Retiree swaps rental properties with ‘indexing with individual stocks’

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Brian Baillet

Occupation

Retired

The portfolio

About 35 Canadian stocks, 15 U.S. stocks and 10 exchange-traded funds (ETFs); positions include BCE Inc., Telus Corp., Bank of Nova Scotia, Enbridge Inc., Microsoft Corp., Johnson & Johnson, Intel Corp., iShares S&P/TSX Capped REIT Index ETF and Claymore S&P/TSX Canadian Preferred Share ETF.

The investor

Brian Baillet worked at Telus Corp. for more than 30 years. He retired in late 2011 at the age of 54 with a "medium-sized" defined-benefit pension.

How he invests

About 30 years ago, Mr. Baillet began investing in rental properties. Some 15 years ago, he switched to stocks, bonds and the recommendations of investment newsletters.

Now he feels "indexing with ETFs should have been my strategy from the start." Market returns are enough to build the retirement fund he wants. There is no need to take on the work and risk of trying to beat the market.

But with over $300,000 in capital gains, Mr. Baillet is not willing "to pay the tax for a total switch to a couch potato portfolio." So he is trying to simulate indexing with his core holdings of stocks, supplemented with ETFs. He calls this "indexing with individual stocks."

Cash is now funnelled into broad-based ETFs rather than individual stocks. And sector ETFs are easy ways to plug gaps in diversification: For example, the Claymore S&P/TSX Canadian Preferred Share ETF adds exposure to preferred shares with just one transaction.

Best move

It was maintaining a high savings rate and staying focused on the goal of early retirement.

Worst move

"Not converting more Canadian dollars to U.S. dollars when we were at par or above."

Advice

"Make it simple. Plan so the returns from broad-based indexes will get you to where you need to be. This reduces worry, risk, time and effort."

Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com or his Website.