Friday, April 15, 2016

A glimpse of my new Hybrid Strategy

Hey Financial Freaks,

I hope all is we'll for you guys. I've been quite busy lately working, saving and doing a little bit of investing. And no... I haven't developed any kind of "strange obsession" with anyone as of late -- well since forever I might add.  (don't get me started!)  ;-)

I have been tweaking my investing strategy though.

Like I've hinted in the past, I have made a few moves to developed a mix strategy between a dividend growth and a Index one. I know some of you are already doing this. Congrats! I also know some of you will be sticking forever with the same strategy, namely a Dividend stocks approach. Both strategies are sound in my opinion. This is why I picked both!

Like I said numerous times in the past, I don't have time (nor the passion) to monitor closely more than 20 stocks. Heck, I barely find the time to do 20 push-ups... So I thought about allowing a certain percentage of my portfolio to Index Investing. This meant I would also cut on the number of stocks I would hold since I had 22 as of late. I say "had" because I now hold only 17 individual stocks.

Since the beginning of the year, I have made more than 26 transactions. This is a lot, I know. If you do you share of reading, you probably know that when it comes to investing the less you do is the better. But I had some tweaking to do and I thought that I would be better off doing this after a 7 years bull Market than before all Hell break loose. Call it Market Timing if you want. I call it necessary changes.

All the 13 buys I have made since January 2016 have been in stocks I still hold today and will be holding for a long time.

My new Big Five holding consists of : Johnson and Johnson (JNJ), Power Corp, (POW) Bank of Nova Scotia (BNS), Royal Bank (RY) and Canadian Pacific (CP). 

Unfortunately (or fortunately in some cases), I had to let go of some companies.

I said goodbye to : Transcanada Corp (sadly, but I prefer Enbridge), Barrick Gold (good frickin' riddance!), Suncor (only sold some shares in my RRSP), COP (dividend cut = adios muchacho and thanks for the good memories), PJC.A (short-term intense romance) and POT (second time around wasn't a charm after all).

That leaves me with 17 stocks. (I will try to never hold more than 20).

Finances (4) : Power Corp, Financial Corp, Bank of Nova Scotia, Royal Bank.
Industrials (2) : Canadian National Railway, Canadian Pacific Railway.
Consumer Staple (3) : Kraft Heinz, Mondelez, Alimentation Couche-Tard
Energy (4) : Suncor, Enbridge, ATCO, Fortis.
Telecom (2) : BCE, Verizon.
Healthcare (1) : Johnson and Johnson.
REIT (1) : Cominar.

I also purchased some new Index Funds:

  • Vanguard Canada All Cap Index ETF (VCN);
  • Vanguard FTSE Developed All Cap ex North America (VIU);
  • And Vanguard short-term Canadian Bonds (VSB).

Check out my leaner portfolio here.

I also still hold two Index Funds from RBC. These funds enable me to purchase on a regular basis shares of the funds without commission.  So, twice a month, I buy new shares without really care if the Market is up or down. Eventually I will sell parts of these funds to buy new shares of my Vanguard's funds.

I find that the most important aspect of my strategy will be the balancing between my bonds % and my stocks %. This is key. Right now I have set this balance to 80-20 in favour of stocks, of course.

This means that, once or twice a year, depending on how the Market performed, I will rebalance everything.

Say, for instance, the Market had a poor year and my balance is now 65-35. This means I would only have to sell shares of my bond funds and allocate new capital to my stock funds (or my individual stocks). I could also simply allocate new capital to my stock funds to find my initial balance.

Or for instance, say the Market has performed too well and my allocation is now 95-5. Well I would then sell some shares of my stock funds and allocate the new capital money towards bonds. Simple as that!

Right now, I hold more cash than normal. I might add a Vanguard US Fund in the coming months. Not sure which one. I'm hesitating between a US currency one and a Canadian one.

But you get the gist of my strategy. It's very simple. The bonds simply act as a security cushion that enables me to balance my portfolio.

Eventually, stocks wise, I would like to get a parity between my individual stocks % allocation and my Index Funds % allocation. This means, most of my coming buys will be in my new funds. However, I swill till keep money aside to grow my actual  individual stock holdings if opportunities arise. (Like Verizon)

I realized this is a bit of a long post. I will shares my other thoughts on this new approach in coming weeks. Stay tune.

Meanwhile, let me know what you think. How do you like this hybrid strategy ? It is too passive for you?















8 comments:

  1. Looks like you picked the right companies to add shares of. hopefully you were able to buy them in January when everything fell off a cliff. If not, not bug deal. To your point they are buy and hold stocks.

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  2. thanks IH. I did make most of my buys in January. Lucky timing. But it's not important, like you said, I'm in it for the long haul. Thanks for coming down here.

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  3. Hey MD,

    I like your strategy. I have stock in 21 companies now and recently started just adding to positions rather than opening new ones as I think concentrating on a few great names is better than spreading your money too far. Look forward to seeing how this plays out for you.
    DB

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  4. Hey DB! We all know a good diversification is key. But just how much is good remain the question. My guess is you probably have a very decent diversification with 20 +,especially if you hold them in 4-5 different key sectors of the economy. A value investing strategy s great but certainly hard to execute in a bull Market. You often end up with too many stocks and it starts to be hard to follow the closely. It's my opinion anyhow. I like your portfolio by the way. You will be a nice young financially independent guy in your late 30s. Keep it up!

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  5. Hey Monsieur Dividende! It's been a while. The hybrid idea is probably a lot less work, and I think I've told you before that I was thinking of doing the same thing... so it's great to see someone else trying it too (before I do, lol). It'll be interesting to see how it pans out over the long term, so I'll definitely be keeping a close eye on your portfolio. Thanks for taking the time to share the details.

    Also, I saw the whole "strange obsession" thing unfold on twitter. I thought it was strange too (not you, his reaction). I guess he's paranoid or something, I don't know. I wouldn't worry about it.

    All the best!

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  6. Salut André! I will be happy to act as a guinea pig for the Hybrid Strategy. ;) I'm sure this approach will suit me from now. Less transactions and more time to do other stuff non investing related.

    As for my so-called "strange obsession", yeah, well, I guess this particular person has become a little thin-skinned. I was told in private various reasons that explained his behaviour. I guess we all have our issues . My blog is public, so I can deal with criticism. Well, Monsieur Dividende can anyway! In the end we all work towards the same goal : becoming financially independent.

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  7. Look, just add VUN and it will be perfect

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  8. Words of wisdom. You are probably right.

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Thanks a lot for your comment.