I’ve been entrusted with building a portfolio for an older couple in their early 60s. Yeah, I’m not sure why they picked me either. Maybe literally everyone else was busy that day? I dunno.

Anyhoo, here’s what we’re looking at. The portfolio goals are as follows:

  • A decent amount of assets spread out semi-evenly between taxable, RRSP, and TFSA accounts
  • An expectation of 3-5% returns, with anything above that being gravy
  • A mix of capital gains and dividends. “I like dividends. I like capital gains.”
  • A relatively simple portfolio mix with minimal short-term trading
  • Very little real estate exposure because the portfolio outside of these accounts is heavily into real estate
  • Ample enough liquidity to access the account quickly if needed

Note that the age here isn’t really a factor. A normal financial planner might put them into a conservative portfolio with plenty of bonds but I’m not going to because the intent is to pass on these assets to the next generation. We’re looking at a 50 year investment horizon, not a 20 year one.

Ideally I want 20-25 positions, with the largest positions coming in at approximately 5% of assets and gradually narrowing down to the smaller names being 2-3% of assets.

The choices

Let’s start with the kinds of companies I think should make up the top 10:

  • Smart REIT
  • Scotiabank
  • BMO
  • CIBC
  • Enbridge
  • TransCanada
  • BCE
  • Telus
  • Fortis
  • A&W

And now for the rest of the portfolio:

  • Algonquin Power
  • Canadian Utilities
  • Genworth MI Canada
  • Royal Bank
  • TD Bank
  • Inter Pipeline
  • Boston Pizza/Pizza Pizza/The Keg/Diversified Royalty Corp (1% each)
  • Sienna Senior Living/Chartwell (1.5% each)
  • National Bank of Canada
  • Canadian National Railway
  • Canadian Pacific
  • Rogers Sugar

Let’s call that 22 names even though I’ve spread some of the crummier royalty trusts into one position and the seniors living stocks into one. That leaves me with 3 wild card choices. It will be as exciting as baseball’s wild card, a sport that isn’t very exciting at all.

Now to answer some of your pointless bitching questions in advance:

Where’s the U.S. exposure?

Not interested in buying U.S. stocks right now because I’m pretty sure I’ll get my ass kicked on the currency. The U.S. Dollar is strong right now, kids. Now’s the time to be selling U.S. assets, not buying them.

These folks also live in Canada and have zero use for U.S. Dollars.

If the U.S. Dollar cooperates I will look into adding a foreign component to the portfolio over time with new contributions.

Why’d you split the royalty trusts and seniors living stocks into groups?

These are sectors I quite like but I’m not smart enough to know which one is going to end up on top. I talked about this a bit when I took an oversized position in Pizza Pizza. In hindsight I wish I would have kept the stock a little more manageable.

You’ll note A&W on the top there. They continue to kill it. I’m quite comfortable turning that one into a full position. It’ll likely be in the 5% of assets range. Check out its long-term chart.

Remember, it has paid a ~5% dividend the whole time, too.

Why do you suck so much?

Lack of confidence, I suppose

No ETFs?

Nah. I’m a stock picker. It’s what I do. I will judge this portfolio’s performance versus the TSX Composite each year, though.

I’ve taken steps to make this portfolio a little different than the average. The two largest banks will only get about 5% of assets split between them while I load up on the smaller ones. I’m avoiding a couple of the telecoms I’m not entirely bullish on and I have a much lower real estate component than the index. I’m also avoiding precious metals and energy completely, with the exception of the pipelines.

Genworth, huh? I guess you enjoy losing money

I’m willing to bet about $15k the Toronto and Vancouver real estate markets aren’t screwed. That should answer your question. The second part wasn’t even a question.

This blog post is over.

Oh wait it’s not!

I want to hear your opinions. Please put your suggestions in the comment section. 

Tell everyone, yo!