# Allocation advice needed



## godblsmnymkr (Jul 15, 2015)

Hey all. 
I'm an early retiree (30's) and i recently took over my account from my adviser after a 6 year relationship. I have been following the market since before then and have read many of the classic value investing books as well as some trend following and Technical Analysis books.
A lot of my time lately has been taken up by what to invest my funds in. 2/3 of my net worth is in USD (my job paid me in USD.) I'm going to sell 1/3 of my USD investments I had with my adviser to take advantage of the great USD/CAD exchange rate right now to help pad my retirement savings. when its all said and done my net worth will be 2/3 CAD and 1/3 USD. my portfolio is solid dividend paying companies, and income paying instruments like PDI and PIMCO monthly income funds. 

My portfolio will be focused on income generating. I want to live off the dividends. I need about $3600 monthly to meet my expenses and my net worth is $1.3xx xxx.00 
The best investment idea I have found so far is DRG.UN. the yield is great, and everything about the company seems solid. I'm thinking about making it a core position but I'm a little apprehensive because drg is all german office space. If I max out my TFSA and my wife's a lot of that income would be tax free

After DRG, I am really struggling with ideas. I want to simplify my portfolio a bit and selling 1/3 of my US stocks will help. I am then going to put that $ into VFV.TO. other then that, I am not sure what to put the $ into. I will have another 200k-300k to invest and need some more monthly income. 
for USD funds i was thinking of something like REM or MORL. everything I've read about REITs right now seems favorable after this recent sell off. also something a little more stable like O might be nice. 
as for CAD funds, I'm finding it so much harder to come up with investment ideas for income. the Canadian market seems very vanilla in terms of options for investments. 

If anyone has any income generating ideas in CAD it would be greatly appreciated, as well as general advice going forward. I recently decided to end my career after conditions worsened in the industry. I definitely don't want to be out of work forever and will start looking for something else to do (part time/passive income) but i wanted to sort out my finances first.
thanks!


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## tkirk62 (Jul 1, 2015)

First, congratulations on the early retirement!

Now as for your question, our investment styles seem like they are similar, and I could probably recommend some companies that might fit your requirements as far as income goes. 

Instead of recommending individual companies (we could discuss that in private messages if you like), I will simply tell you the method by which I obtain ideas. Screeners. You know what you want in a stock, and your brokerage (or Google Finance even) will allow you to search for all the stocks or funds that fit your criteria. For instance, you could quickly find all the stocks on the TSX that have market caps of at least $10 billion and yield more than 4%. Insert whatever numbers or criteria you desire. After you have your basic list you have to do your research on the companies, but as for generating a list of ideas, a stock screener works wonders.


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## Synergy (Mar 18, 2013)

tkirk62 said:


> Instead of recommending individual companies (we could discuss that in private messages if you like)


Why not discuss this in an open forum? That way the OP can get a variety of opinions on opinions of others. That's the beauty of a forum.


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## livewell (Dec 1, 2013)

godblsmnymkr said:


> Hey all.
> I'm an early retiree (30's) and ,,,,,,,,,,
> My portfolio will be focused on income generating. I want to live off the dividends. I need about $3600 monthly to meet my expenses and my net worth is $1.3xx xxx.00
> The best investment idea I have found so far is DRG.UN. the yield is great, and everything about the company seems solid. I'm thinking about making it a core position but I'm a little apprehensive because drg is all german office space. If I max out my TFSA and my wife's a lot of that income would be tax free
> ...


 First off congrats on achieving $1.3M net worth in your 30's, clearly you have been doing something right. Your income needs are ~3.3% of your net worth, what is not clear is what the % of your net worth is in liquid assets that are generating income. What % of your net worth is tied up in real estate? Personally (As a retiree) I treat my RE asset (Home) as last resort/back-up assets and calculate my income needs as a % of my liquid assets.

DRG.UN is a REIT that pays a good dividend (over 8% currently!), probably one that belong in a group of REIT assets, though I personally would not want to own more than ~10% total in RE assets and certainly not in one REIT. Interest rates over the next 30 years I predict will go up - not a very prescient prediction as there is very little room for rates to go down further it really is a question of when not if rates increase. When they do increase REITS will struggle. For a 30 something (financially independent) I would want a diversified income of dividend payers with a focus on dividend growth. Dividend aristocrat list are readily findable, and I would suggest a portfolio of 15-25 such companies. In Canada you are looking at a concentration in banks and utilities mostly, but there are some good small caps around in healthcare and industrials.


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## tkirk62 (Jul 1, 2015)

I just wasn't sure I knew enough about what they was looking for based on the message. And I just wanted to pass on a research tool, you know, teach a man to fish and all that. Nor did I think I would be able to adequately explain my ideas without this becoming just a thread becoming a dissection of different income stocks.

Regardless though, if it is of interest, ideas I currently think are bound to end up well while producing steady, generous dividends are ECI.TO, DIV.TO, and TD.TO (really any Canadian bank). These I view as safe, both DIV and ECI yield over 6% with the ability to grow payouts in the next few years. TD of course should be safe and will grow their dividend. Among REITs I too like DRG, while also being a fan of BTB which is one good way of getting exposure to Quebec along with a 9% yield.


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## godblsmnymkr (Jul 15, 2015)

livewell said:


> what is not clear is what the % of your net worth is in liquid assets that are generating income. What % of your net worth is tied up in real estate? Personally (As a retiree) I treat my RE asset (Home) as last resort/back-up assets and calculate my income needs as a % of my liquid assets.


1.3 liquid after i convert usd/cad (which went up a ton today ) I have 260k equity in my house that i bought for 724k in march. 



livewell said:


> DRG.UN is a REIT that pays a good dividend (over 8% currently!), probably one that belong in a group of REIT assets, though I personally would not want to own more than ~10% total in RE assets and certainly not in one REIT. Interest rates over the next 30 years I predict will go up - not a very prescient prediction as there is very little room for rates to go down further it really is a question of when not if rates increase. When they do increase REITS will struggle. For a 30 something (financially independent) I would want a diversified income of dividend payers with a focus on dividend growth. Dividend aristocrat list are readily findable, and I would suggest a portfolio of 15-25 such companies. In Canada you are looking at a concentration in banks and utilities mostly, but there are some good small caps around in healthcare and industrials.


this article on SA makes a good (long winded) case for investing in REITs, and even in the case of raised rates. http://seekingalpha.com/article/1543642-a-depression-with-benefits-the-macro-case-for-mreits
i went through the aristocrat list today quickly, but will put it through the waterhouse screener and dig deeply
thanks for the reply


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## godblsmnymkr (Jul 15, 2015)

tkirk62 said:


> I just wasn't sure I knew enough about what they was looking for based on the message. And I just wanted to pass on a research tool, you know, teach a man to fish and all that. Nor did I think I would be able to adequately explain my ideas without this becoming just a thread becoming a dissection of different income stocks.
> 
> Regardless though, if it is of interest, ideas I currently think are bound to end up well while producing steady, generous dividends are ECI.TO, DIV.TO, and TD.TO (really any Canadian bank). These I view as safe, both DIV and ECI yield over 6% with the ability to grow payouts in the next few years. TD of course should be safe and will grow their dividend. Among REITs I too like DRG, while also being a fan of BTB which is one good way of getting exposure to Quebec along with a 9% yield.


thanks for suggesting some names. i actually used the waterhouse screener yesterday. its terrific. i'll look into the names you suggested. 
I'm not a fan of TD. I own it through my adviser but i want to sell it. do you still like it here after the rate drop? i know the dividend is rock solid
thanks for the reply


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## james4beach (Nov 15, 2012)

If you don't mind me asking this, how did you end up with $1.3 million in your 30s?


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## tkirk62 (Jul 1, 2015)

godblsmnymkr said:


> thanks for suggesting some names. i actually used the waterhouse screener yesterday. its terrific. i'll look into the names you suggested.
> I'm not a fan of TD. I own it through my adviser but i want to sell it. do you still like it here after the rate drop? i know the dividend is rock solid
> thanks for the reply


Yes I still like TD. It's valuation right now is very reasonable, and if you do choose to sell, I would wait to do it until the price has risen. I believe seasonally the banks do well in the fall, so maybe wait until October to November and the price should be higher. I'm not sure what your exposure is to the banks, but I personally would keep TD for the long term. Over the long haul the small cut in interest rates should not really affect any of the banks a whole lot. If that's not your cup of tea though wait it out until the fall.


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## lonewolf (Jun 12, 2012)

Good god what classic value investing & technical analysis books did you read to make you want to invest in this market ? Even trend following the transports are not confirming.


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## RBull (Jan 20, 2013)

One of these days, or weeks, or months, or years you're going to be right. 

How long has it been you've been expected the mother of all crashes?


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## tkirk62 (Jul 1, 2015)

Despite markets being quite high (too high is a different question), there are always deals to be found


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## godblsmnymkr (Jul 15, 2015)

james4beach said:


> If you don't mind me asking this, how did you end up with $1.3 million in your 30s?


played online poker for 9 years and started investing with an adviser in 2009.
looking at putting 50-100k in EIT.UN. it pays .10/share dividend monthly which is about a 10% yield. anyone have an opinion on investing in it right now?


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## tkirk62 (Jul 1, 2015)

godblsmnymkr said:


> played online poker for 9 years and started investing with an adviser in 2009.
> looking at putting 50-100k in EIT.UN. it pays .10/share dividend monthly which is about a 10% yield. anyone have an opinion on investing in it right now?


It is a closed end fund, and right now there are different regulations coming into play. That could lead to short term volatility, and maybe the dividend is restructured. Closed end funds always trade at a discount to book value so it may look cheap on that metric but that discount will likely always exist. The holdings of the fund look solid though and it is a way to get some exposure to those companies, in addition to the large yield. 

I don't know enough about the company to say for sure but it looks like it would be an okay spot to put your money to earn a bit of income. I would not put that much in, maybe 25K for a portfolio your size? Then find some other high yielding stocks in different sectors to diversify a little bit.


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## james4beach (Nov 15, 2012)

godblsmnymkr said:


> played online poker for 9 years and started investing with an adviser in 2009.


Incredible! Well congrats, that's amazing. You might enjoy some stock market gambling too. A lot of things become simple binary outcomes... you buy a contract, the price either goes up or down.

Given your incredible financial position at this age, I would recommend that you implement a "policy" to help ensure the preservation of a certain amount of this capital. I think the nice thing about a policy is that it enforces some rules upon yourself. Example policies for you might be (and I think these are realistic)

(a) 200k shall always be invested in CDIC-insured 5 year GICs
(b) 500k shall always be invested in a simple 'balanced' fund comprising of 50/50 XIU & XSB, or similar two plain index stock & bond ETFs

The idea behind this is that once you commit to a policy, those amounts become hands-off. In this example it would leave you to do as you wish with the remaining $600k (arbitrary stock purchases)


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## donald (Apr 18, 2011)

Just curious why you don't continue playing poker?(a % of your networth)
I have a friend who plays(he does not have anything near your amt from playing but he is in the black over the years)
Obviously your skilled and can read the table/cards(I know poker is the farthest thing from 'luck'
why you want to pack it in?
I would argue the market is tougher than sitting around a table(I wouldn't chance playing because I am not good at cards but obviously you are)
Sorry to derail but I find it interesting you made your wealth that way


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## godblsmnymkr (Jul 15, 2015)

james4beach said:


> Incredible! Well congrats, that's amazing. You might enjoy some stock market gambling too. A lot of things become simple binary outcomes... you buy a contract, the price either goes up or down.
> 
> Given your incredible financial position at this age, I would recommend that you implement a "policy" to help ensure the preservation of a certain amount of this capital. I think the nice thing about a policy is that it enforces some rules upon yourself. Example policies for you might be (and I think these are realistic)
> 
> ...


thanks for the comment. as stated in the OP, i have a decent amount of trading experience. i quit poker to actively trade for a few months but quit after a mix of losing $, and not liking the hours. 
thanks for the allocation advice. I've never really thought of having a few hundred k locked away into something like a gic, and a couch potato index approach. I am definitely going to be much more passive with my investing approach this time around so I dont over trade.


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## godblsmnymkr (Jul 15, 2015)

donald said:


> Just curious why you don't continue playing poker?(a % of your networth)
> I have a friend who plays(he does not have anything near your amt from playing but he is in the black over the years)
> Obviously your skilled and can read the table/cards(I know poker is the farthest thing from 'luck'
> why you want to pack it in?
> ...


as said in the OP, market conditions aren't favorable ATM and probably are going to get worse. I'll keep this brief because it is not the point of this thread.

I mostly missed out at playing high stakes during the USA poker boom around 2006 (attributed to moneymaker winning the Main Event; hence my user name) but cashed in on the Euro poker boom a couple years later. after a few years though, euro contries started to privatize their poker industries significantly weakening the player pool.
Also, poker bots have become a serious problem for poker sites. they usually end up being detected and having their accounts seized but not before they pull literally millions out of the games. 
In addition, online poker software is becoming much more sophisticated making edges in play smaller. if you're not proficient in these complex programs you are getting left behind.
Probably most importantly, when I first started playing back in 2005 most people were very new to poker. the biggest losers usually quit playing, and year after year the weak players get squeezed out of playing the bigger games. only aggressive, strong players remain. when i first started playing, recreational players were very passive and easy to run over. now the rec players are agro, and much harder to win money from.
I'm not totally done with poker and it might be wise to play part time to supplement my income as I'm so young. firstly, i wanted to change my portfolio from growth focused to income focused to take the pressure off of earning income from poker. when you have been playing as long as i have, its not always fun to spend 8-10 hours/day 5 days a week on it.

I did some searching on canadian CEF's and found this screen helpful. http://globefunddb.theglobeandmail.com/gishome/plsql/gis.show_closed_end_rep I added RUF.UN and SBC.TO to my possible buys list for income generation. 
my two favorites that I have found so far are DRG.UN and EIT.UN. 

I am struggling with figuring out how much USD equity/funds i want to keep, and how much i want to sell to convert to CAD to take advantage of this great rate right now. Also struggling with how long its taking IB to receive my positions from TD waterhouse :upset:

I think the market is definitely more difficult to make money in then poker. in poker, chance is a huge part of the game, but at least you know the simple rules and its easy to understand. in investing, there is so much to learn it makes my head spin a little. understanding risk/reward, different types of investment instruments, which are right for you, fundamental analysis, earnings reports, etc is much more complex.
believe me, i would prefer to sit back and rake in cash playing poker, but times have changed. a lot of the smartest people in poker have got out awhile ago and gone on to great jobs and opportunities. one of the old school online crushers even started a hedge fund.


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## godblsmnymkr (Jul 15, 2015)

anyone have advice on DGS.TO? its a monthly paying income fund yielding 14%. it focuses on solid dividend growers, but they use leverage and sell options to gain the extra yield. 
thanks


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## tkirk62 (Jul 1, 2015)

godblsmnymkr said:


> anyone have advice on DGS.TO? its a monthly paying income fund yielding 14%. it focuses on solid dividend growers, but they use leverage and sell options to gain the extra yield.
> thanks


With leverage and an options strategy I feel like it is not the place to be in a bear market, or a market with a lot of volatility such as the one we are seeing now. It's risky, but you know that from the 14% yield.

It looks to me like you're stretching for yields above 10% and stuff. These names could be alright for small positions but I don't see the need to do it. Based on your net worth I'd say you don't have to be looking at these. If you don't mind me asking, how much money do you have to invest and how much income does it need to provide? These two numbers should guide your decisions. But if you got down to start looking at names with 7-10% yields I think you'd find a lot safer names you could be confident holding. For instance DIV.TO which I suggested to you earlier just increased their dividend 11% and will now be yielding over 8% at today's closing price. I am much more comfortable with names and yields like that than looking for yields like you have been.

Just my two cents.


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## godblsmnymkr (Jul 15, 2015)

thanks for the reply tKirk.
I'm leaning towards not investing with dgs.to. they seem a little less transparent then similar income funds, but i have not finished my research yet. 
i believe my allocation will be:
-150k drg.un 
- 50 -100 k eit.un. 
-50-100k ??? not sure where
my monthly expenses are between 3500-4k. that allocation would meet a good amount of my expenses. on the usd side of the portfolio i own PDI which yielded a monster number last year which should make up for almost the rest of my expenses. 
I took a quick look at DIV.TO. i looked at it before when you mentioned it, but was put off my the low price. some decent sized swings in the price because of this. *do you have a breakdown of their tax info on the units? it was not on their website and quickly went through their annual form and did no see it.* on the TA side, DIV has been in a nice upwards trend until very recently. it broke through resistance that has held since jan 30th. it looks like it got some support today but the stock looks in danger right now of more downward momentum. do you have any opinion on their acquisition of the mr.lube royalty rights?
do you know why it had a big price jump back in july of this year?


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## tkirk62 (Jul 1, 2015)

With those allocations, this $300K will pay about $2152 per month. If you are comfortable with the holdings and the income they produce that is the most important things. Hopefully your USD holdings make up for the rest of your expenses. 

DIV has lived and died by their royalty acquisitions. Late June they announced their second deal and the stock rocketed up. IT has dropped a great deal now because they announced a huge financing and a third royalty deal. They issued shares at $2.70 so that explains the current price. It shouldn't drop anymore past the $2.70 range, the dividend should keep it above these levels. I have only held DIV this year so I do not know how the components of the dividend but I am guessing it is entirely composed of an eligible dividend..

Based on the amount you have to invest, I would want to have a few more holdings and diversification. You are very exposed to international real estate with DRG and RUF. I myself would want about 6-8 holdings (my portfolio is smaller and I have 11 holdings so I obviously would want even more holdings than 6-8 really). But to achieve the same income, there are several other high yielding names I'd feel pretty comfortable with. LIQ, RSI, SRV.UN, CJR, are all in different industries and yield over 8%. 
There are others I'm sure and I just found these with a quick screener. You got to do you but I think most would tell you that relying on just four high yielders for your monthly income is a bit too risky.


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## godblsmnymkr (Jul 15, 2015)

thanks for the info on DIV. i would def want to get the tax info on them before i invested. I also noticed that they are increasing their dividend by 11.5% which is rare in their investment category. are you worried about the recently announced departure of their CFO?
as for diversification, I am more of the William O'neal mindset (of "how to make money in stocks" and IBD fame) of concentrating your portfolio to just a few ideas. i would have to consult his book for his diversification rules, but keeping your portfolio to fewer positions may reduce volatility, but it will be much more difficult to follow all the securities that you own. that is one of the main reason in me selling many of my USD positions. I don't want to follow 15-20 stocks. it will be much too difficult for me ATM. know your positions very well, and hopefully you choose wisely. 
however, when it comes to income these same sort of rules may not apply. its just that it is very difficult to find any funds or etfs in CAD's that pay a high yield with a healthy chart. most of their charts are a mess.

thanks for the suggestions. the best candidate to me was RSI.TO. worried about the low price, but the price does look stable. i will look into it more deeply. 
thanks


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## tkirk62 (Jul 1, 2015)

I agree with you about holding fewer stocks for higher returns. I think you would probably do fine with just buying $300K of DRG. If you think that is your best idea it makes the most sense to put all your money into that idea. Warren Buffett said diversification is defence against ignorance, and made lots of money by betting big on one idea at a time (GEICO, Berkshire, a few others I read in the Snowball, etc). But investing for income is different than investing for the highest return. In the .0001% chance that DRG had to suspend the dividend for a few months, you'd be missing out on over $1000 per month. If had 6 holdings with equal dividends though, you'd be missing out on about $350. Same thing with EIT, a dividend suspension leaves you without over $800.


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## godblsmnymkr (Jul 15, 2015)

as an aside: I'm upset with myself that I switched all my accounts to Interactive Brokers. when i was trading there, it was very cheap but that was all USA stocks so it was pretty cheap.
looked at buying $100k DRG.UN today and it was going to cost 69$ + other fees! If i had left some $ at TD I could have done these trades for their flat $10/trade fee :upset:
I'm going to see if I can leave $ with TD to buy my income generating canadian trades. 
so lesson learned and a warning. If you're buying large amounts of stock on the TSX best to stick with a Canadian Brokerage.


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## My Own Advisor (Sep 24, 2012)

Congrats godblsmnymkr!

To have that net worth in your early 30s, you're set for life if you, ahem, play your cards right going forward...

If I were you, I would "Couch Potato" at least 90% of your assets - all equities. You're young, you should cheer for falling markets like they have been.

This way, you can simply ride the market returns for as long as you live 

The other 10%, keep in cash until you learn more about dividend growth investing. Don't chase yield but instead buy and hold some companies that pay you cold hard cash (like at the poker table) and you can buy more companies with this money or simply reinvest dividends for more cash flow.

I would absolutely not put a bunch of money in GICs right now. That makes sense for capital preservation in your 50s and 60s and 70s. Last time I checked you are half that age. You want asset accumulation


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## godblsmnymkr (Jul 15, 2015)

My Own Advisor said:


> Congrats godblsmnymkr!
> 
> To have that net worth in your early 30s, you're set for life if you, ahem, play your cards right going forward...
> 
> ...


thanks for the reply.
I am torn between investing for growth and selling shares to pay for expenses, or investing for income in solid/high yielding companies. if i couch potato, i will have to sell stock periodically, which could make for some unfavorable situations if the market is @ lows.


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## My Own Advisor (Sep 24, 2012)

Why will you have to sell stock periodically?


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## RBull (Jan 20, 2013)

Up thread the OP mentioned he is looking for monthly income of 3500-4000 IIRC. That's possible with a couch potato ETF portfolio without selling equity, if there is a bias of higher dividend growth payers rather than just broad market indexes. Dividends in the 3.5% range overall should meet this target. Although MER will have to be considered.


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## Spudd (Oct 11, 2011)

godblsmnymkr said:


> thanks for the reply.
> I am torn between investing for growth and selling shares to pay for expenses, or investing for income in solid/high yielding companies. if i couch potato, i will have to sell stock periodically, which could make for some unfavorable situations if the market is @ lows.


With a couch potato you have a mix of different types of funds, generally at least the 4 following:
bonds
Canadian
US
international

The idea is that these are somewhat uncorrelated with each other. When you need to sell, you sell whichever one is highest relative to the desired allocation. Theoretically this should avoid you having to sell when things are down (since if it's down, it will be lower than your desired allocation, not higher).


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## godblsmnymkr (Jul 15, 2015)

I also have to pay taxes on that income. would prefer to make a little more then just meeting me monthly nut  
I sold JNJ, BRKB, IWR, GOOGL, 1/2 of WFC and XSP.TO today. to convert to CAD. waiting on the notes from the fed meeting to see what the CAD/USD does before i exchange that money.


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## godblsmnymkr (Jul 15, 2015)

I've figured out a good part of my CAD income allocation.
500k 
-200 DRG.UN
-100 SMU.UN
-100 HR.UN
-100 EIT. UN

unfortunately, i can't start buying shares until i receive my $ from TD, wait 10 business days, and then send it back to TD through IB. really wish i had looked into how much more commission on CAD stocks were with IB. buying low amounts of shares is fine, but when you get into lower priced equities, you can be spending $50-100/trade to buy a lot of shares. Obviously, TD is better @ 9.99/trade.

I will continue to sell off holdings as i see fit, to simplify my portfolio. i will continue to sell off USD equities, to get my USD to CAD to 40%/60% of my portfolio. much of my remaining USD exposure will be in high dividend paying companies to benefit from the high USD.


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## getliquid (Mar 2, 2014)

godblsmnymkr said:


> I've figured out a good part of my CAD income allocation.
> 500k
> -200 DRG.UN
> -100 SMU.UN
> ...


Is it wise allocating almost half of your networth in REITs? Come tax time, it would be pretty complicated since all the REIT have different distribution% and obviously not all the dividend received are eligible dividends?


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## Sampson (Apr 3, 2009)

I would also suggest that 38.5% allocation of your portfolio to CDN REITS is extremely risky.

I would build the lowest risk portfolio to achieve your goal. It seems your goal is to generate $43,200 annually, a minimum of half of which goes towards paying your mortgage, and I guess you live off $1,800 per month for everything else. How much longer do you have to pay your mortgage. and what other financial goals do you have. Will you be working doing something else to derive income, or dividends only.

The problem is finding a safe withdrawal rate that will sustain you for your life, and that rate is probably 2-3% since you will need the money to last 50+yrs. This means that your strategy of using high yielding CDN REITs, and presumably keeping or spending all the distributions means you will deplete your capital and it will not last long enough if you do not plan to work going forward.

I would second MOA`s suggestion to invest using equity index tracking instruments, diversify globally into markets with low correlation, and also into other asset classes (cash, bonds, small allocation to REITs, physical assets etc).


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## godblsmnymkr (Jul 15, 2015)

thanks for the input guys. 
the old risk/reward balancing act is something i have been struggling with while planning this portfolio. after reading 8-10 hours/day to try to figure out what to put in my portfolio, Ive made some changes. i think i will put 100k into the pimco monthly income m class fund instead of HR.un. the mer is low @ .68 compared to comparative funds. the fund is increasing their NAV YoY and the yield is good. 
also fyi, EIT is not a reit but an income fund investing in equities paying 11% yield. 
the 500k would be roughly 40k in income/ year before tax. thats less then 1/2 my portfolio. the other half is invested in mostly USA dividend paying blue chips, and PDI which is a pimco bond fund with great returns over the last couple of years. i will generate well over the 40k you mentioned but will have to put in some work to figure out exactly how much more.
i'm continually selling off individual equities to to convert to CAD$'s and to buy etfs. i just went through earnings season and it was def hectic for having so many individual positions. this will be an on going process and will take some time. 

also, i've started a position in MORL the 2x leveraged ETN based on MORT. after reading all the articles i could find on the subject, i feel like the bottom might be in on NLY and AGNC. their recent price appreciation and breakout from downwards trend confirm that. the rising rate risk (i dont think the fed is raising rates this year) seems to be baked into the current price, therefore i think the risk and margin of safety in USA REITS right now looks attractive. 
will update this thread when i have my income investments made. transferring out of TD's Private Investment Advice has been a real hassle. they love to take your money, but are not helpful when you try to leave.


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## getliquid (Mar 2, 2014)

godblsmnymkr said:


> thanks for the input guys.
> the old risk/reward balancing act is something i have been struggling with while planning this portfolio. after reading 8-10 hours/day to try to figure out what to put in my portfolio, Ive made some changes. i think i will put 100k into the pimco monthly income m class fund instead of HR.un. the mer is low @ .68 compared to comparative funds. the fund is increasing their NAV YoY and the yield is good.
> also fyi, EIT is not a reit but an income fund investing in equities paying 11% yield.
> the 500k would be roughly 40k in income/ year before tax. thats less then 1/2 my portfolio. the other half is invested in mostly USA dividend paying blue chips, and PDI which is a pimco bond fund with great returns over the last couple of years. i will generate well over the 40k you mentioned but will have to put in some work to figure out exactly how much more.
> ...


wouldn't you have some overlap between EIT and PIMCO? seems like their both Global funds holding dividend payers?

Where are you seeing the PIMCO M class funds? I'm only seeing A class?

https://canada.pimco.com/EN/Funds/Pages/Monthly-Income-Fund-Canada.aspx


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## godblsmnymkr (Jul 15, 2015)

getliquid said:


> wouldn't you have some overlap between EIT and PIMCO? seems like their both Global funds holding dividend payers?
> 
> Where are you seeing the PIMCO M class funds? I'm only seeing A class?
> 
> https://canada.pimco.com/EN/Funds/Pages/Monthly-Income-Fund-Canada.aspx


you need to change the "series" table near the top of the page. however, i fear that the M series can only be bought be an adviser for a client. i emailed pimco for clarification. it also has a 100k minimum investment.


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## andrewf (Mar 1, 2010)

The yield fallacy is rearing its ugly head again... why are we investing in a franken-fund that turns unrealized capital gains into taxable distributions. Interesting that it is a closed-end fund trading at a discount to NAV (wonder why) and charging a fairly steep management fee for an exchange traded security (1.1%).


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## Sampson (Apr 3, 2009)

andrewf said:


> The yield fallacy is rearing its ugly head again...


agreed. 



andrewf said:


> why are we investing in a franken-fund that turns unrealized capital gains into taxable distributions.


As long as the distributions are stable, does it matter in a TFSA? Of course, permanent 8% distribution is impossible.


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## RBull (Jan 20, 2013)

andrewf said:


> The yield fallacy is rearing its ugly head again... why are we investing in a franken-fund that turns unrealized capital gains into taxable distributions. Interesting that it is a closed-end fund trading at a discount to NAV (wonder why) and charging a fairly steep management fee for an exchange traded security (1.1%).


I would have to agree.


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## godblsmnymkr (Jul 15, 2015)

andrewf said:


> The yield fallacy is rearing its ugly head again... why are we investing in a franken-fund that turns unrealized capital gains into taxable distributions. Interesting that it is a closed-end fund trading at a discount to NAV (wonder why) and charging a fairly steep management fee for an exchange traded security (1.1%).


thanks for the reply, and i welcome the criticism. investing in EIT could be a mistake and I havent done so yet. I started my position in DRG today by buying 80k out of the planned 200. I'm stalking smu.un for a good entry point. 
as i feared, the pimco monthly income fund that i had is only buyable by advisers. none of the monthly income funds that i looked at today were very attractive considering their MERs. 
I would love advice as to which ETF i could invest it that would give me 5-6% to round out the income part of my canadian portfolio? utility and preferred share etfs have been hit hard lately. 
I'm in a difficult position trying to retire with maybe not enough $ to invest in low risk etfs, and this has me searching for yield. 
what would you do in my shoes?

also, I read this while out of town this weekend. http://www.amazon.com/Deep-Value-Investors-Contrarians-Corporations/dp/1118747968
highly recommend it. it changed the way i looked at a lot of things in the investing world. goes over "dogs of the DOW" theory, reversion to the mean, why stocks under perform in a high GDP% growth environment, etc.


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## tkirk62 (Jul 1, 2015)

godblsmnymkr said:


> I would love advice as to which ETF i could invest it that would give me 5-6% to round out the income part of my canadian portfolio?


There are none


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## tkirk62 (Jul 1, 2015)

godblsmnymkr said:


> I'm in a difficult position trying to retire with maybe not enough $ to invest in low risk etfs, and this has me searching for yield.
> what would you do in my shoes?


Earn more income before trying to retire so you don't have to stretch for yield.


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## godblsmnymkr (Jul 15, 2015)

tkirk62 said:


> There are none


there are two i listed in my last post...

there are many ETF's that yield that much but most of them are looking pretty negative right now. don't want to buy them until they buck this downtrend. 

i dont necessarily want to retire, but set my self up for enough income to live on for awhile while i figure out what i want to do next to make money. I should have been more clear when I said i want to "retire." I'm not content to not work for the rest of my life but I wanted to switch my portfolio from growth to income to take the pressure off.
thanks for the reply.


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## RBull (Jan 20, 2013)

https://www.blackrock.com/ca/individual/en/products/239495/ishares-diversified-monthly-income-etf

I have not read the prospectus however.


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## godblsmnymkr (Jul 15, 2015)

thanks for the help so far in this thread guys. 
since last posting, there's been some exciting times in the markets. i did not sell through the monday panic. i added a bunch of american REITs yesterday. i also got the money that ive been waiting for from my old adviser account so im ready to rock and roll. i bought xre and zre, started a positon in DRG.UN and I'm waiting on SMU.UN for a better price to put it in my tfsa. i did not buy EIT.UN and I'm currently looking for a better place to put that $

new question for the forum: does it make sense for me to open a RIF account? from the brief reading ive done on it, it seems like it might be a good option for my income needs while tax sheltering. i'm thinking about putting in a USA MLP in there. I'm 32 so my minimum withdrawal would be 17%? 
thanks again for the help


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## Eclectic12 (Oct 20, 2010)

If you truly are setting up a RRIF after 1992, I believe the minimum withdrawal calculation is:


> ... the prescribed factor was 1/(90-age), but only while the annuitant (owner) is under 71 years old.


http://www.taxtips.ca/rrsp/rrifminimumwithdrawal.htm

Unless I'm calculating something wrong, this looks more like 1/58 which comes out to 1.72%.


Not that I'm an expert but it seems that the advantage of the RRIF is that minimum withdrawals won't be subject to withholding tax but will lock one into a schedule of withdrawals. If there some reason plain RRSP withdrawals with the withholding tax that may be refunded when the tax return is file that allows one to be flexible is a problem? Or maybe it was covered earlier in the thread which I've skipped for the moment?

It seems an early age to be setting a withdrawal schedule.


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## godblsmnymkr (Jul 15, 2015)

need some tfsa advice.
i have about 30k in cash sitting in my tfsa after a recent sale. i have about 10% of my portfolio in PDI which is a leveraged pimco bond fund. it has a good yield but the price is not as stable as some sort of vanguard government bond fund. this is the only bond exposure i have so my portfolio ends up being a bit volatile. i believe i need some bonds to help balance my portfolio, but not sure if now is a good time for investing in canadian government bonds. sheltering a bond investment in a tfsa is nice however since its the least tax efficient income. 
the options i am looking at for my tfsa are:
-vab.to 
-xpf.to (preferred share etf) seems really oversold and has a high yield because of this. dominant holding is PFF (usa preferreds heavily weighted towards financials. very little energy exposure. price is very stable unlike xpf) worried about it being canadian hedged however.
- some sort of canadian midstream energy player. with a possible oil recovery (way too early to tell) the chance on a nice tax free capital gain with a nice yield to wait is very attractive.

as always really appreciate any advice especially the critical kind =)


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## cashinstinct (Apr 4, 2009)

Bond investments are better held in RRSP, since they don't have much growth in capital. 

I would prefer to have high-growth investments in TFSA, to increase my TFSA limit as much as possible... not crazy stocks that can go down 90-95%, but indexes...

You must choose your allocation you want in stocks Vs bonds, and act accordingly. Before choosing which investment suits your strategy, you must define what you want.

Right now, choosing between bonds / preferred / stock pick with high risk/reward... it's not the same thing at all.


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## godblsmnymkr (Jul 15, 2015)

cashinstinct said:


> Bond investments are better held in RRSP, since they don't have much growth in capital.
> 
> I would prefer to have high-growth investments in TFSA, to increase my TFSA limit as much as possible... not crazy stocks that can go down 90-95%, but indexes...
> 
> ...


thanks for the reply =) 
I am not comparing the 3 options as someway to balance my portfolio. it is obvious they are all very different from each other. but you seem to have answered my question in that i want to put something higher growth in my tfsa which makes sense and leave any bond fund in my non registered.


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## cashinstinct (Apr 4, 2009)

I would not say to leave bonds in non registered though, since they can be highly tax inefficient. I was discussing TFSA vs RRSP for bonds.

If it was my portfolio, I would consider if there is something I can sell in my RRSP to add bonds, and buyback that stock / index / investment in TFSA.

http://www.finiki.org/wiki/Tax-Efficient_Investing



> Bond taxation
> 
> Conventional bonds that trade at a premium above their face value ("premium bonds") should not be held in a non-registered account because of unfavourable taxation. In addition, strip bonds and Real Return Bonds (RRBs) will require payment of taxes on returns accrued but not paid as they are treated as prescribed debt obligations as described in paragraph 7000 of the Income Tax Act.[7]





> Preferred shares produce dividend income and should be held outside an RRSP so as to benefit from the dividend tax credit


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## godblsmnymkr (Jul 15, 2015)

cashinstinct said:


> I would not say to leave bonds in non registered though, since they can be highly tax inefficient. I was discussing TFSA vs RRSP for bonds.
> 
> If it was my portfolio, I would consider if there is something I can sell in my RRSP to add bonds, and buyback that stock / index / investment in TFSA.
> 
> http://www.finiki.org/wiki/Tax-Efficient_Investing


thanks for the info. i do not have an RRSP at this time and not sure if i will get one. need to get my income generating instruments going first to cover my monthly bills and then i can think about an RRSP. i would love to put some of my USA high yielders in an rrsp.


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## andrewf (Mar 1, 2010)

Premium bonds are highly tax inefficient. There are alternatives: discount/par bond funds, floating rate funds, total return swap funds.


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## godblsmnymkr (Jul 15, 2015)

after doing a ton of reading this week (10-15 hours/day) i have 2 reits on my radar to buy. CAR.UN and WIR.USD.TO
CAR.UN seems like a great low beta/steady growth name that has been outperforming the index by a wide margin over the last 15 years. owns and operates apartment buildings across canada with very high occupancy. divi is 4.3% but they have a history of raising it most years and did not cut it during great recession. 
WIR is in $USD and owns light industrial buildings in USA. has amazon and zulily as tenants. i think you're going to see a trend in online retailers increasing their warehouse space as online shopping continues to grow. 6% dividend and they seem undervalued. they are also a potential takeout target for a bigger reit. http://seekingalpha.com/article/3019696-an-undiscovered-canadian-gem-that-pays-6-percent.

i learned a lot since i started this thread. thanks for all the contributions. i'm starting to regret my big investment in DRG. business is not as solid as i first thought. 8% yield will go along way to covering my expenses however and I dont think they're going away anytime soon. bought xre and zre on the big pull back recently. not a fan of all the companies in the etfs like D.UN, BEI.UN, and NPR.UN but its nice to have some diversification in this sector. XRE is trading at a 8% P/B discount. could be a good buy if the market holds up.

still have a ton in cash on the sidelines waiting to see what hill happen in the market. oil is a sector i hadnt really considered investing in but with the potential of a bottom in oil here (im not holding my breath) it is on my radar. if oil can break out of its downtrend i'll be putting a lot of money to work in the sector to pick up some accidental high yielders at good prices.


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