February Comes to an End

Two months down in 2010, ten more to go. After a 50%+ gain last year, I had set myself a more realistic goal for 2010 - to average at least 1% return per month for the whole year. With banks offering 'preferred' deposit interest rates of 0.3% per year, I figured that 12% return for 2010 would be great, and much more realistic than expecting a repeat of my 2009 return.

At February month end, my overall YTD return is 2.5% so I am slightly ahead of my goal at this early stage in the year. With the TSX being up about 2% since the start of the year, I am happy to be slightly ahead of the Canadian index, while being far less than 100% invested (due to the uncertainty of the markets).

I sold quite a few stocks this week, as my stop losses were triggered. As I have mentioned, I not only put in stop losses just below the 40-day moving average line for each stock, but I also use stop losses to preserve gains if one of my stocks has achieved a gain since I have bought it. I am only 20% invested in stocks right now (the remainder in cash), after ending last week 60% invested in stocks. This type of swing is normal with my investing method, as I sell stocks when they are moving down and I buy stocks when they are moving up. I am NOT a buy and hold investor, even when I believe in the long-term prospects for a stock. I have learned that it doesn't matter if a stock SHOULD be going up, it only matters if it DOES go up.

Right now, I own HXU (Horizons TSX up), TRP (TransCanada), FTT (Finning), T, (Telus), YLO.UN (Yellow Pages Income Fund - although I have sold about half of my holdings, as it is down a bit from its highs and I wanted to preserve the good gains), and PN (PNI Media - the only small-cap that I follow, because I like (and use) their online technology).

For Monday, I am looking at adding HBU (Horizon gold bullion up), HOU (Horizon oil up), and LIF.UN (Iron Ore Income fund). The daily volume for LIF.UN is not as high as I would like, so I may not buy it since it is difficult to do so with stop-buys and still get a good price when the volume isn't there.

As most of us are Canadian investors, I assume that you either already have TSFA's or you are looking to get one. I opened one TFSA in September 2009 and another in January 2010 (I opened a second one since my bank didn't originally offer TFSA accounts that allowed self-trading of stocks). Both accounts were opened with $5,000, the maximum allowed per year. Once I determine which format I like best (between the two online trading formats) and which ones have better long-term trading fees (they have special introductory deals right now), I will combine the two TFSA accounts into one, so I don't have as many accounts to manage.

TFSA #1 (opened in Sept 2009) is now up 23.4% (in 6 months) and TFSA #2 (opened in early January 2009) is now up 10.2% 9in 2 months. I realize that many people may have higher returns in their TFSA accounts but they likely involve much more speculative stocks than the stocks that I follow, so I think my investments are safer (at least for me). Sure, the $5K limit on TFSA accounts (per year) limits your investment levels, but if you combine decent annual returns with maximizing your yearly contributions, you can build up a nice balance in your TFSA account, and not pay tax on the gains.

I see that I have many more followers after the BNN interview this week (I still don't have too many, but many more than I had before the interview), so I hope my information and approach helps at least some of you determine an investing strategy that suits you and your risk tolerance.