Investing For Beginners : BearMoney Portfolio Part 2

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

BearMoney TFSA

It’s been an interesting few weeks on the market with the explosion of bitcoin and the saga over gamestop shares. A lot of important ideas and realities about the market were put forward. The most important two being that you can’t control the whims of the crowd and that big players manipulate the market constantly.

It really is a perfect lesson about taking a balanced and risk-limiting approach to your investments. It has certainly made us reconsider what to do with our investment account. We’re not buying GME that’s for sure!

While there has been no catastrophes we feel it might be better to tighten up our approach from super broad to just plain broad.

If you’re wondering about the journey so far , you can check out our previous articles here. 

person holding coin
A TFSA is a type Canadian Savings Account

Reminder: 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 and contribute a predetermined amount. 

There are different rules and exceptions but overall it’s basically a tool to grow your money without paying 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 this coming year (2021)

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.

space grey ipad air with graph on brown wooden table
Mixed but generally positive results in the market for BearMoney

The BearMoney TFSA – Current State of Play

As of 26 February 2021, our investments currently look like this:

Investment Account February 2021

Investment Additions for Q1 2021

We made three moves on the market so far this year, two purchases and one increase in holdings. The purchase of these shares fitted in with our overall strategy of ‘broad stable ETFs’ and green energy.

Firstly, we increased our holdings in ZRE.TO which is the real estate ETF on the TSX. We brought the total holding up the $3,214.80 across 140 shares. So far this bad boy is feeding in about $12.60 a month in dividends. Not spectacular but it works out to about 5% per annum which is decent and stable.

Although it is at the lower end of the target range of 4.5-7% it is a pretty stable ETF so it have been doing its job very well.

Now on to the purchases

Purchase 1 – Algonquin Power and Utilities Corp. : $AQN.TO

I like this company. I like it a lot. AQN is a power and utility company with operations across Canada and the USA. It generates revenues of $2BN annually on an asset portfolio of about $10BN.

All of that is great and the math looks solid but underwhelming (it’s not a dividend superstar or a rocket ship). It’s financially ‘ok’ but it could be argued to be treading water. The real benefit of AQN is the potential for long term momentum.

The company operates in regulated spaces (stability) and green energy (all the rage and a huge growth market). It is definitely a snails pace type of security buy but it is both solid and renewable which are two pillars of our investment strategy.

So this security was bought as a ‘wait and see’ for the next little while. If it remains stable and looks to build momentum, it’s a keep. Otherwise it might be sacrificed to the index fund gods.

Purchase 2 – Horizons Active Cdn Dividend E. : $HAL.TO

This Dividend ETF might have been a mistake but also might be a keeper. It is based on a select group of dividend paying companies based on the TSX. It has a meagre yield of about 3.5% which is the trade off for incredible stability and pretty wicked value growth.

The HAL.TO ETF outperforms most other TSX dividend ETFs in terms of value appreciation. The value is brought about by extensive use of artificial intelligence (likely machine learning in reality) to pick and balance/rebalance the portfolio.

Also the name is an obvious pun on HAL from 2001: A Space Odyssey so this is effectively a meme stock like $MJ. BearMoney loves meme stocks.

So in terms of long term holding, you could comfortably expect a value increase from HAL.TO of 1.5-2% greater than similar Canadian ETFs. In theory this would give us an extra $2,000 odd dollars over the next 10-ish years of the TFSA (compared to the others that is).

The plan is to hold this until the next steps of the portfolio are known.

I hate Gold

I know, I know, Gold is supposed to be a ‘hedge for inflation’ and and nice little safety net for bad times. Despite this, and the small amount currently in the account, I feel like adding $CGL.C.TO was a bad idea.

It’s true that it isn’t supposed to grow until money rushes into gold, and we’re likely due a significant market correction in the near future.

It is also true that this portfolio is not due to be cashed in any time soon, so holding gold that has been sitting at a loss from day 1 is pretty unproductive, in fact, it would have done much better in an index fund (but more on that later).

So ideally, we will remove gold from the portfolio when the time is right. What are we going to replace it with? It’s not 100% clear at the moment but the new crypto ETFs trading on the Toronto stock exchange look promising.

If we’re going to have a punt, why not dogecoin to the moon?

Cannabis Stocks are High

As we hypothesized at the very start of this, the United States look set to move to a much more liberal cannabis regime under the Biden Administration. What this means is one thing, a second cannabis gold rush.

Several years ago, stocks in Cannabis companies were heavily inflated due to progressing decriminalization and legalization in Canada. This bubble didn’t last due to the fundementals of the cannabis market being more complex than thought.

Government weed is overpriced and poor quality. If you institute such a regime it will take up to a decade to replace the black market. That is why the money left so quickly, the sales boom didn’t match up to the share price boom.

History will definitely repeat itself though, and at one point recently the $MJ ETF was up almost 3x what we paid for it.

They have since dropped down to about 2-2.5x value but rest assured they will spike again. When that happens it opens up serious possibilities for our investments going forward.

Too Broad?

The BearMoney Portfolio currently consists of a whopping 11 different securities that cover practically the entire economy, probably even overlapping. This is a broad and resilient way to do things and can be very useful in the medium term.

The question is though, have we gotten too broad?

In one way what we have is a collection of holdings that match our overall strategy. For example, we hold 3 separate securities to do with Energy. This seems like a solid plan. We have a utility company, clean energy ETF and Oil/Gas ETF.

The flip side of this is that we can never really build up a sizeable holding in any one security here. The same goes for our other ETFs which offer broad access to regions, indexes, or particular industries.

There may be a danger here of not being able to ‘scale’ our investments over time if we keep dropping small amounts of money into them.

On balance it would seem that we should reduce our holdings to something around 6-8 securities so that over a 10 year period we will be able to deploy about $10,000 into each one. This would in theory give us a more stable view on what our overall earnings/increases will be going forward.

What do you think? Are you a single index investor or a basket case like us? Let us know in the comments below!

What Next?

Following on from the above, we need a bit of a strategic rethink. In order to pare down our current holding we are going to have to sell something. At this point we have the time and the small size to not have to accept a loss on any particular security we want to sell.

At writing the potential strategy for April-June is as follows:

  1. Bring $3,000 more to the TFSA
  2. Identify 3-6 holdings to liquidate
  3. Liquidate at cost or profit/set sell limits
  4. If liquated consolidate and add 1 index fund

The end goal is to have a leaner portfolio that can be concentrated in solid industry ETFs and indexes with 1-2 company holdings. It is hoped to get a full $20,000 into the market by the end of the summer.

This, of course, does not include our $500 penny/low cap stock bonanza for March!

March Madness Investing

We are very exicted to share with you the outline of what we’ll be doing in March with this TFSA. To commemorate the 1st Anniversary of the Covid-19 economic collapse we are going to dump $500 into highly speculative stocks known as penny stocks or low caps.

We are doing this because we think investing should be a little bit fun (but still 95% boring) and also as a cautionary tale. Most people lose money on these stocks but a small percentage make a significant amount. We hope to be the second but expect to be the first.

The rules for our ‘March Madness’ are as follows:

  1. $500 deployed on stocks costs <$5 a share (discounting fees)
  2. No selling below 50% net profit
  3. 50% of all profits go to the main TFSA holdings
  4. The remaining 50% go straight back into March Madness

We’ll keep you updated at the end of each article to show how our ‘fun’ account is going, at least until it tanks to $0 of course…

Follow along with us instead of risking your own cash and enjoy the journey.

Total Gains/Losses as of February 26 2021

Gains Canadian Dollars: $1,989.16

Gains US Dollars:$1,564.84

Dividends: $57.93


Total Portfolio Value CAD:$17,788.39

Total Portfolio Value USD:$13,993.86


Leave a Reply

Your email address will not be published.

BearMoney Blog