Review of My Asset Allocation

by: The Dividend Guy

Last week, My Own Advisor, a regular reader, asked me about my asset allocation strategy. It is true that it has been a while since I have discussed asset allocation on this blog. This is why I decided to take a look at my current dividend holdings and comment on them.

Here is my current portfolio:

Stock Ticker Shares Av Cost (CDN$) Price Value Div ($) Div Yield (%)
5N Plus VNP - TSE 400 $5.93 $8.42 $3 368.00 $0.00 0.00%
Scotia Bank BNS - TSE 50 $60.32 $55.91 $2 795.50 $2.08 3.45%
Chevron CVX - NYSE 25 $92.85 $101.64 $2 541.00 $3.12 3.36%
Coca-Cola KO - NYSE 28 $67.67 $65.37 $1 830.36 $1.88 2.78%
Husky Energy OTCPK:HUSKF 100 $27.90 $26.68 $2 668.00 $1.20 4.30%
Johnson & Johnson JNJ - NYSE 25 $64.93 $62.29 $1 557.25 $2.28 3.51%
BMO Covered Call ETF ZWB - TSE 125 $16.43 $14.81 $1 851.25 $1.54 9.37%
Telus T - TSE 36 $55.16 $52.47 $1 888.92 $2.20 3.99%
National Bank NA - TSE 87.46 $69.24 $76.71 $6 709.06 $2.84 4.10%
Cash $152.78
Total $25 362.12 3.67%

And here’s my asset allocation per sector:

asset allocation
(Click to enlarge)

As you can see, there is a massive (too massive!) part of my portfolio invested in the financial industry. If you are an American reader, you might be very surprised that I have concentrated my retirement funds into such a shaky sector. However, all my financial holdings are in Canadian Banks. The reasons are simple:

#1 I am Canadian

#2 Canadian Banks are among the strongest of the world

#3 Canadian Banks pay healthy dividends and they are considered blue chips.

Nonetheless, this is definitely too much concentration in a single sector. And definitely too much in one single stock (26% of my portfolio is in National Bank stocks). On the other hand, I truly believe National Bank will do well in the upcoming years so I’m not afraid to keep so much stock in my portfolio.

As you can see, I have gotten rid of my most aggressive investments [Paladin (OTCPK:PALAF) and Research in Motion (RIMM)]. I have kept 5N Plus as they are working in the solar industry and I think this is very promising. It is the last stock from a “previous investor life”. In fact, I used to take a lot of risk with my portfolio. I started back in 2003 with an investment of $20,000 (all taken from a line of credit) and cashed out everything in 2006 to buy my second house (with some healthy profits!). I didn’t invest much in 2007, 2008 since I was working on paying off my debts. Then, I started (and finished) my MBA in 2008-2009 and this is why I wasn’t too active on the stock market. Back in 2010, I bought this blog and started to get really interested in dividend investing. Since the beginning of 2011, I’ve been restructuring my portfolio and switching towards a dividend portfolio. So far, I’m pretty happy with what I have accomplished in a single year.

I’m done with my Energy and Financial sector shopping and will be looking to make more trades in January as I will invest about $10,000 in my retirement account. At that time, I will probably add another stock from the consumer goods sector and will then look at other dividend paying sectors.

No bonds?

Nope, rates are bad and I prefer the power of stocks combined with dividends. I actually consider a stock such as KO as my “fixed income” portion of my portfolio! Also, I have noticed that in some cases, you get a better yield from the stocks than from its bonds!

As I previously said, I’m not expecting to make any other trades this year while I’ll be cashing my dividends till next year. In the meantime, I’ll add stocks to my watchlist and see which moves I will make in January!

What do you think?

I sometimes let you know what I think of your portfolio through email or this blog. Now it’s your turn to tell me what you think about my investing strategy