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I Bought Royal Bank Of Canada For The Grade 'A' Retirement Portfolio, Here's Why

Feb. 08, 2019 9:00 AM ETRoyal Bank of Canada (RY), RY:CA58 Comments
GrayBeard Retirement profile picture
GrayBeard Retirement


  • The "Grade 'A' Retirement Portfolio" basis and criteria is introduced.
  • We review the business of the first entrant into the portfolio, Royal Bank of Canada.
  • We grade RY based on the portfolio criteria and make a purchase.

Grade A Retirement Portfolio

In this article, I introduce a portfolio concept for the equity allocation of a very conservative retired investor. The portfolio is designed to have a higher yield and lower volatility than market averages. It will contain companies with an S&P credit rating of A- or better. The income from the portfolio should grow faster than inflation. This will be called the Grade A Retirement Portfolio. While total return is a secondary concern, the portfolio will not overpay. Finally, I will introduce the first company admitted to the portfolio.

Portfolio basis and concept

What should I look for in a portfolio that provides an income for a retiree? The first thing that comes to mind is a decent yield. How high does the yield need to be? To know this let’s take a look at an average American retired couple. To begin our analysis, let’s say our couple wants a total annual income of $70,000 or about $5,850 monthly. According to Social Security Administration cost of living adjustment fact sheet that reviews the changes in social security for 2019, the average monthly social security benefit for an aged couple when both receive benefits is $2,448.

Source: Social Security Administration

That leaves $3,400 monthly or $40,825 annually left for the portfolio to generate. For a portfolio of $1 million, the yield will need to be about 4.1%.

That yield, at least right now, is higher than we can get with any type of Treasury investment. Our couple will take on more risk to get the yield needed by investing in stocks. Stocks are riskier than Treasuries, however there are some things we can do to minimize the risk.

Of course, the cost of a loaf of bread and a gallon of milk and most other things go up over

This article was written by

GrayBeard Retirement profile picture
Retired at 54 and traveling the country in our motorhome while living off our investments. My articles contain a balance of retirement costs and strategies as well as investment analysis and discussion and snip-its of our travels.

Analyst’s Disclosure: I am/we are long RY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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