2023-10-26 17:34:51
Aged 81, the retired entrepreneur is banking on stocks and fixed income securities to finance the end of his life. (Photo: courtesy)
SPOTLIGHT ON MY TFSA is a section where individual investors share with us their good and bad investing experiences while submitting their portfolio to a professional’s analysis. To participate, write to us at [email protected].
(Illustration: Camille Charbonneau)
Suffering from muscular dystrophy, this former entrepreneur from Mascouche speaks with serenity and a certain pragmatism regarding the years to come. “I retired young (at 53) and I enjoyed life very well alongside the best wife I might have had,” he admits, very happy with the progress he has made. Still bubbling with ideas, he admits to having always had a knack for business. He founded Nadair, a ceiling fan company (still in operation), which he sold following a serious accident from which he miraculously recovered. He then owned a grocery store and a convenience store, in addition to pursuing all kinds of entrepreneurial initiatives, such as a musical flower project. “I’ve sold over 150,000!” When he sold a business, he would then travel for six months to a year around the world.
He always had a certain aversion to debt, even if he had never yet made a budget when he got married. “It was my mother-in-law who showed me how and I still do it to this day.” He came to investing in securities in the mid-1970s, then independently over the years. 1980.
“I wanted to make more money. I took courses on fundamental analysis at the Montreal Stock Exchange.” He then drew inspiration from the writings of people like Bernard Mooney, journalist and author, and Guy Le Blanc, founder of Cote 100, a management firm wallet.
“The first shares I bought were BCE (BCE, $51.82). It cost me $149 in commission fees,” he recalls. Like Warren Buffett, he has long tried to invest in companies whose business model he understood. “I burned my fingers when I broke this rule.” He particularly remembers the fiasco of an investment in oil through an exchange-traded fund, BetaPro, from Horizons. “I lost $45,000.” He will have a luckier hand by investing in companies like Costco (COST, US$563.78), Dollarama (DOL, $95.09), Fairfax Financial (FFH, $1140.55) and Alimentation Couche-Tard (ATD , $74.68). “I was buying and holding.”
His portfolio has transformed over the years, notably in the late 1990s, as he had to sell stakes in a few companies to fund his retirement. “I started disbursing during this period in some accounts. I have drained my portfolio by approximately $700,000 since 1998.” His current TFSA is made up of stocks (54%), but also a portion (46%) of fixed income securities (cash, certificates of guaranteed investment [CPG] and corporate bonds).
“Given my age, I sold a few shares over time and favored safer investments.” For younger people, he suggests that they keep abreast of financial news. “I’ve always done it and it’s helped me.” He also believes that you shouldn’t be afraid to buy American stocks. He also stocked up on greenbacks when the Canadian dollar reached parity with the American currency. “It was another way to fatten my portfolio in 1976-1977 and in 2009.”
In the eye of a pro
The president and portfolio manager at Rivemont, Martin Lalonde, congratulates this experienced investor on his results on the stock market. “With more than $216,000 in his TFSA, we might think that he had more successes than mistakes. He also demonstrated that purchasing quality securities can pay off in the long term.”
The manager finds that the distribution of Michel Nadeau’s portfolio, more or less 50-50 between equities and fixed income securities, is appropriate given his age and situation. “I also like the rather short duration of its fixed income securities. There is no point in increasing the duration in the current interest rate environment.” Rather than GICs, which often have maturity dates and penalties for early withdrawal, he recommends using high-interest exchange-traded funds. “These are flexible, liquid products at low cost. He might get good returns and access his money quickly when needed.”
For the equity portion, he notes that, although the investor was able to bet on good stocks like Couche-Tard and Costco, the portfolio remains very concentrated in the basic consumer sector — notably with Dollarama and Amazon (AMZN , US$132.33). “Also, I don’t really like Dividend 15 Split Corp (DFN, $3.92), which is unnecessarily expensive. It might diversify further by focusing on one or more quality securities from another sector of activity.”
He also questions the 6% cash balance. “It’s money that’s lying dormant and might be invested in a high-interest fund.” Finally, he notes that the largest position in the portfolio (13.7%) is in a GIC from Peoples Trust Company. When you invest in GICs, you buy a certain peace of mind, according to him. “Is the return he gets here with this company worth what he would get with a GIC from one of the big six Canadian banks? I doubt.”
“Given my age, I sold a few stocks over time and favored safer investments.” – Michel Nadeau Although the investor is banking on good stocks like Couche-Tard and Costco, Martin Lalonde notes that the portfolio is very concentrated in the basic consumer sector, particularly with Dollorama and Amazon.
Rather than investing in GICs, which often have maturity dates and penalties for early withdrawal, the portfolio manager recommends using high-interest exchange-traded funds, which are flexible and liquid products inexpensively.
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