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Discussion Starter · #1 ·
I am trying to help my father pick out a diverse portfolio that he can put a portion of his money into. He is unhappy with his mutual funds and would like to transfer over 30k now with the potential for investing an additional 50k that will come from other sources later in the year.
My idea is to select companies that my Dad knows and can understand, I am not interested in putting in tech stocks or complicated bio-med companies. Brands he knows and loves and have been that way for a very long time is the idea, like having lunch at MCD with a large KO, then go for a walk around CTC with a THI in his hand looking at DE, I think that is a perfect day for him :)

Some additional information:
He is mid 50s with a solid chunk of his investment into his primary residence.
This money is already in RRSP and will stay registered.
He has no consumer debt.
He will have a pension with 35 years in in the next 10 years from the post office.

I would like to hear peoples opinion about this portfolio as well as what they believe are good buying points. We have the time to do this wright so can wait for certain securities.
Please let me know if there are any dogs in the bunch you would stay away from.

Oil & Gas: SU
Banks: RY
Rail Road: CNR
Gold: G
Health Care: JNJ
Agriculture: DE, POT
Consumer Goods: KO
Services: CTC
Food: THI, MCD
Telecommunication: RCI.B
 

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How does he feel about monitoring/managing his investments?

I am thinking divide into two ETFs - XIU and XSP.
Between them, they cover a vast amount of exposure to multiple sectors, regions, economies, currencies, etc.
All the tickers you listed above are part of either XIU or XSP.

Most importantly - it eliminates the individual company risk that a concentrated portfolio carries.
For someone like your dad, diversification is perhaps best since individual company risk will be high in a portfolio comprising ~ 10 stocks.
 

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There are two ways I've seen this argued (and FWIW I've always pretty much sided with Harold): he has DB pension income to provide the "bond-like" component of his retirement income stream - so might as well load up on equities with the rest of his investable wealth.

However, there is another line of thought which goes like, "don't take risk you don't need to take."

NOTE: his pension income might be small, at risk, or inadequate to his overall needs. But from the very basic details provided it sounds like he has an OK risk capacity (risk tolerance aside).
 

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Discussion Starter · #7 ·
I liked the way others had talked before about taking the best from a group of companies and leaving the rest. I know Humble has talked about it a number of times.
Also with some of the ETF's mentioned there is no dividend, and dividend investing makes the most sense out of anything to me.

I agree with Harold and MoneyGal about the pension being bond like, and going 100% equities. He will of course have cash on hand.

Does everyone think ETF's are that great?
 

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Discussion Starter · #9 ·
Sorry, when looking up these codes on Google finance it shows no dividend. Adding them it to a new watch-list shows the dividend now.. I apologize
 

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Meh. For $30K, ETFs make more sense (in my opinion) than trading 10 stocks -- but there are a bunch of other variables to consider, mainly his overall trading plan, and his level of comfort with managing a portfolio with 10 moving parts.
 

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Let me repeat the question:

Can he handle the volatility?
I agree about the pension being a bond and all that, but does he understand that the equities might go down a lot at times? Can he reconcile the entire portfolio (including the pension component) and not worry about any single part of it?

If you pick a bunch of stocks, it's guaranteed that at least one will crater eventually - will that bother him (even if the others do well?).
 

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Discussion Starter · #12 ·
Even when it bumps up to 80k in a few months?
He is not financially inclined, but I am and would be watching these stocks anyways. As half of them I own anyways.
 

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Discussion Starter · #13 ·
Let me repeat the question:



I agree about the pension being a bond and all that, but does he understand that the equities might go down a lot at times? Can he reconcile the entire portfolio (including the pension component) and not worry about any single part of it?

If you pick a bunch of stocks, it's guaranteed that at least one will crater eventually - will that bother him (even if the others do well?).
Very good question, that I will have to ask him.
 

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Also with some of the ETF's mentioned there is no dividend
XIU pays dividends/distributions.
I believe the yield is around 3% if not more.
Since the securities will be held inside a registered account, the specific types of distribution (dividends, interest, ROC) won't matter in your case.

XSP pays distributions too, but the yield is lower.

and dividend investing makes the most sense out of anything to me.
Then you could do XDV instead of XIU.
XIU is better diversified (IMO) because of the materials and energy sector, which are not big dividend payers.
XDV is more concentrated in financials and insurance, which are big dividend payers.

Does everyone think ETF's are that great?
There is no absolute ETFs vs. stock picking answer.
It depends on the investor profile, suitability, portfolio management/monitoring ability/interest, etc.
XIU and XSP are as low cost and diversified as you can get.
 

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And are a better option then Mutual funds yes?
Most certainly better than an equivalent managed mutual fund (2% + MER) that are based on large cap, broad market equities.
Can't compare with niche or special purpose mutual funds (such as small cap, country specific, etc.).
XDV is also a far better option than comparable dividend mutual funds. Dividend yields being what they are, the fees (usually between 1.5% - 2%) will eat up over half of your yield off the top.
 

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i would invest in canadas standout areas: i would would buy 1-3 banks, power financial, su or imo and husky, a REIT (or real estate equity like killiam) and then i would buy DIA or the canadian equivalent ZDJ ... good luck
 

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usually when they come here & say i'm-building-an-investment-portf-for-my-wife/fiancee/mother/grandfather, i find myself wishing that the UBO (ultimate beneficial owner) would visit & speak to us in his or her own words.

DG it might even turn out that Dad is more content with his mutual fund advisor than you might suspect !

the 1st thing to think about as MG suggests is whether this gentleman could be content with any risk whatsoever, notwithstanding his bond-like pension. Here we might want to know why he is unhappy with his mutual funds. Is it perhaps because they went down recently ? this might not bode well for a DIY stock portfolio in the future.

DG perhaps you could invite your father to cmf forum. I'm not convinced that he is "not financially inclined." After all, he sired a talented son, so the DNA for financial savvy has to be there. It's possible that starting to manage his own investments would be an invigorating new growth experience.
 

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Let me repeat the question:

I agree about the pension being a bond and all that, but does he understand that the equities might go down a lot at times? Can he reconcile the entire portfolio (including the pension component) and not worry about any single part of it?

If you pick a bunch of stocks, it's guaranteed that at least one will crater eventually - will that bother him (even if the others do well?).
IMO this is the essence of "risk capacity" vs. "risk tolerance." An outsider (me) could look at his situation and say, "rationally he can handle volatility because he has a government-backed, inflation-indexed DB pension which is going to provide [let's say] 70% of his current income -- he's in a great spot to take advantage of the higher expected return of equities [i.e., he has a high risk capacity]." However, if his emotional tolerance for variation is low, if his investing comfort is low, or if for any reason he would be "upset" at seeing normal (or even abnormal) fluctuations, then why bother taking investment risk (i.e., he has a low risk tolerance)?
 

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Discussion Starter · #20 ·
I have sent my father interesting articles I have found on milliondollarjurney, especially those by Ed Rumple, there is one that talks about getting up to zero. When my father read that, he said he wish some one have had told him 30 years ago. I think he could just do a better job managing his money and save him self a lot of stress and be able to more of the things he wants to do if he took more of an active role.

I know he has had his mutual funds threw manual life for 12 years, and has not been impressed with the results over that time.

I will encourage him to post on cfm himself.

Btw humble, I tried to PM you a couple times in the last week and it says your inbox is full and can not receive msgs.
 
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