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.
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.
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.
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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.
“You’re not still investing with Mom and Dad’s guy, are you?” – Questrade.