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Happy New Year
Yes, I know it is a little bit late. I've been trying to set up some new routines in order to implement some 2009 resolutions and unfortunately those haven't been leaving much time for posting here.
I wanted to do a quick little recap of how things went through the end of 2008 and how things have started to go for 2009.
So for 2008 our portfolio had a return of right around -38%. Lovely. The TSX was down around 35% so we underperformed the TSX a little bit, the S&P 500 was down around 38% as well so we weren't too far off that. and the Dow was down around 33%-34%. Things looked pretty good from an investment income perspective though (despite some issues as we approached the end of the year). Our total investment income grew by a little more than 30% in 2008 (compared to 2007) and the overall increase in investment income was a little over 5% (compared to what we would have received if there were no dividend increase over the year). That 5% growth in investment income was a little less than I was hoping for, it was on track to be just over 9% until the energy companies started cutting their distributions late in the year. If the BCE deal had gone through at the full $42.75 per share purchase price we would have beat the TSX over the year. There was a silver lining to that deal falling through though. BCE has re-instated its dividend.
Looking forward I think 2009 is going to be quite a volatile year, much like the end of 2008 was. I have no idea where to expect the markets to be at the end of this year. I can say however that from an investment income perspective things are looking pretty good in 2009. It looks like we should be able to increase our investment income at least 30% over what our portfolio generated in 2008. There are some risks to that though. We have already seen one energy company in our portfolio reduce their distributions (Bonavista Energy) and I suspect we will see a few more in the next few months if oil prices don't get to the $50 a barrel range soon. The nice part about owning energy companies is that although distributions are probably going to go down our budget for fuel can also go down. Overall for the income aspect of our portfolio I don't think we will see any significant increase in distributions or dividends from companies in 2009 which I hope means that 2010 or 2011 will see some very nice increases.
I hope to start posting a little bit more regularly in the coming weeks. In the meantime if you haven't already you should look into opening your Tax Free Savings Account. Remember, it probably makes the most sense for the first couple of years to use the TFSA to build up an emergency fund (or transfer your existing emergency fund into a TFSA).