Diversification

Everyone talks about diversification and ya it’s true you have to be diversified if you want to spread out your risks, limit your downside, protect your nest egg blah blah blah…. But what about being too diversified? Personally I don’t like the idea of being diversified just because you’re supposed to be. In my opinion if you’re going to blindly diversify your holdings across multiple sectors, currencies, countries etc… why bother buying stocks? Just buy a few index funds and get it over with. Why waste the time and commission fees buying individual stocks? If you diversify too much you’re going to basically mimic the index anyways. I’m not telling you that diversification is bad I’m just saying that personally I think you should buy what’s cheap and if that results in you becoming diversified over time so be it, but don’t buy a fully valued company just for the sake of diversification… in my opinion that’s just stupid (you can’t beat the market by mimicking it).

Rogers

This stock has been on a tear. I've been watching it for a while and to me it looks expensive, and has for the last 6 months. That being said it just keeps rising and analyst keep recommending it as a buy. I know they do have some strong growth in their wireless business but with a P/E of almost 60 and a 2007 estimated forward P/E of 31 it looks expensive to me especially while Telus (another aggressive grower) is trading at a current P/E of 20 and 16.7 X next years estimated earnings. So basically either I’m missing something or RCI.B is overvalued. I know some of you out there would disagree (ie- every Rogers shareholder) so come on tell me what am I missing?

Sold TLM

Ok well… I wussed out today and wanted to secure some gains on TLM so I sold my position for $20.33 (and yes I'm aware of the takeover rumours... but like I said I wussed out). I originally purchased at 17.85 in November/2006 so after commissions I’m up 12.36% and I hope to re-buy this one on a pullback. But I figured hey there's no shame in taking a profit.

Put in a Sell for TLM

Along the same theme as yesterday – “When should I sell?”. I have put in a limit sell for TLM at $20.85 expiring at the end of the week. It might get there it might not. I still really like TLM and believe that it has good long term prospects (I can sleep like a baby holding it – even on the down days) however, when a large cap company runs up 10% in a week it might be time for some profits. But hey if it doesn’t hit my sell price I don’t really care, I’ll keep holding and wait for the next pop.

When Do you Sell?

For some stocks I know the answer – never. Companies I own such as TD, GWO, POW, CSH.UN, TRP and PFE I don’t ever plan to sell. Now some of you may be wondering “Why on earth would I plan on holding those to the grave? Won’t there be an optimum time to sell and rebuy?” Well ya there probably would be an optimal time but if your smart enough to figure that out than stop reading this stupid blog, go make a few hundred million dollars and retire in luxury. Additionally, I plan on holding the above stocks for their cashflow. For example, I’m now making 6.1% in dividends from TD (based on my initial buy price 5 years ago). What kind of yield will I be making in 2012? I’m betting significantly higher than 6.1%, not a bad return in my opinion plus the share price has appreciated about 150%. Now compare that to a 10 year government bond maybe 5% (if your lucky).

Now that brings me to all my other holdings. The more cyclical, resource based companies. Historically, I’ve been pretty good at buying (and mediocre at selling) but how do you know when to sell. Who hell the hell knows? But if you want my opinion on it I think that oil and gas stocks are going to be range bound for the next little while. So after writing this I’m going to take a good hard look at TLM and decide if selling some might be in order.

Remember you don’t make anything until you sell and there is no shame in taking a profit.

(Disclaimer: I’m not your boss or your spouse so do you own research and make your opinions on when to buy or sell. Nothing I say should be bastardized or construed in any way to be advice.)

Jan 18 - 2007 Retirement Nest Egg

Retirement Nestegg as of the close on Jan 18th, 2007.

Here is the breakdown

TRP 4.63%
ABX 4.31%
CSH.UN 3.75%
GWO 5.43%
PFE 5.06%
POW 4.19%
BA.UN 0.40%
L 4.60%
TLM 4.05%
UNS 2.90%
GZ 3.03%
TD 14.27%
American Growth Fund 1.20%
CDN Value Fund 4.13%
Small Cap Growth Fund 3.97%
Deep Value Fund 11.70%
Health Science Fund 1.01%
Bond (9% yield)6.02%
Money Market Fund 15.34%

From now on I'll probably only update the networth at the end of each month.

My Retirement Philosophy

Unlike most people my goal for retirement isn’t to sail around the world, discover myself, read the classics, volunteer at a worthy charity or even travel (to tell you the truth - I like where I live and would be happy if I never ventured more than 50 miles from my home (ever), and instead spent all my time visiting friends, family, cooking/eating, camping, fishing, watching movies and of course following the market). My goal is to retire early and live a typical middle class lifestyle (without having to work anymore). Globe trotting and expensive toys/dinners are not for me.

Now some of you ambitious big spenders out there must be wondering “Why on earth would you want to aim for average?” Now I’ve been asked that before, so I have a good and simple answer: well… (drum roll) the reason is that I don’t have expensive needs or hobbies and absolutely love my lifestyle (except for the working thing). I don’t want a lavish retirement and personally don’t see the point of working until 65 saving a huge pile of money and retiring in “luxury”. Instead, I have chosen to aim to retire at 40 live more modestly than the 65 year olds that have built a huge nest egg, but because of my relatively simple needs I would get more benefit from an additional 25 years of retirement than I would from annual vacations from 65 to 75 year old (health permitting). In my opinion 25 extra years of freedom/time flexibility is worth more than an extra star in the review of the hotel I stay at between 65 and 75. Now here’s where I get the “jaded” or “pessimist” accusations…I know I know many of you are saying “why do you keep saying 65 to 75? Why not 65 to 95?” well before I’m labeled as a pessimist I’d just like to say that I do fully expect to live to 95 (partly from the reduced stress of being retired early) but from observation --- after 75 most people have given up (or reduced) most of their expensive hobbies/activities as they age from their mid seventies to their eighties (ie- the need for: globe trotting, world traveling, walking in/cleaning their huge house, driving new expensive cars seems to fade with age). Now I’m not saying that old people have less fun I’m just saying that for any number of reason (health or just don’t care about keeping up with the Jones anymore) as people reach their senior years their needs seem to become simpler and therefore less expensive. I can certainly relate to this and have already been told by friends that I am “the oldest young guy they have ever met”. (which of course I take as a complement)