So You Want to Build a Stock Portfolio…
That’s why you’re here right? You started a search on Google, found your way to this blog (and others), you’ve read a few of the articles (but there are so many!)
Yep. You’re officially overwhelmed. Not sure where to start or where to begin.
You may have been with a professional advisor for years, dabbled into investments here and there, had some success and some failure.
Basically you’re looking to take control, learn what needs to be learned and take a more active role in the decisions about your money.
That’s why I created this website back in 2007 when I wrote one of my first series on this blog titled, Building an Investment Portfolio. The series was a very basic overview of how to construct an investment portfolio and has always been a popular destination on the site.
Over the past few years I’ve helped clients on this exact journey and process. What I want to do now is help guide you through the same process I help my clients complete at a basic level. If you’re interested in more than just this series you can always contact me for help.
Part 1 of Building an Investment Portfolio is a good place to start with the absolute basics. We are going to get to setting objectives, choosing our asset allocation, selecting diversification, examining active versus passive options and finally stock selection (including when to buy and sell).
But really we need to start at the most basic step if you haven’t completed this already or reviewed it in the past 12-24 months.
Selecting your Discount Broker
There are a number of great articles posted by my peers on selecting a discount broker that I’ll include at the end of this post.
When selecting a discount broker there are going to be a number of factors that depend on your individual situation, the amount of money you have to invest, the time you have (or don’t have) to invest and the features that are needs versus wants.
I’ve broken down some of the major tools in this decision (but there are many more)
Products – Each broker will offer different account types and not all of them offer all major accounts inclusively. If you know you want a broker that offers RESP, RSP, TFSA, Non-registered and/or US Dollar Accounts make sure you examine carefully what accounts they offer or don’t offer.
Pricing – The fees and commissions for all accounts you need have to be looked at in detail. Some accounts will have minimum amounts for their fees to be waived. The fees for accounts should also be considered in context of trading commissions. A minor account fee for a significant savings in commissions may be attractive to an investor who expects to be active. Exchange fees for foreign currency exchange and the fees for online trades versus phone initiated trades need to also be factors. Depending on the time of year there may also be an incentive to switch brokers. If there is a broker you want to change to its never a bad idea to take advantage of a deal!
Ease of Use – The software interface that the broker uses is another important factor in your decision. Many of the brokers have demos of their software for prospective investors to try. Make sure you can navigate the software with relative ease, that you understand where information is kept and accessed.
Customer Service – There will be a time and a place where you need customer service. You may not need it often, but if you NEED someone you want to know that their service is highly rated and accessible.
Market Research & Reporting – Some investors will use research tools, read analyst reports or search metrics not easily found through Google Finance or Yahoo Finance. This is not a necessity for most investors, but it’s a perk that is nice to have when you need it.
Integration – I am a fan of keeping things together. My personal and professional preference is for convenience. I like my discount broker to be with the same institution as where I have my HELOC (home equity line of credit) that I use for investing and easy access to my accounts that fund contributions to our RESP, RSP, TFSA and Non-registered accounts. This is one of the last considerations though as pricing and fees may eat up too much of your capital to simply stay with your current banking institutions discount broker.
Discount Broker Reviews:
MoneySense – Canada’s Best Discount Brokerages (2014)
Million Dollar Journey – Canadian Online Discount Stock Brokerage Comparison 2015
Money Smarts Blog – Canadian Online Discount Stock Brokerage Comparison 2014
Next post we will get into a discussion on asset allocation. If readers would like to post comments or suggestions for items to include in this series please leave them below.
