Weekend Reading: Oil Slump Edition
No, I’m not talking about the Edmonton Oilers’ 11-game skid. Oil prices have collapsed some 40 percent since the summer and oil and gas stocks have taken a beating. Canadian Oil Sands – the same stock that prompted a reader to ask about leveraged investing – slashed its quarterly dividend from 35 cents to 20 cents per share.
Of course I’m the not-so-proud owner of 400 shares in COS, which plummeted 45 percent on the year. It’s like the oil gods are helping reinforce the decision to abandon my portfolio of individual stocks in favour of a two-fund ETF solution.
Speaking of which, I was interviewed by an investment industry website about my two-fund solution. Financial planner John DeGoey was not a fan, saying the portfolio was too simple for his taste.
Because Money
The Because Money show was back this week as we interviewed Jenni Bolton and Caroline Munshaw from Cent$ible Students – which provides in-class financial education workshops for students aged 5 to 13. The video runs about 30 minutes and there’s also a full transcript and resource list.
Christmas Shopping
Last year my wife and I took advantage of a 30-day free trial and signed up for Amazon Prime. The subscription, which costs $79 per year, gives you unlimited free two-day shipping on everything from books, movies, electronics, and more.
Your orders are shipped free anywhere within Canada, which is great for buying and sending gifts to friends and family across the country, and beats paying the outrageous prices to ship via Canada Post.
Before I shop anywhere online I always make sure to go to Great Canadian Rebates first so that I can get extra cash back on my purchases. You’ll find hundreds of merchants listed who ship to Canada and offer cash back incentives for Great Canadian Rebates members.
This week’s recap
Last Friday, Sandi Martin told us about high value clients and why they get the royal treatment at Canada’s big banks.
On Monday I wrote about the two-fund solution and on Wednesday Marie asked if we’re ready to give up cash.
Over on my Rewards Cards Canada blog I talked about the Costco Executive Membership that paid for itself this year. I also reviewed the WestJet RBC World Elite MasterCard.
Weekend Reading:
Preet Banerjee had a brilliant idea for the airlines (and its passengers). Charge passengers for carry-ons, not checked luggage.
Million Dollar Journey looked at the best credit cards for collecting Aeroplan miles.
Adam Mayers explores some options for new graduates who may not have health or dental coverage with their first job.
Jim Yih from Retire Happy Blog shared a sobering lesson from a 63-year-old who frequently raided her RRSP in order to fund her lifestyle.
Michael Lewis wrote the hit book Flash Boys about high-frequency trading and Michael James does an excellent job explaining what HFT means with this grocery store analogy.
Ben Carlson at A Wealth of Common Sense listed seven simple things most investors don’t do that can make a big difference.
My Own Advisor shared his personal finance a-ha moments.
Our Big Fat Wallet asks if you need to use a Realtor?
Sheryl Smolkin interviewed Gail Vaz Oxlade about her My Money, My Choices financial literacy project.
Have a great weekend, everyone!
Oil has always been cyclical. The “hockey stick” price forecasts for oil have always been considered ridiculous even by those who use them to run their Monte Carlos on exploratory drilling. We have held our stock position in an oil company for over 20 years and it has served us well. So long as the fundamentals are there it’s worth staying with it through the swoops and plummets. I understand not everyone wants to hold individuals stocks, though.
Hi Bet, no doubt the price of oil will rise again and I’m sure COS will be the first to raise its dividend once the price exceeds its $75 price target. Just sucks to hold one of the few oil & gas stocks to suffer the biggest loss.
COS is not the one I own so I don’t know how sound it is. But oil is definitely a cyclical commodity: just ask anyone who’s worked in the patch for a few decades.
Thanks for the mention, Robb. Very tough to be an Oilers fan right now. For your portfolio I think simple is good! I can see myself doing something similar in the future. I will always hold dividend stocks, but I think a mix of dividend stocks and indexing would be best for me at this point going forward.
Hi Dan, I won’t put too much stock into one advisor’s recommendation as he doesn’t know why I don’t have a bond component, for example. I’ll assume he means that two funds is not sufficient for the majority, which is true.
Are you an Oilers fan living in Calgary? Must be tough, indeed!
Yeah I think simplicity is good sometimes. It would be tough to sell the solid performers especially the big banks. I am not an Oilers fan but I have relatives that are. I hear they changed the name of the TSN special from “Oil Change” to “Oil Leak” 🙂
Glad you liked the grocery store analogy. For some reason your declared switch to indexing fell off my list, a mistake on my part. I had one reader ask me about your choice of VCE vs. my choice of VCN. It’s always possible to argue about such small differences, but the main thing is to stick to your choice over time. Owning either VCE or VCN is likely to be better than switching every time you notice the one you’re not holding performing best in the recent past.
Hi Michael, when I chose VCE it was because I was comparing it against XIU. I forgot to even look at VCN and I get why you might prefer the total stock return rather than just the large caps. I can’t see one having much of an advantage over the other so I agree to just pick one and live with it.
Sorry about your COS – that will be a hard one to dump for an ETF until it recovers. It is one of the worst-positioned oil plays at the moment although most of us have been taking oil hits big time.
It is hard to complain about hockey to a Toronto resident where the Leafs usually find a way to disappoint. On the upside of that we are willing to share the Raptors with the country and they are flying high.
I used the 30 day Amazon Prime membership this year when I knew I had some purchases coming that made sense on Amazon. It was nice. As for Costco – I find it hard to walk into their store environment and stopped about 20 years ago.
Hi Robert, what’s happening in Edmonton right now is on a whole other level from even what Leafs fans have suffered through over the years. Three 1st round picks in 2007, three consecutive 1st overall picks from 2010-12, and numerous top 10 picks in-between and they’ve easily been the worst team of the last decade.
Bold choice with the 2-fund solution, but I see why it’s attractive, I’m even doing the same.
I’ve only been investing for a few years but I hate the hassle of watching individual stocks, so I’m streamlining my registered accounts, particularly the TFSA, to ETFs. (I also transferred a whackload of cash out of a common US stock and bought VXC. Nice to see the ETF was your choice as well!). I’ll be taking my risks with my money outside of the stock market, so I want a robust portfolio that doesn’t require any babysitting. I’m doubtful I’ll go down to just two funds, but I still like your style.
I am thankfully avoiding much of this oil bust. I owned only one energy stock in my portfolio, and while it’s tanked an appropriate 40%, it was such a minor position it’s barely rocking the boat.
I didn’t buy into oil because my fiance works for an oil & gas firm and nearly 1/3 of his compensation is company stocks. Additionally, he was overly enthusiastic (as all native Calgarians are) about the energy sector and dumped a decent amount of his own cash into O&G stocks. With his job and his portfolio so dependent on the industry, I felt that adding too many oil stocks to my portfolio would over-expose us to the industry. I’ve never been so grateful a clear head won over my greed!
My wish? Oil stays down for a bit so housing prices in Calgary can fall after it and I can buy a condo at a great price 😉
Hi Bridget, picking stocks was exciting at first – especially starting in 2009 when everything has gone on a tear since – but now the excitement has faded and I’d prefer to spend my time elsewhere.
Good call hedging away from oil and gas – you never want too much of your fortunes tied to one sector. I hear you that pretty much everyone working in a particular industry tends to be overly optimistic about its prospects.
I don’t mind the two-fund solution. I mean, do you own XIC or ZCN or VCE or VCN? I dunno, I mean really this splitting hairs.
There will probably be a new product that comes out in a few years that changes the landscape anyhow.
I like XIU, mostly large-caps, yes but the returns have been just as good if not better than XIC over 10 years. Will that continue…we’ll see…
As for the O&G stocks, most dividend investors own COS. Great time to buy more. I think investors that can load up on SU, CNQ, BTE, COS, and U.S. conglomerates will be nicely rewarded in 5-10 years time.
Happy to subscribe following your indexing or dividend investing or hybrid approach. 🙂
Thanks for the mention!
Mark
I’m not too happy to see COS cutting their dividend but maybe that was a little expected?
It’s tough to see Oil price dropping, it’s tougher to be an Oilers’ fan right now.