Saturday, January 11, 2014

Financial Goals for 2014

Although I’m not much for resolutions, I enjoy setting goals for myself each year. Putting objectives on paper, or “on the cloud” helps me focus.  Since I spend a fair amount of my free time researching companies and investments, I decided to share what I’m looking to do with my investment holdings in 2014.

Increase my portfolio value by 17% :
Since I’m not comfortable disclosing how much my investment portfolio is worth, I have to state the first two goals in percentages. The 17% increase in value corresponds to a number I’d like to hit by year end. Although I had very strong returns in 2013, I don’t expect the same this year. However, I do expect my portfolio to appreciate, I’ll reinvest the dividends I receive in 2014, and I should be able to deploy some new capital, all of which should help me meet this goal.

Total Dividends Received Up 18%:
As indicated above, the 18% also corresponds to the amount of dividends I expect to receive in 2014. None of the companies in which I'm currently invested should cut their dividends in 2014. Alternatively, I expect most, if not all of the company’s I own will increase their payouts during 2014. Add to this some new capital I plan to inject in my portfolio, and this is a realistic goal.

Maintain US Holdings at About 30%:
I ended 2013 with holdings of US stocks accounting for 28% of my investment portfolio. With the USD appreciating against the CAD, this number is now closer to 30%. I feel that by investing in large multinational companies with sales across the world, my portfolio gains geographic diversification. Even though the US market was hot in 2013, I’m comfortable with all my US holdings.

Doubling Down on Comfortable Holdings:
As my investment portfolio grows, I’ve learned that in order for a strong performer to make a difference to my portfolio return, there has to be a material investment in the company. A good example is Microsoft, a great dividend grower, who was up about 40% in 2013. However, since I only bought 100 shares, the impact on my portfolio was minimal. My plan is to invest in fewer companies, but increase the amount of money I invest in my core holdings.

Get rid of all companies who haven’t raised their dividend in the past 18 months:
During 2013, I was very happy to get rid of all the laggards in my portfolio, who hadn’t recently raised their dividends. I think it shows good financial management on the part of companies who are able to increase their payouts without raising their payouts ratio to unsustainable levels. I plan to get rid of any companies that haven’t raised their payouts in the last 18 months. So far, I think only Intel and Western Union are on my watch list in this area.

Figure out what to do with cash in excess of $500 (especially in TFSA and RRSP):
Given the amount of distributions I receive each month, I find myself with excess cash in my various investment accounts that isn’t doing anything. Since iTrade allows me to buy and sell a number of ETF without commissions, I plan to pick one or two high yielding ETFs to deploy my excess cash in when I don’t have any investment ideas I’m looking to test. I’ll pay particular attention to my TFSA and RRSP since I can buy and sell ETFs without worrying about tax implications.

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