How time flies! Last May, my HELOC portfolio started taking shape with an initial transfer of $5,000. The portfolio was subsequently introduced with its holdings at the time. I must admit that 1 year later, I am extremely satisfied with the results since I never expected this success:
I guess hard work does pay as I enjoy spending considerable time buried under company presentations and quarterly results. Even then, do I believe I can reproduce this performance for the May 2011-2012 period? Not a chance! That is simply because my dividend payers currently constitute a large portion of my holdings so I do not get to buy in and out of them like I do with the non dividend paying juniors. I also foresee my dividend payers keeping their weight in this portfolio as market sentiment has turned and we are no longer in the great recovery from the last crash. In my opinion, the following years will be a stock picker’s market since growth will slow as more and more nations tackle debt and deficit. The interest rates will eventually start rising as well which will keep markets in check. Even though the return for the last 3 months has been dismal, I am optimistic and still aiming to achieve double digit returns for 2011.
Would I repeat the experience? You bet! ??In fact, following the end of QE2, if panicky investors decide to bring down the TSX under 13,000, I might be tempted to step in and take advantage of quality companies selling on special. In the end, I will not be paying a cent from my money as my dividends will be covering the interest payments and more. So far, I have not paid a penny from my money in HELOC interest or margin interest. I always bet against the global economy collapsing, slow growth yes but total collapse? Not in my time. Central banks will take their time to raise interest rates and I doubt the FED did all it can to engineer its sputtering recovery so that it abandons it because QE2 is done.
Finally, what I am proud of the most is what I wrote in my portfolio objectives for 2011:
Even though the moral is high and the troops are ready to rumble again in 2011, notice how I did not assign any numbers representing a target rate of return. That is because no one knows what is coming this year; it will certainly have its fair share of volatility and potentially 1 or more ‘black swan’ events. Never underestimate the market and never overestimate your skills no matter who you are or what your ROI was in the past.
Boy did we get to see black swan events this year! What I wrote was not prophetic in any sense, it was simply me being realistic and blocking hot air from reaching my head. This is the stock market and it takes a cool head, cunningness and determination if you want to make it alive with a decent return. If you are missing one of these variables I urge you to consider passive index investing.
Have you ever borrowed to invest? How did it turn out for you?