You should not be trading in this market. Today for example, Toronto was up 40 at the open then at 11am it was down 170, flat at lunch, down 40 at 2pm and then it closes up over 200 points. Forget market timing, forget stop losses, it’s time to take control of your portfolio. You need a three D approach
D1 Diversify – Your portfolio should not mimic the TSX. The TSX index is 25% materials, 25% energy and another 25% in financials. You should own no more than 25 stocks with no more than 5% in any one stock and no more than 15% (at most) in any sector.
D2 Defense – The following types of companies should be removed from your portfolio immediately. Biotech, emerging markets, junior miners, speculative companies that will have profits in 18 years or so, fads, fashions, sky-high nosebleed P/E Ratios and companies with too much debt. Instead, you should own companies that have low valuations, significant free cash flow and good balance sheets. Own companies that sell products and services that people can’t live without. We can live without $175 yoga pants and $1,900 gold bars.
D3 Dividends – Don’t forget why you have a portfolio in the first place. Income. You can’t live on 1.5% a year from ING. Own a diversified portfolio of dividend paying stocks, especially companies that have a history of rising dividend payments. Supplement your portfolio with good quality government and corporate bonds as well as preferred shares for non-taxable accounts.
Let us help you create a proper diversified portfolio. Please feel free to give us a call or email anytime
