What is the Perfect Starter Investment Portfolio?

Just a short post on starting an investment portfolio and how you should go about it.

I hear and personally get a lot of questions about where to start my investment journey. We all wish we could go back in time and tell ourselves what to do with what we know now. So, what would change?

I got involved with mutual funds in the 80's because that was the thing to do. Everybody I knew anyway was invested that way. Ranga Chand, Gordon Pape, David Chilton and Brian Costello were all touting the merits of this type of investing. So, I put all my money in high fee mutual funds. I never gave a thought to how much they were costing me to hold. I just blindly believed and followed what the investing gurus of the day were selling.

Canadians pay some of the highest fees to manage money in the WORLD!

Needless to say I don't do that anymore.

This is not going to be a long blog post on specifically what you should do but more of a new way of thinking and looking at where to invest your hard earned savings and what I've learned and done. I don't tell people what to eat, how to exercise or where to invest. I just give you my experience and what I'm doing.

This is what I would now try and impart to my spawn about how to invest their money. If only they would listen.

Say NO to ETFs, Mutual Funds, Bonds and Preferreds

This is just plain investment dogma. What I mean is everyone does and invests this way. Worse yet, you get tied up with an advisor who is just a mutual fund salesperson in disguise. They just sell ideas and stuff you don't need. Learn to start small, simple and do it yourself. This is what I would teach my kids and anybody else that cares to listen.

I don't own any of these products in any great amount other than to supplement my portfolio with some stocks from around the world. All my Canadian stocks, I buy individually.

I don't own bonds or preferred shares as I believe they are not safe and are a drag on your total return. They are sold on the guise of safety and worst of all DIVERSIFICATION!

You don't need to diversify with bonds or preferreds or stocks from around the world you know nothing about. Buy a US stock ETF or an Int'l one for that. It's what I do too.

Invest Today for Retirement Tomorrow

This is really why you are putting money into an investment account. So you and the family can enjoy what is hopefully a better life after work. Even at 62 years old I still set aside 20% of our income a month for investment purposes. I think 20% should be a number one should aim for at a minimum.

What Should I Invest In?

It's a well worn sales pitch but the simple answer is; Invest in what you know. Well, what do you know? Where you bank, pay your bills, where you shop and in general invest where you spend your money.

Starting today I would tell my kids to buy a bank, a utility, a telecom, a railroad company and lastly a food retailer or grocery store.

Why these areas specifically? because we use them, need them and give our money to them. Railroads deliver them all and the economy just can't run without them. 

Why not just buy everything like the whole market so we can leave those decisions to professionals? There are a lot of bad stocks in funds and ETFs that I would never buy on their own. They are in there so traders can make money trading in and out of stocks to generate fees. Stay away and learn to pick your own stocks.

How Do I Do This?

Every bank has a wealth management arm. I am with Bank of Nova Scotia. I opened a self-directed investment account and started to buy my own stocks online. It's called Scotia iTrade. Go to your bank website and open one of these accounts NOW. So much cheaper than paying someone else and a lot more fun.

Investing is not rocket science so stop believing it's too hard for you to do.

What Next?

You've picked your first five stocks now go back to the top and pick 5 more in the same order. You will then have 10 stocks all concentrated in big stable dividend paying Canadian companies.

As a quick example I started with TD, RY, FTS, CP, CNR, TRP, ENB, BCE, EMA and Telus.

I then added BNS, BMO, CM, SJR.B and BIP-UN as time went on and more money became available. Keep to this core and then buy other companies as your knowledge base expands and you get more confident.

Here is an updated view of our portfolios and what I do with our money.

This is not investment advice but only what and how I would teach my kids to do. My wife still brings income into the house on a part time basis. This allows me to invest our money this way. It may not be suitable for you. I invest for income an the future cash flow these companies will provide us in the future. You hold these companies forever and just collect the money they spin off in dividends. They will continue to grow and raise that dividend every year. That is our GOAL!

I Don't Have a Lot of Money

Wait until you have a thousand dollars and buy one bank stock with whatever amount of shares that will buy. Keep building slowly until you have your 5 positions. Building a PF takes time so no need to rush. 

The Dogs of The TSX

Every year a list of 10 of the highest yielding worst performing stocks of the TSX comes out. I subscribe to 'Canadian Moneysaver' magazine who publishes the list courtesy of Ross Grant.

The 2018 list is comprised of ENB, BCE, POW, TRP, SJR.b, CM, BNS, NA, BMO, and RY.

5 banks, 2 pipes, 2 telecoms and 1 diversified financial. I never sell any stock on the dogs list. I simply add to ones I don't own. I own all these stocks in various portfolios except for POW which I did but sold last year. The growth was slow so I replaced it with another railroad.

Are all these dogs a buy right now? NO. Some are way up since January so I would buy the ones that are still trading down in price and represent good value. Right now they are; RY, BNS, BCE and POW. You can do no worse by starting with these stocks. Keep watching the list for an entry point. Use it as a guideline and not investment advice. 

I NEVER USE MY RETIREMENT MONEY TO TRADE IN AND OUT OF 

STOCKS!

Looking for Saving Ideas so You Can Invest? 

If you are looking at ways to save money this new book The Cashflow Cookbook can help you find some savings to then use to invest.

If you are having trouble getting your financial house in order and organized then you need to read Worry Free Money. 


If you are further looking for portfolio ideas then you might find my review of The 6-Pack Portfolio a way for you to get started on your investing journey. All of our retirement money is invested in this manner. We just hold more than 6 positions.

In Sum

• keep a list of companies you know, like and use for investment when they get cheap and you have more money
• read and educate yourself to gain confidence
• take your time, it should take a good 5 months to build a portfolio
• ignore all talk on asset allocation and diversification
• we diversify within quality dividend paying growth companies
• no gold, bitcoin or junk you know nothing about
• our holding period is forever 
• read everything you can on Warren Buffett, my greatest influence 

You have lots of ideas, what will you do now?