Sticking with My Core Portfolio in Tough Times

Just a short post on what I have been doing with my portfolio during the latest carnage in the markets. I've made lots of changes.

Everyone has an opinion on what you should have or own in your portfolio. I'm no different and I'm no investing guru.

What I am is retired now so trying to protect money invested is at the core of my investment thesis. Also with that comes income generating investments. I firmly believe as a retiree you need to be invested in income producing stocks.

This has to be the goal. The core of our retirement portfolio is invested in dividend growth stocks that produce this income. 

I did a lot of buying and selling during the October pullback only to see markets retreat a further 1000 points on Monday and Tuesday this week. Here we are on American Thanksgiving and wondering if all that buying and selling is actually going to turn into a Santa Claus rally.

I'm out of cash and shot my load last week adding to existing positions.,s I'm done for the year.

What I Sold to Buy Stocks

My Wife's LIRA

I dumped her MAW104. When I heard the news it was looking for a buyer, I decided to sell all units. This mutual fund was being held in my wife's LIRA. I decided to turn those MF units into holdings of CP, CNR, TD, BNS, RY, FTS, CU, EMA, TRP and ENB.

As you can see her core is now banks, utilities, pipelines and rail stocks. Her Mawer fund was costing 1% so we are now free of that monthly cost. It was not performing that well during these daily pullbacks as the bond funds were of no protection. Bonds are not safe, it's all jargon and bullshit. You don't need them. They lose value in a rising interest rate environment and the monthly distributions will never keep up with capital erosion. How is that safe? It's just spin to get you to buy into the balanced, diversified portfolio theory. Build your own portfolio and let it work it's long term magic.

Her RRSP

We still had a small position in XAW so I sold it and divided it up the cash and bought Royal Bank and BNS. We are in the process of moving her LIRA (in kind) to her RRSP. We'll see how and at what cost that works out to. Fortunately her LIRA is small enough that she has the RRSP room to make this tax efficient. She also owns all the same stocks in both accounts so this should super charge those existing stocks.

My RRSP

I sold my VFV which is a low cost S&P 500 ETF. I used the money to buy FTS and BNS. Yes boring stocks but dividend payers to supplement my dividend income.

All of these accounts now have a very safe and respectable 4% yield.

Growth Stocks

Now for the sexy stuff. FB, AMZN, BRK.B all down significantly since purchase. I would never sell them because I believe in their long term future to provide a little torque to our dividend stocks.

Our holdings in MTY and COST are still in the green even after triple digit losses on Monday and Tuesday of this week. I like food stocks and Costco is just one of the best food/retailers on the planet. I hear it all the time, "I love shopping at Costco but it's too expensive an investment". I just don't look at it like a trader. You pay up and then hold. It becomes cheaper the longer you hold this company.They just generate tons of free cash and make money.

The only tech stock I hold is CSU. Another great Canadian success story in the tech space. I'm basically flat since purchasing this stock a few months ago. Growth stocks have been hammered in the last month. I believe if you have any cash at all there are a lot of great companies now on sale. Some are 25% cheaper than they were at the beginning of October. This is a Black Friday stock sale going on right now.

Final Thoughts

The core of all portfolios is very concentrated in the 5 sectors of banks, utilities, pipelines, rails and telecomms. I own no bonds, preferred shares, mutual funds or ETFs. We are 100% stocks. Not recommended for everyone it's just what I do and doing what I do means being different.

You have to swim upstream and rid your cluttered mind of all modern portfolio theory. Fuck diversification, buy quality companies. Bonds are and have been a shitty investment. Funds cost money and you save a lot doing it yourself. Take a look at any chart on pref share funds/etfs. They have fallen of a cliff and barely grow your money at all. Why do people buy this shit?

Advisors just come at you with jargon and BS financial terms to justify taking your money while they rub your balls. If you don't know what to do go sit in the library and study. This will save your wealth over time and in retirement.

Investing within the confines of modern portfolio theory just means you love the comfort of what the industry is selling. I question every expert and everything investing. To make your own money grow you have to invest in quality companies. Individual stocks are safer than the whole fucken industry with their complex products.

I buy stocks for their future cash flow because if you buy quality stocks that cash flow only increases over time. Is TD bank going to lose money or go under? No I highly doubt it and think of the increasing dividend payments you'll receive over the next 10 years. That should be why you invest in stocks.

The goal is to have a growing income in retirement and NOT turn into a coupon clipping, penny pinching pensioner.

NEVER GAMBLE WITH MONEY YOU HAVE SAVED FOR RETIREMENT!

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.

If you want to read more about the theory and methodology of some of Canada's professional investment/portfolio managers then you need to pick up a copy of the book 'Market Masters'. Robin Speziale conducts interviews with top money mangers in Canada using a set of pre-arranged questions. This will give you a real insight into how others invest money and how they think. A must read!

New Book and Recommended Reading

This is the second edition of Robin Speziale's book 'Capital Compounders'. I have just received a review e-book version that I am currently reading and will have a review posted here and on Amazon in the coming weeks.

Robin invests in growth stocks and is the best selling author of 'Market Masters'

Robin has been saving, investing, and building his portfolio since the age of 18. Now, 10 years later, at the age of 28, he’s amassed a $225,000 stock portfolio. He lives in Toronto.

Besides following his blog he has a Capital Compounders Facebook Page well worth joining for learning where to better invest your capital.

An October to Forget

Worst month for the S&P since 2011. $2T was shed alone in October. Both the TSX and S&P 500 lost 7% and 6.5% respectively.

Lots of money was wiped out but on the bright side we did close the month with consecutive days of triple digit gains.

Here's the thing, you probably were more likely to panic if you've never lived through this before. "In the last 10 years the S&P 500 has dropped at least 5% 23 times. That's an average of twice a year." So says Barry Schwarz of Baskin Financial.

If you are going to invest in equities then you have to expect and embrace months like we just had. I'm 100% stocks. US and Canada. No bonds, prefs and just a small amount of ETFs. That's just me and not a suggestion for you to do the same.

Even my wife's balanced fund lost money so there was nowhere to hide in October. I am looking to unwind that fund and buy some bargain based stocks during the tax loss selling season. I may wait until the new year, I haven't made a firm decision yet. It did tell me that the 40% bond allocation did nothing to save money during this past month. The fund shed almost $1K.

I did sell some stocks during the first week of the correction as I was holding them with borrowed money. I had used my HELOC for purchases. It turned out to be a good decision as my rate rose to 4.2% and the dip was followed by an even greater pullback last week.

I punted DOL, ATD.B, TOY, QSR, LNR and OTEX

The only stocks that I would consider buying back are ATD.B and TOY

QSR is mired in debt OTEX has been over hyped and is down 13% since I bought it. It is still digesting acquisitions and too many people like this stock. Probably why it's tanked. DOL is a disaster. Nothing sells for a dollar and now it's being heavily shorted by a US hedge fund. They claim it's overvalued. Why be there? LNR is suffering from the tariff war and my play on that did not even come close to working out.

I did not sell anything in my retirement accounts. As it turns out I bought Costco at a good time but Facebook, Amazon, Berkshire are all below my purchase price. I like them even more after the pullback.

Be Different

You only win this game by thinking long term and holding. The only reason I sold the stocks mentioned is because of leverage. With interest rates continuing to rise this is not a good strategy to continue. The dividend payments and or growth of the stock does not keep up with interest payments. It's just too hard to make some short term capital gains so I'm out for now.

Hunting for Value

Where to look? All the recommendations for the 'Dogs of the TSE' made in February are down a combined 7%. The worst performers and if I was looking to put money to work, look at BNS 11.7%, BCE 9.6% and TRP 10%.

Will this list get cheaper? I have no idea but after the sell off we just experienced, now is the time to start looking. If not now when?

Hunting for Growth

I like to stick to what's been working so far and how can you argue with old giants like CNR and CP. Low dividend sure but they continue to make money, beat earnings and rise in price. I just keep buying more when I have the money. I believe all portfolios should hold at least one of these rail stocks.

CP has an ROE of 37% and CNR 35%. These guys know how to allocate capital and in this era of crude by rail it should continue for years.

I also like food stocks just like Buffett does. I love and own MTY with it's 21% ROE. During this correction it has actually ended up higher than where it was 2 weeks ago. This is what's working and where I want to be. ATD.b should also be on your radar with it's 24% ROE. 

Dividends and Income

I use a combination of growth and dividend growth stocks to build wealth in my retirement accounts. It all depends on age and what your comfortable with. For me I love this combination. My core holdings include banks, telcos, utilities, food and pipelines that pay dividends. I have only sold ETFs this year and then bought stocks for our retirement accounts. I continue to add to positions as dividend income builds up.

Growth stocks I hold in these accounts include; FB, COST, AMZN, BRK.B, TFII, CSU and MTY. 

Buy businesses you understand and use. I'm looking at Netflix. Everyone I know uses it and has to have it. Don't you want to own something like that? It will always be expensive so who knows where it's going.

New Book and Recommended Reading

This is the second edition of Robin Speziale's book 'Capital Compounders'. I have just received a review e-book version that I am currently reading and will have a review posted here and on Amazon in the coming weeks.

Robin invests in growth stocks and is the best selling author of 'Market Masters'

Robin has been saving, investing, and building his portfolio since the age of 18. Now, 10 years later, at the age of 28, he’s amassed a $225,000 stock portfolio. He lives in Toronto.

Besides following his blog he has a Capital Compounders Facebook Page well worth joining for learning where to better invest your capital.