Last week, I started a new investment series called “Build an Investment Strategy”. All my readers have made at least one trade in their broker account, but it doesn’t mean they have a solid investment strategy. It goes far beyond a simple set of ratios and metrics that you enter into a stock filter. An investment strategy is your philosophy; it describes the way you intend to manage your portfolio. The investment strategy is useful when you are about to make a tough decision: to buy or to sell.


    Last week, I covered the first step: why do you invest? Answering this simple question will tell you a lot about the strategy you will use to manage the account. Today, I’ll be writing about adapting to your tolerance for risk within the portfolio.


    I’ve already covered the whole “create your investor profile and invest accordingly” within my newsletter. This is step #2 in an exclusive investing series for my subscribers. Click here to subscribe to my mailing list.  Therefore, this article is NOT about your investor profile. If you buy stocks, we will assume you are already well aware that there are more risks with stocks than with GICs… risks of making money of course! Hahaha! I’ll talk more about how to manage this risk within your stock portfolio as all companies weren’t created equal.


    Manage Your Risk within Your Stock Portfolio


    When an investor is ready to invest in the stock market, he is also ready to lose money. Technically, you could lose 100% of your investment in a stock if you make the wrong decision. However, if you select sound dividend stocks, chances are you will not see a zero dollar value next to one of your stocks. Therefore, we are talking a little bit more about market fluctuations than risk of losing all your money.


    Still, you can decide to take on more risk with some stocks than others. You can build a “safe” portfolio including several consumer (defensive) stocks and well managed REITs. Retirees and those who are looking to generate immediate revenue from their portfolio are more likely to select these kinds of stocks. There are several “safe lists” in the dividend world. You can pick stocks that have been consistently increasing their dividend payments for the last 5, 10, 15 and even 25 years. The Dividend Achievers, Dividend Champions and Dividend Aristocrats are three lists that include companies that have been paying dividends for X number of years. This does not guarantee your investing success but it’s a great place to start if you are looking for safer stocks.


    On the other hand, you can decide to pick stocks with higher risk, but higher reward potential. For a dividend investor, this type of investment can be achieved through two different techniques: picking high yield dividend stocks or picking companies with higher growth potential.


    High Yield Dividend Stocks


    Adding high yield dividend stocks in your portfolio will generate higher revenues, but you may lose money in the stock value of your portfolio. There is always a reason why a company pays a 7-10% in dividend compared to another one paying 2-4%. Most of the time; it’s because the company doesn’t show strong fundamentals. Some companies have been paying a high dividend yield for years and investors are laughing at my investment strategy. But some others have tanked faster than a rock thrown in the lake. I’m not a big fan of this strategy and this is why you won’t find high yield dividend stocks in my dividend holdings.


    Higher Growth Potential


    I must admit, picking stocks with higher growth potential than high dividend yield is more my thing. I’ve successfully done it in the past with trades on Seagate Technology (STX) (sold), Apple (AAPL) (still in my portfolio), Walt Disney (DIS) (in my portfolio) and Gluskin & Sheff (GS.TO) (in my portfolio). These three stocks that are still in my portfolio don’t even pay 3% in dividends. However, I’m +30% (Apple), +25% (DIS) and +11% (GS.TO) without counting the dividends with less than a year owning them. I bought these three companies for the same reason: they show strong growth potential. The thing is that they are riskier as well. I took the bet that Apple will continue to dominate the cell phone industry, that Disney will continue to dominate with ESPN and will make tons of money with their movies and that Gluskin & Sheff will continue to outperform the wealth management industry (and hopefully will be bought out by a bigger firm).


    If I’m wrong, I’ll also pay the price. You don’t have this kind of dilemma with a “boring” stock like Kimberly-Clark (KMB), Coca-Cola (KO) or Procter & Gamble (PG).


    My Strategy to Manage Risk within My Portfolio


    I love dividend investing because it helps me save time when managing my portfolio. But pure dividend investing is often synonymous with buying and holding the same companies forever. This is kind of boring and I don’t want to follow this path exactly. This is why I have come up with a hybrid strategy that manages risk in my portfolio while offering me the opportunity to trade a few times per year.


    This is why I’ve separated my portfolio into two parts: The Growth portfolio and The Core portfolio. The goal with the core portfolio is to follow a dividend growth model and invest in stocks I intend to hold for several years, if not forever.


    The growth portfolio enables me to trade once in a while. These stocks are on my “close watch list” and I can buy or sell them at any time once I figure I’ve made the money it can produce. For example, this is how I dropped STX at $40 (put a stop sell). I could have rode it to $60,  but you never know what it going to happen! So I’m closely watching the following four stocks and could trade them out of my portfolio at any moment. The core portfolio should remain stable for several years.



    I like having two sides to my portfolio as there is nothing more exciting than buying a new stock or selling one for a good profit! It happens too rarely with my core portfolio so I had to find something fun to keep my interest towards stocks.


    Now that we have covered the “blah blah” around the strategy, the next post will be about writing down your investment strategy with numbers and a clear method. In the meantime, I’ll publish the Ex-dividend dates and 2014 Best Dividend Stocks result. So stay tuned!

    2 Comments   |   Read more >


    Money is definitely the biggest taboo these days. People never talk about how much they make or how much they owe. Nonetheless, the place where information leaks is probably when we talk about investments and when someone was successful with his latest trades. You will never get the full details of the trade, but you will surely be aware that your friend, neighbor or brother-in-law made 100% return on his latest trade (before losing 50% on his past 4 trades, but he won’t tell you that!).


    The idea of making lots of money from investing is very seductive. You may dream of becoming the next Buffett but you won’t make it without a sound investing plan. As I’ve previously mentioned on this blog, this is my #1 investment advice for all investors: have a plan.


    One of my readers, Gary, asked me how to write down such thing. I thought it was a terrific idea to share with you not only my dividend search criterion, but to share with you my complete investing plan. I’ll share with you my plan step by step as you can use my model to build your own investing plan. Remember, this is my plan, not yours. You can’t copy it and think it’s a good plan for you. An investing strategy is very personal and should be tailor made for one’s needs.


    This article is the first of a series as I just started to write about this topic and noticed that if I want to give you a clear view of how to setup your investment plan, I should deliver it in segments.

    I must also add, this topic covered in detail through a series offered to newsletter subscribers only. The good news is that the subscription is 100% free ;-)


    Click here to subscribe to my mailing list



    Step #1: Why Do You Invest?



    Today’s step starts with a four word question. This sounds like a simple question, but the answer is crucial for the rest of the plan. Why do you invest? Why not go on vacation, buy a new car, a home or pay off your debts? What is the rationale behind you putting money aside in an investment account?


    I personally invest for many reasons

    #1 I have an account to fund my children’s private school (the oldest one will start in 3 years)

    #2 Another for my children future education (called an RESP in Canada)

    #3 And my biggest account for my retirement plan (called an RRSP in Canada).


    The focus of this article will be on my retirement account. It’s the biggest and probably the most common reason why someone invests. In order to answer the question why do I invest? I must give you a little bit of background:


    #1 I have a defined pension plan, meaning my employer will pay 70% of my salary at the age of 65.

    #2 I am turning 33 in 2014, therefore, I’m 32 years away from retirement.

    #3 I have limited space (and budget!) to contribute to my RRSP.


    The goal of my retirement account is to compensate for the 30% income loss at retirement. I’m already very lucky to have a defined pension plan that will allow me to retire peacefully. Technically, I could enjoy life, spend all my money and work until I am 65 and cash in my generous pension plan.


    However, I never take anything for granted in life and would rather save some money on the side just in case. In the best case scenario, I keep my defined pension plan and stop working at the age of 65 without losing a penny. The worst case scenario is that I lose my pension plan security and I’m left with my savings. Saving money in my retirement account also creates another possibility: retiring earlier than 65. If I accumulate enough funds, I might be able to retire at 60, who knows?


    Since I want to cover 30% of my income and have 32 years left prior to retirement, my investing strategy will be focused a lot more on growth and revenue creation. It would be a whole different story if I was 5 years away from retirement.


    This is why it is so important to understand clearly why you want to invest


    Some invest “play money” to make big gains but don’t expect to need this money any time soon.

    Some invest for a future project like buying a home, retiring or children’s education.

    Some have plenty of time in front of them to invest.

    While others have only a few years left before their project happens.


    When you ask yourself why you invest, it is also important to understand your own background. If I didn’t have such a pension plan, I would definitely focus on saving more and my investment strategy would definitely be different. The fact I have a pension plan clearly changes my risk tolerance.


    Speaking of which, this will be our next topic in step #2: Understanding your risk tolerance. I will not only cover the classic investor profile, but also help you understand the underlying risk there is between two stocks. It’s a whole different ballgame to invest your next $5,000 in a junior mining venture vs buying shares of Procter & Gamble (PG)!

    Post Comment   |   Read more >

    As you can see, I’m back with my regular posting schedule. Vacations were great… but they are not over. I’m also currently working on a new system to rank all dividend stocks and give them a score. This will be the Rock Solid Ranking. Look for it in a few weeks!


    If you have missed it, I suggest you start by my #1 Investment AdviceNow it’s time to share yours!


    Great compilation of top 20 dividend growth stocks from 20 bloggers @ Dividend Growth Stock Investing – JNJ and KO are the most popular J


    Dividend stocks for consistent cash income @ Dividend Growth Investor


    New design and awesome post from Dividend Mantra: Selective Dividend Reinvestment Vs. Drip


    Interesting concept: you don’t need a million to retire @ My Own Advisor – Right… I need probably 2M$!


    Top 20 Dividend Stocks @ The Passive Income Earner



    Dividend Stocks Analysis


    Walgreen (WAG) @ Dividend Growth Stocks

    MacDonald’s (MCD) @ Passive Income Pursuit

    Wisconsin Energy Corp (WEC) @ Dividend Engineering

    Pepsico (PEP) @ Captain Dividend

    4 Comments   |   Read more >
  • Page 3 of 42512345...102030...Last »