My Home Run! (Part 2 of 2)

At the end of 2002 the value of the three remaining funds was about 66% of the original investment.  By the end of 2003 they'd recovered to the 76% level.  These three funds would test my resolve to never sell at a loss.

In mid 2004 my patience ran out and I undertook a serious review of these holdings.  I made the decision to transfer the investment in the Canadian Fund to a very attractive Income & Growth Fund that was performing much better than anything I was holding.  By year end, the revised holdings were worth 87% of the original amount.

In mid 2005 I rolled the weaker of the two Global Funds, which never went above 66% of the original value, into the Income & Growth Fund.  Two months later the other Global Fund recovered to the a level whereby I was able to sell the units and put a full measure back into my GIC ladder.

Half way to recovering the investment in the Fab Four and they were all gone.  Two back into GICs and two rolled into the new Income & Growth Fund.  For the remainder of 2005 and most of 2006 the value of the Income & Growth Fund units fluctuated between 84 & 87% of the original investment.

In the fall of 2006 I wondered why a small holding in my RSP account seemed to be outperforming everything else.  I learned that this was an Index Fund, simply mirroring the TSX. As the TSX was doing well, so was the fund.  At the same time, I was becoming disenchanted with the inability to sell mutual funds when the price is up.  The value of fund units are set once daily, at the end of each day.  If you decide to get out of a fund you have to make the decision by about 1:00 pm Eastern time.  If the market and the value of a fund’s holdings fall off the cliff later in the day you take the hit, having made the decision to sell some hours ago.

I began looking for something that would provide some control over valuation and timing.  I’d been paying attention to the rise and fall of energy and gold for a number of months and had come to believe that there was an opportunity if one could move quickly and time things correctly.  In addition to my various funds I have a small trading account with a discount broker.  I sent a note off to them asking if there was anything like an index fund that could be traded more like stocks than mutual funds.  Welcome to the world of Exchange Traded Funds!

After studying and learning a bit about ETFs, (iShares) Energy Sector (XEG) and iShares Gold Sector (XDG), I took the giant leap (for me) in late September.  I cashed out all the units of the Income & Growth Fund, then valued at 86% of the original investment, and put the proceeds into XEG and XDG on a 60/40 split.  I bought the Energy ETF (XEG) on September 25 and the Gold ETF (XDG) the following day.

On November 30 I sold XDG for a 26% gain in 65 days!  On December 14 I sold XEG for a gain of 15% in 80 days!  As a result of these two trades, I was able to rebuild my GIC ladder, returning it to its original state.  A ten year roller coaster ride.  I had learned that this investing stuff is not for the faint of heart!