Hello everyone are you an investor in individual stocks and ETFs? Do you have concerns or struggle with how to select a stock or ETF, how many shares should you buy etc…. Then I think this post is for you.
In today’s post I am going to share with you some areas that I struggle with. Back in July 2014 I decided to try investing in stocks that offered a dividend. At that point I had been a index investor for the past six months. You could kind of say I was in no man’s land as an investor bouncing around trying different investment strategies.
When I chose to invest in individual stocks I had zero experience, I didn’t know about what stocks I should be buying, ones I should stay away from etc… I can remember when my brokerage account was opened typing in companies names, and I would look at the share price, then I would grab my calculator and divide that number by 5,000. Why 5,000? Well at that time I had around $55,000 to invest and so I randomly decided that I would invest $5,000 in a stock. Once I got my number of shares that I could buy I would then multiple that by company’s dividend to see how much money I would earn. That is pretty much how I come to own BCE, Bank of Montreal, Royal Bank of Canada, TransCanada, Fortis and Canadian Utilities.
So let’s now get to some of the issues that I have been struggling with.
What To Look For When Buying A Stock
As mentioned above when I started investing I began buying stocks based on how much money I would earn back in dividends. Not the greatest strategy I know! Last month marked my third anniversary as a dividend investor I no longer just look at how much money I will earn, I look at the following:
- P/E (Price to Earnings)
- Net Earnings
- Payout Ratio
I always tend to feel like I am missing other key metrics to look at. Should I be looking at other metrics??? Please let me know your thoughts in the comments below.
Here in Canada our stock market is dominated by the resource, financial, telecoms and pipeline sectors. We always hear that we need to be invested in Canadian, US and International equities. At the moment I am invested in 25 stocks and 1 ETF. All of the stocks are Canadian and the ETF is focused on the US market with 100 dividend paying stocks.
I have struggled so far in geographical diversification with my portfolio and it is an area that I need to address. I currently have no investments beyond Canada and the US. Some of my companies have operations around the world Canadian Utilities (Australia, Chile), TransCanada (Mexico), and Power Corp of Canada (Europe, China). However this isn’t enough.
Sector diversification is another area of concern for me, my portfolio currently has the following areas covered.
- financial, telecoms, pipelines, utilities, industrial, consumer and reits.
Areas that I am currently missing:
- healthcare, technology, resources such as gold & silver, renewable energy, infrastructure.
The Canadian Government is currently planning to spend billions of dollars on infrastructure across the country. They are also in the stages of setting up a $35 billion infrastructure bank. So it might be advantageous to look at industrial companies.
How Much Or Little To Buy
This is one that I seem to have the most difficulty with. I never know the quantity to buy. One reason for this is that my brokerage charges me $9.99 per trade so I try to usually set a minimum of $1,000 per purchase.
At the moment I currently have $2,510 in my Tax Free Savings Account (TFSA) so I have a decision to make, if I were to make a purchase today should I buy one stock with the full amount or do I split the money and invest $1,255 in two stocks. This is what usually bounces around in my head before buying.
My last three purchases have been for 33, 26 and 25 shares. I usually set a minimum number of shares to buy at 25 as that seems like a good number to acquire. Do you do the same? Or does the number matter to you?
One stock I like is Canadian National Railway the stock currently trades for $100.37. Let’s say I have $1,000 to spend I would only be able to buy 9 shares which in my opinion is to few. Is my thinking flawed??? Should I look past the number of shares and just focus on making an investment in the company??
One problem being a Canadian investor is having to pay US dollars if we want to purchase US stocks. Why is this a problem? Well for the past few years the Canadian dollar has been weaker which raises the price of the stock.
For example if I wanted to buy 1 Apple share at the time of this post an Apple share costs $158.59US that would cost me $200.96 Canadian.
I see other Canadian bloggers and investors continuing to buy US stocks should I?? Why I struggle with this area is because I don’t have a lot of money to invest and always default to Canadian stocks where I can purchase more. Let’s go back to Apple if I were to buy 10 shares that would cost me $1,585.90USD, Canadian it would be $2008.46 so it would cost an extra $422.56. For that price I could get an extra 10 to 15 shares of a Canadian stock.
The exchange rate is a big reason why last November I decided to sell my shares in JP Morgan and Proctor & Gamble as I felt that I wouldn’t be able to buy more. In my mind a way to get around the exchange rate was to invest in an ETF that invests in US stocks, and that is what I did. I own an ETF that invests in 100 dividend paying stocks.
If your a Canadian investor do you worry about the price of the Canadian dollar?? Has it stopped you from buying US stocks?? Or should I not worry about the exchange rate and get back into the US market??
Well folks I hope you like this post. I wanted to share with you some the areas that I have struggled with since I started investing in individual stocks. I’m sure that everyone struggles with investing and I hope you feel comfortable sharing, as I feel that is how we learn and grow and improve ourselves. If you any concerns please feel free to let me know in the comments below.
Thank you for reading I appreciate it.