Stingy Investor Search - Contact - Subscribe - Login
  Home | Articles | Links | SNW
Where to invest $100,000

Standing in front of a giant glassed in freezer at the sweet shop in Tobermory, Ont., I was faced with a plethora of choices. Which sinful ice cream should I indulge in on a fine summer day? The selection of flavours, toppings, and cones was daunting. Thankfully, I had time to consider the fattening possibilities because the wee nippers in front of me were similarly perplexed. And, as important a choice as it may be, it was only ice cream.

But when it comes to investing, the possibilities are vast once your portfolio grows beyond $100,000. Problem is, much like Bertie Bott's Every Flavour Beans (a devilish Harry Potter confection) the investing flavour you choose might wind up tasting like earwax. Alas!

That's why the advice I dished out in How to invest $10,000 still applies. If you aren't intensely interested in the markets, you should probably stick with a good low-fee balanced fund. After all, much like grilling a nice steak, if you poke and prod your portfolio too much then you're likely to obtain less than desirable results while expending a great amount of time and effort.

But if vanilla really isn't for you, let's check out some other tasty ways to invest now that you have a more sizeable portfolio.

The lazy way to riches.

Back in the 'How to invest $1,000' section, we introduced the idea of investing using passive index mutual funds, which rise and fall in tandem with the large market indexes. Long-time MoneySense readers will know that we call this a Couch Potato portfolio, as it's so easy to execute you rarely have to haul yourself up from your comfy couch to tend to your investments. The goal is to take the returns the markets give you while keeping your investing costs as low as possible. This allows you to enjoy a big advantage versus high-priced fund managers who, far too often, fail to earn back the fees they charge investors.

Now that your portfolio is larger, you can execute the exact same strategy with a new type of fund that has even lower costs: the exchange-traded fund or ETF. These funds are much like index mutual funds in that they passively follow an index such as the S&P 500, but instead of being sold through the banks or advisers like mutual funds, you buy them on the markets, just like a stock. The ETFs you choose depend on your investment goals, your time horizon and your tolerance for risk, but we find that plonking 40% of your money into a good bond fund, and spreading the remaining 60% among Canadian and U.S. stock funds is the simplest way to start. If you do it through ETFs, you can reduce your fees to very low levels. For example, if you use the iShares S&P/TSX60 ETF (XIU), the Vangaurd Total Stock Market ETF (VTI), and the iShares DEX Universe Bond ETF (XBB) for the Canadian stock, U.S. stock, and Canadian bond components respectively, then the annual fee on your portfolio will be a minuscule 0.19% a year.

Just remember, because ETFs are traded like stocks, that means you get dinged with a brokerage commission when you buy and sell them. The commissions can really add up for small portfolios but, by $100,000, the big Canadian discount brokers usually offer online trades for less than $10 a pop. As a result, they shouldn't be a big factor as long as you trade infrequently.

You can also move into more complicated Potato portfolios which offer greater levels of customisation. But, frankly, I wouldn't get too much more complicated. I've seen portfolios with a huge number of ETFs that provide more confusion than clarity. This is particularly true for some new ETFs with much higher fees and others that follow highly speculative slices of the market.

However, expanding the classic potato beyond just U.S. and Canadian stocks is a sensible thing to do. As a result, I suggest the Global Potato variant with international stocks added in via the Vanguard FTSE All-World ex-US ETF (VEU). Here you'd put 40% of your portfolio in the XBB Bond ETF, 20% in Canadian stocks via XIU, 20% in U.S. stocks via VTI, and the final 20% in international stocks via VEU.

You can also tilt a Potato portfolio a little more to bonds or a little more to stocks if you want to be more cautious or more aggressive.

Don't want to go it alone?

If the thought of opening a discount brokerage account and buying ETFs fills you with fear and trepidation, don't worry. You wouldn't be the first to feel daunted by the task. I still remember that my first trade, back in the day when you had to phone a real trader, was rather nerve-wracking. Maybe you need a little advice to help you along?

You're in luck because when your portfolio moves above $100,000 advisors will start to take an interest. Problem is, the advice often comes at a steep price, which usually only falls to more reasonable levels when your portfolio grows even larger. To help you out, I've sleuthed out a few ways you can get the basics without spending an arm and a leg. You might not get expensive wine and cheese service but you will get core asset allocation advice and a friendly hand to help you build a customised portfolio.

One good choice is to enlist the services of investment management firm Phillips, Hager & North. PH&N is the granddaddy in the field and it still represents good value (it was taken over by Royal Bank a few years ago). The firm offers a very broad line up of low-fee funds and when you sign up directly with them, you can get a dedicated advisor, portfolio planning, and a long-term investment strategy. All of which is included in the already low cost of their funds.

Another option is Steadyhand, a new entrant run by PH&N alumni Tom Bradley. You get the benefits of his experience, but you also get advisors who are still hungry and are likely to work harder for you than others who may have had a few too many ice-cream cones. Portfolio strategy is included with the low cost of their funds, and Steadyhand's fees fall as your portfolio grows. At $100,000 you already get a discount and there are more discounts to be had at higher levels. In a break from usual practice, their fees also decline based on how long you've held their funds. You get a nice break after both 5 and 10 years, which encourages long-term thinking.

So, don't be swayed by fancy advisors offering brie and Merlot. Get the basics right with low-fee advisors, grow your portfolio, and invest your savings instead.

Getting started with stocks.

At the other end of the spectrum, you might want to take a more active approach and start picking your own stocks. While it might not be the right thing to do for many investors, it would be hypocritical of me if I didn't say that it can be great for some.

If you're just starting to buy your own stocks, I suggest moving slowly and in a modest way for the first few years. The experience will likely to be educational and you don't want to make mistakes with the bulk of your portfolio.

To get going, you should keep the core part of your portfolio in a good low-fee balanced fund, or Couch Potato portfolio, and then supplement that with a handful of stocks. Say at least 80% of your money in the core and at most 20% in individual stocks. At $100,000 that'd be about $80,000 in a low-fee balanced fund or portfolio of index funds, and about $20,000 in stocks.

A great way to start is to select five large Canadian dividend stocks, preferably in different industries. While you can go wrong with big dividend stocks - I'm looking at you Yellow Media - they're generally less volatile than their smaller brethren. Large businesses with good credit ratings also tend to have more staying power than smaller outfits. To whet your appetite, I've highlighted five, in the table below, which show promise at the moment.

Sun Life Financial (SLF) $25.235.71%8.921.01
BCE Inc. (BCE) $36.925.61%13.622.59
Canadian Oil Sands (COS) $22.405.36%10.422.75
Power Corp of Canada (POW) $23.394.96%12.381.21
Bank of Montreal (BMO) $57.204.90%11.351.67, August 10, 2011

Start slowly when learning the ropes to figure out if buying individual stocks is something you really want to do. As your portfolio and experience level increases, allocating more money directly to stocks becomes reasonable. Just be warned, successfully picking your own stocks is harder that it looks and requires a great deal of patience and discipline.

No matter which option you choose, growing your portfolio is an achievement. While larger portfolios open up more possibilities, the simple vanilla options are often the best. Keep costs low and, if you insist, add only a little chocolate on top of your cone.

+ First Published: MoneySense magazine, September 2011

Globe & Mail Articles

 Dividend All-Stars for 2024
 250 Megastars for 2024
 Extreme yields
 The easy way
 Smaller stable dividend
 250 Megastars for 2023
 Champagne portfolio
 Screaming Value
 Blended momentum
 Dividend monster
 Frugal dividend
 Stable dividend
 Speads and recessions
 TSX 60 for value investors
 Looking at 10-year returns
 Watching for a bottom
 Oh, bother!
 Indexing advice
 Media-shy stocks
 Curse of size
 Market uncertainty
 Be even lazier
 Scary beats safe
 Small, illiquid, value
 Use the numbers
 What value is good value?
 Sculpt for value
 Value vs CAPE
 Graham Rules
 CAPE vs PeakE
 Top value ratio
 Low Beta
 Value and dividends
 Walter Schloss
 Try unloved AIG
 Why I'm a value investor
 New world of ETFs
 Low P/Es possible
 10 yielders
 Be happier
 Dividend Downside
 Shiller's P/E
 Copycat investing
 Cashing in on class
 Index roulette
 Theory collides
 Diving too deep
 3 retirement villains
 Scourge of inflation
 Economic omens
 Analyst Expectations
 Value stock scarcity
 It's all in the index
 How to pick good funds
 Low Beta Wins
 Hunt for dividend stocks
 Think garage sale

MoneySaver Articles
 2 Graham Stocks for 2018
 2 Stingy Stocks for 2017
 2 Graham Stocks for 2017
 3 Stingy Stocks for 2016
 5 Graham Stocks for 2016
 3 Stingy Stocks for 2015
 3 Graham Stocks for 2015
 3 Stingy Stocks for 2014
 4 Graham Stocks for 2014
 8 Stingy Stocks for 2013
 6 Graham Stocks for 2013
 9 Stingy Stocks for 2012
 8 Graham Stocks for 2012
 Simple Way 2011
 5 Stingy Stocks for 2011
 7 Graham Stocks for 2011
 Simple Way 2010
 5 Stingy Stocks for 2010
 8 Graham Stocks for 2010
 Simple Way 2009
 Timing Temptation
 19 Stingy Stocks for 2009
 4 Graham Stocks for 2009
 Simple Way 2008
 Active at Passive Prices
 Unbundling ETFs 2008
 5 Stingy Stocks for 2008
 5 Graham Stocks for 2008
 Is your index too active?
 Graham's Simple Way
 Canadian Graham Stocks
 5 Stingy Stocks for 2007
 8 Graham Stocks for 2007
 Top SPPs
 The Simple Way
 A hole in your IPO?
 Monkey Business
 8 Stingy Stocks for 2006
 Graham Stock Gainers
 Blue-Chip Blues
 Are Dividends Safe?
 SPPs for 2005
 Graham's Simplest Way
 Selling Graham Stocks
 RRSP Money Market Funds
 Stingy Stocks for 2005
 High Performance Graham
 Intelligent Indexing
 Unbundling Canadian ETFs
 A history of yield
 A Dynamic Duo
 Canadian Graham Stock
 Dividends at Risk
 Thrifty Value Stocks
 Stocks in Short Supply
 The New Dividend
 Hunting Goodwill
 SPPs for 2003
 RRSP: don't panic
 Desirable Dividends
 Stingy Selections 2003
 10 Graham Picks
 Growth Eh?
 Timing Disaster
 Dangerous Diversification
 The Coffee Can Portfolio
 Down with the dogs
 Stingy Selections
 Frugal Funds
 Graham Revisited
 Just Spend It
 Ticker Temptation
 Stock Mortality
 Focus on Fees
 SPPs for the Long Term
 Seeking Solid Stocks
 Relative Strength
 The VR Approach
 The Irrational Investor
 Value Investing

Old MS Articles
 Cdn Top 200 2018
 Cdn Top 200 2017
 Cdn Top 200 2016
 Cdn Top 200 2015
 Cdn Top 200 2014
 Cdn Top 200 2013
 Cdn Top 200 2012
 Cdn Top 200 2011
 Cdn Top 200 2010
 Cdn Top 200 2009
 Cdn Top 200 2008
 Cdn Top 200 2007
 Cdn Top 200 2006
 Cdn Top 200 2005
 US Top 500 2018
 US Top 500 2017
 US Top 500 2016
 US Top 500 2015
 US Top 500 2014
 US Top 500 2013
 US Top 500 2012
 US Top 500 2011
 US Top 500 2010
 US Top 500 2009
 US Top 500 2008
 US Top 500 2007
 US Top 1000 2006
 Dividends 100 2017
 Dividends 100 2016
 Retirement 100 2015
 Retirement 100 2014
 Retirement 100 2013
 Retirement 100 2012
 Retirement 100 2011
 Retirement 100 2010
 Income 100 2009
 Income 100 2008
 Income 100 2007
 Top Trusts 2006
 Top Trusts 2005
 Hot Potato
 Buffett Buys
 Stocks that pay
 Value in the S&P500
 Where to invest $100k
 Where to invest $10k
 Summer Simple Way
 A crystal ball for stocks?
 Cheap & safe
 Risky business
 Dividend investing
 Value investing
 Momentum investing
 Low P/E P/B
 Dividend growers
 Graham's prescription
 The case for optimism
 Wicked investments
 Simply spectacular
 Small stocks, big profits
 Value that sizzles
 So simple it works
 No assembly required
 Investing by the book
 Invest like the masters
 A simple way to get rich
 Stocks for cannibals
 Car bites dogs
 So easy, so profitable
 Dogs of the Dow
 Money for nothing
 Yield of dreams
 Return of the master

Advisor's Edge Articles
 Passive Rebundling
 Doing the math

Flip Books

About Us | Legal | Contact Us
Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...