A buy and hold portfolio

Many investors prefer to avoid active trading — first, because it’s expensive and second because it requires a great deal of time and attention.

As a result, I decided to create a Buy and Hold Portfolio using names from the Recommended List of my Internet Wealth Builder (IWB) newsletter that I believe will significantly outperform the TSX over time. Here are the components.

iShares DEX Universe Bond Index Fund (TSX: XBB). In line with my belief that every portfolio needs a bond component, we will invest approximately 20 per cent in this core ETF.

BCE Inc. (TSX, NYSE: BCE). This telecommunications giant has been on the Recommended List since December 2008 and has generated a total return to date of 126 per cent, including $6.32 in dividends. The shares yield 5.2 per cent. Weighting: 10 per cent (note that target weightings may vary slightly due to rounding of the number of shares purchased).

Brookfield Asset Management (TSX: BAM.A, NYSE: BAM). This was one of the first stocks ever recommended in the IWB. It has been on the list since April 1997, or more than 15 years. The company has had its ups and downs over that time but by staying the course we have earned a total return of about 520 per cent. That works out to almost 13 per cent annually. I doubt anyone would complain about that. Weighting: 10 per cent.

CN Rail (TSX: CNR, NYSE: CNI). CN has been one of our mainstay investments since May 2002. It has performed well over that decade, with a capital gain of 220 per cent to this stage and I believe it will continue to be a strong earner for at least another 10 years. Weighting: 10 per cent.

Enbridge (TSX, NYSE: ENB). We’ve been touting this one to readers since August 1999 and anyone who bought then or along the way has not been disappointed. Based on mid-week prices we have a capital gain of $31.41 plus dividends of $6.18 for a total return of 470 per cent. That works out to 16.7 per cent annualized. Weighting: 10 per cent.

Toronto Dominion Bank (TSX, NYSE: TD). Our list would not be complete without a Canadian bank stock and we regard TD as the best bet. We first recommended it in February 2007. The stock nose-dived during the credit crunch of 2008-09 but has since recovered well and I like the long-term prospects. Weighting: 10 per cent.

AT&T (NYSE: T). This is a newcomer to the Recommended List, having just been added in May. But the company has been around for more than a century, offers a good yield of 5 per cent, and has respectable growth prospects. Weighting: 10 per cent.

McDonalds (NYSE: MCD). The day people stop eating burgers is the day this will no longer be a buy and hold stock. Until then, it will stay firmly on our list. We first recommended the stock last September. It bounced up to over US$100, then pulled back to around the original recommended price. We think it is good value here. The yield is 3.2 per cent. Weighting: 10 per cent.

Walt Disney Corp. (NYSE: DIS). This is the iconic entertainment stock. It has only been on our list for about six months but it has done well in that time and I expect it to be an above-average performer going forward. Weighting: 10 per cent.

Note that there are no commodity stocks in the portfolio. They are too volatile to be comfortably owned as part of a buy and hold strategy. Rather, I see these as trading stocks, which should be bought and sold at appropriate points in the economic cycle.

Here is a summary of the portfolio. Prices are as of mid-day on June 15. The initial value of the portfolio for tracking purposes is $49,945.40. Share positions have been rounded up or down to the nearest five. For simplicity, we assume the Canadian and U.S. dollars are at par. Commissions are not factored in. Ask a financial advisor if this type of portfolio is suitable for your account.

This article originally appeared in the Internet Wealth Builder, a weekly e-mail newsletter that provides timely financial advice from some of Canada’s top money experts. For more information about becoming an Internet Wealth Builder member, go here.

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