Rate of Return: 12.2%
Some people hate trading stocks. They get a pain in the gut every time they think about it. Am I selling too soon? Should I buy Royal Bank or TD Bank? Is there a risk the market will collapse?
They would just prefer to invest their money and forget it. What we used to call a couch potato approach.
Our Buy and Hold Portfolio was designed for exactly these people. It was launched 13-1/2 years ago, in June 2012. The idea was to invest in high-quality stocks, with the intention of holding them through bull and bear markets. The core premise was that the long-term trend of the markets is up and if you own good stocks, they’ll move with it.
The portfolio consists mainly of Canadian and US blue-chip stocks that offer long-term growth potential. It also has a bond ETF holding. The original weighting was 10% for each stock with the bond ETF starting with a 20% position. That has now been reduced because equity increases have outpaced the bond market.
I used several criteria to choose the stocks. These included a superior long-term growth profile, industry leadership, a good balance sheet, a history of dividend increases, and relative strength in down markets.
The objective is to generate decent cash flow (all the stocks pay dividends), minimize downside potential, and provide slow but steady growth. The target rate of return was originally set at 8% annually.
Comments: The new portfolio value (market price plus retained dividends/distributions) is $229,454.89. That compares to $187,319.48 at the time of the last review, for a gain of 22.5%.
The big gainers during the period were Alphabet, which almost doubled, Royal Bank, and Brookfield.
Since inception, we have a total return of 359.4%. That represents an average annual compound growth rate over 13-1/2 years of about 12%. That is well ahead of our 8% target.
Changes: This is a Buy and Hold Portfolio so we should always resist making changes. At the time of the last review, I expressed concern about two of our holdings, BCE and UNH. However, both have since rallied so we’ll keep our positions for now.
We will reinvest some of our retained earnings, as follows.
XBB – We’ll buy another 10 units for a total cost of $284.20. We now own 570 units and have $204 in retained earnings.
BN – We will add another 10 shares for $657.50. We now own 565 shares, with retained earnings of $120.17.
UNH – We’ll purchase another 5 shares at $329.71, for a cost of $1,648.55. We now own 50 shares and have retained earnings of $565.77.
The portfolio has cash and retained earnings of $4,530.64. We’ll move the money to Steinbach Credit Union, which is offering a promo rate of 4.6% for four months.
Here is the revised portfolio. I will update it again in six months.