Buying Gold Coins

Buying gold coins is a great way for the average investor to slowly build up a position in gold.  They are sold in a variety of sizes from the standard 1-ounce bullion coin to a variety of fractional coins.

It’s been a while since I last purchased any physical gold, but I recently took the plunge and purchased a 1/4 ounce pure gold bullion coin that’s produced every year by the Royal Canadian Mint.  These coins are among the highest quality, pure gold investment coins in the world.

As I’ve said in a prior post on investing in physical gold, I believe that the only way to “invest” in gold is to own it physically.  I leave things like GLD and other so-called “paper gold” ETFs and depository receipts to the speculators.  The main reason for this has been my concern about a number of reports that suggests that there is far more “paper gold” circulating in the market than there is actual physical gold that’s supposed to back it.  So if anything ever were to happen that we needed our gold, I don’t want to be that guy holding a worthless piece of paper…I want the real piece of gold.

Buying gold Royal Canadian Mint 1:4 ounce fine gold 9999

Now I don’t see gold as a particularly great investment, but I still buy it for its “insurance” value.  Some finance gurus like Warren Buffett hate gold and think it’s an idle non-productive asset that doesn’t pay any dividends or interest.

Other billionaire investors like George Soros, Jim Rogers and the “Bond King” himself, Bill Gross, have advocated the need to own gold in an investment portfolio to protect against inflation and even deflation.  Their rationale has to do with all the money that central banks around the world have been printing since the Global Financial Criss of 2008-2009.  In their view, all that money has inflated the prices of paper assets (bonds, stocks, T-Bills etc) and that eventually investors will retreat into hard assets like real estate, gold and other commodities.

My own view is that I like gold as an asset class because it is usually negatively correlated to the stock market.  This means when stocks go down there is usually a lot of fear in the market so people buy gold, causing it to rise in value.

As a rule of thumb investors are told to keep no more than 5% of their assets in gold.  I’m not really a trader, but more of a buy and hold kind of guy so I tend to slowly accumulate my investments of a long period of time.  My strategy with buying gold is no different.

My goal is to keep about 1% of my assets in physical gold.  So I estimate that I need about $8-10 k in gold to reach that allocation.  My current holdings sit at around $6k so I will be slowly buying gold to add to it.

July 2016 Investment Income

Welcome to my July 2016 investment income report.  This report helps me track all of my investment income from rental properties, dividend stocks, index funds and exchange-traded funds (ETFs).

June 2016 Investment IncomeI was pleased to see that our net worth continued to rise in July, hitting 866k.  The increase in net worth had to do with the strong performance of global stock markets.  This brought the value of our financial assets to an all time high at just over 400k!  This is why I think that it really pays to stay invested and not try to time the market.

I received some good news regarding the new rental property.  One of the existing tenants is moving out as of Aug. 1st (so much for giving 2 months notice!).  Anyway, this is the opportunity that I’ve been waiting for.  Now I can do some repairs and (hopefully) get it rented out at the higher market rate by September 1st.  This will give the monthly rental income a nice boost!

While I was pleased to see our net worth rise this month, I’m even more pleased to see that our monthly investment income continues to stay above the 2k mark.  In my opinion, having a high net worth is great and all, but unless it’s backed up with some solid investment cash flow it’s not really all that impressive.  To my mind, cash-flow is KING!

Monthly Investing Activity

As usual, I’m sticking to the same old investment plan.  I continue to buy up blue-chip Canadian dividend stocks and keep making extra cash purchases in my DRiP account to buy more shares of great dividend-paying companies.  I like to save and invest automatically because it’s a proven strategy for building long term wealth.  In addition to the stock purchases, I’m also investing in low-cost index funds in our retirement accounts.

One of the great things about being a dividend investor is that all of my dividend income is automatically re-invested.  Every month this income buys more shares in my favourite companies that will, in turn, produce even more monthly income for me.  This is how compounding works and is why it’s such a powerful force…what Einstein called the “Eighth Wonder of the World”!

This month, reinvested dividend income bought more shares in Bell Canada (BCE), Telus (T), KP Tissue (KPT), the Bank of Nova Scotia (BNS), TD Bank (TD), TransCanada Corp (TRP), CIBC (CM), and RioCan (REI).

January’s dividend income report made me realize that the majority of my dividend income comes from Canadian banks.  While I love the banks, I recognize the need to diversify a bit more.  So I’m focusing on building up my positions in Telus (T), BCE (BCE) and my pipelines and utilities.  The problem is that these shares are trading at or near all-time highs!  So I haven’t been able to bring myself to pile a lot of money into them just yet.  I’m waiting for a big pullback before I invest any serious amount of money.

Dividend Raises

Emera (EMA) raised its annual dividend by 10% or 19 cents.  I also had Potash Corp (POT) cut its dividend for the second time this year!  Luckily this stock isn’t a large part of my portfolio.  But this does illustrate the need to diversify investment income so that if one source dries up, there’s always another to fall back on.

Monthly Passive Dividend Income

July has been another great month for dividend income.  This month’s dividend income has grown by nearly 12.5% from that of July 2015 ($1,032.25).  As always, a large part of that increase came from investing my own personal savings, while the remainder was due to the regular reinvestment of my dividend income and from companies periodically raising their dividend payout.

Here is the breakdown of the numbers for July:

Dividend Stocks

Bell Canada Enterprises (BCE) – $32.75

Telus (T) – $9.35

KP Tissue Inc. (KPT) – $98.10

RioCan REIT (REI) – $4.26

TransCanada Corporation (TRP) – $18.45

Bank of Nova Scotia (BNS) – $501.39

Canadian Imperial Bank of Commerce (CM) – $27.18

Toronto Dominion Bank – $358.60

TransAlta (TA) – $0.75

ETFs and Mutual Funds

iShares S&P TSX Canadian Preferred Share Index ETF (CPD) – $51.27

iShares S&P TSX Capped REIT Index ETF (XRE) – $40.22

Vanguard Canadian Short-Term Corporate Bond Index ETF (VSC) -$9.86

Vanguard Canadian Short-Term Bond Index ETF (VSB) – $6.34

Total Dividend Income – $1158.52

Options Income – $0

I decided to test out options trading to squeeze a bit more income out of my long term stock holdings.  I’m just learning about options trading so I took a conservative approach and sold some covered calls on my bank stocks.  I didn’t sell any options in July.

Rental Income

All units are rented and the properties are cash flowing.  July’s profit on the rental units was $955.07.  This is after all expenses.  This is the reason that I decided to invest in rental property in the first place.  I expect that in the next few months I’ll be able to increase the rental income by about $200 by fixing up my latest rental purchase.

Total Monthly Rental Income = $955.07

This brings the grand total for our July 2016 Investment income to $2,113.59!

I still can’t believe that our investments are paying us that much income!  After years of saving and investing, I’m finally seeing the fruits of my effort and I’m happy to finally have my money working for me.  If we can have our investments pay us over $2k a month that’s like having somebody bring in an extra monthly paycheque.

Our new annual passive income goal is $18,000 and we have so far received $10,176.12.  So we are already 57% of the way there.

Both the dividend portfolio and our rental properties are adding a considerable amount to the monthly investment cash flow.  We manage to get roughly $1,000 / month from both sources.  Hopefully I can increase this amount further.

Photo by sscreations/