whimsical posting style, I do come here for serious, concrete advice and direction. Short story that I can't quite remember if I told here before, anyway: 

- I'm in my early 30's
- I had a precarious childhood/teenage years (too personal? Bare with me) 
- My health has been quite unstable/relatively poor for a good deal of my life -- this continues to this very day, although very gradually improving
- I dropped out of university (on three different occasions) as a result
- I currently live with my parents as a result
- I currently am unemployed as a result, and when I did work, it was obviously low-wage, non-skilled jobs that unfortunately only exasperated my on-going health conditions
- I did receive 500K recently 

Whew! So with that said, I am here to try and make the best investing decisions I can in order to ensure my ability to survive in the future. I need to get a system in motion that will yield a monthly income and I can do night shift security work or something on the side, because I highly doubt I will ever be able to maintain a normal career/job path for the rest of my life because of my on-going health issues that continue to evade medical treatment. So I truly do appreciate your advice and everyone else's. Any further input is certainly welcomed.


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## humble_pie (Jun 7, 2009)

JackJac said:


> James: Many thanks to you! Despite my whimsical posting style, I do come here for serious, concrete advice and direction. Short story that I can't quite remember if I told here before, anyway:
> 
> - I'm in my early 30's
> - I had a precarious childhood/teenage years (too personal? Bare with me)
> ...




jack is the above all really true? if so we should probably restart this thread.

if true, you are a person who deserves & needs to be somewhat protected. The same can be said for your recent windfall, with bells on.

$500k is a handsome amount & with proper care it should last you the rest of your still-young life. But it's not a stunning mega-amount nor does it come with any guarantee of perpetuity, so you will need to be super extra careful with these funds imho.

i think a good way to proceed is in baby steps. Making no mistakes as one goes along.

first off, do you have someone knowledgeable, whom you trust, who can help you plan a solid investment profile for this lifetime account.


.


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## TomB16 (Jun 8, 2014)

He needs help, Humble.

Please show him how to make $5K per month with $500K of investments and do it simple terms that I can understand.


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## james4beach (Nov 15, 2012)

JackJac said:


> James: Many thanks to you! Despite my whimsical posting style, I do come here for serious, concrete advice and direction. Short story that I can't quite remember if I told here before, anyway:


I could tell you were serious... I don't know why people are giving you a hard time.

As humble_pie says, please move cautiously and don't rush into any investment. The good news is that it's totally feasible to get a steady stream of income from your 500K capital. The bad news is that there are many pitfalls. You will encounter tons of very bad investment advice, encounter many salespeople with agendas to enrich themselves, and even some scam artists.

From what I understand, you want to establish some base income for the rest of your life. Have I understood this correctly? If it's really "for life" then you probably will want the income to increase over time, with inflation. Does this sound like what you want?

Start with realistic goals. 500K of capital can only sustainably generate up to about 18K or 20K of annual income ($1500 to $1667/month), assuming you want a steady constant payout, increasing payout with inflation, and that you want it to last for your entire life (60+ years). 

If someone tells you a number very different than this, then there must be some caveats. Beware... because I've even seen RBC advertise products like this that generate "income for life" but there are always caveats. For example that the money can be expected to run out after X years.

One safe/temporary solution to consider is to invest in VSB and XSH. These are short term bond funds and very low risk. This is basically a money storage option while you learn more about all of this. With 250K each in VSB and XSH, you will receive automatic payments of about $450 from VSB and $600 from XSH = *$1050/month*. These can automatically pay into your chequing account monthly. The caveat is that short term bonds don't generate any high returns, so you will start eating into the 500K balance.

e.g. after one year in VSB & XSH, you will have received about $12,600 in payouts and the capital balance will shrink to about $495,000. Not the best, but probably a good starting point. If this is the only income you have in a year, assuming you live in Ontario, you'll have to pay a couple hundred dollars in tax, and maybe no tax if you're also able to claim a credit for your rent.


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## james4beach (Nov 15, 2012)

I want to illustrate one of these bad investment ideas, because this might help you watch out for similar bad ones. XTR is a "monthly income fund" that lured in many investors with its high yield -- about 6%. Many people were mislead into thinking that XTR could steadily pay out 6% yield (that would be $2500/month from your 500K) while also preserving capital. iShares marketed like this, actually.

Here's what happened in reality. Looking back over 10 years, from 2007-2017

* It failed to pay a constant distribution. The distribution was reduced once, maybe even twice.
* The capital balance declined by 20%. That means your 500K would have shrunk to 400K in just one decade.

This is a great example of what tends to happen if you chase a high yield (or higher income than the norm). Your capital gets depleted AND you don't get the constant payouts you expected.


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## JackJac (Mar 13, 2017)

humble_pie said:


> jack is the above all really true? if so we should probably restart this thread.
> 
> if true, you are a person who deserves & needs to be somewhat protected. The same can be said for your recent windfall, with bells on.
> 
> ...


Thanks HP. Yup it's all true...for real.


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## JackJac (Mar 13, 2017)

james4beach said:


> I could tell you were serious... I don't know why people are giving you a hard time.
> 
> As humble_pie says, please move cautiously and don't rush into any investment. The good news is that it's totally feasible to get a steady stream of income from your 500K capital. The bad news is that there are many pitfalls. You will encounter tons of very bad investment advice, encounter many salespeople with agendas to enrich themselves, and even some scam artists.
> 
> ...


Basically my situation is relatively unique in the sense where I currently do not have any financial obligations due to living with family. I would however like to contribute a little something each month to show good faith, however, it's not necessary (and I would contribute from my work pay cheque anyway when I pick up a security gig in the near future). Therefore, I don't need to utilize monthly payments or any distributions that any investments would yield, at this time. I am looking to set something up now that I can eventually live off in the future. I'm not planning on moving out anytime soon, so time is on my side. I will be working for as long as I can but my health conditions make even simple jobs like security hard to maintain, so the quicker I can get something up and running the better but I'm in a pretty decent position as long as my father is alive. 

Now, unfortunately I do have 300K in GICS, so at this point in time I only have 200K sitting in traditional savings accounts gaining 0.50% interest. I also have $80K in a TFSA. So I have 280K to start with and then I can move the 300K when the GIC's mature.


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## JackJac (Mar 13, 2017)

james4beach said:


> I want to illustrate one of these bad investment ideas, because this might help you watch out for similar bad ones. XTR is a "monthly income fund" that lured in many investors with its high yield -- about 6%. Many people were mislead into thinking that XTR could steadily pay out 6% yield (that would be $2500/month from your 500K) while also preserving capital. iShares marketed like this, actually.
> 
> Here's what happened in reality. Looking back over 10 years, from 2007-2017
> 
> ...


Yikes. Thanks for highlighting that cautionary tale...now I'm all gungho! :nightmare:


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## humble_pie (Jun 7, 2009)

james4beach said:


> I could tell you were serious... I don't know why people are giving you a hard time ...
> 
> One safe/temporary solution to consider is to invest in VSB and XSH. These are short term bond funds and very low risk. This is basically a money storage option while you learn more about all of this ... The caveat is that short term bonds don't generate any high returns, so you will start eating into the 500K balance.
> .




jas4 if i could disagree ... i would be profoundly against any invasion of capital whatsoever at the start. Carrément contre. It's too slippery a slope & Jack is far too young to start out this way. Instead, he should learn how to make do with whatever sensible, well-balanced income he can derive from the windfall, in order to preserve & protect the capital.

me i would suggest starting with one of those 6-month 2.40% promo rates at Tangerine & i'd plunk a multiple of 100k at the big citrus, in spite of the fact that CDIC insurance won't cover more than the first 100k (CDIC won't cover your bond funds either, so we are down to the same thing.)

6 months will give Jack enough time to learn how to prepare a lifetime financial plan. It might include, for example, buying an annuity with part of the funds on hand. Many things are possible.

returning to the tangerine promo, a good thing about jack's situation at the moment is that he's living with his parents, so his immediate expenditures should be flexible. He should be able to live on a shoestring for 6 months. If he has a car, cut down on the gas. No expensive overseas vacations. Jack may have a disability income, so his basic financial circumstances chez the 'rents will likely be stable & secure, although frugal, for the next little while.

lastly, it would be great if altaRed could be recruited to this thread! altaRed has a vast knowledge of conservative income products & in addition he is selflessly & scrupulously able to look after the financial needs of vulnerable cases.


.


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## humble_pie (Jun 7, 2009)

JackJac said:


> Now, unfortunately I do have 300K in GICS, so at this point in time I only have 200K sitting in traditional savings accounts gaining 0.50% interest. I also have $80K in a TFSA. So I have 280K to start with and then I can move the 300K when the GIC's mature.



hey. Please tell us about that TFSA. $80k is a pretty respectable return, did you accomplish that by yourself? was there an advisor? what is the TFSA invested in at present?

something worked out well in that TFSA, for sure. Me i'd be reluctant to tear down whatever the successful something is & rush off into an investment that was casually mentioned to me in an anonymous internet chat forum ...

a good thing to do would be to cull the different views of a few well-known gurus on here. One is actually named Guru! i'm hoping altaRed & other members will join this thread, james4beach is another conservative income expert on here, so you should end up with a smorgasbord of good ideas & can learn about each of them.

meanwhile $200k in tangerine at 2.40%, available on call but pledged by tangerine for 6 months while you develop a lifetime fin plan, looks OK to me.

.


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## like_to_retire (Oct 9, 2016)

humble_pie said:


> .................meanwhile $200k in tangerine at 2.40%, available on call but pledged by tangerine for 6 months while you develop a lifetime fin plan, looks OK to me.
> 
> .


Anything over $100K is a needless risk with almost no upside. Split anything over $100K with a different institution regardless of their slightly lower rate.

ltr


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## My Own Advisor (Sep 24, 2012)

james4beach said:


> I want to illustrate one of these bad investment ideas, because this might help you watch out for similar bad ones. XTR is a "monthly income fund" that lured in many investors with its high yield -- about 6%. Many people were mislead into thinking that XTR could steadily pay out 6% yield (that would be $2500/month from your 500K) while also preserving capital. iShares marketed like this, actually.
> 
> Here's what happened in reality. Looking back over 10 years, from 2007-2017
> 
> ...


Good points James. I recall XTR is a high "ROC" fund - meaning, you're getting your capital back. ROC should not be mistaken for ROI!

A better income-oriented ETF, with less bank exposure, is XEI. Probably one of the better low-fee but modest dividend/distribution funds in Canada. Most of it is eligible dividends and only a very small portion is other income and/or ROC. >4% yield but is about as good as you're doing to get these days with some capital appreciation to fight inflation.


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## humble_pie (Jun 7, 2009)

like_to_retire said:


> Anything over $100K is a needless risk with almost no upside. Split anything over $100K with a different institution regardless of their slightly lower rate.




would you be aware of a different HISA financial organism with only a "slightly lower rate" though

most have been battered by the HCG collapse. Folks are looking to tangerine because of the stronger parent.

still, you have a good point. There is a case to be made, in these HCG inspired hard times, for keeping HISA deposits below $100k.

.


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## Just a Guy (Mar 27, 2012)

james4beach said:


> I could tell you were serious... I don't know why people are giving you a hard time.


Well, it could have something to do with all he threads which looked like "how can I get rich quick with no effort". I tend to treat everyone as if they are serious, but he also seemed bound and determined to go ahead with some risky ventures judging by his other thread. 

All that being said, I agree he needs to take it slow. He should also discover what his investment personality is. By this I mean he needs to discover what kind of investments work with and for him. You will not do well as a buy and hold value investor if you've got the day trader personality and vice versa.

Not knowing what kind of investor you are can cost you a lot of money in a very short time period.

There are probably millions of different investment strategies out there, so start reading and find something that appeals to you intellectually. Then come on here and discuss it so that people can help you fully understand it. Theory is often different than practice.

It may take years to discover your personality, so take it slow and don't get caught up in any initial success...the market is long term, you need a system that works long term. Living through a few downturns is the real test of your strategy. Any idiot made money in real estate over the last 20 years because the market only went up for the most part, the real test comes when the market corrects...that's what'll separate the investors from the fools.

The stock market has also had a similar run of good fortune, though with some bumps along the way. 

My second piece of advice, after understanding your own personality, is to never invest in anything you don't understand. If you don't know the product/company/industry etc. Then how can you judge the numbers? There are far too many highly touted companies producing excellent returns on paper which later turn out to be scams. This happens because people (analysts) rarely do any actual research anymore, preferring to trust the numbers and information produced by companies...the very companies asking for your money.

This has lead to many highly touted companies (Enron, bre-x, worldcom, Nortel, sino-Forrest, pets.com, etc.) that lost fortunes for investors...it's even worse on lesser known companies which promise Berger than average returns. If you don't understand the company, and where it gets its money, then it's probably wise to stay away from it. If you trust others to do the research for you (after all that why you pay them right?), remember that they get paid for getting your money into the fund, they don't get paid from their investments in that fund. I only take advice from people who make money doing what they preach, and then with a grain of salt, but that's a personal thing.

B.T.W. the real estate idea was solid, assuming you could find the properties and the returns are actually understated if you also account for the principle paydown, however, real estate isn't for everyone.


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## CalgaryPotato (Mar 7, 2015)

I don't know what your health problems are, but is there any chance you could qualify for a disability diagnosis?

Because then you could put some of that money into an RDSP, and you would get government money added to what you are getting. It would give you a few extra grand.


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## RBull (Jan 20, 2013)

TomB16 said:


> ... and double your money in 6 years.
> 
> We shall call this investment strategy, "Freedom 35".


Too late here. Freedom 55 worked though!


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## tygrus (Mar 13, 2012)

$75k into FTN.TO will give you $1000. Put the remaining $25k into some REITs.

Its a split share company and the analysts always rag on these guys but its been around for a long time and hasnt crashed yet.

I hold $50k of FTN.TO but risk doesnt affect me because I farm.


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## Nerd Investor (Nov 3, 2015)

One of the biggest risks when you are drawing income from a portfolio over a large time frame is Sequence of Return Risk. This means you might easily average, say 6% in your portfolio over the next 30-40 years, but if you ware withdrawing a consistent or an increasing dollar amount, the order of the returns that make up that 6% average can have a huge impact on whether you get into trouble or things look rosy. The strategy I'm planning to implement when I retire to eliminate this risk is combining a cash wedge with a _consistent percentage_ withdrawal rate (James described a version of this). 

So picture something like this: 

When you "retire" you set up a cash wedge that has about 2 years worth of living expenses. 
The rest of your portfolio is in some combination of assets that should produce a respectable long-term rate of return and that you are comfortable with and can keep consistent in implementing. 

Annual living expenses are taken from the cash wedge. 
At the end of every year, 4% of the actual portfolio balance at the time gets transferred to the cash wedge.

What this does: In the good years, you are taking more dollars from the portfolio. In the bad years you are taking less from it. 
You can take this one step further and also implement something where you re-invest additional funds when the cash wedge gets large enough.


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## Pluto (Sep 12, 2013)

JackJac said:


> I would do that but some those sorts of stocks seem overvalued atm from what I've seen.


1. Well just sit tight until they are fair value, then start buying them. By the way, what stocks are these? and what would you say is fair value for them? What method do y9ou use to value them? 
2. HP has asked what was in your TFSA to get it to 80,000 or so? Seems like you are doing OK there. 
3. The short term bond ETF's james cited seem reasonable for short term parking of $ until stock values are beter for you.


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## humble_pie (Jun 7, 2009)

TomB19 said:


> I fail to understand why a disabled person less deserves to lose their money seeking get rich quick scheme than a person in good health.




tomBee do Bee nice now.

we know you have it in your heart to bee nice. Look how nice you were to ciara with the pets & the low income. 

there are unanswered questions in this thread. Where did the $500k come from. Who managed that ace TFSA.

what i sense going on here is that the parents, who all along have helped a partially disabled or disabled son, are presently making ready for the day when they will no longer be around to offer support. Fortunately the parents still seem to be hale & hearty so these are practice runs. 

that's what i sense.


.


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## JackJac (Mar 13, 2017)

Thanks for the responses. 

1) Yes, it is true that my health is not critical and I appear to function quite normally -- and I do for the most part, things are very slowly improving although I don't think I'll ever be 100% but who knows. I have been through a lot of BS, bad circumstances and chronic health conditions have prevented me from progressing in any substantial manner. I have chronic illnesses such as delayed sleep phase syndrome, interstitial cystitis/prostatitis, sleep apnea, restless leg syndrome, etc. this leaves me functioning most days at around 25%, I'd wager. It was A LOT worse in the past when I was abusing various substances (I've been totally clean for well over 8 years now). Anyway, I've had my fair share of doctor's visits, sleep studies, and meds in attempt to control these issues, but nothing seems to have much of an impact, so I have more or less given up on the medical establishment and resigned to living a very simple life (which I am perfectly OK with). I should also add that I haven't officially asked for disability. I feel that my case isn't severe enough to warrant disability, yet it isn't benign enough to live normally. Indeed, I have attempted to live normally so many times now. I had to drop out of university multiple times and I had to quit so many jobs because I couldn't take the pressure. The workload and work pressure is meant for those who function at around 80-100%. I snapped under the pressure because on my best days, I'm at 25% -- although it doesn't look like it because a lot of these illnesses are invisible illnesses slowly, consistently chipping away at my health each and everyday. I'm in a better situation now with my father and therefore looking to give work another shot, but I can't count on it.

2) My apologies, I misspoke. I don't have 80K in a TFSA. I have 80K of my own personal savings. My TFSA is maxed out with annual contributions. I have the rest in a credit union. So I currently have 300K in GICs. 100K in a CIBC HISA. Another 100K in Scotia HISA. All CDIC insured. 

3) The strategy that I was personally going to implement was the Derek Foster strategy of buying blue chip companies and having the dividends reinvested to the point where I could eventually opt to have them in cash payments and live off them. However, I lost confidence in that approach when he changed that strategy during the recession. I have looked at other investment methods, but remain skeptical.


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## james4beach (Nov 15, 2012)

Nerd Investor said:


> One of the biggest risks when you are drawing income from a portfolio over a large time frame is Sequence of Return Risk. This means you might easily average, say 6% in your portfolio over the next 30-40 years, but if you ware withdrawing a consistent or an increasing dollar amount, the order of the returns that make up that 6% average can have a huge impact on whether you get into trouble or things look rosy. The strategy I'm planning to implement when I retire to eliminate this risk is combining a cash wedge with a _consistent percentage_ withdrawal rate (James described a version of this).


Yup very good point about Sequence of Return Risk.

I still think some people here are unfairly giving JackJac a hard time. The guy is new to investing, came here looking for ideas, and asked all the natural questions someone would.

JackJac: I'm glad to hear you already have money locked up in GICs, this is a good move! As far as other ideas, take it very slow.

humble_pie & JackJac: I think you're right, that VSB & XSH idea I gave would assure that the capital starts to get depleted and that is not good. Avoid digging into that capital for as long as you can. If you can simply invest it in high interest savings for now, that's the best. However, I do not recommend going over the 100K CDIC limit.

Bigger picture and longer term... I think the 50/50 stock and bond allocation (balanced fund) will be the best solution, something like global couch potato.


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## olivaw (Nov 21, 2010)

This is an interesting challenge - and a very difficult one. 

JackJac needs to develop an investment strategy with a high probability of success for the next 50, 60 or 65 years, all the while struggling with a severe sleep disorder. 

I can't help, but I'm interested in what the forum gurus have to say.


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## CalgaryPotato (Mar 7, 2015)

olivaw said:


> This is an interesting challenge - and a very difficult one.
> 
> JackJac needs to develop an investment strategy with a high probability of success for the next 50, 60 or 65 years, all the while struggling with a severe sleep disorder.
> 
> I can't help, but I'm interested in what the forum gurus have to say.


I think he's going to need to figure out some form of income beyond that 500K for that time period. And I don't know what the right answer for that is. I don't totally understand how the combination of his conditions limits his lifestyle to be honest. Clearly he has the mental fitness to be talking about these advanced investing strategies, could part time work be an option? Or something working from home?

I'm not sure what 25% functioning means, I mean to me that sounds like something that would qualify for disability payments. But I don't know how you are coming up with that number. I know the OP has given up on traditional medicine, but I really do think some sort of physical or mental health professional giving a proper diagnosis can do more good than investing advice at this point.

Not trying to be mean, i really sympathize with you JackJac, but it's still hard to take the sum of the things you are diagnosed with and see you not being able to work every in your life because of them.


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## james4beach (Nov 15, 2012)

The length of his time horizon makes this really different than what is the "norm" around here. JackJac needs the portfolio to last 65 years. He should be very cautious about pursuing ideas that are designed for seniors who have a much shorter time horizon.

If you're talking 65 years of withdrawals, you can do it with a variable withdrawal strategy or withdrawing a fixed % of the overall portfolio value. Doing some rough calculations with my Monte Carlo simulator, the following approach is projected to work for a 60 year horizon:

* Invest 50/50 in globally diversified stocks and bonds
* Every year, withdraw 4.5% of *current* portfolio value
* The money will last forever this way
* Your annual withdrawals, on average, will keep up with inflation
* Caveat: during bad years in the market your annual withdrawal could drop 30%

I hear people in the background saying, why not put it all in stocks for higher returns? Here's what happens if you do that while taking 4.5% of current portfolio value each year:
* Yes the money still lasts forever and you don't deplete capital
* However your annual withdrawals don't keep up with inflation
* And during bad years your income stream drops by about 70%

Which is why I say that you need bonds, yes even for a young investor. It's all because of the withdrawals.


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## JackJac (Mar 13, 2017)

My 25% functioning is just an estimate on my part. There were weeks when I was living alone and dealing with daytime construction where I was functioning with a few broken hours of sleep *per week*. During those times (years) I was so sleep deprived I was afraid to cross the street, and I was hallucinating to varying degrees. I am doing significantly better now, but I still wake up multiple times to go to the washroom each night and the urge to urinate is constant, it feels like a constant UTI that doesn't respond to antibiotics. A few years ago I was urinating 10+ times per night and every hour during the day. I kept a "pee jar" beside my bed, wet my pants before a job interview, pissing in bushes every time I go out, etc. It was bad. Again, things are getting better but I'm still dealing with low quality, broken sleep and an unforgiving prostate/bladder condition. Better but not anywhere near normal. 

I was just looking for a job but my options are certainly limited. The only viable option seems to be security work. I have done it before, but it took a toll on my health, but my circumstances were a lot worse then. I could probably do it now, but I'm just looking at part-time so as not overwhelm myself. Naturally my conditions produce significant anxiety so I need to take things slow and not bite off more than I can chew. 

In about 10+ years, the medical establishment did not provide any solution or real help. I wasted a lot of money on expensive drugs for everything from anxiety-psychosis to bladder-prostate drugs. Made little if any difference aside from perhaps a placebo effect. During one sleep study I went to, I had to urinate I think it was 15 times during the night and each time the worker had to unplug all the wires and then re-wire me up. I still had a pressing need to urinate, but I didn't want to bother him anymore, so I just laid there in the dark, wide awake with a stinging need to urinate. That has been my experience with doctors and so forth. So I'm not too keen on entering that world again. I feel at this point I need to take things into my own hands and work with what I've got.


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## JackJac (Mar 13, 2017)

james4beach said:


> The length of his time horizon makes this really different than what is the "norm" around here. JackJac needs the portfolio to last 65 years. He should be very cautious about pursuing ideas that are designed for seniors who have a much shorter time horizon.
> 
> If you're talking 65 years of withdrawals, you can do it with a variable withdrawal strategy or withdrawing a fixed % of the overall portfolio value. Doing some rough calculations with my Monte Carlo simulator, the following approach is projected to work for a 60 year horizon:
> 
> ...


1) How do I get started with investing "50/50 in globally diversified stocks and bonds"? 

2) Please keep in mind that as long as I am living with my father, I wouldn't have to withdraw from my portfolio


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## JackJac (Mar 13, 2017)

TomB19 said:


> Why get stuck into a job you hate?
> 
> Start a business and find a way to make a bit of money doing something you enjoy. Figure out what you are good at and find a way to build a life around it.


As I'm sure you know, that's easier said than done. Especially for an individual who has no market-edge skills and abilities and relatively unstable health.


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## james4beach (Nov 15, 2012)

JackJac said:


> 1) How do I get started with investing "50/50 in globally diversified stocks and bonds"?


Hmm... can someone paste some of the getting started links? One place is the Canadian Couch Potato web site.


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## humble_pie (Jun 7, 2009)

TomB19 said:


> I was being nice.
> 
> If I were in Jack's orthodic shoes, I'd want someone to be direct and constructive, instead of treating me like an emotional invalid.
> 
> Jack is obviously intelligent. He has the opportunity to do as well as any of us. Let's feed him steak, not pablum.



no, you were not being nice. You & others were jeering & taunting.

it's not a question of jack's intelligence. Read the posts. 

repeat: read. the. posts. I knew something like this was coming. Not the details, of course; but i knew a dark story was afoot which you, tomBee, had totally missed. You are still believing that bootstraps are going to work here. Nothing could be further from the truth.

there's a lot to this story - perhaps the greater part - that is missing. It's totally understandable that jack would not want to discuss his medical condition before strangers, however he has said enough to indicate that there is a serious disability & it's not entirely physical.

i'm left wondering where the $500k came from? if from the parents, it is likely that there is a financial advisor, certainly accountants, possibly lawyer, already in place. More missing story.

tomBee you are wanting direct & constructive? direct & constructive says Do not waste time taunting, jeering & cavilling. Direct & constructive says jack the OP needs to set up a strong low-risk lifelong financial plan & he probably needs a trustee or a good financial advisor or a competent trustworthy relative to help with the times when he is going to creep out.

direct & constructive says we could take notice of the handicap here & we could help jack plan for the above. Because otherwise, the probability is high that, when the money runs out, he is going to become a ward of the state & a dollar burden upon taxpayers.

.


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## hboy54 (Sep 16, 2016)

JackJac said:


> 1) How do I get started with investing "50/50 in globally diversified stocks and bonds"?
> 
> 2) Please keep in mind that as long as I am living with my father, I wouldn't have to withdraw from my portfolio


Two things come to mind. One, if the life expectancy of your father is reasonably long, say > 10 years, and thus you will not be drawing any off, then this speaks to long term money should be matched to long term assets, that is the money should head to equities.

The second point is that part of the strategy might be life insurance on your father.

hboy54


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## humble_pie (Jun 7, 2009)

bzzzzzt tom hiya .each:

alas it is yourself who should read jack's posts. There's a medical diagnosis in em. You are still not getting it. Bootstraps are not going to work. Right now jack is not going to get a job or start a business & he has very clearly said so.

.


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## JackJac (Mar 13, 2017)

Well y'all I think my best bet might be to seek out a fee-only financial advisor and take it from there. I'll brainstorm and see if I can come up with ideas to make money outside of the conventional job/career path. I think as long as I remain cautious and increase my financial IQ I should be quite well off for life.


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## Rusty O'Toole (Feb 1, 2012)

If you are still following this thread I have a couple of suggestions. One is a natural health approach to your illness. Simple things like a plant based diet, cut out junk food etc. look into vitamins and diet supplements, get some fresh air sunshine and exercise. I know this approach helped me with some health problems the doctors couldn't do much about.

The other thing is, you may not be well enough to work but you can still learn about investing. The Darvas approach happens to be one that appeals to me and that I believe in but there are others. You need to approach it as if you were taking a college level course in investing. It may take some time and study but it is definitely possible to learn how to invest successfully.


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## JackJac (Mar 13, 2017)

Rusty O'Toole said:


> If you are still following this thread I have a couple of suggestions. One is a natural health approach to your illness. Simple things like a plant based diet, cut out junk food etc. look into vitamins and diet supplements, get some fresh air sunshine and exercise. I know this approach helped me with some health problems the doctors couldn't do much about.
> 
> The other thing is, you may not be well enough to work but you can still learn about investing. The Darvas approach happens to be one that appeals to me and that I believe in but there are others. You need to approach it as if you were taking a college level course in investing. It may take some time and study but it is definitely possible to learn how to invest successfully.


Thanks Rusty, I'll continue to fight and remain hopeful that I'll grow stronger and healthier day-by-day.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> JackJac said:
> 
> 
> > 1) How do I get started with investing "50/50 in globally diversified stocks and bonds"?
> ...


Some like the balance of a Mawer fund or a Tangerine fund ... everything is in one fund so there is no re-balancing transactions by the investor.
http://canadianmoneyforum.com/showthread.php/69010-Mawer-Balanced-Fund-MAW-104

Others like to focus things a bit more so they go with more funds.
http://canadiancouchpotato.com/model-portfolios-2/


Cheers


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## hebsie (Mar 5, 2017)

Eclectic12 said:


> Some like the balance of a Mawer fund or a Tangerine fund ... everything is in one fund so there is no re-balancing transactions by the investor.
> 
> Others like to focus things a bit more so they go with more funds.
> 
> ...


Mawer104 is posted on the GM at 8.09% YTD

Can't get much easier than that...hebs


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## james4beach (Nov 15, 2012)

JackJac the original question you posed is similar to what I'm trying to do myself. I'm 10 years older than you and have been saving up money with the goal of semi-retiring early. Like you, I want an income stream from my capital, intend to work a bit too, and have a very long time horizon like 60 years.

Here's how I view things at a high level (my model for retirement investing). I'm not a finance professional, but I'm a computer/electrical engineer who has thought a lot about this problem.

I think of my savings or capital as one big pool, like a "fund" or "container". The money grows over time based on what it's invested in. Then, I extract cash out of this container. I have the liberty of controlling exactly how much cash I withdraw/extract in any given year.

I also control what's inside the container. The main question here is the asset allocation... how much stocks? Bonds? Other assets? Which countries to be exposed to?

My goal is to allocate things inside that container so that it achieves the best long term return possible, at a level of risk and volatility that I'm comfortable with. For example if my "fund" is worth 500K one year, I don't want to see its value slashed down to 200K. That would make me feel very upset. The term for this is "maximum drawdown", or the worst drop from a peak. The asset allocation has a huge impact on the maximum drawdown.

The pipe which extracts my income from this container is a totally separate matter. I can extract any amount of cash, no matter what the investments are. Imagine one extreme where the container contains 500K all in a savings account, and I withdraw 50K cash per year. Why not? The container and pipe are separate.

*Viewing the problem in this way will distance you from the misleading concept of "yield". People in the investment world are obsessed with yield, but in my opinion it takes your eyes off the prize and distracts from the primary concerns. If you view the problem as a container account, and a separate pipe that extracts arbitrary cash levels, you will see that yield is meaningless.*

Having tried many different allocations for what goes into the container, I think one of the best ideas is a 50% stock and 50% bond allocation, with globally diversified stocks. I described some ways to do this in my earlier post, link here. The nice thing about this container structure is that maximum drawdown is limited to about -25%, which is easier to handle, and you still get excellent long term performance.

And yes, MAW104 (the Mawer Balanced Fund) can do all of this, if you want to keep it simple. This is what my parents have done in retirement.

Personally, then I'd hook a pipe up to that container, and extract maximum 4.5% of the current portfolio value per year (only as much as I need). According to my calculations, even over 60 years, that container would never be depleted, and the cash you extract -- the income stream -- keeps up with inflation.

All of that is doable with your situation, meaning that 500K of capital can generate approximately $1875/month of income forever... as long as you are keep in mind that in years your container declines in value, your extracted income would also drop. For example if market volatility turns the 500K into 400K, then your income level drops to $1500/month.


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## olivaw (Nov 21, 2010)

In some ways, many of us are trying to do the same thing but our anticipated remaining lifespan is shorter. I need my investments to last 35 years. 

4.5% seems too high to me. Interest rates are so pitifully low that 4.5% may be unsustainable for a 50% stock/50% bond allocation. You'd need a more aggressive, and riskier allocation. 

3.75% is the figure I use.


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## Rusty O'Toole (Feb 1, 2012)

Rusty O'Toole said:


> Have been watching PI (Impinj Inc) for a breakout above the all time high at 42. This came last Friday but so far has not closed above 42. Getting set to make a small buy with a tight stop.


Pi has been taken off my list of potential buys.


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## james4beach (Nov 15, 2012)

olivaw said:


> 4.5% seems too high to me. Interest rates are so pitifully low that 4.5% may be unsustainable for a 50% stock/50% bond allocation. You'd need a more aggressive, and riskier allocation.
> 
> 3.75% is the figure I use.


It depends on which strategy you use. For *constant* dollar withdrawals (with inflation adjustment), 3.75% is a good sustainable level. I actually think lower is safer, more like 3.5%.

What I described in my post was a variable withdrawal scheme, a percent of current portfolio value. That's a different problem and higher amounts are sustainable. The catch is that when the market drops, your income level drops -- it's proportional.



> You'd need a more aggressive, and riskier allocation


Due to sequence of return risk, a riskier allocation does not necessarily give better results. For example a 100% stock allocation gives worse results for most long term withdrawal schemes.


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## Nerd Investor (Nov 3, 2015)

james4beach said:


> It depends on which strategy you use. For *constant* dollar withdrawals (with inflation adjustment), 3.75% is a good sustainable level. I actually think lower is safer, more like 3.5%.
> 
> What I described in my post was a variable withdrawal scheme, a percent of current portfolio value. That's a different problem and higher amounts are sustainable. The catch is that when the market drops, your income level drops -- it's proportional.
> 
> ...


This is a good point and it's where the variable withdrawal of a percentage of portfolio can help. If you're able/willing to stick to a fixed percentage withdrawal (meaning variable amounts) it can make a "riskier" asset allocation which theoretically provides a higher average rate of return feasible because you are mitigating the sequence of return risk. This is my plan. My portfolio is essentially all stocks/equity ETFs + a trend following/momentum strategy that gives me periodic exposure to a few additional asset classes. The only change I intend to make in retirement is incorporating a cash wedge and scale back on the options trading


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## james4beach (Nov 15, 2012)

Nerd Investor said:


> This is a good point and it's where the variable withdrawal of a percentage of portfolio can help. If you're able/willing to stick to a fixed percentage withdrawal (meaning variable amounts) it can make a "riskier" asset allocation which theoretically provides a higher average rate of return feasible because you are mitigating the sequence of return risk. This is my plan.


Yup -- going the variable route using fixed % is something I only warmed up to recently. But it doesn't come for free: if you're 100% in stocks, and stocks fall 50% and remain low for a number of years, your withdrawals are cut in half. You're going to have to make do with half the income level until stocks rebound, and that could be many years.

That would be a disaster for someone living off their portfolio, and you can't go find a job because this would happen during an economic crisis like 2008. That's why I still strongly endorse the safer allocations (like 50/50) because it works better both for constant $ and variable (%) withdrawal schemes.

I don't know about you guys but I would not be able to suddenly go from living on 36K down to living on 18K. And what kind of a life would that be?


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## like_to_retire (Oct 9, 2016)

james4beach said:


> I don't know about you guys but I would not be able to suddenly go from living on 36K down to living on 18K. And what kind of a life would that be?


Exactly. And it wouldn't be for a week or two. It would be years.

ltr


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## james4beach (Nov 15, 2012)

like_to_retire said:


> Exactly. And it wouldn't be for a week or two. It would be years.


I think that some investors visualize stocks as a steady march up at 8% CAGR. Reality is quite a bit harsher and we haven't even seen these bad scenarios for a few decades. Markets recovered unusually fast after both 2001 and 2008 which has fed this idea that large stock allocations are a good idea.


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## olivaw (Nov 21, 2010)

james4beach said:


> Yup -- going the variable route using fixed % is something I only warmed up to recently. But it doesn't come for free: if you're 100% in stocks, and stocks fall 50% and remain low for a number of years, your withdrawals are cut in half. You're going to have to make do with half the income level until stocks rebound, and that could be many years.
> 
> That would be a disaster for someone living off their portfolio, and you can't go find a job because this would happen during an economic crisis like 2008. That's why I still strongly endorse the safer allocations (like 50/50) because it works better both for constant $ and variable (%) withdrawal schemes.
> 
> I don't know about you guys but I would not be able to suddenly go from living on 36K down to living on 18K. And what kind of a life would that be?


I agree with the more conservative allocation to help mitigate sequence of returns risk. 

Another significant risk facing retirees and those who cannot work is *inflation*. A variable withdrawal method has to address it in a sustainable fashion. 

Bond yields are so awful right now that the real return is zero. The 50% stock portion has to do all the heavy lifting. You would need to average inflation plus 9% to make the 4.5% withdrawal rate sustainable, otherwise you will end up with a portfolio that shrinks in real dollar terms.


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## james4beach (Nov 15, 2012)

I agree, inflation is a big risk.

But bond yields change over time. Just as you don't say "avoid stocks because CAPE is at all time highs", it doesn't make sense to say "avoid bonds because yields are at all time lows". Both are short term market timing attempts.


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## olivaw (Nov 21, 2010)

Nothing to do with market timing. Inflation changes with time too. 

I am not objecting to bonds and other fixed income instruments. In fact, I use a 50/50 allocation to counter sequence of returns risk. 

It is the 4.5% withdrawal rate that I question. It just seems too good to be true. So I will ask it another way: 

The assertion is that you can withdraw 4.5% of the total value of a balanced portfolio every year. Have you a link to an academic paper that proves this method to be mathematically sustainable? Does it provide for inflation? Has the proposed method been back tested?


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## JackJac (Mar 13, 2017)

The Mawer Balanced Fund (MAW104) looks solid. So:

1) Should I put $280K into MAW104? 

2) What is the best way to purchase MAW104?

If I do that I will have:

1) 100K in a 2 year GIC

2) 100K in a 3 year GIC

3) 100K in a 5 year GIC

4) 280K in MAW104

When the GICs mature, where should I put that money?


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## JackJac (Mar 13, 2017)

Also can someone briefly explain why exclusive blue chip stocks on discount are a bad idea? What if I waited for a downturn in the market and then plowed thousands of dollars into stocks like Johnson & Johnson, Colgate-Palmolive, Enbridge, Big 5 Banks, etc. and I had those dividends reinvested and then converted to cash when I have enough stock to live off the dividends? 

Is that strategy a recipe for disaster? Why?


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## Rusty O'Toole (Feb 1, 2012)

JackJac said:


> Also can someone briefly explain why exclusive blue chip stocks on discount are a bad idea? What if I waited for a downturn in the market and then plowed thousands of dollars into stocks like Johnson & Johnson, Colgate-Palmolive, Enbridge, Big 5 Banks, etc. and I had those dividends reinvested and then converted to cash when I have enough stock to live off the dividends?
> 
> Is that strategy a recipe for disaster? Why?


Nothing wrong with this idea at all. Fortunes have been made this way. The drawback is you may have to wait for years for a suitable opportunity. And, it is very tough to shell out all your money on stocks that have dropped by 30 or 40 percent, even though you know it is the thing to do.


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## indexxx (Oct 31, 2011)

JackJac said:


> My 25% functioning is just an estimate on my part. There were weeks when I was living alone and dealing with daytime construction where I was functioning with a few broken hours of sleep *per week*. During those times (years) I was so sleep deprived I was afraid to cross the street, and I was hallucinating to varying degrees. I am doing significantly better now, but I still wake up multiple times to go to the washroom each night and the urge to urinate is constant, it feels like a constant UTI that doesn't respond to antibiotics. A few years ago I was urinating 10+ times per night and every hour during the day. I kept a "pee jar" beside my bed, wet my pants before a job interview, pissing in bushes every time I go out, etc. It was bad. Again, things are getting better but I'm still dealing with low quality, broken sleep and an unforgiving prostate/bladder condition. Better but not anywhere near normal.
> 
> I was just looking for a job but my options are certainly limited. The only viable option seems to be security work. I have done it before, but it took a toll on my health, but my circumstances were a lot worse then. I could probably do it now, but I'm just looking at part-time so as not overwhelm myself. Naturally my conditions produce significant anxiety so I need to take things slow and not bite off more than I can chew.
> 
> In about 10+ years, the medical establishment did not provide any solution or real help. I wasted a lot of money on expensive drugs for everything from anxiety-psychosis to bladder-prostate drugs. Made little if any difference aside from perhaps a placebo effect. During one sleep study I went to, I had to urinate I think it was 15 times during the night and each time the worker had to unplug all the wires and then re-wire me up. I still had a pressing need to urinate, but I didn't want to bother him anymore, so I just laid there in the dark, wide awake with a stinging need to urinate. That has been my experience with doctors and so forth. So I'm not too keen on entering that world again. I feel at this point I need to take things into my own hands and work with what I've got.


JackJac, if you're looking for work outside of the norm, can I suggest that you look into doing food delivery for a company like Skip The Dishes or whatever exists where you live? I now do this and it's actually pretty great. I set my own hours and pick which days I want to work, take whatever time off I want, have no boss, no stress, and just drive around listening to music and dropping off meals to people. I get a text on the app telling me where to pick up the next order, and then directions to the customer's home. No hassles, almost everyone pays online so no risk of losing money, and the earnings are not too bad- up to $25/hour. I can write off my gas, car maintenance, and cell phone usage. If you do it full time (40-50 hours/week) you can pull in close to $4,000/month. I know a guy who does it 6 days a week, 10-12 hours a day and takes home $1,200 a week- pretty good for a non-skilled job that anyone with a driver's license can do. I wouldn't do it that much, but it's nice to know it's possible if I need it.


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## humble_pie (Jun 7, 2009)

Nerd Investor said:


> My portfolio is essentially all stocks/equity ETFs + a trend following/momentum strategy that gives me periodic exposure to a few additional asset classes. The only change I intend to make in retirement is incorporating a cash wedge and scale back on the options trading




really so heavy 100% in stocks? perhaps you have a pension that represents the bond/safety side for now?

i don't have bonds or GICs at present - returns are too low - but all my life i've had a healthy cash wedge. I don't believe that this approach is only for seniors, i think it applies to all ages. 

they can label cash as emergency funds or cash damming or sequence-of-return mitigation or whatever fancy term they like, but cash is cash. I keep cash in 3 different currencies.

on a different point, why would you scale back on options trading in retirement? to the contrary, i think the opposite approach has extraordinary merit in retirement, because income from a conservative option program can equal dividend income. This large extra income can stave off or entirely prevent withdrawals of capital.

dMoney's diary thread shows how a very young investor can earn close to the same in option sales as he takes in in dividends. Moreover, the options income is usually taxed favourably as capital gains.

the big problem is that a retiree will not normally start learning to trade options. The apprenticeship has to be served well in advance of retirement imho.

someone like Nerd Investor should be ace-OK when it comes time for options in retirement .each:


.


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## JackJac (Mar 13, 2017)

indexxx said:


> JackJac, if you're looking for work outside of the norm, can I suggest that you look into doing food delivery for a company like Skip The Dishes or whatever exists where you live? I now do this and it's actually pretty great. I set my own hours and pick which days I want to work, take whatever time off I want, have no boss, no stress, and just drive around listening to music and dropping off meals to people. I get a text on the app telling me where to pick up the next order, and then directions to the customer's home. No hassles, almost everyone pays online so no risk of losing money, and the earnings are not too bad- up to $25/hour. I can write off my gas, car maintenance, and cell phone usage. If you do it full time (40-50 hours/week) you can pull in close to $4,000/month. I know a guy who does it 6 days a week, 10-12 hours a day and takes home $1,200 a week- pretty good for a non-skilled job that anyone with a driver's license can do. I wouldn't do it that much, but it's nice to know it's possible if I need it.


Thanks man looks like a cool job but I let my licence expire and don't plan to renew it anytime soon. Back to the drawing board!


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## james4beach (Nov 15, 2012)

olivaw said:


> I am not objecting to bonds and other fixed income instruments. In fact, I use a 50/50 allocation to counter sequence of returns risk.
> 
> It is the 4.5% withdrawal rate that I question. It just seems too good to be true. So I will ask it another way:
> 
> The assertion is that you can withdraw 4.5% of the total value of a balanced portfolio every year. Have you a link to an academic paper that proves this method to be mathematically sustainable? Does it provide for inflation? Has the proposed method been back tested?


You're right. I think there might be a bug in the monte carlo simulator I was using, or I'm using it incorrectly. I agree that 4.5% is too high, running some other experiments I get closer to 3.6%.

*JackJac: disregard what I said about 500K generating 22K forever... the number is probably closer to 18K forever.*


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## james4beach (Nov 15, 2012)

JackJac said:


> Also can someone briefly explain why exclusive blue chip stocks on discount are a bad idea?


Buffett made money like this. But he made his fortune when stocks were significantly cheaper than today (look at measures such as Shiller PE aka CAPE). By these measures, US stocks have been persistently overvalued for over 20 years. The question is... how long will you wait? And how much performance will you forego by "waiting until stocks are cheap again"?


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## james4beach (Nov 15, 2012)

JackJac said:


> The Mawer Balanced Fund (MAW104) looks solid. So:
> 
> 1) Should I put $280K into MAW104?


I'd feel better about it if you spend some time reading and learning about all this stuff first. For example, be aware that -- as great as MAW104 is (and it's non-registered equivalent MAW105, Mawer Tax Effective Balanced Fund) -- there are still risks. In case of a severe market decline, the Mawer Balanced could decline 30% from high to low. That would mean you'd see your 280K balance become 196K. Such is the risk of stock exposure.

Provided you're OK with that risk of decline, and believe you can stay invested through market volatility, yes it would be reasonable to put 280K into MAW104 or MAW105. To get good results from this, you have to stay invested through stock market volatility.

I still suggest that you spend more time reading and understanding all of this before opening any new investments.



> 2) What is the best way to purchase MAW104?


Sorry, I don't know and hopefully others will answer that



> If I do that I will have:
> 
> 1) 100K in a 2 year GIC
> 
> ...


That would be a good scenario actually. You've taken on some risk with the Balanced Fund and still have the money safely locked up in GICs. By the time those start maturing, you should have more knowledge about all of this. At that point you could decide whether to add to MAW104/MAW105, or do something else. For example if you decide you want more/less stock exposure by the time the GICs mature, you could invest accordingly to make that happen.


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## JackJac (Mar 13, 2017)

james4beach said:


> I'd feel better about it if you spend some time reading and learning about all this stuff first. For example, be aware that -- as great as MAW104 is (and it's non-registered equivalent MAW105, Mawer Tax Effective Balanced Fund) -- there are still risks. In case of a severe market decline, the Mawer Balanced could decline 30% from high to low. That would mean you'd see your 280K balance become 196K. Such is the risk of stock exposure.
> 
> Provided you're OK with that risk of decline, and believe you can stay invested through market volatility, yes it would be reasonable to put 280K into MAW104 or MAW105. To get good results from this, you have to stay invested through stock market volatility.
> 
> ...


It looks like I should go with CIBC Investor's Edge as purchase and selling of MFs is commission free. I have 100K in a HISA with CIBC right now so I'll start with that. I'll leave 180K in cash to be on the ready in case of a significant downturn, and continue to educate myself, as you recommend.


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## james4beach (Nov 15, 2012)

JackJac said:


> It looks like I should go with CIBC Investor's Edge as purchase and selling of MFs is commission free. I have 100K in a HISA with CIBC right now so I'll start with that. I'll leave 180K in cash to be on the ready in case of a significant downturn, and continue to educate myself, as you recommend.


That sounds like a reasonable idea. You might try messaging Eder or jargey3000 who might have experience with mutual funds at CIBC Investors Edge. You should also inquire with CIBC Investors Edge and ask specifically about MAW105 (the non-registered balanced fund) to check whether it's available, and if there are fees for buys & sells. While you're on the phone call, ask about any other fees at CIBC Investors Edge. If there are some fees, ask if they will waive it for you if you open a new account and fund it with $X.

You can also ask questions in this thread about Mawer Balanced Fund
http://canadianmoneyforum.com/showthread.php/69010-Mawer-Balanced-Fund-MAW-104

You should also read more details about that fund to know what you're getting into, e.g.
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05MRQ&region=can&culture=en-CA
http://www.mawer.com/our-funds/fund-profiles/tax-effective-balanced-fund/

I hate sounding like a salesperson. This isn't the only diversified balanced fund out there. Tangerine Balanced Fund is another good option. I happen to know a bit about the the Mawer one because my parents went this route and I also looked into the fund for them.


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## olivaw (Nov 21, 2010)

james4beach said:


> running some other experiments I get closer to 3.6%.


Thanks for running it again James. 3.6% is closer to where I was with my own calculations. 

I find myself fussing over my sustainable withdrawal rate. My calculation is based on a spreadsheet that I developed myself. Do you have access to advanced standalone software or a website to do these calculations?


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## james4beach (Nov 15, 2012)

olivaw said:


> Thanks for running it again James. 3.6% is closer to where I was with my own calculations.
> 
> I find myself fussing over my sustainable withdrawal rate. My calculation is based on a spreadsheet that I developed myself. Do you have access to advanced standalone software or a website to do these calculations?


I'm glad the number turned out very similar to yours, this is good. And if we were talking about fixed $ (not the % method) the sustainable number is also in the mid 3%s, from studies I've seen -- so all this sounds consistent. Either way, below 4%.

I was using the Monte Carlo simulator at Portfolio Visualizer. However I am growing concerned it might have some bugs in it, so I'm not sure I'd recommend it until I do more testing.


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## Nerd Investor (Nov 3, 2015)

humble_pie said:


> really so heavy 100% in stocks? perhaps you have a pension that represents the bond/safety side for now?
> 
> i don't have bonds or GICs at present - returns are too low - but all my life i've had a healthy cash wedge. I don't believe that this approach is only for seniors, i think it applies to all ages.
> 
> ...


Not always 100% equities, I also have a trend following strategy that rotates into the top two performing ETFs from the following: US Mid-Caps, US Small Caps, Gold, Emerging Markets, 20 Year Treasuries. If the price is below the 6 month moving average, I go to 1-3 Year Treasuries. This strategy still has a nice expected return, historically very low max draw downs and diversifies my stocks/equity ETFs really well, not just through exposure to different asset classes but to a different "factor" as well (most of my criteria for stock selection would be considered some combination of value and quality). 

For example (and I know back-tests guarantee absolutely nothing) in and around the market crash of 2008 returns were as follows:
2007 = 22.51%
2008 = 9.77%
2009 = 32.55%

That would have definitely helped dampen the blow of the effects of the market crash. 

To clarify, scaling back the options trading would mean reducing position size relative to my portfolio and potentially taking higher probability (ie: lower delta) trades. Right now I'm in pure growth mode so I can be more aggressive. I have steady cash flow coming in and access to cheap debt so the margin cushion I'm comfortable with now will be very different than in retirement. My plan for option income in retirement is to have most of the after-tax profits flow into a US savings account which I will dub the travel fund


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## Spudd (Oct 11, 2011)

olivaw said:


> Thanks for running it again James. 3.6% is closer to where I was with my own calculations.
> 
> I find myself fussing over my sustainable withdrawal rate. My calculation is based on a spreadsheet that I developed myself. Do you have access to advanced standalone software or a website to do these calculations?


You can try firecalc.com or cfiresim.com.


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## olivaw (Nov 21, 2010)

Spudd said:


> You can try firecalc.com or cfiresim.com.


Thanks Spudd - these sites are excellent. I just spent a half hour running simulations.  Bookmarked.


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## janus10 (Nov 7, 2013)

Coming in to this thread very late... If I had to create a strategy that would generate 12% returns annually, I would definitely use volatility derivatives. It wouldn't be necessarily a constant income, but in fact would generate significant returns in infrequent and unanticipated periods.

The recent VIX spike when Trump was discovered to had talked about Comey being a nut job and suggesting that the press should be imprisoned is just a minor opportunity. It still allowed me to generate > 10% return in less than 2 weeks. Bigger ones like Brexit allowed me to double the capital invested in vol derivatives in less than two months.

There is a fund manager I know that is up almost 90% YTD primarily from shorting vol - he does have other stocks in the portfolio, but primarily he is taking advantage of the low vol environment we are in coupled with the fact that vol futures are in contango more than 75% of the time.

There is another respected blogger who is VERY aggressive (and fortunate) who turned $47k into > $1M in less than a year by strictly playing options that benefit from a big spike in volatility and then playing for its demise. He bought LEAPS on an inverse vol derivative and they are up > 20x and they could very well end up much higher before they expire (he has already hedged his position with other options). 

Here is a sensationalized article (but still with good information once you remove the rose tinted glasses): https://seekingalpha.com/article/15...to-become-a-billionaire-without-really-trying

Of course, this isn't a no risk strategy and many people lose money because they do the exact opposite of what you should do. You could potentially just (as in the above article) buy short vol derivatives and just let them do their thing, but I prefer to sit on cash and then buy them after volatility spikes. It is somewhat boring as you aren't invested for long durations but it also means that if you're long equities, you can be happy in good times and bad.


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## Brin68 (Aug 25, 2016)

With 300 k could look at split preferreds and retractable preferreds. Splits and retractables have fixed maturities. Would produce 1000 k a month. ie FTN.PR.A ( would find a better quality split though, this is only an example)( not FTN to risky).


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## atchoooo (Feb 13, 2017)

As a Tangerine alternative there's EQBank that pays 2.3% I think (if you're not in Québec).


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## Rusty O'Toole (Feb 1, 2012)

Rusty O'Toole said:


> I've been doing rather better than this for the past 6 weeks or so. Started a new investment program based on Nicolas Darvas' methods. Suggested reading How I Made $2,000,000 In The Stock Market. You can download it for free.


Update. My account is up 13.2% for the year even though I did not get started on the new investing plan until March and did not commit fully until May. At no time have I risked more than 1% or at most 2% of my account on any one trade. Have 10 open positions, all profitable, and have been stopped out of 2 or 3 with a small loss. This is following the Darvas method of picking rising stocks.

Now I am looking at a new way of picking stocks. The Momentum Gap Method by Lowell Miller. He claims excellent results by buying stocks that have gapped up. There are other details to it but that is the first thing you look for, then qualify them in other ways. Have nearly finished the book and will start paper trading soon.

If I thought anyone was interested I could report back on my findings.

Did anyone read the Darvas book or look at the free videos on Youtube?


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## OnlyMyOpinion (Sep 1, 2013)

Yes Rusty, I read the Darvas book. Found it interesting, particulary so given its vintage but apparent obscurity (at least I'd not heard of him).


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## Rusty O'Toole (Feb 1, 2012)

I first read it in the early 70s thought it was interesting but "too good to be true" and set it aside. On rereading it recently saw a lot more value in it than I did originally. For one thing I now appreciate his journey of educating himself in investing. I have gone through similar experiences and so have many others. A beginner who wishes to be educated in investing, will learn a lot and at some time will find themselves in similar situations, and it helps to know how someone else handled them successfully.

Then there is the method of investing in rising stocks. I was afraid that was out of date and obsolete but no, a web search turns up a lot of people who have built on his method and practice some version of it today. William O'Neill of Investors Business Daily is a fan and so are a lot of successful investors.

If you try a few web searches you may be surprised how well known and influential he is.


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