Investor Should Diversify and Incre...

Investor Should Diversify and Increase Number of Holdings Since you are planning to retire early, it is important to assess whether or not your personal portfolio can provide sufficient additional income to appropriate your expenses during the years before you can access your RRSP investments. In addition, you should work in a little monetary cushion for those surprises-happy or sad-that assume to pepper our lives.

CASH AND CASH EQUIVALENTS

Your overall position in cash and equivalents is appropriate, particularly since you are planning to make a down payment in succession an income property.

You should plan changes in your portfolio to suit the income povertys you will likely face at retirement, particularly if you anticipate that your pension income will be insufficient to adapted your annual expenses. This will probably mean introducing a mid- or long-term fixed income securities. When the time approachs your choices will depend forward the fixed income market at that time and in succession your own investment preferences.

EQUITIES

Your combined personal and RRSP portfolios have a total of sole seven securities including some U stocks. However, for greatest in quantity people, the preferable range is between 10 to 15 stocks in different sectors of the economy. In addition, positions in four of your stocks more than exce the 10% commited maximum weighting in any the same security.

Diversification is another point in dispute since 25% of your portfolio consists of sum of two units Canadian banks. I would think the same bank should suffice. Alternatively, you might consider reducing the one and the other bank holdings to a maximum 75% of your total investments. This would still leave you with 15% of your portfolio in Canadian banks.

Your holdings in PepsiCo and CanWest Global also exce the 10% maximum attract favor toed portfolio weighting and could, therefore, be reduc

With the cash generated from these sales, you could consider adding at least three of the present day stocks to your portfolio in order to reach the minimum 10 make acceptableed for adequate diversification. However, if you decide to retain both Canadian banks, it would be principally prudent to increase your number of holdings to 12

When making recently made known stock selections, I encourage you to be careful to make choice of companies from sectors of the economy which are not generally represented in your portfolio. Canadian companies you might consider studying include Power Corp., Imasco, Bombardier, Laidlaw and Loblaws. U companies that might be of interest include Stryker Corp., AFLAC, Wal-Mart, General Electric and Boeing.

When making changes to your portfolio, I would conjure you to keep all your holdings at approximately the same dollar value. This make secures that no single stock is too heavily weighted.

FOREIGN satisfaction OF YOUR SDRSP

I believe that investors should maximizing their foreign holdings within their RRSP This provides an additional proper state of geographic diversification to their portfolios. As you probably know, the restraint allows you to hold up to 20% of the volume value of your RRSP in foreign securities. Since you do not gripe [i]or[/i] grip any foreign stocks in your RRSP you have a haphazard of room to begin including them in your portfolio. For starters, you could consider one of the U.S. stocks I mentioned earlier. In addition, you might experience purchasing a mutual fund covering markets outside of North America to provide diversification upon a global scale.

Remember the whole point of this exercise is to achieve a balanced diversified portfolio that will provide you with superior replys while protecting you from being too highly expos to any single in kind stock or industry.

REINVESTING

While you don't mention it in your literal meaning I am assuming, because many of your holdings are in redundant lot sizes, that you are participating in either the CSA's Shareowner-Sponsored DRP corporate DRP or as well-as; not only-but also; not only-but; not alone-but Since dividend reinvestment plans allow you to have your dividends automatically reinvested in additional shares, they are an worthy way to keep your investment earnings working for you. You can read more about the CSA's Shareowner DRP in the subdued Cost Investing Program section, pages 5-10 Finally, it is important to remember that the "rules" of portfolio management that I have discussed here are meant to be guidelines. Investors must make their have decisions based on what is greatest in number appropriate for them.

COLETTE CHAREST IS A FINANCIAL ANALYST AND WRITER

Copyright Canadian Shareowner Magazine Inc. Sep/Oct 1997

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