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me & my money

Brad Ferris

Age: 28

Occupation: Health care author/consultant, living in London, Ont.

Portfolio: Stock holdings include Bank of Nova Scotia, Canadian National Railway Co., IGM Financial Inc., Rogers Communications Inc., Royal Bank of Canada, Saputo Inc., TMX Group, Colgate-Palmolive Co., Coca-Cola Co., Procter & Gamble Co. and Wal-Mart Stores Inc.

Investment approach Mr. Ferris is an investor in the Warren Buffett mode. Like the investment legend, he prefers to buy shares in reasonably valued companies with "enduring competitive advantages," or in the words of Mr. Buffett, "moats." They are stocks "I can see myself holding well into my fifties," he says.

When picking companies with "moats," he prefers those that regularly raise their dividends and are eligible for the dividend tax credit. A goal is "to create a growing, tax-efficient stream of income for early retirement."

As outlined in his blog, Triaging My Way to Financial Success, several "value rules" guide his stock picks. One is that a company's business must have sustainable, high profit margins. It is hard for a company to grow over the long run without solid profit margins.

Disciplined investor During the bear market, Mr. Ferris not only stayed invested but worked extra hours to generate money to buy stocks while they were on sale. As an April 6 post to his blog indicates, stock purchases included Russell Metals Inc., Manulife Financial Corp., Canadian Tire Corp., Husky Energy Inc. and Fortis Inc.

Asset allocation The fixed-income portion of his portfolio is set at 30 per cent, equal to his age as most financial advisers would recommend. But this will drop to 5 per cent when he buys his first house because he views home ownership as similar to owning a "giant bond" that appreciates by up to 4 per cent a year.

His Canadian dividend stocks are held outside of a registered retirement savings plan. They make up half his portfolio, departing somewhat from the rule that one should diversify globally. He sees this as a necessary tradeoff to his goal of building a portfolio of tax-advantaged, dividend stocks.

He is keeping contributions to his registered retirement savings plan to a minimum. One reason is that he can get a bigger tax deduction when he moves into a higher income tax bracket. Another is that he doesn't need particularly large savings in a registered plan because he will be receiving retirement income from a defined-benefit pension plan.

Best move Last fall, he bought preferred shares in Westcoast Energy Ltd. and Power Financial Corp. at prices around $15 and yields above 9 per cent. "Those preferred shares now trade for over $20."

Worst move In 2006, he purchased shares in lumber company Norbord Inc., largely on the basis of the opinions of well-known value investors. In 2008, the shares were sold for a loss of 44 per cent.

Advice "My worst mistake was … a failure to think independently," he says of his Norbord investment. Investors need to do their own due diligence too, he advises.

Special to The Globe and MailWant to share your strategies?