What should I add to my investment portfolio to diversify it?

[KingstonU]

Just starting to invest (24 y/o with a timeline of 20+ years from now). After a bit of research I just got my first mutual fund purchased. What should I add to my investment portfolio to diversify it? I'm from Canada.

Current money allocation:

40% Stock Mutual Fund : Canada Index ( 28% Financial Sector, 27% Energy, 23% Basic Materials, 6% Industrial, 4% Communications….)

20% GIC’s (low 2.1% return, locked in for 2 more years)

40% Cash

I’m thinking that at this point my portfolio should be more like 80%-90% Stock Mutual Funds. So I am trying to decide on what other funds to buy. I figure I should have 3 or 4 different funds that have no overlapping of companies.

What would you do if you had to pick 2 or 3 more funds to invest in? (with a 20+ year timeline)

Should I get 1 U.S. fund ( Nasdaq? Dow Jones? S&P 500? Russell 3000?) and 1 international fund? And maybe 1 high risk fund?

Any advice appreciated, thanks

 

[Phokus]

Waffles, tasty tasty waffles

 

[IceBergSLiM]

10% should be immediately plowed into H&B

 

[Vageetasjn]

40% of your portfolio is in Canadian companies? That seems like a lot.

 

[Imp]

Definately waffles...

Then put more money into mutual funds or stocks, but not 80-90%. Personally, I'd keep at least 30% in GICs or "cash" (savings account). This allows you to really make some gains when the market kicks the bucket; you have a nice amount to buy in with when things are rock bottom to offset your losses/increase your gains.

I'm 80% U.S. invested because I find Canadian stocks boring and not volatile enough. I also actively, obssessively manage my portfolio though. If you're just buying mutual funds, then there's no reason not to, unless you think the U.S. will never recover. But then you should also know that over, what, 70% (?) of Canadian exports end up in the U.S.

 

[DesiPower]

Reduce MF and cash by 10% and invest (20%) in property.

 

[Sukhoi]

You are waaaay too conservative for someone with a 20 year timeline. I'd suggest closer to 80% stock, 10% bonds, 10% cash.

Also you're viewing what a mutal fund is wrong. It's not an investment type (stock, bond, etc.), it's an investment vehicle. Investing in a bond mutal fund is far different than a stock mutal fund regarding risk and such.

 

[mshan]

If you are truly investing for retirement and have adequate emergency fund (3 - 6 months living expenses if you have stable job or think you can find another fairly quickly if you were let go), then you should be 100% stock until age 50.

You can add some bonds to that if you don't have the stomach for increased volatility of 100% stock portfolio, but you will be cutting long term returns as stocks (say 8 - 10% average annual return over time) >> bonds (say 5 -6%) > cash (maybe 2% and unlikely to even keep up with inflation) over time.

Give you are only 20, strategic asset allocation should have much more significant impact on your long term compounding of wealth vs. specific investments (unless you the one fund that outperforms immensely over 20 years and is only identifiable in hindsight, or you have a lot of obviously poor investments).

If nothing else, you can start dollar cost averaging into Vanguard Index Total Stock Market mutual fund (mutual fund) and use that as a core around which you can underweight or overweight with other funds. VTSMX is 99% tax efficient, so this dollar cost averaging should be in a taxable account, and just put it on auto-pilot for 30 - 40 years, then be very happy. You can even let it continue to compound during early years of retirement, when you live of mandatory distributions from tax deferred accounts.

 

[SunnyD]

Charlie Sheen?

 

[shiner]

Waffles, tasty tasty waffles

If he wants to diversify he should look into chicken and waffles.

 

[DaveSimmons]

Are Vanguard funds available to you in Canada? Their Target <year> funds include USA and world stock index funds, and a bit of USA bonds.

Depending on how Canada taxes foreign investments you might want to buy that in a tax-sheltered retirement fund while (if necessary because of limits) buying the Canadian funds in a regular brokerage account.

 

[speg]

Did you open a TFSA? Any reason you went with Mutual Funds rather than ETFs? What broker are you using?

 

[lozina]

I would invest 60% in bulk beef, 15% of which is in the cubed form.

 

[MegaVovaN]

I would invest 60% in bulk beef, 15% of which is in the cubed form.

What % in alternator-sized?

 

[KingstonU]

Did you open a TFSA? Any reason you went with Mutual Funds rather than ETFs? What broker are you using?

TFSA is maxed out, currently in GIC's, as soon as they are free I figure I should move them into stock mutual funds as well. I'm using TD Waterhouse for the fund I currently have which has 0.31% MER.

 

[speg]

TFSA is maxed out, currently in GIC's, as soon as they are free I figure I should move them into stock mutual funds as well. I'm using TD Waterhouse for the fund I currently have which has 0.31% MER.

Well at least you got a TFSA... but I would put my highest risk/reward stuff in there next time. I would not advise GIC's unless you have huge amounts of cash and the 2% is actually meaningful. Are you planning on buying any individual stocks?

 

[KingstonU]

Well at least you got a TFSA... but I would put my highest risk/reward stuff in there next time. I would not advise GIC's unless you have huge amounts of cash and the 2% is actually meaningful. Are you planning on buying any individual stocks?

Yah if I had started educated myself on investing a few years ago I would have put the TFSA's to riskier stocks as opposed to GIC's like u said, I'll know for the future I guess. I've tried individual stocks before but got burned so I probably won't go that route until I educate myself a lot more and have the majority of my finances on the right track.

I figure I should for now focus on choosing 2 or 3 more stock mutual funds that are U.S. and international. Perhaps mostly blue chip companies. Is that a bad plan?

 

[ichy]

http://www.bogleheads.org/wiki/Lazy_Portfolios

 

[yllus]

50&#37; TSX index fund, 50% Canadian bond index fund, then occasionally re-balance but otherwise forget it and let it grow.

 

[YoungGun21]

You need to actually diversify rather than invest in all of Canada.
Why 40&#37; cash?
You are young, you can be riskier with your money.

 

[KingstonU]

I plan on converting most of my cash into more stock mutual funds. But which funds? Nasdaq? S&P 500? Russel 3000?

Having a hard time choosing the fund, I just figure choosing and index is better unless I have in in depth understanding of the markets.

 

[Regs]

d/l

 

[Sukhoi]

I plan on converting most of my cash into more stock mutual funds. But which funds? Nasdaq? S&P 500? Russel 3000?

Having a hard time choosing the fund, I just figure choosing and index is better unless I have in in depth understanding of the markets.

Indeed, and even if you know the markets an index fund can still be better. My cousin is a big time retirement investment banker, and his own personal retirement money is all in index funds.

 

[sunzt]

Who's your broker?

I have fidelity for my Roth IRA and they have no-fee/commission ETFs that I like as well as their no fee funds. What I like to do instead of "cash" is to keep my "cash" in a no-fee bond ETF.

 

[KingstonU]

Who's your broker?

I have fidelity for my Roth IRA and they have no-fee/commission ETFs that I like as well as their no fee funds. What I like to do instead of "cash" is to keep my "cash" in a no-fee bond ETF.

I'm with TD but I also have RRSP's from employer in Great West Life and Manulife (previous employer) I'll have to transfer those into stock mutual funds as well.