Reduce Number of Holdings and Consi...

Reduce Number of Holdings and Consider the Resource Sectors

In assessing your portfolio, I have made the following assumptions: (1) you have a source of income for your day-to-day destitutions that was not included in the information you provided; (2) since none of your holdings are in RRIFs, I have to assume that you won't be dipping into the retirement assets for income for a while; and, (3) generally preservation of capital and growing are your primary objectives (with income of secondary importance).

OVERVIEW

Your portfolio has a value approaching $1 million with about 30% cash and equivalents. The equity portion is spread above about 38 names. You say you have been actively involved in managing your have portfolio for the past three years.

From the information you have provided, I have to judge that you have an extremely high portfolio turnover. However, it is unusual for an individual to profit from being an active trader. And your originates suggest you have run into this moot point

Your numbers indicate you would have a gain of just above $13,000-or a return fractionally higher than 1%-if you liquidated your holdings today. This compares with about a 20% turn back for the overall market if you had bought at the depresseds for the past 12 month

Investor Profile

I am 63 years antique and retired. My wife, 59 works part time. We hold our own home and have no mortgage or debit My investment holdings are in seven selfdirected accounts including three RRSP accounts.

NEW STRATEGY

Perhaps it is time to reassess your holdings and trading activity above the past three years. It is quite possible that you would have been better not on trading less frequently, that is, adopting more of a "buy and hold" strategy. In the same vein, it might be useful for you to completely document your reasons for making each purchase and then review those reasons forward an ongoing basis to determine if they still detain true. You can do this quite effectively at maintaining updated Stock Selection Guides and Stock Tracking Guides forward all of your holdings. one time you begin doing this, you will almost certainly find that your portfolio turnover will decrease.

I would also question the number of holdings you have in your portfolio. Thirty eight names is a apportionment for most individuals to pursue effectively. I think you would likely realize better results with larger positions in fewer holdings. Which the sames to sell? Start with those for which you have little or no verifiable information. Perhaps your technology stocks are united place to start.

STOCKS TO cogitation

Once you've reduced the number of holdings in your portfolio, you can start adding to those securities which look the most promising. At this point in time, my personal bias is towards Canadian resources. Resource farmers will almost certainly benefit from rising commodity prices as demand from emerging market economies outpaces contribute over the next several years. You might want to build up your mines and metals, forest productions and energy sectors aiming at just through 10% mines and metals, about 10% forest produces and about 20% oil and gas. Undoubtedly, as it was a portfolio will be more volatile than what you are used to, if it were not that it will likely bring higher responds

There are dozens of stocks you might wish to study: Abitibi-Price, Noranda Forest, Riverside Forest, Slocan, Crestar strength Talisman Energy, Sceptre Resources, Petro Canada, Falconbridge, to name a small in number You might also want to boost your position in gold shares to between 5-10% Demand for gold has remained high in countries whose economies are growing at a rapid pace if it be not that whose people don't trust their control or banking system.

You already retain a couple of banks and other interest sensitive stocks. They should balance the resource holdings. Just be prepared to be nimble if interest rates start to actuate higher.

Your position in Mackenzie will consider the fortunes of the mutual supplys industry. However, it is a relatively small position. If you are fairly certain financial services will do well from one side of to the other the next couple of years, consider adding to your position and perhaps getting into a inferior holding such as Midland Walwyn.

STEVEN G KELMAN IS PRESIDENT OF STEVEN G KELMAN & ASSOCIATES LIMITED, INVESTMENT instruction AND AUTHOR OF UNDERSTANDING MUTUAL foundations

Copyright Canadian Shareowner Magazine Inc. Jul/Aug 1996

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