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Building A Profitable PortfolioThe Canadian stocks that I buy have Dividend Reinvestment Plans with Share Purchase Plans. Canadian MoneySaver publishes a monthly chart of the qualifying companies.I can buy these stocks at bargain prices when the 52-week price indicates their low cost. Of course, I can keep all the profit for myself since I don't pay any commissions or other fees to make monthly purchases. I consider buying these blue-chip companies as "no brainers" as they are well-known and mature companies. Since I do not have much time for my portfolio acquisitions, the hour needed monthly for this plan meets my needs. And I can sleep very comfortably with this profitable strategy. The question often arises about the number of stocks required for a well-diversified portfolio. A "risk" graph produced by the American Association of Individual Investors (312-280-0170) clearly shows that a dozen randomly selected securities will eliminate most of the company risk in one's portfolio. It shows that market risk cannot be avoided through diversification. Total risk is the combination of company (70%) and market (30%) risk. A number of other objective sources have confirmed these findings. Let's examine some factors that I consider when I'm selecting the 12-15 common stocks that I buy. Remember I purchase only commons with DRIPs (Dividend Reinvestment Plans) and SPPs (Share Purchase Plans). A diversified portfolio should hold stocks from different sectors. DRIP and SPP commons are found in the following sectors: Resources, Finance, Manufacturing and Industry, Consumer Goods and Services and Utility. The utility companies are further segmented into: Pipelines, Telephone and Electrical. Investment dates are the monthly periods for additional cash purchases and/or dividends reinvested. To explain, TransAlta Corporation's investment dates are January (J), April (A), July (J) and October (O). The numbers 1, 15 and 30 give you the approximate investment day that payments for the purchase of additional shares (SPP) are to be completed (monies must be paid to the trustee from one to five business days before the investment date). For example, cash payments (maximum $5,000 each quarter, minimum $50 each payment) must be received by TransAltas' trustee at least five business days before any investment date (January 1, April 1, July 1, or October 1) to be invested on that investment date. Knowing these dates can help you plan your investing budget or set up a dollar-cost-averaging program, which I don't recommend. I make my additional purchases based primarily on the current price according to the high and low prices for the year. Doing so, allows me to buy at discount prices when they are available. Twice a year I list the minimums/maximums one can invest in each company. I also provide investment dates, sectors, discounts and the toll-free numbers to call the trustees for specific information. |
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