Start with the Toronto Stock Exchange (TSX) 60. Then grab the top 10 highest yielding dividend stocks at the end of one year, and then hold for the next year. Rinse and repeat each year and then sit back and beat the market over the longer term. Sounds simple, right? The Beat The TSX portfolio is so simple, the strategy might take you just a few minutes to execute each year.
The portfolio strategy finds profitability, moats and value, as it will often find more beat up stocks that have fallen in value and hence, lifting the dividend yields available. This would be a great time to remind you that past performance does not guarantee future returns.
That said, the Beat The TSX portfolio has a very solid long term performance beat over the market. The charts below run to the end of 2019.
The charts are courtesy of the dividendstrategy.ca site that tracks the Beat The TSX (BTSX) portfolio. And here’s a look at portfolio growth over time vs the TSX 60.
From that chart we can see how a few additional percentage points per year can lead to a doubling of returns over time.
The Beat The TSX Portfolio in 2020.
2019 was another good year for BTSX.
We can’t say the same for 2020. Here’s the portfolio for 2020.
For 2020, Manulife was replaced by Interpipeline. That was an unfortunate switch as Manulife continued to perform well enough in 2020, while Interpipeline cut its dividend and has lost over half of its value. Within the portfolio Interpipeline was the only stock to cut its dividend. There were 6 dividend increases for the BTXS in 2020.
The BTSX portfolio is down by 10% in 2020 while the TSX 60 is up by 6.8% to the end of last week. That is a significant underperformance. This is when patience will/may pay off for those that embrace the BTSX approach. If history repeats, there is even more value today in that high yield mix; so says that drastic underperformance in 2020.
The BTXS portfolio had a tough time in the financial crisis as well. It is perhaps not ‘market correction friendly’.
Should you buy the BTXS stocks?
Of course that is a personal decision. If you do, go in with eyes wide open. You are taking on more concentration risk. At times you would have to watch individual stocks fall to a degree much greater than a stock index ETF. That can be much harder to manage emotionally.
The more important consideration is that you embrace a style, understand that approach, and invest on a regular schedule. Embrace portfolio diversification by way of US and perhaps International stocks. Bonds and cash and gold and commodities and bitcoin might also be a consideration. Know how to manage the risks.
There are tax considerations if you hold the portfolio in a taxable account. You may be selling winners at year end. That said, you might have the opportunity to sell some losers to offset any capital gains.
Any decision to embrace a portfolio of individual stocks might rest on your emotional ‘make up’ and the ease of operation. With a one ticket ETF portfolio you can set it and forget it, and just add monies on a regular schedule. The one ticket asset allocation portfolios will manage the rebalancing plus they will include that all-important diversification.
Weekend Reads.
Many, or perhaps most self directed investors employ a mix of stocks and ETFs. Mathew at All About The Dividends uses such a strategy. Here’s a recent update. Mathew added to Power Financial (one of the stocks that you find in BTSX) and he also added to his iShares XAW that takes care of US and International diversification with one ETF. Great strategy.
And here’s a very good and important post from Mark at My Own Advisor as he looks to reduce his Canadian home bias. That is a fault that many of us Canadians hold, and that can be exacerbated as well as we fall in love with our Canadian dividends.
GenYmoney offers a Canadian dividend investor round up.
Mike The Dividend Guy offers that investing in Alimentation Couche-Tard delivers some indirect exposure to electric vehicles. That is a great Quebec/Canadian success story.
Savvy New Canadians looks at the best savings rates for your TFSA.
Yesterday on this site I had offered how to use your TFSA account. If you do go that savings route for the TFSA you can sign up through this partnership link.
Blockchain and bitcoin.
On stocktrades.ca Mat Litalien looked at blockchain ETFs. Blockchain is the supporting technology and framework for bitcoin. But that technology is likely to have many more applications beyond digital currencies.
And speaking of bitcoin it is up another 18% this weekend.
I am using the 3iQ funds for bitcoin exposure. I am up over 120% in just a few months. What a crazy ride. For those who are interested in gaining exposure you might consider dollar cost averaging over time. Corrections are likely but there is no guarantee, of course.
On findependencehub precious metals are the bedrock of the financial world.
And if you want to see a few hundred reasons and support for why US stocks are ridiculously expensive, here’s The Stock Market Party from John Mauldin.
Thanks for reading. Enjoy your Sunday and any other vacation days you may have. You can follow this blog by way of the subscribe button on the right hand side of this page.
How to support the blog.
While I do not accept monies for feature blog posts please click here on the mission and ‘how I might get paid’ disclosures. Affiliate partnerships help me pay the bills for this site. That will allow me to keep this site free of ads, and hence, easy to read.
Check out EQ Bank for those who want to make their cash work a lot harder. The current high interest savings account rate is 1.5%. EQ Bank recently introduced RRSP and TFSA accounts with a rate of 2.3%. You’ll also find GICs.
I also have partnerships with several of the leading Canadian Robo Advisors such as Justwealth, BMO Smartfolio ,Wealthsimple and Questwealth from Questrade.
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Dale
Hi Dale,
If the bitcoin began a substantial downward correction, how easy/fast would you be able to sell a large position vs any other stock such as Tesla? Is a bitcoin ETF more or less liquid than holding coins on an exchange or in cold storage? I understand that many exchanges limit the amount of BTC you can sell at one time.
Hi Alan, the 3iQ funds are closed end funds. It could become even more volatile. They are priced based on supply and demand. There are no ETFs in Canada as of yet.
That said, I will not be shaken by any major corrections. In fact I’d buy more. I was looking to add more and then it went on this crazy run over the last few weeks. I’ll let it sit for now it it continues to hold or keep increasing.
I believe it is a done deal that bitcoin will become an accepted portfolio asset, that is well under way.
Time will tell.
Dale
Thanks Dale – can QBTC be held in a TFSA – thoughts?
Yes, you can hold it in a TFSA, and that is likely the best place, given how explosive it can be.
Dale
David Stanley’s BTSX portfolio introduced many Canadian investors to the power of dividend investing. Although the BTSX portfolio was adjusted every year, he indicated that BTSX could be used to build a buy-and-hold portfolio of high-quality dividend stocks. David excluded all the companies that converted from income trusts to corporations and some investors also eliminate resource stocks from consideration. Although I do not follow the BTSX process for the concentration reason you mentioned above, I still credit David Stanley for teaching me to buy or add to my holdings of high-quality companies when their dividend yield is high from a historical perspective.
Thanks Stuart. I would have been in that camp of excluding energy producers as I believe was the practice of Mr. Connolly?
It appears that there might be great value in there, these days. I’m happy to hold Enbridge and TC Energy. I may layer in the producer index ETF for an added potential inflation hedge.
Thanks for stopping by,
Dale
Can you explain what Bitcoin is? As a stable store of value (ie. fiat currency) it fails. As an investment, it feels like a pure speculative play.
What am I missing here?
Bob
Hi Bob, I have created an article on Bitcoin for MoneySense. That will be posted in the new year. We should not let the volatility get in the way of the ‘fact’ that bitcoin is a store of value. It appears that it is much more than that. You can think of it as digital gold and the anti-fiat currency. Central banks can create as much money as they like, they can create inflation. They can devalue their own currency by creating more without more backing (aka the strength of the nation and taxing powers).
Bitcoin is scarce. There will only be 21 million coins. More and more individuals and institutions (small and major) embrace bitcoin every day. That is will become an accepted asset class for investors and portfolio managers is a given IMHO. That is already well under way. It is even being regulated when offered in funds, and ETFs will be on the way as well.
More people and institutions are acquiring an asset that is limited in supply. Supply and demand.
And we are in the very early stages of institutional adoption. Very early stages of self-directed investor adoption. All together known as mainstream.
Every day that is survives it gets that much stronger. That is the opposite of a bubble IMHO. That is the opposite of speculation.
But there are risks. And certainly the price can be manipulated. That does not discount the greater trends.
For me, it was/is the best risk/return proposition available. Many suggest at least a 2-3% portfolio weighting. It is so explosive that bitcoin might make a meaningful difference in your portfolio and retirement.
Each investor will have to do their own research and make their own decision.
I did my research. I made my personal decision.
I invested a small amount. It is now approaching 5% of portfolio weighting.
I also hold gold stocks and ETFs that hold physical gold.
Hi Dale
I am in the process of reading “Beating the Dow” and was wondering if anyone has done any research re: “Penultimate Prospect Profit” for the TSX or if anyone has tried it, and with what kind of success? As I understand it there is a trade agreement between the U.S. and Canada, U.S. stocks held in an RRSP do not have the 15% deducted from Capital Gains and Dividends received from U.S. Stocks. Is the same true re: Canadian TFSA?
Hi again Dale,
I can see that the TFSA does have 15% withheld re: U.S. dividends and capital gains. I would still like to know if anyone has tried the Penultimate Prospect Profit for the TSX though.