My TFSA Update March 2018

Last update on April 16, 2018.

Image Credit: IEA April Oil Market Report

 

In this series, I (Jin Choi) talk about my goal of reaching $1 million in my TFSA account by 2033. If you want to know what a TFSA is, I recommend you read my free book.

In the past, I had included a second topic in my articles, but I’ve decided to change up the format, as it often felt like I was writing two different articles in one. I’ve therefore decided to limit the topic of this article series to just my TFSA account, and publish the separate topics as separate articles.

 

March Results: Down 0.1%

At the end of March, I had $46,227 in my TFSA account, which was down by 0.1% since the start of the month. By comparison, the Canadian stock market went down by 0.2% while the U.S. stock market went down by 1.9% in Canadian dollar terms. Therefore, my portfolio outperformed.

The majority of my portfolio consists of oil and gas stocks. In March, oil prices rose from $61.43/bbl $64.87 (in US dollars). Yet, my oil stock didn’t register significant gains, although they did perform better than the rest of the stock market.

I remain puzzled that oil stocks remain so cheap. As of the time of this writing, XEG.TO, the Canadian oil and gas ETF, is trading at the same level it was back in April 2016 when oil was trading in the low $40s.

One reason for this seeming irrationality, I’ve discovered, is because many investors continue to assume that oil prices will drop in the future. For example, this firm continues to value oil stocks based on its assumption that oil prices will stabilize at $55. But it has now been more than three months since oil dipped below $60, and if oil prices continue to stay up, such investors will be forced to use a higher oil price assumption. I don’t know when that will happen, but my hope is that it will be pretty soon.

In the meantime, market fundamentals continue to support high oil prices. In its most recent report, the IEA reported that OECD oil inventories declined by 26 million barrels in February. They also now forecast that oil demand will exceed supply for the remainder of this year.

Saudi Arabia also recently telegraphed their intention to target an oil price of $80/barrel, presumably to support their Initial Public Offering (IPO) of the state owned Aramco. You can think of an IPO as a way of raising cash through partial sale of a company. The higher the oil price, the more cash Saudi Arabia gets.

I therefore remain optimistic about my TFSA portfolio.

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