Found My Investment Vehicle!.. Zoom Zoom!
I posted back on August 21st that I was looking for a spot to invest my Smith Maneuver money. I think I’ve found it!
I had a few goals that I wanted to achieve with this money when invested.. and the criteria was as follows:
- low-risk
- low commissions
- automatic deductions? Or easy to purchase
- dollar cost average
- ability to get out at any time
The other day I was browsing the Financial blogs which I subscribe to, and noticed that The Financial Blogger had an article back on the 26th which detailed ETF’s which paid a dividend! I truthfully didn’t even know such a beast existed, but I immediately knew that I had found my new favorite investment for my HELOC (Home Equity Line of Credit) money.
As I read the list of ETF’s, I noticed that some of them had very high yield rates.. XTR (ISHARES CDN S&P/TSX INCOME) for example had at the time a 9.12% dividend yield! Wow! Now that’s the type of growth that I would want year after year.
To make a long story short, I have decided that as with most things.. if you want something done right, you have to do it yourself. So I’ve re-opened my account with Questrade, and funded it with $1000 of my HELOC. Since it’s a margin account, I’ve already made my first monthly purchase. I’ve purchased 151 shares of the FIE.A (CLAYMORE CN FINCL MNTH I ETF) at a %7.75 dividend yield. To be exact, I purchased the shares at $6.65, and it distributes a $0.04 dividend every month. So this month I’ve spent $1004.15 and will get $6.04 at the end of this month when the dividend gets issued.
Next month, I plan on buying another $1000 and then will receive $12.08 at the end of December. I entered a rough estimate of what I could make if I just used this fund, and just for fun, I averaged a horrible 2% gain over the lifetime I bought it.. check out the sheet:
![2009-11-09-[1]](http://www.lencurrie.com/wp-content/uploads/2009/11/2009-11-09-1.jpg "2009-11-09-[1]")
I think I could live on the interest if I had $1.7 million in the bank.. now mind you, that’s when I’m 67.. and that’s 34 years away for me.. but on the other hand, that nice $354K when I’m 50 mark looks pretty darn tasty to me too 
Notice that this is also JUST my Smith Maneuver account, I also stopped at $98,000.
So looking at the stock itself, here’s it’s long term track record:
Now that price is a reflection of the NAV (which is in Mutual Fund terms, the price per share). Now that whole spreadsheet above is looking for a percentage gain of 2% a year (on top of the 7.75% dividend which is already being distributed.. in fact it used to be more before the big downturn in the economy last year)… so as you can see, over the course of the last 5 years, the ETF is certainly down.. but let’s use an example scenario in which hypothetically I would have purchased when it first came out in 2005.
Now keep in mind that this fund is down from $10 to $6.60 – a 34% drop in price! But then keep in mind that there are dividends distributed every month, as well as the fact that we were averaging in.
I did a quick spreadsheet up, and came up with the following numbers:
I would have invested $52,000 in the income trust if I stuck to the $1000 every month since this fund was opened. I would own 7101.54 shares IF I re-invested every cent I received from the fund (and that’s at 0.04 a month.. which is the lowest it’s been.. it used to be higher).
My portfolio would stand at $47012.21 as of the 6th of November ($47793.36 as of close today). So with a fund which has dropped 34% in less than 5 years, we would only be down $4206.64 or 8.1%.
Now I realize that this isn’t the perfect scenario, and no one likes to see numbers where they’re in the red.. however you have to realize the situation we just came out of (and a lot of people believe we’re going so sink back into!)
In any case, I don’t plan on using this as my sole ETF, however I do plan on utilizing a number of the dividend paying ETF’s as I begin my journey.. this is just the first one.
