Portfolio Planning

24 Jul 2016 23:21

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Obviously the markets have had a significant run-up as of late and many individual investors are hesitant adding new funds to what may possibly be an overvalued market.

Normally I do not pay close attention to market gyrations because I focus on whether the combination of dividend yield and dividend growth will meet my long term investing goals. But even I am struggling to find companies with the right yield/growth combination while maintaining a diverse portfolio. In other words, my buying activity is rapidly declining.

Since I am not actively buying I decided to use this time to analyze my portfolio in regards to diversification and to develop an acquisition plan. The chart below is a depiction of my target allocations, where I am and the remaining gap. If you are wondering why the allocations do not add up to 100% that is because I keep 5% in cash and did not include it in the chart


In the Consumer Defensive (staples) and Utilities sectors it is not shocking that I still have a rather large gap to fill as these sectors have been hot all year with YTD returns of 10% and 21% and are overpriced to what I need. I am waiting on a significant market pull back before I buy anything here but I do like the classics General Mills (GIS), Archer Daniels Midland (ADM), JM Smuckers (SJM) and Unilever (UL). Of all UL seems the most promising for a near term buy.

One area I was surprised at how underfunded I was in was Healthcare. Johnson & Johnson is my favorite in this group and I am just waiting for a pull back in prices before I buy more shares but considering how large the gap is I will add Pfizer (PFE) and Merck (MRK) to my watch list as potential buys. At the end of the day I am not sure how I missed funding the Healthcare sector but it just goes to show you even an actively managed portfolio needs to be analyzed regularly.

Energy is a sector I know I have ignored but now is possibly a time to visit. 3 stocks that look interesting are Valero (VLO), Marathon Petroleum (MPC), and Phillips 66 (PSX). Unfortunately I do not know enough about these companies and will need to investigate further.

Interestingly, one area I thought I was overbought in (financials) I was actually a little bit under and I can make one more purchase. This is good news as financials are the only S&P sector not participating in the rally and offers the only area where buying opportunities exist. My most likely near term buy will be the Royal Bank of Canada (RY) which put me at my target of 15% allocation.


With my planning complete I now have a target amount of investment dollars for each sector. All I need now is a shopping list and a market decline :)

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