Investing For Beginners: BearMoney Portfolio Part 0

BearMoney Team

BearMoney Team

BearMoney is the balanced finance blog for new and old Canadians alike. We are a team of people living international that research, write, and share

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What is a TFSA?

A Tax Free Savings Account or TFSA is an financial tool for Canadians to invest their money and reap the profits tax free*. Every year each person living in Canada with a SIN can open up a TFSA a contribute a predetermined amount. There are different rules and exceptions but overall it’s basically a tool to grow your money without pay in tax. In our first article in this series we explained what the TFSA is, how much you can contribute, and the type on investments possible.

The purpose of this series of articles is to set up a very basic beginner’s TFSA and to allow you all to follow along with our investing, profits, and losses. We want to put the whole thing out there so you can see that investing is not something that you have to be afraid of. Hopefully you can learn from some of our mistakes and possibly share in our success as we run this experiment over the course of 2021 (and possibly further).

If you’re new to investing or TFSAs we recommend that you start in our first article (linked above) and check out the many useful resources listed there. With that out of the way let’s dive in a see what the BM TFSA is actually going to be!

*exceptions here.

Our American friends would be familiar with the ROTH IRA which is a broadly similar type of account. For a USA specific strategy have a look at what our friends over on MyWealthMoney have to say about the simple path to getting rich. 

What we’re doing

The BM TFSA is starting off with a $12,000 investment all-in, that means that the money has to pay for fees and charges incurred in buying stocks or exchanging currencies etc. Overall this shouldn’t be too much of an issue but it is worth noting that less that $12,000 of investments will be bought.

Following the initial bunch of securities, no new funding will be added to the portfolio until January 2021 at which point $500 per month will be added into the pot. This money will either be spent monthly or bundled together for a specific goal (e.g. saving $1,000 over two months to buy X shares).

In addition to this normal investing, for March 2021 we will be spending the entire $500 on penny stocks. These are low value, high risk shares that are generally seen as the most ‘gambling’ form of investment. This is to keep things interesting and fun as well as to highlight different strategies that other people might use when investing.

Over the course of the BM TFSA we will be writing up on our thoughts as to why we are picking certain securities, our overall strategy and keeping you up to date with out profit/loss*. 

Note: A TFSA is really designed to held for a long period of time, usually more than 10 years. Profit and Loss in terms of months really means very little in terms of this kind of investing. We’re only showing you to highlight the ebb and flow of the markets.

Picking The Right Investment Tool

As discussed in our first article, there are as many different ways to operate a TFSA as there are people that have them. Depending on your age, finances, experience, and risk profile, you will have different ideas and strategies to us. If you already have one baked in, feel free to share it in the comments below or on our social media.

For the BM TFSA a lot of the more traditional methods have been discounted and a more modern and increasingly popular route chosen: The discount online brokerage. There are an abundance of these platforms operating in Canada that offer you cheap, accessible investing. 

The fees are usually very low and when coupled with bundled securities like ETFs and robust trading apps you can invest as simply or as complexly as you like. In general terms they are much more useful than using your bank or an old school brokerage. The online investing platform that we have chosen in Questrade.

And added bonus is that our dividends will get recycled tax free into our investment account so we can keep investing more and more over time. While dividends (share of company profit) are nice to have we are primarily looking at growing our investment value. For more information on dividends feel free to check out the awesome guide our friends are Inkmattic put together.

Why did we pick Questrade?

The are several reasons as to why we chose to invest the BM TFSA money via Questrade. It mostly comes down to money and ease of use but our full list of reasons is;

  • No Annual Fee
  • Easily Avoided Inactivity Fee
  • Cheap Trades (From $0-9.95)
  • Clean and Simple Platform
  • Large Range of Options
  • ETFs (backbone of our TFSA) are Free
  • Roboadvisor if we feel lazy
  • Solid Free Research Tools/Factsheets

While these reasons might not be enough to tempt the advanced investor for a beginner they certainly remove a lot of the frustration and difficulty. Seeing clearly what fees you will pay, and seeing that they are much lower than many other providers is a great feeling. The broad range of options is also very helpful for a TFSA that is very much in ‘learning mode’. It will allow to invest in straightforward low risk ETFs as well as the try out other areas over time.

If you’re considering signing up with Questrade use this affiliate link to get $50 worth of FREE Trades.

What TFSA Investment Strategy to Pick

Exchange Traded Funds or ETFs are the pillar of the Group 2020 investment for the BM TFSA. As mentioned in the first article, an ETF is a collection of equities that are collected in numbers bigger than individuals can afford and then bundled together. Effectively, by putting 1$ into a S&P 500 ETF, you have a share in the entire S&P 500 list of companies (although it’s via the intermediary ETF).

This is why many people call ETFs ‘investing on easy mode’. The risk is generally better spread than buying a regular stock, and the base of different companies you are ‘betting’ on is much wider. They also tend to be cheaper than the similar Mutual Funds. So, for the start at least, we are going to pump our money into a broad range of ETFs covering the following areas: Green Energy, Consumer Goods, Cannabis, Gold, Logistics, Healthcare, Value, Indexes and REITS.

A good rule of thumb when first investing is the play it safe and go with what you know. So, in following this tradition the BM TFSA will buy generally recommended ETFs in Consumer Goods, Gold, REITS, Indexes and possibly a Value ETF trading in Toronto (consensus buys). In addition, we will invest in Green Energy/Oil, Logistics, Cannabis, and Healthcare (experience buys).

Investment Thinking

BearMoney is a personal finance blog not an investment blog. We’re not experts so we’re cautious about investing outside our personal areas of expertise. We know enough to see that a large market correction is coming in the future, and although nobody can really say when, it’s best to take a conservative stance to begin with. The idea is to invest in a series of ETFs that are broadly based, undervalued somewhat, and not particularly volatile. The categories used to realize this idea are;

Consensus Buys

Value ETF – Value ETFs are designed to track ‘undervalued’ companies so they will return ‘value’ to your portfolio by beating the general market growth rate. They are moderately risky compared to general index funds. This was a consensus buy.

Gold ETF – Gold is gold, it’s a staple of investment portfolio and usually pays to have a certain amount to hedge any upcoming market corrections. This was a consensus buy.

REIT ETF – REITs are usually a solid investment, and with Canada’s current money laundering fueled property boom, a Toronto based ETF will have value for a few years at the least. This was a consensus buy.

Consumer Staples ETF – Staples ETFs work to keep a steady but unimpressive return during economic downturns. Adding one to our portfolio will create a small bit of a buffer for the oncoming economic headwinds. It will also generally provide a decent enough return to justify its purchase irrespective of this. This was a consensus buy.

Experience Buys

Cannabis ETF – Cannabis stocks were drastically overvalued and fell sharply the past few years, but decriminalization and eventual legalization in the United States will lead to huge gains. Given that the TFSA is long term, this is a no brainer. This was an experience buy.

Logistics ETF – Logistics is a huge growth market, especially with the inevitable march of internet business as well as a future of integrated manufacturing-supply-consumer chains. A logistics ETF will be well place to reap the benefits of future consumer trends and the post COVID economy. This was an experience buy.

Healthcare ETF – People are living longer and requiring ever more expensive care. In fact, aging populations are a serious threat to government financial stability. Any solution to this problem is going to involve significant spending on healthcare, including elder care and related services. This was an experience buy.

Green Energy – Is was difficult to pick between Green Tech and Oil & Gas for the investment strategy. Ideally we would hold both, and possibly in Group 2021 we will but this is a gamble on a Biden Presidency. If ‘Sleepy Joe’ takes the White House on Nov 3 you can rest assured that the growth in subsidies for green tech will outstrip the dynamism of the Oil & Gas sector. This was a very tough call so expect to see Natural Gas ETFs being purchased soon. This was an experience buy.

BM Investment Strategy TFSA

Starting Invetment Strategy

Specific Picks

So what specific securities are we going to put into our TFSA? Following on from the strategy above we have put a rather broad range of investments into the account. We have also budgeted for a little immediate reserve. The reason we have an amount of cash left in the account is the upcoming US election. This is tempering our desire to buy into our US index ETF and Green Energy (there are no green energy ETFs traded on the Toronto exchange).

Despite this we were able to fill in most of our picks at prices we liked and have settled on 7 particular securities that will likely carry us into 2021. In addition, we added in a European ETF to diversify away from Canadian and North American economic performance. How smart this choice will end up being is up for debate.

Again, it is worth stating that these are just our picks for the BMB ETF it’s not an endorsement of any particular security or strategy.

CGL.C.TO – iShares Gold Bullion ETF NON HDG This is an ETF designed to replicate the price of gold bullion insofar as it is possible.

LIFE.TO – Evolve Glbl Healthcare Enhanced Yld Fund – This is an ETF that invests in healthcare providers across the globe and has a portion of ‘covered calls‘ which is essentially a riskier high growth trading strategy.

MJ – ETF Managers Trust Alternative Harvest ETF – This is an ETF that covers a wide range of the cannabis industry in North America

XIU.TO – iShares SP TSX 60 Index ETF – This is an ETF that is an index fund of 60 large companies that trade on the Toronto Stock Exchange.

ZRE.TO – BMO Equal Weight REITS Index ETF – This is an ETF that invests in real estate companies to try to mirror and index fund of several large REITS.

Not filled Yet

XCV.TO – iShares Canadian Value Index ETF – This ETF is designed to mirror the Dow Jones Canada Select Value Index. It theoretically designed to invest in undervalued companies that will give solid growth over the long term.

EUR.TO – First Trust Alphadex Euro Div IDX ETF – This ETF holds investments in European companies. The goal is that they will grow in value (if not dividend) over a set period of time. It is a broad based ETF with investments in natural resources, telecoms, construction, and technology companies.

What is in and what are we waiting on

At the time of writing, the BM TFSA is composed of the following securities to a grand total of $6,647 with $2,387 outstanding in orders and ~$2,940 in reserve to make the next move in the market.

Name  Number Bought Avg Price Mkt Value %Portfolio
CGL.C.TO 65 21.65 1416.35 11.82
LIFE.TO 25 20.90 515 4.30
MJ 90 11.155 1027.80 11.26
XIU.TO 75 24.70 1833.00 15.30
ZRE.TO 95 19.58 1855.35 15.49
Current BMB TFSA Investments

The outstanding orders are our European Index and our Canadian Value Index

Name Number Sought Current Price Bid Price %Portfolio
XCV.TO 50 21.91 21.49 N/A
EUR.TO 75 17.70 17.50 N/A
Upcoming BMB TFSA Investments

Overall we’re quite happy with the prices that these securities were/hopefully are purchased at. Although it’s clear than many stocks are overvalued and will likely fall during the next correction, for long term, they weren’t bad prices. The end goal is to have at least $11,000 investment by December 31st before we begin the Group 2021 investment journey. Ideally this take the form of roughly $1,000 in Green Energy/Natural Gas and $1,000 in logistics.

Next Step

The final two months of 2020 are going to be a holding pattern for the BM TFSA. We’l wait to see if our two outstanding orders are filled. In addition, any type of large correction that presents and opportunity to buy will be taken. We’re excited to see what happens over this short period of time but we’re not taking any gains/losses too seriously. This TFSA is an investment for the long term >5 Years so a short-term instability is to be expected. Although we will be showing you monthly fluctuations for the sake of openness

For the next few months we will be formulating a strategy for 2021 and keeping track of the investments. Join us next month when we see how our orders filled and what our balances look like one month in!


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