September 2013 update

September 2013 investment update

In spite of the attempts by the US government to deliberately sabotage the US economy and thus the stock markets, September, along with some gut wrenching volatility, was able to produce some gains.

The Dow Jones rose just over 2% and the S&P gained 3% while the TSX eked out a modest 1.1% growth.  That after a dismal last day of the month.

My portfolio grew by 1.3% as expressed in Canadian dollars (low, due to the strengthening of the Canadian dollar) but almost 3.5 % in US dollars.  My gains for the year are 12% in Canadian dollars and 7 % in US dollars.

Fall Purchasing Plan

As usual I do most of my purchasing in the fall, after the summer doldrums, which hopefully is now over.  During the course of the next few weeks I will be either adding to my positions in current stocks, or perhaps adding some new stocks to my portfolio.  I feel I have enough quantity of stock selection, so I am reluctant to add more companies, but I may if it looks like there are some good deals.

In general I will be selecting either from my stock screener or from my existing holdings.  I would be happy to hold stocks from either list, but I would like to only buy those stocks that appear to offer higher value, which means trying to time entry to the market.  I have mentioned many times that you really can’t time the market, and no one has been successful over time, but that doesn’t stop me or anyone else from taking a stab at it.  What I won’t do is conduct a series of buy and sell transactions to try to time the market.  All I’m trying to do is attempt to time my entry.

Some stocks that look like they may be ripe for purchasing are:

INTC (badly beaten up this year), VZ, KO, UL, PM, all of which are well off their highs.

One stock that has bubbled up since I dropped the dividend yield requirement is CAH (Cardinal Health).  I will be taking a closer look at that one.

Stocks I will avoid, as they are trading quite high relative to history are:

LMT, DD, MMM, ADP, ITW, NVS, COP, JNJ, TOT

All are good stocks to own (and I do), but I’m not sure this is the best time to get in.  I may be wrong and they may have lots more in them, but that’s the game you play when in purchase mode.

I’ll keep you informed on my decisions, which should be done before the end of October.

Mutual Funds (again)

 

The following article was written for investments in the US 401(k) plans, but is really a commentary on mutual fund fees.  It shows how fees can often be hidden in the prospectus and statement under other titles and how they could cost you up to a quarter of a million dollars in your lifetime of investing.

 

The Retirement Savings Drain: Hidden & Excessive Costs of 401(k)s

 

May 29, 2012

|

Robert Hiltonsmith

Though your retirement or bank accounts statements contain no evidence of it, everyone who has an IRA, 401k, or any other individual retirement savings account pays a variety of fees every year. But because these fees are taken “off the top” of investment returns or share prices accountholders generally have no idea how much all of this is costing them.

These fees can be substantial: over a lifetime, fees can cost a median-income two-earner family nearly $155,000 and consume nearly one-third of their investment returns. Worse, these fees are often excessive and financial services companies can get away with charging higher-than-necessary fees for a number of reasons, namely: the savers’ lack of information, the inefficiency of financial markets and individualized investing, and the substantial costs—both in money and time—associated with switching between investment brokers.

This brief sheds light on the hidden costs of 401(k)-type individual retirement plans, details the different types of fees paid by the consumers, and uses an example investment from Demos’ own 401(k) plan to illustrate these fees’ heavy burden on the average account-holder. Using industry data on fees, the brief estimates the high costs of 401(k) fees to a model family over a lifetime of saving for retirement. The brief also explains the causes of the nearly universal excessive fees that investment firms charge to savers, and argues for a wholesale reform of this country’s broken private retirement system.

KEY FACTS

LIFETIME FEES

  • According to our fee model, a two-earner household, where each partner earns the median income for their gender each year over their working lifetime, will pay an average of $154,794 in 401(k) fees and lost returns.
  • A higher-income dual-earner household, one where each partner earns an income greater than three-quarters of Americans each year can expect to pay an even steeper price: (as much as) $277,969.

OTHER FEE FACTS

  • The median expense ratio of mutual funds in 401(k) plans was 1.27 percent in 2010.
  • Trading costs vary from year to year, but have been estimated to average approximately 1.2 percent a year as well.
  • In the long run, the average mutual fund earns a 7 percent return, before fees, matching the average return of the overall stock market. However, the post-fee returns average only 4.5 percent, meaning that, on average, fees eat up over a third of the total returns earned by mutual funds. 
  • Smaller 401(k) plans have higher average fees than larger ones. The median expense ratio for plans with less than 100 participants was 1.29 percent, while for plans with more than 10,000 participants, it was 0.43 percent.

TYPES OF 401(k) or IRA FEES

  • Expense Ratio Fees: This ratio incorporates the administrative, investment management, and marketing fees charged to savers. Because these fees do not vary much from year to year, they are reported as a static expense ratio and listed both in a retirement plan’s summary documents and the individual prospectuses of each mutual fund in the plan.
  • Trading Fees: The costs incurred by a mutual fund when buying and selling the securities (bonds, stocks, etc.) that comprise the fund’s underlying assets. Investment managers of mutual funds pay a fee each time they buy or sell one of the securities that comprise the underlying assets of the fund, and they pass these on to savers via the funds’ share prices. Trading fees vary from year to year depending on the frequency with which fund managers buy and sell the funds’ assets.

 

 

ValueLine stock screener for this month (2% or more dividend, consistent dividend growth and A++).  There are now almost 40 stocks on the list.

If anyone wants a detailed report on any of these companies, let me know and I will send it to you.

 

Company   Name

Ticker

Financial   Strength

Dividend   Yield

Dividend   Growth 10-Year

Cardinal   Health

CAH

A++

2.33

25

Deere   & Co.

DE

A++

2.46

13

Int’l   Business Mach.

IBM

A++

2.02

18

Intel   Corp.

INTC

A++

3.85

26

Total   ADR

TOT

A++

5.39

15.5

Verizon   Communic.

VZ

A++

4.45

2.5

AT&T   Inc.

T

A++

5.35

5

Baxter   Int’l Inc.

BAX

A++

2.95

8.5

Exxon   Mobil Corp.

XOM

A++

2.89

8

Gen’l   Dynamics

GD

A++

2.57

13

Home   Depot

HD

A++

2.05

19.5

Johnson   & Johnson

JNJ

A++

3.03

12.5

Lockheed   Martin

LMT

A++

3.77

22.5

McDonald’s   Corp.

MCD

A++

3.3

27

Medtronic,   Inc.

MDT

A++

2.15

16

Northrop   Grumman

NOC

A++

2.53

9.5

Occidental   Petroleum

OXY

A++

2.93

14.5

PepsiCo,   Inc.

PEP

A++

2.83

13.5

Pfizer,   Inc.

PFE

A++

3.37

6

Raytheon   Co.

RTN

A++

2.83

8

Royal   Dutch Shell ‘A’

RDS/A

A++

5.47

8.5

Travelers   Cos.

TRV

A++

2.33

4

Wal-Mart   Stores

WMT

A++

2.52

18

Chevron   Corp.

CVX

A++

3.24

9

Coca-Cola

KO

A++

3.05

10

Du   Pont

DD

A++

3.06

1.5

Emerson   Electric

EMR

A++

2.51

6.5

Kimberly-Clark

KMB

A++

3.39

9.5

Merck   & Co.

MRK

A++

3.61

1.5

Procter   & Gamble

PG

A++

3.09

11

Smucker   (J.M.)

SJM

A++

2.2

10.5

Texas   Instruments

TXN

A++

2.97

21.5

3M   Company

MMM

A++

2.11

6.5

Automatic   Data Proc.

ADP

A++

2.47

14

Bristol-Myers   Squibb

BMY

A++

2.98

2

Colgate-Palmolive

CL

A++

2.35

12.5

Illinois   Tool Works

ITW

A++

2.17

13

Novartis   AG ADR

NVS

A++

3.22

16

Unilever   PLC ADR

UL

A++

3.47

9.5

 

 

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About borgford

Feel free to contact me with questions: brianborgford@hotmail.com
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