If you’ve been following my blog, you might recall a few months ago I called out to Derek Foster, wondering what Canadas Youngest Retiree has been up to.

Back in September, Derek was a busy guy.  I found out he completed an interview with MoneyTalk host Patricia Lovett-Reid, he was preparing for a speaking engagement in Toronto at Canadian MoneySaver’s Investment Conference, he was putting the finishing touches on his new book and as always, he was helping raise his five kids.  I don’t know about you but that seems more like a year’s worth of work, let alone one month.

For those of you who don’t know who Derek Foster is, here’s a quick bio (photo courtesy of his website):

• Derek was born in Ottawa in 1970.
• Derek was able to become a millionaire and leave the proverbial rat race at the age of 34 by using various investing strategies, many he believes any investor can emulate.
• Derek, ”Canada’s youngest retiree” is a well-known Canadian author and has shared his personal investment experiences and strategies in his National Bestselling Books:
• Stop Working:  Here’s How You Can!
• The Lazy Investor: Start with $50 and no Investment Knowledge
• Money for Nothing: And You Stocks for FREE
• Stop Working Too:  You Still Can!
• *The Idoit Millionaire (*Latest book, Fall 2010)
• When not writing books or giving speaking engagements, Derek spends time with his wife and five children in Ottawa (in my old neighbourhood no less).

For a couple of years now, maybe like some of you, I’ve been both entrigued and somewhat skeptical of Derek’s investment journey.  I’ve read a few of his books (Stop Working:  Here’s How You Can! and The Lazy Investor) and to be honest I’ve been more inspired than skeptical of his success.  Sure, he may have had some great timing on his side and some risker investments paid off, but sometimes you make your own luck as well.  I know others don’t feel the same and have written so.  That’s fine because everyone is entitled to their own opinion. 

Overall, I’m happy for Derek because he had a dream, saw it fulfilled and then some.  Investment timing, luck, skill or otherwise, he’s a fortunate guy. 

I’m glad I got the chance to chat with Derek for almost a couple of hours a few weeks back.  Here’s what he had to say in Part 1 of My Own Advisor interview.  I hope you enjoy the read.

*     *     *     *     *     *     *     *     *

My Own Advisor:  Thanks again for the interview Derek. It’s a busy time of year for everyone and I’m glad you got back in touch with me. It’s great to finally chat with you – enough email already!

Well, onto my questions.  Ready?

Derek:  Fire away Mark.

My Own Advisor:  Youve just released the latest book in your Stop Working series entitled The Idiot Millionaire: You Can Become Wealthy! What inspired you to write this book?


Derek:  To be honest, it was largely because of the 2008-2009 economic downturn. Because my personal situation had changed since I originally left the rat race at 34, (I was earning an income from other sources such as book sales, etc), I wanted to switch my portfolio to higher growing dividend-payers as this would save me tax and generate better returns over the long-term. BUT I wasnt as smart as I thought I was; hoping to sell my stocks at one price and trying to get back in at a lower price. In some cases, it worked. I bought businesses like JNJ, Shoppers Drug Mart and Phillip Morris at reasonable prices. For other businesses, it didnt work. For example, I waited too long for Canadian bank stocks. I missed the bottom and their subsequent run ups in price. Admittedly I missed that boat. I would buy some if prices to crept lower. I guess the title of my book really applies to me, kind of tongue-in-cheek.


My Own Advisor:  What makes this book unique in your Stop Working series?

Derek:  More so than any of my previous books, this one discusses a companys competitive advantage. I describe what I mean by this and how investors would do well to invest in those companies that have it and it also offers a list of those companies.


There are many companies out there that are worth owning, companies that pay dividends but they do not have any economic moat around them. This is important because ideally you want to buy companies that not only pay dividends, but that increase their dividends over time and also have great growth opportunities because of their advantaged products and services. My new book includes a pretty good list of these companies in Canada and the U.S. In the U.S. for example, Coca-Cola quickly comes to mind. In Canada, Enbridge.

My Own Advisor:  Switching gears a bit, tell me about your investment strategy. Still a dividend investor?


Derek:  Absolutely, but my approach or maybe should I say my focus has changed. Before I was more focused on higher yields for income generation, maybe slower-growing stuff but now my needs have changed. I mean the books generate income which was an unexpected surprise (because being an author or a writer is not usually the path to riches). Really though, Im fortunate to have some other income streams with no debt and so things are different for me at 40 than 34 when I wrote Stop Working (Heres How You Can Too!). Geez, that was six years ago. Im now more focused on companies that have their moats and good long-term growth prospects. I try to explain that in plain language in the new book.


Also, the reality is many folks dont retire from the workforce at 34, or even 40 or 50. They are working their way towards retirement bit by bit and hopefully this book will provide them with a more complete list of companies to help them out.

My Own Advisor:  A short time ago, when the market was falling (in 2008-2009) you sold all your dividend payers. I read a few articles about that. You took some heat. Can you walk us through that decision?

Derek:  I was an idiot but at that time, I sold my shares in early February 2009, I thought I could get back in later and at cheaper prices. Turns out I did and I didnt as I told you before. I managed to buy a lot of stocks much more cheaply but a large part of this was luck. I benefitted from put-option premiums and the incredible strength of the Canadian dollar. After I sold my stocks, I remember humming and hawing for a couple of weeks – should I say anything to the media? The books encouraged folks to do the opposite; buy and hold dividend-payers for income. I didnt want to be hypocritical but I can see why some people were a little put off, you know what I mean? In the end, my approach did save me money and I came out ahead but not on everything; I missed the boat on those Canadian bank stocks and some other companies I would like to own.


The book (The Idiot Millionaire) actually includes some of this stuff and Ive got some details in there about my prices when I got back in.


My Own Advisor:  Made any recent purchases?


Derek – Yeah, I bought Strayer Inc (a for-profit university) at a pretty reasonable price. It just made sense with our Canadian dollar being so high and the recent stock price weakness due to pending potential changes to loans for students. Im very comfortable with this holding but I realize there are potential risks. The stock price had dropped from over $250 earlier this year to under $140 where I bought it. This is even cheaper than at the March 2009 low of $159 and the Canadian dollar is much stronger now, so the stock price is actually 30% below the March 2009 bear market low (in Canadian dollar terms).


My Own Advisor:  Something more fun now. Whats on your Christmas list for 2010?


Derek:  Well with five kids in house, Christmas is really for them, not me. Ive never been one to covet stuff, Im not materialistic. I finally got a GPS this summer for our trip out West and Ive got a laptop computer. During our trip, once the kids were in bed and all the chatter had stopped for the day, I pulled out my laptop and wrote a couple of pages (for the new book). Honestly, Im a cheap guy. If a burglar came to my house, he would quickly leave in disgust as my material possessions are not really worth stealing (except perhaps for my Sienna minivan). When I look at stuff, I always ask myself, is this really going to add any value to my life? If the answer is no, I dont buy it. I guess nothing Mark. I dont even own a cell phone. I guess I dont consider myself important enough to need one.


I had to laugh at this last response. I mean, with five kids, how can Christmas NOT be all about them?
 
It was great to chat with Derek.  He’s a bright and funny guy.  Foster’s fast track to early retirement through  savings and diligent investing in Canadian and U.S. dividend paying stocks may not appeal to everyone but I think it’s inspirational.  In the end, we’re all trying to achieve financial freedom and regardless if you’re a fan or a critic, learning something from Derek Foster can and should be done.  That doesn’t mean you need to follow his path or emulate what he did.  Knowledge is always different than the application, but learning what works and what doesn’t for you is important.  I’m trying to build my investment knowledge and application all the time because in my opinion, continuous improvement is critical to success. 
 
In Part 2 of my interview, you’ll hear more from Derek about his portfolio allocation and his stock market predictions for 2011.  Stay tuned for that blogpost after Christmas. 
 
I hope you enjoyed Part 1 and as always, I look forward to any comments!
 
Cheers,
Financial Cents

I dont know about you, but applying for a mortgage can be frustrating and time-consuming. From our perspective, we were just another number applying for a bunch of numbers. Insert a great mortgage broker into the equation.

Heres a short (but not inclusive) list of great things a great mortgage broker can do you:

Give you customer focus – Unlike banking representatives, mortgage brokers are not tied to any one bank. Sure, they might have some favourites, but great brokers canvas the full field. Our guy was looking out for the customer (us), our terms, conditions and pre-payment options. He was working to find a product that fit our needs and situation, not his agenda. In brief, our mortgage situation is not ideal, we have a hefty penalty to pay if we break our existing mortgage and go with another lender within the next two years. (This is a reminder to look at the detailed print of your mortgage agreement before you purchase a new home .) In our case, a great opportunity arose and sometimes you simply cant pass those up regardless what the fine print says – life happens, choices need to be made and chances need to be taken. Back to my point, you can certainly make a strong argument that mortgage brokers work for themselves, not you, however without attention to personal detail, they wouldnt be in business. Our broker put our needs and requirements #1. He was always very responsive. He never said he didnt have time for us or needed to take another call.

Give you leverage The way I see it, using a mortgage broker to fund a mortgage, youre going to get more attention because the lender wants that broker to continue sending business their way. As an individual customer, were just a number apply for a bunch of numbers. In talking with our broker, I know if he sensed any run around from a prospective lender hed move on and our mortgage prospects would go with him.

Save you money No doubt mortgage brokers are compensated by the lenders they strike the deal with but a) that means you dont pay them and b) as long as the rate and conditions of the mortgage are better than what you could have obtained youre saving money. Potentially lots. Like I mentioned earlier, our broker worked hard to get us a good deal. He knew his stuff and actively monitored bond yields for us. We more than appreciated that because without our new great rate and its associated terms, we wouldnt be coming out ahead over our hefty mortgage penalty. Weve taken our lumps and learned from them. My advice? Dont take a five-year mortgage term if theres even a chance you might move within that term period. Sure, you can sometimes port your 5-year fixed term to your new home (it doesnt cost anything but the mortgage appraisal and sometimes a small discharge fee) but that wasnt ideal for us. In hindsight, we should have taken a shorter fixed term a few years back or instead, given historical research, a variable rate. Click here to read more about variable mortgage rates and how more often than not, you come out a winner over a fixed rate mortgage.

In closing, mortgage brokers can be a tremendous resource, if you have the right one. Were glad we worked with our guy. Actually, we still are.  He’s still checking in with us to ensure all the rebates we were able to take advantage of are coming our way, including one for the mortgage appraisal.

I know if I have mortgage question going forward, Ill drop him a line. Hell take my call, hell listen, hell provide good customer service and objective feedback. I dont mind sharing who we used because the experience was very positive.

Thanks very much Rob!!

Click here if you want his contact information.

Do you agree or disagree what a great mortgage broker can do for you?
Any positive or “other” experiences youd like to share?

Cheers,
Financial Cents

Getting back to work and into the grove (or rut) from vacation this week, I feel compelled to import some of what Im experiencing at work into my blog today.

Ill set the scene

Youre asked to work on a new project, its high-profile and youre the project manager. Youll be given resources, although there are limits. Youll be given time to complete the project, although there is a due-date down the road. Youll be given scope to work within, although youve got some wiggle room to manoeuvre. Youre excited and you want to get going. Thats great because theres a natural tendency to dive right into the work – do this; do that; full steam ahead. From my perspective, that’s the last thing youd want to do. Enthusiasm and keenness are great attributes for a project but youll have fun soon enough. Successful projects require effective management from the very beginning; creating objectives, plans and communication of your approach to name a few.

Is your personal finance journey any different than a long-term project? Not in my opinion…

According to the Project Management Institute (PMI) project management is the application of knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholder needs and expectations of a project. Technical, I agree, but I live this stuff everyday. In plain language, project management is a toolkit for folks to get work done effectively and efficiently.

At work, you might be responsible for implementing a new product or service. In your personal finance journey, the product is you. Youre the long-term project deliverable, financial independence is your outcome. At a very high-level, I dont see many differences between project management principles and the personal finance journey, I’ll explain:

1.Both need clear objectives - The most successful projects have clearly defined objectives from the outset. Wouldnt this apply to your financial journey?

2.Both need good plans - A carefully thought-out project plan serves two purposes. First, it allows everyone involved to understand and perform their part in the project. Second, it serves as a monitoring tool allowing you or others to take action if something doesnt go the way you thought it would. Written plans are always the best. I would argue your financial plan is simply a long-term project in disguise.

3.Both need lots of communication - Your projects at work are a collaborative effort between all of the individuals involved, even if its just you and your boss. Your personal finance project is probably not so personal, it likely affects your spouse, your kids, maybe even your parents. Everyone needs to be on the proverbial same page at home, just like work, if the journey is to be a successful one and all successful ventures begin and end with effective communication.

4.Both need controlled scope Just like work, numerous issues will arise during your project and not all these changes will help you achieve your objectives. There will be setbacks, there will be changes, its inevitable. At work, its important to stay focused on your objectives. I dont see your personal financial journey being any different. In my opinion, it doesnt matter if your financial objectives are 100% GICs or 100% stocks – managing your scope and staying true to your plan is absolutely necessary.

5.Both need sponsorship and support - Projects typically involve several stakeholders, folks who invest time, resources and have a vested interest in the project. If the project is you, you need to remain invested and vested. That can also mean, getting support when necessary, from your spouse, kids, parents, friends or a financial professional when you need it. Rarely can anyone achieve success (financial or otherwise) without help from others. While it may be a personal finance journey, the journey isn’t taken in isolation.

I could go on. I think theres tons of parallels between the project management world many of us experience everyday and the personal finance journey. In the end, good management is simply that, at work or at home.

What do you think?
Do you see any of the same parallels I see?
Do you think I’m nuts and too immersed into my work?

Cheers,
Financial Cents

Investors hear plenty about asset allocation and asset diversification but in my opinion not so much about asset location. Why is that? Is it often overlooked? I know I used to, but no longer, and here’s why…

Asset location refers to the type of account(s) you use to hold your stocks, bonds, ETFs, GICs, real estate investment trusts, cash or other investment products in.

In a post this summer, I wrote about asset allocation and diversification; I said everyone needs to have AAAD! I think asset location is equally important because owning all the right investments in the world does little good if youre always taxed on them. Taxes, bad. Keeping your money in tax-advantaged locations, good!

Heres a very brief overview of what I earn (and what you might too) from some investments:

Interest Income - from bond funds, bond ETFs, GICs and money market funds. I own bond ETFs. If you own any of these, in unregistered accounts you are taxed at your marginal tax rate. You probably dont want that. I know I dont.

Dividends - from eligible Canadian stocks. I own Canadian dividend-paying stocks. If you own Canadian stocks like me, you might receive some tidy dividend tax credits for doing so. This can be a very good thing. Why? In Ontario, for example, its possible for an individual to earn over $40,000 per year in dividends without forking any of that income over to federal or provincial tax. Wow eh? Honest.

Foreign dividends from U.S. stocks, for example, are taxed at your marginal tax rate. I own U.S. dividend-paying stocks. I don’t own any other stocks, outside the U.S. (yet). With my U.S. holdings, I don’t have to sit back and get taxed at my marginal rate: U.S. stocks held inside my RRSP and LIRA - I don’t pay withholding taxes.

This is much better because:
U.S. stocks held inside any RESP or TFSA – you pay 15% withholding taxes.
U.S. stocks held in unregistered accounts – you pay 15% withholding taxes PLUS tax at your full marginal rate (ouch).

Capital gains from selling a stock or security for more than you paid for it you made a profit. We sold our condo last year but I dont intend to sell my stocks, ever. You need to report 50% of your capital gains as income and pay tax on that amount.

Other Income from Real Estate Investment Trusts (REITs) or income trusts. I own REITs. These investments (sometimes) pay healthy distributions. Be mindful that “tax friendliness” varies from REIT to REIT since these companies distribute Return of Capital (good) and Income (bad). A former blogger, Think Dividends, who knows this stuff very well reminded me about this important point – so I’m passing it along! (Thanks). If kept unregistered, income received from REITs and trusts are taxed at your marginal tax rate. I don’t keep my RioCan or H&R unregistered…

The above mentioned, you might be asking yourself (or not), what does Financial Cents do with this information?

I certainly dont advocate you follow my lead, Im no personal finance or tax expert, but I know I dont like paying tax any more than I have to. This leads me to my asset location general rules:

Rule # 1 For now, I keep all my Canadian dividend-paying stocks unregistered. I want that dividend tax credit, I want the favourable tax treatment. Over time, I will probably put a few Canadian dividend-payers in my TFSA, just not right now. My 20-year goal is to make some good income from dividend income. Im on that journey, one dividend payment at a time…

Rule # 2 - I keep all my U.S. dividend-paying stocks in my RRSP or LIRA. I dont want to lose any dividends paid to me. I want to reinvest all dividends received. Besides, my U.S. dividend-paying stocks dont get the same (great) tax treatment as my Canadian dividend-paying stocks do.

Rule # 3 I keep Canadian bond ETFs (like XBB) in my RRSP and TFSA. Interest income, just like employment income, is taxed in a big way. I use these registered accounts to defer or eliminate tax respectively.

Rule # 4 I keep Canadian equity ETFs (like XIU) in my RRSP. Outside of a few U.S. dividend-paying stocks, I like to use passive investing in my RRSP. I dont have to think about the markets and besides, XIU amongst other great equity ETFs pay solid distributions that get reinvested.

Rule # 5 I keep Canadian REITs (Iike RioCan) in my RRSP and TFSA. RioCan pays nice distributions, which is exactly why this income should be tax-sheltered.

As always, buyer beware, do your own research, other investing disclaimers apply. When in doubt, ask questions from knowledgeable people. Nobody learns about asset location or AAAD in a vacuum. I didn’t. I learned from books. I learned from trial and error and some investing mistakes. I learned from bloggers, some pretty smart ones like Canadian Capitalist, Larry MacDonald, Canadian Couch Potato, Money Energy, Ending the Rat Race and Million Dollar Journey, just to name a few. I know I haven’t covered all the “rules” of tax-advantaged investing but I’ve described what I’ve learned that applies to me so hopefully it can help you too.

I became a better investor in recent years thanks in part to better asset location. I hope to become more knowledgeable over time, as I mature as an investor and learn more. Death and taxes will never go away. At least for the latter, you can do something about it.

Got other ideas about the best locations to hold investments, and why?
Do my rules go against yours?

Cheers!
Financial Cents

In last months dividend income update, I said the following:

We might add more to our BNS position, maybe another $50 or $100 if we can but even if we dont, I bet our dividend income will increase again regardless of what Mr. Market does. I look forward to sharing that with you.

Well, Mr. Market had a decent run until today, but regardless of how Mr. Market feels today were happy – because our stocks are paying dividends and our dividends are buying more stock. Our dividend income has moved up.

This month alone, we had or will have in a matter of days, the following Canadian companies pay us: Bank of Nova Scotia, BCE, CIBC, TransAlta and TransCanada. Thats in addition to RioCan and H&R REITs who pay us every month

My post today reminds me what Tom Connolly has posted on his site, DividendGrowth.ca:

First you have to know about dividend growth investing and understand how dividend growth builds wealth. Second you have to believe it works. Third you have to resist the temptation of ‘story’ stocks, to control your behaviour and finally you need the patience to execute the strategy (to wait for the value buy price, and then wait for the dividends to grow). Nothing spectacular will happen in the short term. Good luck.

My portfolio doesnt have what many DIY investors might consider the best of the best dividend-payers, but I think its a decent start. Im working on it. Its a journey, not a get rich scheme I remind myself. Dividend investing is part of my retirement strategy, not the full-meal deal. I’ll make mistakes, and I’ll move on. I’ll learn from them…

Some stocks like TransAlta (TA) have very high payout ratios and run the slight risk of cutting dividends by a few cents if earnings dont keep pace. Until that happens, dividends are paid. Other stocks like Sun Life have been beaten up since the recession started and are having a hard time rebounding amongst some sector peers (such as Great-West Life Co.). In the meantime, dividends are paid. Until major dividend cuts happen we need to hold the line. I need to remind myself there will always be threats to the system; stories of better performers, analysts and skeptics that write-off many companies when signs financial trouble or takeovers arise. You shouldnt own those because you should own these they say. Thats fine. I wont sell anything until I’ve been handed a very significant reason to do so. If nothing more, risks of TA and SLF remind me that my small basket of stocks should be further diversified, not sold. My small basket needs to be more like a full shopping cart, and unlike a trip to WalMart on a weekend, I enjoy this type of shopping. Buying Emera (EMA), Fortis (FTS), and Crescent Point Energy (CPG) are some fine examples of shiny products I can see down my shopping aisle. We’ll save over the many months that follow and try to buy those payers when the time is right. Until the sky gets very dark, were going to enjoy our $4,200+ in dividend income this year, but only for a bit, because its quickly reinvested to buy more stock.

This year’s stars could be next year’s duds but in the end, dividends never lie. Companies can either to afford to pay their shareholders or they can’t. As long as my companies consistently pay, I think it pays to consistently own them. Overall, we just need to stick to the plan; buy and hold established companies that have a history of paying dividends. Simple plan, extraordinary results over time.

Cheers!
Financial Cents

Over a hundred years ago, TransAlta (TA) was launched as a small, local power company in Alberta. Today, its a massive energy company, Canada’s largest publicly traded generator and marketer of electricity and renewable power. With approximately $3 billion in annual revenue, more than $9 billion in assets held in power plants across Canada, the US and Australia, TA means serious power.

It also means powerful dividends…

I bought a bunch of TA shares earlier this year around $20. As of today, TransAlta is only trading a bit higher. Thats a good thing. Im hoping it stays that way, for a very long time actually. Confused? Wouldn’t I want stock prices to rise? Nope…

Earlier this year, I received almost two (free) shares of TransAlta stock because of my synthetic DRIP. In the end, I only got one. You know this story well; set up the DRIP for free with your discount brokerage; tell them you want all stock dividends paid to you to buy as many whole shares as possible each quarter; tell them what’s not reinvested into stock(s) to be deposited as cash into your brokerage account for future purchases; yada, yada. Well, as a dividend investor, I want TransAlta prices to stay low or go lower because when dividend payment time comes around (every quarter) it gives me the chance to buy more shares. High TransAlta prices never do me any good because I cant buy as many whole shares via my synthetic DRIP. On the other hand, the better hand, Im hoping for low TransAlta prices because that gives me an opportunity to buy more whole shares.

What happened when shares stayed closer to $20 this past month? I got those two new shares, unlike the one share from the previous quarter. Thanks to moderately low TransAlta prices this year, my TA compounding machine is starting to run faster; dividends paid during lower stock prices bring in more shares; more shares bring in more dividends; more dividends continue to work to bring in more shares over time…you see the cycle.

I like owing TransAlta because the way I see it, you can put off buying a car, a computer or a new pair of shoes. Frankly, I doubt most of us will keep our lights off tomorrow after we come home from work, keep our TV off, or keep our stove off. Most of us want to see things so we don’t trip over them, some of us might watch a hockey game on the tube and I’m sure most of us are going to want to eat. Based on those needs or wants, I bet some of you, somewhere, are using TransAlta power to do that

How about you, do you like seeing your stock prices drop?

Cheers,
Financial Cents

This post introduces Captain……..Aqua America to our portfolio.
A superhero? No.
A super stock? We think so.

Who they are:

Aqua Americas history dates back to 1886, when some college professors were granted a charter to supply water to the residents of Springfield Township, in Delaware County, Pennsylvania. Well over a hundred years ago, the professors built a small pumping station and laid pipes to their homes. Initially, new customers were welcomed but as the number of potential customers increased, so did the associations operating responsibilities. It was then that the association made the decision to incorporate. This company was known as the Springfield Water Company. Throughout the 1900s, the company continued to grow to meet the needs of neighbouring municipalities and state counties and in 1971, the company was listed on the New York Stock Exchange. In the 1980s and 1990s, growth-through-acquisition continued and tens of thousands of customers were added to the system. Over the last few decades, the company has grown even more, adding customers in North Carolina and Florida. Today, Aqua America (WTR:US) provides water and wastewater services to approximately 3 million people in 14 states.

Why we picked them:

Aqua America (WTR:US) provides what everyone needs; clean, safe, reliable water.
Has paid dividends since 1939.
Has paid a consecutive quarterly dividend for more than 60 years.
Has had 20 dividend increases in the last 19 years.
Five year average dividend growth rate over 8%
Market cap of almost $3 billion.
Current dividend yield = 2.8%
% shares held by institutions > 40% (pensions like it, thats a very good sign)

Like I mentioned, Aqua America provides what everyone needs. I know Ive taken clean, safe water for granted, and I certainly shouldnt. It is without a doubt our most essential resource. As we continue to use mother earth very liberally, it will become an even greater commodity. My eyes have certainly been opened to this realty with our recent home inspection. The house we purchased (more details to follow) uses a well and septic system, just outside Ottawa. (Needless to say, in the coming months, Ill need to become more knowledgeable about these systems.) Clean, safe, quality water and wastewater facilities are essential for modern living. Millions of city-dwellers across the U.S. rely on Aqua America for their services; millions in Pennsylvania, New York, New Jersey, North Carolina, Texas, Florida, Virginia, South Carolina, Georgia, Illinois, Indiana, Maine, Missouri and Ohio.

There is absolutely no certainty about Aqua Americas long-term prospects, no company for that matter, but we now own it because its a company thats needed, its a company that continues to grow and its a company that we understand. Those are pretty good starters.

What do you think? Are owning water and utility companies good long-term investments?

Cheers,
Financial Cents

The proliferation of fresh new breakouts among high ranked SEPA set-ups, suggest that this market may have even further to go on the upside. The majority of our portfolio holdings have held up well with only a few triggering stop-losses. Currently we are long 24 names, most of which are smaller than our normal weight position sizes. We are very close to moving to heavier weighted positions should our long-term model flash the all clear signal. This relatively rare bull signal may take some additional upside to trigger or perhaps a market pullback prior.

While the market could pullback and digest the recent run-up, I should point out that during the initial leg of a new bull market; pullbacks are generally contained to 3-5%.

There is plenty of headline risk brewing in the world. Whether it’s the troubled US Dollar, credit default swaps or the Greek debt crisis, a wall of worry may be just what this market needs to continue its climb.

Our current portfolio holdings include: AGP, ADTN, AKRX, BJRI, CACC, CNI, COHR, EZCH, FCFS, HRC, IFSIA, IIVI, INTX, LTD, MCRS, MDCO, PANL, PCYC, PLCE, SHOO, SOLF, SRCL, THI and VICR.

We took profits in the following names: LVS, KEI, EDU, MDCO (partial) and BIDU

Mark Minervini

Its hard to ignore the media coverage on global markets these days I find myself avoiding CNBC during market hours more and more just to keep my focus where it needs to be. Across all major news sources weve heard a lot in the last year, the Dubai Debt Crisis, European Debt Debacle (P.I.I.G.S), fear of a U.S. double dip and more, but many investors missed the stealth success of an emerging BRIC (Brazil, Russia, India, China) country. Despite tepid performance across the BRIC countries in recent months India has persistently remained strong over the last 24 months and just this week hit 31 month highs.

Lets delve into this surprising trend and determine if you should be chasing or fading this emerging powerhouse. I like to look at India based on three different time frames using three different technical based systems this is the strategy that I use in the ETFTRADR portfolios each day. I call it a 3X3 strategy where I constantly monitor three time frames and three time-frame-unique systems, which provides diversity on indicators and periods. If you are interested in learning more about strategies we use I recommend joining Freemium TRADR, it’s the easieast way to become a rockstar ETF TRADR. Well use the Wisdom Tree India ETF (EPI) since it has far better liquidity than other India ETFs (INP, IFN). In the last two years EPI has gained more than 20% outpacing the BRIC Index (BKF) and the S&P500 (SPY) significantly.

Lets start with the birds eye view and weekly charts. The INVESTR system, which uses Williams % R, moving averages and Parabolics, has been extremely effective in 2010. The trend based system does show extreme strength, however, is it too strong to chase now? In my view, its not a good time to enter based on weekly charts traders do not want to fight the current on EPI, but rather look for lower risk entries. Take a look at the chart below; Ive highlighted several different entry points based on this type of bull retest. I look at 80 or 50 level retest to provide advantageous entry prices. The key is marking the retest bars low as your stop. To continue reading, click HERE.

By Andrew Hart ETFTRADR

Cono Sur Merlot - Food Pairing: Merlot can be served with steaks, burgers, duck, lamb, and pork. It also goes quite well with rare tuna and foods flavoured with balsamic vinegar. This wine is also smooth enough to accompany a salad toppled with cheese or cold cuts.

You probably already know from reading my blog, I like banks. My premise for investing in banks can be distilled to this; everyone needs one.

Sometimes, people pay banks to keep their money (through fees); banks make money. You need a house; you need a mortgage, banks lend and make money. You need a car; you need a loan, banks lend and make money. Banks are an integral part of our economy. They alone, they have perfected the science of compounding.

Which begs the question, as an investor, why wouldnt you want to be part of that successful money-making machine?

Almost two years ago, my wife and I became shareholders of three of Canadas five big banks: Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CM) and Bank of Nova Scotia (BNS). Regarding BMO and CM, we made major investments (for us…) in those and now were fortunate to own enough shares via healthy dividends that buy us about five more BMO shares and three more CM shares every three months. Both of these compounding machines are well underway and hard at work.

The same can’t be said for BNS (yet) – we dont have enough shares in Bank of Nova Scotia to provide us with even one share each quarter. We’re certainly working on it, and I’ll explain what we did last month to accelerate our holdings, especially knowing that Canadian banks are poised to raise their dividends soon.

Last month, my wife and I were able to save $100 and cut the same amount in a cheque to Computershare to buy more BNS stock, free. Well, thats not entirely true. I did have to pay for the stamp, the envelope I sent the cheque in probably cost a few cents and there was a small labour cost for me to walk across the street and put the letter in the mail. Seriously though, we added to our BNS position last month for next to nothing and all we needed to do was to find $25 each week to make it happen. Instead of eating out for dinner one night we BBQed instead and saved close to $50. Instead of buying our fancy wines at the LCBO (over $15 , we bought a few of our favourite table wines and saved another $50.

Lets take a quick look at what our contribution to BNS stock could look like in 20 years:

For simplicity of calculations:
Cost of two BNS shares = $100
Dividend yield = 4%
Dividend growth rate = 4%
Stock price growth rate = 4%
Number of years = 20

The result?

Our $100 BNS investment this month alone will be worth almost $500 in 20 years. Sure, 20 years is a long time but making that type of return by changing some spending habits in just one month is nothing to sneeze at. Our Bank of Nova Scotia compounding machine is picking up steam with our most recent cash infusion and the good news is, it’s only the beginning. There will be more savings going towards BNS and more dividends to rise as well to help us in our passive dividend income journey. Although “history is not indicative of future performance”, I like my chances. BNS declared its initial dividend at the rate of 3% per annum on July 1, 1833. Yes, that’s right, over 170 years ago. Dividends have been paid since 1892 and they don’t seem to be stopping anytime soon.

Last month we accelerated our BNS compounding machine all for trading one little evening out and a few $20.00 bottles of wine for some cheaper, everyday stuff. In my opinion, the BBQ paired with our Cono Sur Merlot never tasted so good!

Would you trade one evening out and some fancy wine to make $500?
We did, and we might do it again!

Have a great long weekend, be safe and enjoy!