CanETF Portfolio Trade #1: Starting With Preferreds

Today presented an enticing opportunity to make the first investment for the CanETF Portfolio.

Preferred shares are one of the more attractive parts of the market in terms of potential mid-to-long term risk-adjusted performance. Given their generous yield and the view that both stocks and bonds are priced to deliver lower returns than in recent years, preferred shares stand out as an attractive asset class for new investment. The ETF of greatest interest made a fresh 52 week low today, presenting a compelling opportunity to pull the trigger.

That ETF is the iShares U.S. Preferred Stock ETF (PFF).

Trade 1 Order PFF

At that limit price, PFF would yield nearly 5.7% (based on dividing all dividends paid in 2017 by the limit price). Minutes later, the trade filled:

Trade 1 Filled PFF

Trade 1 Confirmation PFF

Shares closed at $37.58, so the investment was down $1.20 (($37.58-$37.64)*20) in the first day. The new portfolio allocation is as follows:

Current Allocation and Balance – January 29, 2018

TFSA

Cash: $5,000.00 CAD

RRSP

Cash: $4,247.80 USD

iShares U.S. Preferred Share ETF (PFF) – 20 Shares: $751.60

RRSP Total

$4,998.00 USD

Grand Total (CAD at 1.2317 per USD as of 1/26/2018)

$11,157.02 CAD

The decrease from the January 1, 2018 grand total of $11,291.00 CAD is due mainly to the decline in USD/CAD in the period, and to a small degree due to PFF closing lower than the purchase price.

This new allocation to PFF makes up 15.0% of the RRSP portion of the portfolio and 8.3% of the total portfolio. There is plenty of room to consider adding more if a situation were to occur where PFF makes a meaningful move lower from here and the fundamentals remain largely the same.

More detailed rationale can be found in this SeekingAlpha article.

The CanETF Portfolio is not meant to be taken as investment advice. Please conduct due diligence on any ETF investment you are considering, including but not limited to a review of the prospectus, underlying benchmark methodology (if applicable), portfolio characteristics, holdings, performance since inception, role in your existing portfolio, and outlook for future performance.

Inception of the CanETF Portfolio

Today, January 1, 2018, marks the beginning of the CanETF Portfolio, a real money, unconstrained, and totally transparent ETF portfolio.

The portfolio is starting with $5,000 CAD in a TFSA and $5,000 USD in an RRSP. Splitting the original funds into two accounts and two currencies will make totals a bit more complicated, but the advantage is to better reflect the choices Canadians have in investing their savings (account type) and the choices Canadian ETF investors have in buying and selling ETFs (both Canadian and U.S.). Tax efficiency can be improved by holding some ETFs strategically in one account or the other, and a much larger ETF market can be accessed south of the border.

No ETFs are currently held, and the starting allocation of all cash will be invested as compelling opportunities arise. A monthly update and a post for each trade will be shared, providing a timely and transparent look into the strategy.

Current Allocation and Balance – January 1, 2018

TFSA

Cash: $5,000.00 CAD

RRSP

Cash: $5,000.00 USD

Grand Total (CAD at 1.2582 per USD as of 12/29/2017)

$11,291.00 CAD

 

The CanETF Portfolio is not meant to be taken as investment advice. Please conduct due diligence on any ETF investment you are considering, including but not limited to a review of the prospectus, underlying benchmark methodology (if applicable), portfolio characteristics, holdings, performance since inception, role in your existing portfolio, and outlook for future performance.