Wednesday, September 18, 2013

My TFSA Anti-bragging Story

And the stories behind the ill-fated purchases:




HYX recommandation from, I mean Mich the guy behind the site put the money where his mouth is and bought it himself so no hard feelings here, only the facts

REM I read somewhere about it

XHY, XSB, XRB I bought bonds as I'd thought they are safer than stocks, it doesn't seem so


MQL same as HYX

MKP If the people pay their mortgages I should be doing o.k. and they seem to be paying them, don't know why the stock is down

PDL Doctor Stock from

PBR In 2009 the stock was $51, how much could it go lower especially as the price of oil has gone up in the past 4 years? But it did.

RWX my love affair with real estate

TMC same as MKP


  1. I came in from canadiancapitalist, but I thought I'd comment here.

    You're better off buying a single actual bond from a +AA rated company then buying bond ETFs/funds. Despite what the general perception of it, I'd think of it more like a special paying stock that expires. The price of the bond goes up and down, just like any other stock. You don't exactly lose money on owning a bond, just lost opportunity. The time you lose money is when you sell it off at a lower price you bought it. You can hold it, collect interest until it expires, if that is the situation.

    Holding a bond fund(ETF/etc,) gives you a less return and control. MER eats a little of the interest you should be getting. The grouping of different bonds gives you the diversification, HOWEVER grouping it together and pricing it gives you more volatility. At least a greater perception of volatility since, the price of the fund changes due to the market value the bonds it is holding.

    I hope that helps you out a bit. I learned that the hard way, a decade ago, making the same assumptions you've made. I bought bond funds, ETFs were not known to me then, and lost money the same way you're having right now.

  2. @VanLarry
    Thank you for your comment and I tried to get my head round it. The risk I see is that even if the company is +AA it might go bankrupt, the risk is very small but it exists. The grouping gives you the diversification and the protection for such cases. However, it is interesting your strategy.

  3. True. It looks like I've made some assumptions I've forgot to mention.

    But first, I've overlooked a significant advantage funds do offer: they compound. In cases of ETFs, they partially compound. Broker may not do fractional shares if they offer DRIPing for ETFs. The bonds I am thinking of and have observed so far pay you on the month/quart/year. Or pay on the end of the bond life. Never seen a compounding bond before.

    So owning a bond vs owning a bond fund. I guess the 2 key ideas I'm rumbling about is control and perception.

    I agree risk for bankruptcy exists and yes diversification migrates some of that loss. However, I forgot to mention the risk is a variable and part of it you can control. Real life example: holding a BMO bond vs. Laurentian bank bond. Assuming both bond are the same and rated same, the risk is still lower holding BMO bond. Due to the fact that the chances of big five bank failure in Canada are slim. And if it did happen, it would have to a bigger disaster than the 2008 credit crisis. So hold a good company bond as well as a good rated one.

    The second part of managing risk is that you're also active. That is even if you are a passive investor you should be active enough to read and perhaps respond to news. Generally, for bond holders, if the company is doing bad, you should be able to see things like dividend cuts, job cuts, selling of assets, etc,. The price of a bond in this situation, is less falling volatility less due to the fact the chances of getting your principal back is high.

    The other assumptions I've made is well, it depends on the investor. Perhaps one likes to put in money on regular basis. At small rates, ie. $100 monthly, it's hard to buy a bond and maybe you're better off on funds. A consistent monthly investment like that would really smooth out volatility. Or perhaps you really want to be that passive because you've got other more important things in life.