Investing For Beginners : BearMoney Portfolio Part 1

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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Wow, what an insane month it has been both in the wider world and in the BearMoney office. We’ve seen a new US president elected (sort of?), COVID-19 vaccine hopes and an the birth of our BearMoney TFSA Investment Account with all of our outstanding orders being filled. Welcome to month 1 of the BearMoney financial journey. 

We’ve bought everything we wanted at prices we liked and put together a solid and balanced investment portfolio. This is a lot better than we thought it would be so let’s continue in this positive spirit for 2021!

If you’re wondering how/what we’re doing , you can check out our previous articles here and here. To summarize it in a sentence: we are creating a public facing investment account throughout 2020/2021 and allowing you all to follow along with us.

You will get a fully open and honest looks into the peaks and dips of investing, beginners mistakes, beginners luck, and realistic returns.

Month 1 has been very interesting. We experienced the excitement of our investment orders filling over a couple of weeks. Then we experienced our first dip, and finally we saw a significant swing in our total equity following the US Election.

But what exactly does our beginners investment strategy look like? What does our final portfolio look like and where do we go from here? Keep reading to find out!

Investmnet Banks

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 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.

TFSA Investment Account

The BearMoney TFSA – Current State of Play

As of 27 November 2020, our investments currently look like this:

Security Quantity Bought Current Value P&L
CGL.C.TO 65 21.65 20.01 1300.65 -106.60
EUR.TO 75 17.50 19.48 1461.00 148.50
ICLN 30 19.25 23.59 707.70 130.20
LIFE.TO 25 20.90 20.90 522.50 0
MJ 90 11.155 15.21 1368.90 364.95
XCV.TO 50 21.67 24.68 1234.00 150.50
XIU.TO 75 24.70 26.12 1959.00 106.50
ZEO.TO 50 23.56 30.55 1527.50 349.50
ZRE.TO 95 19.58 22.40 2125.00 267.90
The BMB TFSA Investment Account November 2020

First Investment Mistakes

This month has been a complete and very interesting introduction to the world of investing. It’s always a difficult thing to make decisions with your money, especially when there is an element of risk involved. No matter how calculated it might be, there is a possibility that you will end up worse off than before.

Thankfully, this risk is offset by the comparative guarantee that you would lose money in the below inflation savings accounts that are offered by most major banks.

When failure is part of the process you have to accept that what you wanted to achieve and what you actually achieved might end up being two completely different things. With that being said, let’s have a look at the few investment mistakes that we made this month. 

There is nothing major but maybe it can help you in your journey by highlighting a few places to stop and think before trading.

Investing in Gold (blindly)

Investing a portion of your money into gold is a basic prerequisite. Gold is seen as a ‘hedge’ against risk, that is, it will hold or increase in value during times of economic uncertainty. 

The idea is that you hold a small part of your money in gold (maybe 10-15%) just to provide you a little financial cushion until your other investments (hopefully) rebound. The mistake we made here putting an order in for gold at the very start of our journey.

Sure, it is good to have gold in your portfolio. We’d never advocate against it, the issue it that by its nature the gold price should be relatively stable or moderately down in good times and moderately up in bad times. There is very little need for a financial cushion when you are starting out.

The ~$1,300 of gold derivatives that we invested in never really did anything and are essentially locked away for the medium term now. To put that in perspective, we could have increased our other portfolio holdings proportionally and had a fair amount of growth.

Now, this isn’t relevant in long term thinking, long term it is probably very smart to have gold. We just should have bought it in our second round of investments in 2021.

Not having a clear USD/CAD Investment Plan

This mistake wasn’t particularly troublesome but it is helpful for those starting out to think on. The investment account was denominated in Canadian Dollars which meant that any US based securities were going to require some currency conversion. 

Now, this isn’t particularly difficult on Questrade and the costs etc are pretty nominal but it did cause some issues in picking what to invest in.

Obviously on a dollar for dollar basis the quoted price for American stocks is going to be higher than that of Canadian ones, and you can’t really use one currency in place of the other. So this means that you either have to convert as you go or have a fully planned out CAD/USD split. We didn’t have this and ended up doing a spot conversion to buy $1,500 CAD worth of shares. 

It’s worth checking out ahead of time what currency your investment strategy will use most and see if you can make the vast majority of your trades be in one currency.

Current investment value BMB TFSA account

What Growth Means / Investment Wins

Buying On A Dip/Buying Undervalued Securities

A lot of talk around investing talks about buying when there is a ‘dip’. That means having your money ready to go and waiting for a fall in the value of your chosen securities so you can buy them at a discount. Usually a dip is short term and you basically get a boost of value for your patience.

Make no mistake that it does require patience, because you can’t really time the markets to suit your investment strategy. There was a massive dip during the COVID-19 pandemic in early 2020 which could have given super profits for people holding cash. Good luck predicting such an event though!

We don’t have the knowledge and experience to successfully call major dips. What we do have is a basic knowledge of the economy and the functioning of the markets. 

With this knowledge we tried to find securities that were still trading below their March 2020 highs by acceptable amounts. We didn’t buy anything that had regained what it had lost already. They were no longer undervalued and were likely not going to give a ‘dip’ style boost to our portfolio.

Instead we targeted ETFs that were trading at ~10% that their Year-To-Date or YTD peak. With the exception of our gold investment, this has paid off. Although to be fully honest for the first month it didn’t look like that. In fact it looked like we had bought too high and all our investments except our Cannabis ETF were falling.

Overall then it seemed like a relatively smart strategy, to pick securities that were just about to return to the previous highs. This allowed us to have a bit more confidence that the securities were solid (they were almost back to their best) as well as undervalued.

The results above and below are early positive indicators that this strategy was a good one, but that can change in an instant.

Temporary Growth vs Good Investment Decisions

That last point is an important one. One month’s investment performance is a completely useless tool in gauging how smart our decisions were. 

The stock markets in general had a positive reaction surrounding vaccine news and the light at the end of the COVID-19 tunnel. They also shrugged off the uncertainty of the US Presidential Election. It is likely that a significant portion of our portfolio growth is derived from this and may be temporary.

However, the broad based nature of our portfolio and the significant returns in most areas are a better sign than the earlier drops in value that we had seen.

It remains to be seen if all of our investments were good decisions. Certainly the only one that we would bet on being a long-term grower is the $MJ cannabis ETF that was stupidly undervalued at the start of the year anyway.

So overall, the growth is definitely not a bad thing, and it’s much better to start on a positive than a negative. However, it is so early in the process that we many see a reversal of fortune in a matter of days. So what we can say is that the signs are good, and the decision seem at least to be solid

That’s good enough for a beginner’s first batch of securities.

Diversifying to Build For The Future

A lot of people say to invest in a few stocks at most. You are supposed to leverage the size of your cash pile to get solid returns on a few low risk investments. After this point you can add, subtract, and tinker with your portfolio as you see fit. 

We chose not to follow this advice. Instead we decided to have a massively broad portfolio that tried to cover both conventional wisdom and our own theories from research.

This is why we bought both Clean Energy and Oil & Gas ETFs. We don’t see either losing a large amount of value over the next ten years. That’s the important part, we don’t imagine selling these securities for another 10 years or so (unless there’s a stupidly good deal).

We know that clean energy is going to win the battle for the future of electricity, but we also know that oil isn’t dead yet. Holding both allows us to be a bit nimble and jump on any particular opportunity that presents itself.

In the same way we have tried to take in as many industries that we know as possible as well as some index funds. You can see that split of investment types in our second article here. Overall we wanted to have a broad and solid base that we can build on.

This of course means that our investments are spread quite thinly, and as a result, are quite modest. We’re basically in for about $1,000 in each of our investment areas. Long term this will change, but for know, it’s a good foundation for the future.

BMB TFSA cash on hand November 2020

What To Do With The Spare Cash

As of 27th November 2020, our spare cash sits a $677.71 CAD. This represents %5 of our fund. We purposefully did not spend this money for a couple of reasons. Firstly, we wanted to be sure that we had some emergency cash on hand in case we ran into any legal or technical difficulties with out purchases.

The other reason is too keep a small amount of cash in reserve to use as a ‘dip fund’ that will allow us to increase our ability to buy securities when a great offer comes along. This is going to be especially helpful as our 2021 Group of investments is going to operate at 50% the capacity of our 2020 Group ($6,000 vs $12,000).

 It is always a good idea to have about 5% of your fund in cash ready to go, whether that’s $5 or $5,000.

The ability to put $1,000 into the market in one month instead of $500 could be very significant for the next 12 months. In addition, 100% of any dividends will also be added to the cash pile for reinvestment in 2021. 

We expect another $25 of dividends or so before the end of the year. In theory our portfolio should give us at least $300 of total dividends a year to reinvest.

Check back with us next month as we explain our strategy for our Group 2021 investments and the future of the investment portfolio going forward.

Total Gains/Losses as of November 27 2020

Gains Canadian Dollars: $1,411.45

Gains US Dollars:$1,086.92

Dividends: $13.93


Total Portfolio Value CAD:$13,425.38

Total Portfolio Value USD:$10,338.41


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