Investing windfalls
I was recently interviewed by the Investment Executive about how to invest a hypothetical 10 million inheritance windfall.
Investment philosophy
My philosophy is a value-oriented approach where I look at each investment as to its quality and ability to pay a good income for a lifetime. When I buy enough of these investments, I then have a more stable capital value and the payments resembles that of a life pension. I generally like using individual securities to save costs and keep more of the income unless it make sense on reducing risk to use a pooled fund or mutual fund. When picking stocks, I typically look for strong balance sheets, decent dividend yield, low price-to-earnings ratio, higher market capitalization and lower debt-to-equity ratio, amongst other things. Essentially “blue chip” stocks.
Investing inheritance money
After assessing the client’s risk tolerance, objectives, tax situation, estimated cash needs and economic environment, I then recommend custom tailored mix. In the article, as an example, I recommended allocating 40% to stocks, 30% to fixed income securities, 20% to preferred shares and 10% to money market. For the stocks, I would pick 40 stocks and weigh them equally. Some Canadian some US stocks. For the fixed income part of the portfolio I might use mostly GICs as we can now get almost 5% from GICs.
Here is the article. In it you’ll find some of the individual stocks I’m recommending as well as the recommendations of another portfolio manager the Investment Executive interviewed. My colleague, Constantine Lycos, while he shares a similar value investment philosophy, usually considers including some other asset classes in the asset mix. For other timely stock recommendations please visit the advice section of our website.
Next step
If you are in a similar situation, needing advice on how to invest windfall money such as an inheritance, lotto winnings, etc, please give me a call at 604-288-2083 (Ext. 2) or email me at [email protected]. Thank you.
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