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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, and 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:

As 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!

In addition, reading Boomer and Echo’s surprising post about him selling all of his dividend babies opting for growth instead and focusing on two Vanguard stocks inspired me to check the growth of my investment portfolio.

My YTD (since beginning of 2015) growth of my portfolio has been a dismal 0.5%, mind you, the benchmark index I compared it to was Canadian mainly and it was a 0.35% so far in 2015.  I know previous years my portfolio had been on fire, so perhaps it is just this year that drove to re-evaluate my portfolio.

I wasn’t seeing the growth I wanted to see and felt that I had too much Canadian allocation.

The New Plan of Action

I plan to “spring clean” my portfolio and slowly sell a lot of the ETFs that I have that were in multiple portfolios.  There was a lot of repetition and redundancy in my portfolio.  I also will plan to sell some of the dividend stocks (of course I will still keep Fortis and Husky among other stocks) that I have bought recently which are not as good value as my dividend darling/favourites.  I also plan to get rid of some preferred shares ETFs.

I will aim to have my ETFs be about 60-70% of my portfolio and the remainder can be my favourite dividends.

Then I plan to switch over $3000 a month (mostly from selling ETFs/ stocks and using my Questrade account to purchase ETFs for free) over 20 months (to dollar cost average) with the asset allocation (thanks to my favourite site Canadian Couch Potato) of:

Then I will contribute regularly after that per my investing contract with myself.

Readers, what do you think of this plan? Should I instead thinking about just taking the ultimate step in simplicity by opening up a robo advisor account, or is it still worth my time to purchase and rebalance these ETFs individually?

Article comments

13 comments
MaTT says:

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Kyle says:

Hi Matt,

Your proposal will be ok from a big picture point of view. Not ideal though. Here’s a great resource from some of my favorite writers on what to but where. Hope this helps!

May says:

I would suggest you check out VSB or VSC as possible alternatives to VAB. I hold all three and prefer the first two. VAB holds very long term government bonds (amongst others) and has not done nearly as well as either of the other two. VSB holds short term bonds (7 year average maturity if I remember correctly) and VSC holds corporate bonds. Both pay higher dividends than VAB.

Kyle says:

Remember that past performance does not predict future results May. Also, VSB is another tool in the toolbelt, but remember that corporate bonds pay higher dividends because they are inherently riskier. Taking a quick look at the holdings, 40% of those bonds are either A or BBB rated – not equivalent to VAB.

Chris Brugman says:

Good article. I used to be in favour of dollar cost averaging but then I read and article from Mr. Collins and decided that I like his angle on things. DCA isn’t more safe than doing things all at once, it just feels that way. You are still taking a position on the market even though it doesn’t seem like it.

Anyway, have a read and see what you think =)

http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/

I think this is a good plan: have 3 ETFs and the rest in dividend paying stocks.

I have a bias though since this is what I do. A couple of indexed products and the rest, about 40 dividend paying stocks and REITs. I get the “best of both worlds” this way – capital appreciation via ETFs and cash flow via dividend stocks over time.

Good on you.
Mark

Justin says:

Awesome move. Much better diversification compared to your previous allocation, and reduced home bias 🙂

Young says:

Justin- yes, Canada is not 53% of the world, so why should I have 53% of my investable portfolio in Canada? 🙂

Ben says:

by that logic you’d have ~ 2% invested in canada

Leigh says:

What a simple new portfolio! Good luck with the transition. Mine is around 35% US / 35% International / 30% fixed income. My YTD is 3.31%, mostly because neither of those stock indexes are up very much this year.

I think the most important part though is writing down your plan and then sticking to it! Having that plan really helps me to not fidget with my allocations and such.

Young says:

@Leigh- Awesome Leigh! 3.31% is still better than my 0.22% and the 0.75-1% that fixed income GIC’s are spitting out hehe. Yes, there will be a post on my contract plan coming out soon I think.

Robb Engen says:

Hey, nice portfolio makeover – I like it!

And thanks for the shout-out. I couldn’t be happier with my new two-ETF solution. Now instead of obsessing over my dividend stocks, especially the oil & gas stocks that were in the tank, I mostly ignore my portfolio and take comfort that I’m diversified with over 3,000 stocks from around the Globe.

Young says:

@Robb- I’m glad you like it! Thanks for the inspiration and leadership 🙂 I am slowly converting though, I didn’t have the guts to sell everything like you did.