- I invest for income. Period. Except in those VERY rare cases when I don't. In the past, I insisted on at least a four percent dividend. Now, with the markets at all time highs, three percent is the new cutoff. When does the three percent rule not apply? A good example would be BAM.A. It does not pay a great dividend but it is such a great investment that I find it almost impossible not to include it in my portfolio. I'm adding it the first chance I get.
- I strive for diversity in my retirement portfolio. To this end, I have a spreadsheet that tracks my asset allocation. For instance, I try not to have more than 30% of my investments in the financial sector and no stock every commands more than 10% of my total portfolio. At the moment no one stock even breaks six percent.
- I believe there's safety in numbers but the number cannot be too great. I try to have at least two dozen different investments but never more than thirty investments total. This is a mix of mainly individual stocks with a small number of ETFs. My U.S. and international investments are always accomplished using ETFs. I like XUN or XUS for my U.S. exposure and VIU or VIDY for my international.
- I insist on having some exposure to REITs and utilities. I always have at least ten percent of my portfolio in REITs as a mix of two ETFs: RIT and ZRE. Because these two ETFs use different approaches to building the investment universe in which each one plays, owning the two gives a bit more diversity and RIT adds some exposure to the U.S. REIT market. As for utilities, I own the standard players and ignore the utilities-based ETFs. I like Emera, Ontario Hydro, Fortis, Alta Gas (Yes, I consider this more utility than pipeline.) and Algonquin Power and Utilities. I like something in the order of 10% to 15% of my portfolio invested in the utility sector. (Note: I own AQN but it is not longer recommended.)
- I buy good quality companies with intentions of holding the investment for two years or more. In a perfect world, I'd hold each stock forever. Sadly, the world is not perfect. Still, it is not uncommon for me to have zero turnover in any given year. The top six Canadians banks or the major utility players or Bell or Telus in the telecom sector are all examples of stocks that pay a fine dividend and can be held indefinitely.
- I like to have one or more stocks under consideration. If these good bets fall onto hard times and lose 20% or more of their value, this is a buy signal with one warning: find out why the stock is out of favour. Recently Restaurant Brands was more than 20% off it high for the year. It was a buy. Algonquin Power was also off 20% but I worried that it will might lose more. Eventually I added AQN to my portfolio. I should have resisted buying AQN. AQN is having serious problems. As of today it is down more than 30%. A 20% drop is entering bear market territory. A 10% drop, or a correction, is also a boundary that when breached should draw one's attention. Recently, TD was down about 8.5%. It wasn't correcting but it was on sale.
Today, after almost eleven full years of retirement and of withdrawals to live in retirement, my portfolio has more than doubled in value. As you can see, so far, my approach has been very successful in my retirement.
