This is for Young Canadians (not too close to retirement) who are interested in long term investments. For US stocks, we have shown that portfolios constructed using our novel risk measure TRE (discussed in Portfolios that Beat Markets) out performs those using traditional risk measure 'beta'.
The toronto exchange index equivalent to SP 500 is S&P/TSX (ticker ^GSPTSE). The ETF ZCN.TO follows closely S&P/TSX and represents about 95% of the canadian equity capital. So we keep ZCN.TO as the bench mark. The aim is to construct portfolios which yield considerably higher returns than ZCN.TO
To start with, you need to have a brokerage account for trading equities. (Online trading sites such as Wealthsimpletrade (https://www.wealthsimple.com/en-ca/product/trade/ ) offer commission free trading.
Then use the following step by step tutorial to construct and manage your portfolio.
Every two months, during the first week, we publish a table of stocks with their corresponding TRE risk values calculated from the past 5 years of data. The stocks are given in ticker symbols and arranged in the increasing order of TRE. Click trerisk_zcn to access the latest tables for stocks in ZCN.TO
From these tables, choose the stocks with the risk value range you are comfortable with. This is your portfolio.
After choosing the portfolio, invest an equal amount of money in each of the stocks in the portfolio.
After six months or a year (turnover time), look at the new published risk tables. The stocks around the chosen risk value can be different. Sell the stocks in the old portfolio and with that capital and any dividend accured, buy these new stocks, all the time keeping in mind to invest an equal amount of money in each stock.
Note: (see above for commission free brokerage account)
Follow Steps 1-4 every turnover time until a period of 5-6 years or longer if you wish. Longer the better. Normally taxes on stocks held at least one year (long term capital gains) are smaller than those on short term capital gains. But please get familiar with Canadian tax laws.
In the following, we show our portfolio pick for 2022-10-01 created using Steps 1-4.
Ticker risk file trerisk_zcn.to for stocks on 2022-10-01,
Risk range: 1.84 to 2.288 average 2.05
No. of stocks for the portfolio = 15,
Total Initial investment = Canadian $10,000.
Investment/stock = 10000/15 = $666.67
The following table shows the securities chosen for the portfolio. Columns 1-4 give the ticker symbol, company name, risk value and the current price, for each security. Noting that an equal amount of money is to be invested in each security, the number of shares bought for each security is given in column 5.
The information and tools provided here (including the links) are research tools to help self-directed investors evaluate securities. The criteria and inputs entered are at the sole discretion of the user, and all strategies with pre-selected criteria are solely for the convenience of the user. Information supplied on this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell securities, or a recommendation. EntropicDynamics makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.