2. The Dividend Guy’s Guide to Building a Dividend Portfolio: Getting Started

Welcome to post number two of the series, The Dividend Guy’s Guide to Building a Dividend Portfolio. In this post we are going to cover a couple of the things I consider important for an investor to know prior to getting started; namely choosing a broker and managing multiple accounts.

Disclaimer: Remember, nothing in this post, or any other post on this blog is to be considered as investment advice.

Choosing a Broker

Most people choose a broker based on the bank they do their day-to-day banking with. This is fine, but if you want to get serious about your investing you need to make sure that you are choosing the best broker based on your needs. Only you will know what these needs are. However, when I chose my broker, there was one need that I always kept at the top of my mind:

• A low cost broker

Keeping costs as low as possible should be the key deciding factor in the choice of broker. However, notice I did not say the lowest cost broker. The lowest cost may not be the best depending on all your needs. For example, one of my needs was the ability to hold fractional shares in my account so that all my dividends would be reinvested into additional stock. Most discount brokers allow dividend reinvestment, but only if the proceeds of the dividends are enough to purchase whole shares. Therefore, I choose my broker (the CSA) primarily based on this fact. However, at $9 per trade ($15 to sell) I definitely chose a low cost broker.

There are a few things you will need to be aware of when choosing a broker. For example, some brokers require a minimum deposit amount. Others have account maintenance fees. Make sure you read all the fine print to see exactly what you will be responsible for in terms of costs. In addition, some brokers are meant strictly for more “sophisticated” investors. Interactive Brokers is one such example. There is no hand holding here – just cheap trading.

To help choose a broker, I have supplied a list of links below that you can use to help you identify the options available to you. Good luck and get at it…

Baystreet.ca (Canadian)
Smartmoney.com (US)
Kiplinger.com (US)
Investorguide (US)
The Motley Fool Discount Broker Comparison (US)
ConsumerSearch.com (US)
MSN Money (US)

Managing Multiple Accounts

In a perfect world, you would have one account that holds all your investments.
We don’t live in a perfect world and that means that you will probably have more that one account that holds your investments. For example, in Canada you will probably hold an RRSP account and a cash account. In the US, you may have a 401K and an IRA account. If your company offers a pension plan, then you may also have a separate account for these investments.

Multiple accounts can make managing your portfolio a bit more complicated, but there is one rule that I pay attention to in the management of my own portfolio:

• I treat all accounts as one big account – I examine and run my portfolio as one large account rather than my RRSP separately from my non-RRSP account and separately from my pension account. This ensures that I keep my asset allocation in check and I am not duplicating or missing items in my portfolio. (Note: I also consider my spouse’s accounts as part of my overall portfolio when doing my planning)

To get started, list all your accounts so that you know where you stand. It will make it much easier to plan for your investment choices.

Conclusion

That is all there is to it in terms of getting started. It is not rocket science. I choose a good, cheap, broker and organized all my accounts. My next step concerns asset allocation and discusses how I chose the asset allocation that is use. Stay tuned for post #3.

• 1. The Dividend Guy’s Guide to Building a Dividend Portfolio: Introduction
• Top 8 “Other” Ways to Save Money on Your Investments
• Switched My Main Broker to Questrade
• Things to Consider About Costs to Run Your Porfolio
• Investing With Less Than $1,000 Part2: How To Pick The Right Brokerage Account Before Investing