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Youngandthrifty’s Investment Owner’s Contract

As discussed in a previous post that explains the change or makeover to my investment portfolio, this investment owner’s contract is long overdue.  I had meant to create one (well, five years ago) when I initially read The Intelligent Investor, but never got around to it.

The investment/ diversified portfolio comes from one of my favourite go-to sites, by Dan Bortolotti (an author of Moneysense magazine among other publications), Canadian Couch Potato.  The dollar amount I am contributing will vary, but I am aiming for $500 to $1000 a month.  I will also plan to rebalance once a year to make sure that the asset allocation continues to pertain to my investment portfolio.

I will continue to have some dividend stocks, and will continue adding to them, but I will be cognizant of not adding too much Canadian exposure to my investment portfolio.

The weighted MER is 0.19%.  With Questrade, buying ETFs is commission free (any ETF that is traded on the North American market) but selling ETFs incurs a commission.  Unfortunately I will have to do this manually because Investment Owner's Contractit is an ETF but this will be okay as I will make sure I contribute regularly on a monthly basis (e.g. set up a reminder for myself for the second Friday of the month).

Here’s a little more detail about the ETFs:

  • VAB- Bond aggregate index, invests in public and investment grade Canadian bonds, top holdings are government bonds.
  • XIC- 100% are Canadian holdings, with the top holdings to be RBC, TD Bank, Valeant pharmaceuticals, BNS, Canadian National Railway. The MER is 0.05%
  • VXC- Approximately 50% of the holdings are in USA, with the top holdings to be Apple (I’m a little hesitant about this being the top holding), Microsfot, Exxon, Wells Fargo, Johnson and Johnson, GE, and Berkshire Hathaway.  The rest are 23% Europe, 15% Pacific and just under 10% to be Emerging Markets.  It has a 2.3% dividend.  The other concern is that it is just over 1 year old.

Likely the VXC All-World Ex Canada will end up needing to be outside my RRSP, maybe my TFSA… this will be more tax inefficient but there is no other choice as I will have maxed out my RRSP and I do not want to sell my TD e-series at present.

Therefore, as quoted/ slightly modified from The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham Revised Edition (2006), on page 225: Continue Reading

Re-Reading The Intelligent Investor by Benjamin Graham

On my recent holiday, I had the opportunity to re-read The Intelligent Investor by Benjamin Graham.  Some (one? two?) of you may recall that I reviewed it back in 2010 (I can’t remember) on a trip to Hawaii.  Here is the original book review of The Intelligent Investor.  It is such a big book it almost reads like a reference book (in fact, there is an index at the back of the book).  I’m frankly surprised it took me another 5 years to re-read it again because as I read it again I felt like I got much more out of it the second time around (and perhaps five more years of personal finance and investing experience).  I have been meaning to read this book again for about a year or so, but never found the time to, unfortunately.

As it managed to do the first time I read it, it was an eye-opener to the things I did know and the things that I still do not know about investing.  Reading it a second time around, I learned even more than the first time.  I learned that I am still not learning despite learning so much in the past few years on investing.  I learned that picking your own stocks takes a lot of time, effort, knowledge, know-how, all of the things that I don’t really have or have been doing with my stock picks.

If you don’t know, Benjamin Graham was considered the greatest investment advisor of the 20th century.  He was a value investor and taught Warren Buffett too.

What I Learned From Reading The Intelligent Investor…Again

The intelligent investorI learned that it is best to be a defensive investor.  I know I was being defensive, but I do not think I was being defensive.. enough.

I also again learned the things that you can control and you can’t control.  As per The Intelligent Investor, you can control your brokerage costs, ownership costs, your own behaviour, and your risk.  Most people want to buy when the going is good and sell when the going gets rough.  I had my own experience with this with my preferred shares.  When they tanked I was tempted to sell.  Re-reading The Intelligent Investor reinforced that you really need a rational approach and a logical approach to investing.  You have to be rational and logical when other people are not.

Related: Dividend Investing vs Index Investing

In addition, I was reminded me of the crash related to the tech stocks and how people and online/ Internet brokerages have increased the ability for a stock to get so hyped, that people buy without realizing the actual worth of the company.

It is All About the Principles, Baby

It is not about the Benjamins, but it is about the Benjamin Graham’s Principles…  His principles, to always buy low and sell high, to not get caught up in the hysteria that is the Mr. Market, to not act on emotion or impulse when other people are, and to realize that no one cares more about your money than you do, are key takeaway points from the book that the investor can apply to his or her own personal finance situation.

Benjamin Graham said it is the character of the investor, the discipline, the patience, the interest in learning and the ability to control your emotions is the true intelligent investor, rather than someone that has a high IQ and high level of education. Continue Reading

Young’s Investment Portfolio Makeover

I suppose the impetus to start a slow process of my investment portfolio makeover was from a number of different events that made me go “huh… maybe I should do something about that”.

Initially I was really happy with the plan for the extra money I had saved up if and when I needed a down payment for a home with my future prince charming.  However, as the months and years passed, the plan didn’t cut it for me anymore.

Here are a Few Reasons why my Portfolio Needed a Change:

  • One example is that the markets are so flat so far this year and my portfolio has been pretty flat
  • Another reason, my financially savvy (swoon) boyfriend had a look at my portfolio and was surprised by the number of stocks that I had in my TFSA, my RRSP, and my non-registered.
  • Deep down (actually, not that deep down, both deep down and on the surface level but I just ignored it really) I knew that my asset allocation was off because I never really sat down to check my asset allocation.
  • My preferred shares tanking and making up such a large portion of my total portfolio
  • Not being able to buy more USD stocks because they were in my RRSP and my RRSP contribution room had already been filled
  • I had three ETF portfolios but I didn’t like to split them up between my TFSA, my RRSP, and my non-registered, and I liked to have ETF portfolios (or different ETF portfolios) in each account in their own little portfolio.  The desire to have each ETF portfolio (mind you, they were different portfolios) in each account could have been my pseudo-OCD tendencies acting up, I’m not sure.

Well, three different portfolios in their own microcosm and duplicating themselves doesn’t make a right, unfortunately.

The Painful Process of Change:

Young's Investment Portfolio MakeoverAs with most processes of change you need to take a good look at the current situation. So I did a few things.  I calculated since the beginning of 2015 my return year to date, quarterly and compared it to the benchmark.  Also, I finally checked out my asset allocation for my ENTIRE portfolio and was a little appalled by the end result.

Here below is my current asset allocation of my entire investing portfolio:

  • 13% Bonds
  • 15% cash (not including the cash savings I have outside of my investment portfolio, which some people count as part of their portfolio)
  • 52% Canadian
  • 10% US
  • 8% International (including Emerging Markets)
  • 1.4% REITs/ Real estate

There is obviously something glaringly wrong with that (other than the terrible asset allocation and it being a mess).  The high percentage of Canadian allocation is… well…very high! Continue Reading

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