# How would you invest 1 million dollars?



## sam (Mar 16, 2012)

What would be the smartest way to invest 1 million dollars ? To get a nice income stream. (70-100k income )


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## slacker (Mar 8, 2010)

You're asking 7-10% return? Which is doable if you portfolio contains a mix of stocks and bonds. But that will not give you a guaranteed consistent income stream.


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## crazyjackcsa (Aug 8, 2010)

Aiming for income of 70-100k is a pretty good way at risking a substantial loss. At a million dollars you're into wealth retention levels, not wealth building (for the average person). Conservative is the way to go at this point. Bonds, blue chip stocks and dividends are now your friends.


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## cash (Mar 5, 2011)

Go for a 4% yield from Canadian dividend paying stocks and earn $40,000 of income with $0 tax. This amount is only slightly less than what a working stiff earning $70,000 would net after paying taxes (if you live in BC, AB or ON a 70k a year income from working nets about 55k). If you wanted to boost your income, you could write some covered calls on the stocks you own.

http://aprivatebeach.com/blog/2012/02/reduce-income-tax-paid-canada/


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## Argonaut (Dec 7, 2010)

It is not $0 tax unless it is in a tax free savings account, and no one has a million in their TFSA. I will in the distant future, and plan to use it as such. I do agree with your 4% rule, though. I try to keep my aggregate yield around that.


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## Square Root (Jan 30, 2010)

I think you can earn about $40k in dividends(assuming no other income) and pay close to zero in income tax depending on your province.


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## Argonaut (Dec 7, 2010)

Looks like you're right, according to this: http://www.taxtips.ca/dtc/enhanceddtc.htm

Tax rules make my brain hurt.


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## sam (Mar 16, 2012)

What do you guys think about the following stocks ? I'm going to start with 250k canadian , and 250K US for now


Canadian: 

BPF.UN 
LIQ
EIF 
IPN.UN
PPL
SJR.B
REI.UN 
D.UN
CUF.UN 
AX.UN
CWT.UN 
THI
DOL
CGQ
Telus
ENB
BNS
LLL
ACQ


US : 

AAPL 
MCD 
ABT 
IBM 
MSFT 
CAT 
INTL 
GOOG
GE 
NIKE 
VISA 
MA 
YUM 
UPS
KFT
PM
PG 
JNJ
SBUX
FORD
LVS
BAC
MO


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## KaeJS (Sep 28, 2010)

I think I'd almost feel responsible if I commented.

Whatever you do, do it carefully.

If we have a repeat of 08/09, and/or the housing bubble pops in Canada.... your $500k could be worth $300k in no time. But, I'm sure you know this already.

I like the majority of your picks, but I don't understand why you only have one Canadian bank and zero American banks.

Do you not like banks? You don't have any railroads, either.

Why not throw in BMO, BAC and CNR or something to your mix?


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## Dmoney (Apr 28, 2011)

I'm debating starting a new thread titled _How to *make* $1 million dollars_. Would be interested in your input.

I don't think you'll be able to hit the ~$70K mark with any traditional holdings (banks, telecoms, railroads, oil producers).

You could buy something yielding 7%, but that will generally have higher risk or no growth potential (which is okay if you just want the yield).
The alternative is an option writing strategy.

Obviously, you could chance something riskier like real estate, but that's a part time job and not nearly as passive as stocks/bonds.


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## KaeJS (Sep 28, 2010)

Dmoney said:


> I'm debating starting a new thread titled _How to *make* $1 million dollars_. Would be interested in your input.


Please do.


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## Canuck (Mar 13, 2012)

i agree with cash..


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## Cal (Jun 17, 2009)

IMO way too many stocks....I would keep it to 20. Just my opinion. 

Also, it is easy to calculate your projected returns, as you can figure out how many shares/units of eaqch you woul buy, what they pay out....then compare to the tax bracket you would be in.


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## KaeJS (Sep 28, 2010)

Cal said:


> IMO way too many stocks....I would keep it to 20. Just my opinion.
> 
> Also, it is easy to calculate your projected returns, as you can figure out how many shares/units of eaqch you woul buy, what they pay out....then compare to the tax bracket you would be in.


Maximum diversification isn't reached until you have 32 securities.

At $500k, I'd hope you have 32 securities and not 20.


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## Argonaut (Dec 7, 2010)

10-20 stocks at most. Even 20 stocks is a bit much. If a million is at stake I would maybe spread out the purchases some time-wise. It's not the same as someone like me who started out in their early 20's, investing more every few months. It's like a swimming pool. Jumping in the deep end right away may be cause for some shock if you haven't swam before, and tested the market waters. Probably best to start in the shallows, doing a few laps before you get into the fully invested deep end with no lifeguard on duty. Have a plan, and stick to it. Maybe dump $10,000 into each of your choice stocks now, and then at regularly set intervals afterwards. Pretty soon you'll be swimming with Michael Phelps.


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## KaeJS (Sep 28, 2010)

Why are you guys against owning more than 20 companies, might I ask?

Even the most basic knowledge states that 32 securities need to be held in order to achieve maximum diversification...

If I was investing $500k like this guy, you can bet I'd be buying 32 companies.


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## Argonaut (Dec 7, 2010)

The law of diminishing returns. All stocks are not created equal, and I am of the mind that there are really relatively few worth investing in. I would rather not put money in the 21st stock on my list when I could be adding to the 1st stock on my list.

Assuming a 50% stock weighting, and 20 stocks; a significant drop in any one company.. say half of its market cap, would only represent a 1.25% shift in the portfolio. This is very manageable tactically and emotionally.


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## leoc2 (Dec 28, 2010)

There is a risk of investing in a too few individual stocks. William J. Bernstein says in his book "The 15-stock diversification myth"; "To be blunt, if you think that you can do an adequate job of minimizing portfolio risk with 15 or 30 stocks, then you are imperiling your financial future and the future of those who depend on you."


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## KaeJS (Sep 28, 2010)

Argo, the guy already has a million bucks....

Diversification is his best friend. He wants his portfolio to be as stable as possible. He doesn't need 15% returns. He's already rich.

5% is what the guy should be aiming for. This way he can beat inflation and remain wealthy with as little risk as possible - no?


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## blin10 (Jun 27, 2011)

why would he buy cnr ? it's divi only 1.9% now... he need to aim at 5-6% return which is very doable ... btw sam stick with canadian companies you get dividend credit that way



KaeJS said:


> I think I'd almost feel responsible if I commented.
> 
> Whatever you do, do it carefully.
> 
> ...


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## donald (Apr 18, 2011)

Think kaejs was mentioning cnr for asst allocation by sectors.You only have one industrial in the us-Id prob pick one more of those like utx or cmi maybe?No tele co's either T would be a good div/stable.....pep or ko might be a good bet with the kraft...maybe jpm for a extra financial or even get into the insurance co's?(seem like a solid semi passive portfolio to start with)I'm learning/novice too thou so my 1 cents.


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## Canuck (Mar 13, 2012)

I'm with you KaeJS, it's super easy to choose way more than 20 great companies with a million dollars.


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## Dave (Apr 5, 2009)

Whatever you do, do not invest everything at once. Not all stocks on your list will be good buys at the same time. Wait for good entry prices like for Christmas gifts. The less you pay for your shares (better value), the better the potential return and the lower the risk. 

Dave


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## Cal (Jun 17, 2009)

KaeJS said:


> Argo, the guy already has a million bucks....
> 
> Diversification is his best friend. He wants his portfolio to be as stable as possible. He doesn't need 15% returns. He's already rich.
> 
> 5% is what the guy should be aiming for. This way he can beat inflation and remain wealthy with as little risk as possible - no?


The definition of rich differs for many. Same for the relative returns or growth that they are seeking.

Having said that, I think that a 7-10% dividend return is a little high to aim for. It is a good overall dividend/growth target though.

My personal reasoning for limiting holdings to around 20 is that I work full time and only have so much 'free' time to research/follow certain stocks, I follow roughly 25 positions give or take, and at this time do not have over 20 holdings.

My best advice for someone who comes into money like this would be to make a plan and stick with it.


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## sam (Mar 16, 2012)

Thank you very much everyone for your help , You guys are amazing . 



I added the following stocks to my portfolio today: 

KO , SBUX , V , DG 

REI.UN , AX.UN , CWT.UN , LLL , BPF.UN


Wish me luck !


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## Financial Cents (Jul 22, 2010)

sam said:


> Thank you very much everyone for your help , You guys are amazing .
> 
> 
> 
> ...


Good luck sam! I'll be following your progress with interest.


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## Argonaut (Dec 7, 2010)

KaeJS said:


> Argo, the guy already has a million bucks....
> 
> Diversification is his best friend. He wants his portfolio to be as stable as possible. He doesn't need 15% returns. He's already rich.
> 
> 5% is what the guy should be aiming for. This way he can beat inflation and remain wealthy with as little risk as possible - no?


Plot the Dow 30 against the S&P 500. On a one year basis there is a difference of 0.37%. On a ten year basis there is a difference of just over 2%. And the Dow isn't even that diversified: a bunch of US large caps with whole sectors missing, and a funny price-weighted calculation to boot. 

At a certain point, adding more names to keep track of gives diminishing returns. Think of it like a baseball team. You've got 50 names to choose from. You do your research, you do your scouting, and gradually you trim down the list. This guy is injury prone or too old, or this stock pays out too much of its earnings in dividends. We've got seven guys who play third base or seven utilities in the portfolio, let's make some cuts. After some homework, you'll be left with the 20 best names for the opening day roster and your team will be better for it.

I've gotta stop with these metaphors, I'm starting to become a predictable old rambler.


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## CanadianCapitalist (Mar 31, 2009)

To answer OP's question, I would invest $1m the same way I would invest $10K... in a broadly diversified mix of asset classes. At 10K, I'll go with low-cost index mutual funds. Anything over $50K, I'll go with broad market ETFs.


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## donald (Apr 18, 2011)

Hey argo-I noticed on the buy thread you have cat on your watchlist.With the baseball team approach how many stocks do you have join the roster from time to time?Would you never hold a industrial long-term because of it being cyclical?In other words cat or deere would never be full season players?Is cat largely a trading stock(guess it depends,on entry)?I understand why it is volitile but it is a mega cap/div grower ect...Just curious what your take is on Cat & how long did it take you to modify your team(years?)


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## KaeJS (Sep 28, 2010)

Argo.

After your last post, I half agree with you. Nice metaphor.


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## Argonaut (Dec 7, 2010)

I'm a minor leaguer myself, and don't have a large enough salary cap to have a fully-fleshed team right now. Maybe in the opposite vein, I'm full of ideas and looking for a million, rather than with a million and trying to flesh out ideas. Will get to six-figure net worth in 2013 and we'll go from there. I agree with Canadian Capitalist in one respect, that I would treat the portfolio similar regardless of size. As to CAT specifically, you're right in that it is a cyclical stock and can be traded profitably. But it's also a high quality stock and one that could be held as a cornerstone position indefinitely. Because of its share price it has a high weighting in the Dow, along with IBM, MCD, and Chevron. Coincidentally these are probably my four favourite in the Dow.


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## Causalien (Apr 4, 2009)

To OP,

Managing $1mil is very different than smaller amounts. The options available and the cost of trades are now a factor. Yes 1% for cost is ok, but 1% of a million is...
You get the point. With that, some options are now open to you which were not there before. 
What's interesting is that you are asking this question. It means that you did not manage the money from when it's still until its current size. I'd say, only double your capital every year. Just so you get used to it.


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## SixesAndSevens (Dec 4, 2009)

sam said:


> I added the following stocks to my portfolio today:
> KO , SBUX , V , DG
> REI.UN , AX.UN , CWT.UN , LLL , BPF.UN
> Wish me luck !


if i may make a suggestion , your portfolio is fine for a conservative, defensive equity investor but it's not designed for good returns.
in fact it is likely to underperform the major equity indexes.
it will alos likely underperform the debt yields of the same companies.
in other words you will do better by either buying the major equity indexes or buying the bonds of the same companies that you have picked instead of their common shares.

the reason is that pretty much every single one of those companies is either fully valued or over valued now.
some of those are trading at crazy multiples like the company that basically sells bitter tasting hot piss to upwardly mobile self proclaimed professionals.
or the company that sells grossly overpriced workout pants.

other large cap blue chips like KO on your list are already (and have been for many years) fully valued and priced in.
there is no dramatic growth in them.

to get higher returns you HAVE to pick out companies or sectors that are seriously undervalued right now.
those are the only ones that will give you above average returns.
you have to find companies or sectors or countries that for some reason or another are seriously undervalued right now.
and not under valued by just 2 or 3% based on some p/e calculations.
but deeply undervalued.
like the banks and financials were in 2008
or the tech companies were in 2002

you have to watch out that you don't end up buying something that can actually go bankrupt in the short run.

but buying these fully valued or over priced large cap names won't get you any returns.

you are better off buying a 5 year GIC at 3% and sleep well.


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## blin10 (Jun 27, 2011)

agree completely


SixesAndSevens said:


> if i may make a suggestion , your portfolio is fine for a conservative, defensive equity investor but it's not designed for good returns.
> in fact it is likely to underperform the major equity indexes.
> it will alos likely underperform the debt yields of the same companies.
> in other words you will do better by either buying the major equity indexes or buying the bonds of the same companies that you have picked instead of their common shares.
> ...


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## donald (Apr 18, 2011)

Ya know what sam-maybe you should just keep doing what your doing?(unless your dealing with a windfall)If your still young and have built-up a sum of a Mil*and have everything under control for the 4C-able future* is there a way you can leverage that?How did you accumulate that sum?how old are you?What do you do for a living?You have a family ect ect.Might be a easier answer and something way more simple*and faster* than going to the market?ie:expanding a business,using the cushion to excute a idea in your line of work ect ect ect-You got some capital to step out and try ideas/passions in your life.*where you @ in your life cycle*


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## gibor365 (Apr 1, 2011)

SixesAndSevens said:


> you are better off buying a 5 year GIC at 3% and sleep well.


But maybe be OP already has another 1 mil in GICs? And he's asking about1 mil that he wants to invest?
Personally I never would invest 100% into market even with royal blue-chip stocks.
Curently I have about 40-45% of our assets in cash or cash equivalent (GIC, HISA, Protected notes etc), 3-4% short-medium term bonds and rest in equities.
Another question in whick account types he has money, if registered -> US blue-chips are fine, if CASH or TFSA -> better stick with Canadian stuff...
Looking at his potential portfolio I'd add some oil/energy stocks with high dividends (8-10%) like EGL.UN, PSN..... on US side I really like COP, for growth I'd pick SU or CNQ or HSE (also good yield)
Like KaeJS I 'd have more Canadian banks (or ZEB to cover all 6) and 1-2 US banks (JPM or Wells Fargo)...

P.S. For US portion of his portfolio, I'd recommend OP to read some great articles on seekingalpha.com , authors like dividends4life, David Crosetti, Dividend Groth Investor, David Fish etc


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## blin10 (Jun 27, 2011)

how's the progress ?


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## lonewolf (Jun 12, 2012)

Sam the odds of getting an income stream of 7% - 10% in the stock market is low. In fact I think the odds of getting a 7 -10% return would not be buying now but buying after the 09 lows are taken out.

The highest odds of getting that kind of return might be with buying a franchise, I dont like annuities right now but @ a certain age maybe 80 or 90 years of age I think they would be paying 70,000 to 100,000 on a million dollar investment, A private reit would pay that high but it could be debated how safe private Reits are.


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## blin10 (Jun 27, 2011)

uppp


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