Since I’ve written this blog, I’ve been completely transparent about my investment decisions. I always thought it would be helpful to see how others invest their money as I believe we can all learn from each other. However, since money is more taboo than sex, most people, even bloggers, are shy to bare it all. But since I believe there is no better credibility test than transparency, here I am today telling you that I’ve received my lump sum payment at the beginning of the month. The check was in the amount of $108,760.02.
This is exciting… but it’s a lot of work too
As I already explained, I intend to invest this money quite rapidly. My goal is to have a fully invested portfolio by the end of October. Why am I in such a rush? Because there is no better timing to invest in the market than now. I want to rapidly build a strong dividend growth portfolio and start cashing those dividend checks.
The technique used to build a whole portfolio within two months is different than how I build my RRSP portfolio (my retirement account). This account now shows close to $70K in value, but was built with a few thousands each year. Therefore, I only have two questions to answer while reviewing my RRSP account:
#1 Is the asset allocation and the current holdings continue to make sense? Are all my companies continue to meet my investment thesis?
#2 Which companies will I add this year with my contribution?
I added on average about 2 companies per year for a total of 13 companies. This time, I’m about to add about 20 companies within 2 months. It will not influence my asset allocation over the years; I will build it right up front.
I’ve already identify 20 prospects
Usually, building such portfolio would take forever if I want to do it properly. Finding the time to screen the market, analyse my favorite picks, determine an entry point and review my asset allocation would command several hours.
Fortunately, this is what I do full time now with Dividend Stocks Rock. I can then use the work my team and I do on our dividend growth investing platform and build my portfolio accordingly. To be honest, I am proud to use my own service and realize how DSR makes my life easy. The whole system has been built to make investment decisions simple & efficient. By using a mix of our existing portfolios and our exclusive stock ranking, I was able to identify 20 strong buys within an hour. At the end of the process, my portfolio should look like this:
As you can see, I will have a concentration on financials and tech stocks. I believe both sectors will outperform the market over the upcoming years. I’ve selected four tech stocks that are not evolving in the same sub-sector. They are all leaders in their market and three of them show strong cash flow generation abilities.
As for the financials, there again, I’ve picked two Canadian and two U.S. companies that are not exactly evolving in the same sub-sectors. The idea is to make sure I am well diversified in these two sectors since they will represent 40% of my investment. I like being invested in many different sectors to make sure that, if the market crashes, my portfolio will hold still.
My first trades are done already!
Last week, I pulled the trigger on a few stocks already as the market was down on September 5th. I’m definitely not about timing the market, but when everything is down, it’s just a great opportunity to make a few purchases. I will be updating you with my trades in the upcoming weeks, but I think each company deserves a full analysis. In fact, I will share our DSR stock cards of each purchase with you. Those are 2 pages reports helping investors to make smart decisions.
In the meantime, I’m curious about what you would buy if you were me? post your suggestions in the comments below.
Sounds exciting for sure, Mike. Personally, and that’s my opinion only, I don’t see what is the rush to invest all of it now. I understand the phrase “the best time to invest is now”. Without being a market timer, I think one should be careful when investing a large percentage of its asset. After all, the market has been going up for 7 or 8 years. There will be a major correction! When? Nobody knows. I’m more of “dollar cost averaging ” type of investor. Are we in a stock bubble right now? This post should, rightly so, create a lot of responses. By the way, my top stock right now is Telus. A long time keeper.
I’m with you on this one, Michel.
No time like the present when it comes to investing but that’s a lot of capital to allocate at one time.
It would make me nervous. Especially with the market at all-time highs.
I’d probably divide that lump by 20 or 24 and invest those smaller chunks each month.
It’ll get the money in fairly quickly but still have some dollar cost averaging.
Either way, deciding how to invest $100k is a great problem to have!
Hello Michel,
I always appreciate your sound advise. The problem with everybody thinking the next correction will happen tomorrow is that we now get a bunch of sheep following gurus telling this is the only truth to believe in. Interesting enough, nobody discuss that between the Black Monday of 1987 and the techno bubble of 2000, the S&P 500 climbed up by over 500% (without dividend). What if we are right in the middle of another gigantic bull market of 13 years long?
If we are in the middle of a gigantic bull market, you would still do very well by spreading out your new found cash. But, if for example you lose 35% soon after your purchase, it could take a long time to break even. I guess there is no sure answer to this dilemma. Nice problem to have. It also depends on your personality. I’m quite conservative by nature.
You have good timing with the canadian dollar being so strong – a great time to buy US stocks at a “discount”.
Hello Erik,
I’m glad to buy U.S. stocks today and not 2 years ago! hahaha!
Well, you’ve certainly said a lot without saying a lot.
I’ve recently had the same problem with a bit more money. I made a small-ish wager about a month in but then backed out and waited 8 months before deciding on what to do. Fast forward to the present and I made a big ‘buffett style’ wager. Value investing style in a high Dividend yield & dividend growth Canadian financial company. Sometimes when you’ve got a good opportunity that you’ve waited a long time for you have to swing for the fences.
hahaha! I didn’t want to share all my purchase in one article. It would have been long and a bit boring :-).
Cheers,
Mike
Hello Mike!
I have been a long time subscriber to the Dividend Monk blog and to the Dividend Guy since you acquired the former (I think). Now, I receive both newsletters, and I enjoy the advice and information you share with us.
I have been planning for a long time to write to you or at least make comments to some of your posts. However, since time is a scarce resource, it is always in short supply in my schedule. Nevertheless, tonight, after an exhausting Aikido practice, on my last evening at home before flying back to the Oil Sands tomorrow, I would like to share some of my thoughts:
Generally, I share your investment philosophy. I consider myself a dividend growth investor who is value oriented but recently I have introduced a new aspect to my profile. For me, it all started with reading Derek Foster’s first book followed by the second, third, etc. I began my investing journey during the darkest hours of the Great Recession, which actually worked out to my huge advantage. Unfortunately, back in those days, I didn’t have a lot of capital to invest, otherwise by now I would have been “retired” and living my dreams!
Still, even while raising three children and starting from absolute zero (my wife and I are both first generation immigrants), we have built a $250,000 portfolio, and I project that we’ll be mortgage free before I turn 45 (that is in four years). All in all, we are doing fine.
In the beginning, I accumulated some shares through the DRIP and OCP plans offered by Computershare and CIBC Mellon (back in the days). Later, I started buying stocks “in bulk” in my discount brokerage accounts. And so it went for a while until…I read Derek Foster’s book “Money for Nothing…”. There I got introduced to derivatives and namely, stock options. I was fascinated by this newly acquired knowledge, but I wasn’t quite ready nor comfortable to begin using this new strategy. I don’t remember when exactly, but it was later in that year when I came upon another interesting read: “The Warren Buffets Next Door Whom You Have Never Heard Of”. I strongly recommend it to you or your readers as a different perspective of do-it-yourself investing. Each chapter in the book is awesome, but it is the second one which is my favorite. It’s called: “Options Apostle”. I won’t spoil the read by giving away all the details. All I am going to say is that it provided me with further information and confidence to start using stock options to my advantage.
Early this year, I think it was in February, I decided I was ready to get my feet wet. I had opened a margin trading account with stock options authorization. I transferred $10 000 in stocks and cash, and began selling cash covered puts of companies I like to own in the first place. At the same time, I sold many covered calls towards the stocks I own in our RRSPs and TFSAs. I made some mistakes, and I learned from them. I didn’t lose money, but simply undercut my profit potentials. So, have I been successful so far and how much? Well, first of all, let me say that options are absolutely fascinating and they give you so many…options (pun intended). There are many strategies out there, some riskier, some more conservative, some for income, others for hedging your portfolio, etc. What matters most is setting your specific goals. I find trading options a bit like playing chess. You plan your moves, you prepare for unexpected events, and you cover your positions. My goal has always been and will be to increase the dividend income of my portfolio. At this time, I am projecting around $4500 annual dividend income. Meanwhile, I expect my income from my stock options to come up to $2800 or more. That is a more than 60% percent increase in value. Perhaps, some of your other readers will say that it is too risky or it’s speculative in nature. I would strongly disagree, and I would urge the readers to check the above mentioned books, together with “The Rookie’s Guide to Options”. Like I wrote above, it really boils down to what are you trying to achieve with the options trading. In many ways, options strategies are far less riskier than owning stock shares outright.
Finally, I would like to think that my comment gave you a new idea how to use your capital without trying to time the market. No one knows when will be the next market correction, and it’s not prudent to park your cash in a regular savings account to earn returns less than the rate of inflation. But what if there was a way to get paid and make 8-10% (or more) return while waiting? I have already found this way for myself with the stock options trading.
Let me know what you think!
Cheers,
Hey,
Thank you for your comment. When I started my career in the financial industry, I worked in a back office, balancing options and other derivatives trades. It is a fascinating world indeed!
For some reasons, I’ve put this part of knowledge aside for many years and never gave much thoughts about trading options in my own portfolio. But I don’t have a specific reason why I didn’t do it.
I may reconsider it based on your comment. Thank you for bringing this topic on top of my “investment to do list”.
cheers,
Mike
Good Job Mike!
There will always be the concern of the Big Bad Bear coming in and mauling your portfolio. But if past history is any indication of what will happen in the future, her are some facts of what then should occur.
1. Dividend paying stocks will outperform non-dividend payers long term.
2. Good companies will continue to pay dividends AND INCREASE PAYMENTS regardless of what the market is doing.
3. If you are just starting out and in the accumulation phase, reinvesting the dividends will enhance your portfolio in down markets. and add more value in bull markets.
4. If you are retired and depend on the dividends for income, collecting the same amount of income (or even getting a small raise) while the unrealized portion of your portfolio is taking a beating. Is a very reassuring consolation. while you wait for the market to recover.
5. Since dividend paying stocks have historically out performed the S&P 500, you too should also do the same in the long run. Placing you in the top 10% of money managers who run mutual funds.
Hello Pretty Beast,
You pretty much resume all reasons why I decided to invest 🙂
Cheers,
Mike.
With Sept and October traditionally being the worst two months for equities, I would probably spend the balance of this month compiling my list, monitoring it daily, and dollar cost averaging it in during October.
You are right; Sept & Oct are not known for being “solid month” per se. However, we are already half way in September and nothing is going sideways yet. I will take up to October to finish my portfolio.
it would be contrarian but what about the energy sector?
Hello Steve,
I’m a bit concerned about this sector. I intend to initiate a position, but I will keep it small. Too cyclical for my taste.
Cheers,
Mike
Hi,
I share the view of Nick and MIchael.
I am not sure what would be the correct approach but my feelings would be to wait for a correction before moving with the money. It is quite clear from valuation perspective that we are in the top of the mountain. Nobody knows how far we are still climbing but it is for sure that we are closer for the climb downwards than we were 2 years ago. If we are already now at the top what is the probalitity that we can climb higher. If interest rates starts to climb, there is not much revenue growth in the companies.
Why wouldn’t you sit on the cash pile as Warren Buffet is doing? Then after 6 months, 1 year, 2 year or even more start to buy?
Do you think that the market is still going up after 1 year? Now debt levels are high, money does not pay anything and the hype is on. At least for me it feels that this can not last long?
Hello Jukka,
The problem with sitting on the sideline is that the correction may happen in 2-3 years and then, it will simply bring back the market to today’s level. Then, I would be just missing 2-3 years of dividend payments.
When you think about it, 2008 crashed and brought us back to 2002 in no time. Then, fast forward to 2012 and the stock market was about 64% higher than 10 years ago. This is not the most impressive return (5% annualized return), but this is counting the worst crash ever. Therefore, I’m willing to bet next crash will not be worst than 2008.
Cheers,
Mike
Hi. I think that if market climb 6 years backward it will definitely be lower than where we are now. Despite if it happens now or after 2 years.
I understand your point but just think about the other option that you could buy the same stock much lower than they are now. You could get more stocks and that would accumulate your wealth even more. Putting 100k and getting dividends is good but after 30% correction you have 70k anymore.
I have a bit same problem but not so much money. This is why really interested about the subject 🙂
Hello Jukka,
The key is; what if I had written this post in early 2015? I guess we would have the same discussion, right?
some food for thoughts for this Sunday 🙂
It’s a good thing to be a conservative investor, yet how do you know anything for sure? In my view, all these gurus talk about investing boils down to one thing; know your edge and apply it wisely. Value play is good, just as I have found free cash flow to be a no-brainer. With free cash flow, you can hedge no matter the direction of the market. Plus, you always come out tops in the long run provided fundamentals are favorable.
Here are the four bank stocks I would buy.
Wells Fargo, Bank of America, TD, Bank of Nova Scotia.
Utilities, Bell, Telus, Fortis, Emera.
Energy: Imperial Oil, Chevron
Consumer: Canadian Tire
Pipeline: Trans Canada
Tech: Microsoft, Google
We have lots of common names on our list!
I’m not sure I’ll go in the energy sector thought…
You have 13 stocks and intend to buy 20 more. Does owning 33 stocks tend to mimic the market overall and thus resemble a mutual fund? I assume that you are buying shares over most or all market sectors.
I like dividend growers and use DRIPs when possible. The power of compounding really “kicks in” after 5 years.
33 stocks isn’t too much. I expect to hold 20-21 for a 100K portfolio. You are still far away from a perfect mimic of the market and this is how you can beat it 🙂 .
I am buyiing what I hope will be recession proof medical companies….Quest Diagnostics, Exact Sciences, Stryker…..
I tried few months ago dividend growth investing but now switching to ETFs. I’m planning to buy SCHD, SPHD, VYM and VNQ with an average yield of 3.52
I put more weight on SCHD and SPHD.
What do you think?
I rather invest in individual stocks than ETFs. The first reason is because I want to keep control of what I hold. Most of the times, ETFs include companies I would not touch.
Best regards,
Mike.
What about the food stocks Mike? ADM, Kraft, Campbells, Smuckers, GIS, etc? Bull or Bear folks still got to eat.
I’m thinking of Canadian food and wine companies; Andrew Peller and Lassonde Industries.
Cheers,
Mike.
Good luck with your exciting new adventure Mike!
These are the stocks I would add to the 13 you already own:
Cdn: BEP.UN BIP.UN BPY.UN BCE TD BNS RY FTS ENB IPL KEY MFC
U.S.: CMI HD INTC MMM MSFT NHI PG WEC
I imitated my self directed DGI portfolio in mid 2008 after releasing my financial advisor. It was the best financial decision I ever made! I currently have 36 holdings, all stocks.
Hello Bernie,
HD, MMM, MSFT are already on my buy list (I actually bought some MSFT already!).
I have some RY in my RESP account. Thinking of adding BCE, FTS, TD.
Thank you for the suggestions!
Mike.
Thanks for being so transparent with all of this, it’s very helpful.
I am a 50% DRIP/50% ETF guy. I used to lean more towards the DRIPs, but when I see companies go down (or under), I think to myself, “Why didn’t I see that coming?” Recent examples are TransAlta and Gran Tierra Energy. The example I often use is Lululemon. A few years ago, the stock price plummeted due to them selling see-through yoga pants. Other examples would be Nortel, Enron and Blackberry. Who saw these drops coming? I think that every company is potentially one ‘see-through pants’ episode (pipeline spill, CEO misbehaviour, etc.) away from significant price drops or bankruptcy and I don’t have a crystal ball. My ETFs hold hundreds (or thousands) of stocks so that I have global diversification and sleep very well at night.
I really love my dividends, but the risk-averse side of me gets nervous.
Hello Steve,
I think many investors like to have a core of ETFs and then add some div growth stocks. I like this strategy as well. I might even fall for it one day 🙂 hahaha!
Cheers,
Mike.