A
reader of my blog asks me for help by investing 15k of his money. Here is his
question:
“I am a
Canadian beginner, 56 years old, 29 years with the Federal Govt. I want to
retire next year. I have $15K to start, and I don't know where to start...what
would you recommend? Right now I have $5K CP, $5K CNR, $1K Sprint...and they
are just not doing much right now.
Another question: If Sprint is bought by DISH, will the stock go up, or cease to exist and I would loose my holding? I am holding approx $1000. at $7.15 per share. I don't want to loose my investment to stupidity...Thanks again for your time.”
My
first thought is that 15k is enough to start investing. I also started to buy stocks
with a similar amount in EUR. Ten years later my net worth developed to a
six-figure amount and I’ve received a total dividend amount of more than 30k.
My
second thought to your current holdings is that they are not really diversified.
You have a strong focus on value. Canadian Railways stock could deliver a great
stability for your portfolio but with only 3 holdings and 4k of cash it’s hard
to make money if you have only two bets. $CNR has good fundamentals and the
stock price follows. Canadian Pacific Railway $CP grows dividends but the earnings
go down. The stock price explodes. Sprint Nextel $S received a bid from $DISH –
They will be off. All have in common that they are infrastructure bets and
deeply integrated within the economy and they all have a very low dividend
yield. Infrastructure is a very capital intensive business and also very
inflexible.
To your second question: You will receive cash in exchange for your Sprint shares if the deal passes through. DISH offers $7 per Sprint share.
I
would recommend to increase your bets when the time is right to invest. If you
have a cheap broker you can build a better portfolio by owing more stocks with
a lower value. Some offer a $1 trade commission. It’s hard to make money and
with 15k and a solid return of 8 percent coul result in $1,200 capital income
per year of which $450 could be dividends, calculated on a 3% dividend yield. All you need is to be disciplined
and diversified.
Below is a nice graphic about how to buy stocks and build a dividend portfolio with only $5,000.
If
you have any further questions, to not hesitate to contact me. If
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Happy
Investing!
Tom
Roberts
