Friday, 24 August 2012

Recent Market Plays August 2012

Not much has happened in terms of building my portfolio. I've managed to squirrel away some funds but none of the stocks that I have my eyes on are at an attractive price in my opinion. I've been sitting on this cash for a couple weeks now and I feel that I'm losing out because I'm waiting. Because of this, I dumped it all into CLF which is an ETF for Canadian government bonds. The money will earn me more interest there than it would sitting in a savings account.

When the right prices come along all I have to do is sell some units of CLF in order to fund the purchase of the new position. There are disadvantages to this, the obvious one being the commission fees involved with the plan. However, if the ETF is held long enough, the extra interest earned will negate the commission fees and I'll come out on top. The issue with this is that I don't know exactly how long I'll be holding the money in CLF. Quite the dilemma but I may have found the solution to it.

By using Pre-Authorized Cash Contributions offered by Claymore (the company that runs CLF), I'm able to add to my position in the ETF monthly without having to incur the commission fee. My plan is to always have units in CLF so that I can regularly add money that I save up (which would generate more interest in the ETF than in a savings account) while I wait for opportunities in the stock market.

That's great and all but there's another problem to deal with. Since I'm working part-time, my income is anything but predictable. Since this is a monthly contribution at a set amount, I can't set it too high because I simply may not have enough funds in a particular month. The flip-side is that some months I may have an excess amount of cash which would just be sitting in the savings account because the set amount for the contribution may be too low. The minimum and maximum is $50 and $5000 respectively. For now I'm thinking somewhere between $100-$150 should be adequate because I'm confident I'll be able to save at least that amount every month, and if I have extra then I guess I'll just have it sit in the savings account until I have enough to buy stocks.

This may seem very convoluted but once I work out all the kinks I think this will make everything run more efficiently. I'll keep you guys posted.

-the Paperboy

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