Thursday, November 22, 2012

The Four Percent Rule

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The 4% rules dictates that, given historical market returns, we can't afford to withdraw more than that amount from our retirement portfolio after age 65 when we, presumably, stop contributing to it.  From what I understand, this is before fees, and other related costs.  On that basis, does it make sense that we should be paying more than half of our potential retirement income to the mutual fund industry in the form of management expenses?  Whose money is it, anyway?  I plan on withdrawing more than 4% from my retirement portfolio.  Given the high fees relative to performance, I won't be parking my funds for retirement in any mutual fund!

Have you looked at your mutual funds, lately?


Wednesday, November 14, 2012

COW (part 3)

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The Consensus
I started my analysis of COW (iShares Agriculture Exchange Traded Fund) by determining the companies which make up the majority of it, and then I did a Price/Earnings calculation for each, based on consensus earnings as at the end of 2012.  The next step is to calculate the expected price difference between now and the end of the year.  We can calculate the difference between today's prices and the year-end target prices. Using the same weightings we derived for each company in the fund, we can then compute each company's contribution, and thus, a year-end price.

The Price
That said, the target price I calculated for COW by the end of the year is $28.78, a 32% increase from today.  Now, if I only relied on fundamentals, COW would be a buy, although I have to say earnings estimates are being cut during the current reporting season.  Dupont, for one, had to do so.

The Charts
If we also look at the charts for COW, however, we can see that it has approached a point of resistance where it is not totally clear whether the price will continue much higher than that.  Still, the upward trend remains, largely, intact.  While it is no guarantee of future performance, that same upward trend has continued into the new year in each of the last four years.  Personally, I have my doubts given the uncertainty over tax rates in the U.S. after the end of this year.  I can't advise people what equities they should buy, but for myself, I would only be willing to hold COW if it breaks above that line of resistance.

What do others think?  Are you convinced?

Tuesday, November 6, 2012

October 2012 Returns

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Seasonally, November brings the beginning of the best six months for the TSX market.  The materials sector normally shows strength at the middle of the month with the technology sector continuing in strength.  Technology as measured by the iShares XIT Exchange Traded Fund is currently trending higher, but the materials sector - not so much, yet.  Overall, the TSX was relatively flat for the month of October, finishing slightly higher.

Mutual Fund redemptions have been growing, and I expect that trend is likely continuing, given investor uncertainty over the situation in Europe and the elections/fiscal cliff in the U.S. coupled with continuing high unemployment.  All in all, no news is still better than bad news, but not by much.  It is still impossible to tell, yet, whether, or not, we will get much of a rally going into the end of the year. 

22 month return for TSX @ October 31, 2012 =     -6.98 percent
Return for Basic Timing Model Using XIU =          13.5   percent
Return for Advanced Timing Model =                    -4.36 percent
Money for charity =                                            $0.00

Any predictions for the end of the year?