The Dividend Guy Investment Process Part 4B: Portfolio Building – Filling Out My Asset Allocation and Introducing Dividend Growth Stocks
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With my maximized employer contributions going towards the funds that fit in with my asset allocation, I need to fund the remaining asset classes in my target asset allocation. As I mentioned in the Part 4A, I only have a select number of funds I can choose from and it does not cover all asset classes. Therefore, I need to fund a couple of other assets with money I have in my other accounts.
REITs and International Equity
To get exposure to the REIT assets, I go right to the index funds. My fund of choice for REITs is the iShares CDN REIT Sector Index Fund (XRE). It has been a solid performer both in shares price and distribution history. I do not have the interest nor the understanding to select individual REITs so I choose to invest in an index fund.
Due to the high allocation I target for international equities, I go beyond my pension plan fund and also invest in the iShares CDN MSCI EAFE Index Fund (XIN). This fund includes securities from Europe, Australasia and the Far East.
The Dividend Growth Stocks
So if you have been following this series, you were probably wondering when I would get to talking about dividend growth stocks, which is really what this blog is all about. Now is the time. I choose to invest in individual dividend paying securities that consistently increase their dividends in both the U.S. and Canada. I do this as opposed to using index funds because I love the investment selection process and the reward I get when I see dividend payments grow and my portfolio value increase. I know this goes against William Bernstein’s investment philosophy, but it is a risk I choose to take.
My goal is to hold approximately 15 Canadian dividend stocks and 15 U.S. dividend stocks to help provide enough diversification and minimize individual security risk on my overall portfolio.
Why do I like dividend stocks so much. I think that is best covered by referencing a series I completed covering research from Tweedy Browne that covered various research studies highlighting the benefits of dividend stocks. To see this research, please see the links below:
In the next post in the series (Part 5), I am going to talk about how I do an initial screen for dividend stocks and some of the tools I use.
7 Comments on this post
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Gavin Adamson said:
Hey Dividend Guy,
My name’s Gavin Adamson. I write occasionally for the Globe and Mail and this time I’m writing a piece about what part online – DIY investing plays in RSP building.
Not sure if you own an online RSP account, but if you do, I’d be interested to speak with you. Here I’m looking for a chat about what sorts of tools/data research you use to make RSP decisions. Do you use your online brokerage site research and tools? Are they good?If you don’t have an online, RSP account, or you’re not interested, I’d appreciate an announcement on your site that I’m looking to speak to someone. They can get in touch with me at gavadamson@rogers.com
Thanks a lot
Gavin
January 17th, 2008 at 8:32 pm -
Angie said:
I think the most important step is to be realistic in what you can and cannot do. I’ve seen so many first time home buyers jump into something they cannot afford only because they have big dreams.
March 19th, 2008 at 1:15 pm -
Leo said:
How do you determine how many shares of stock to buy to make a reasonable amount of income from the dividens..
April 17th, 2008 at 10:50 pm
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