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.