What Kind of Stock Portfolio Should You Maintain?

By building your unique portfolio, you might buy Fortis Inc. (TSX:FTS) or iShares NASDAQ Biotechnology Index (NASDAQ:IBB). However, you should be comfortable with your stocks and know why you’re holding them.

| More on:

We all invest with the intention of making more money, and there are many successful investing gurus out there.

Should you follow Philip Fisher’s style and look for companies that are superior to their peers in their respective industries?

Should you follow William O’Neil’s style and look for growth stocks?

Then, of course, there’s Warren Buffett and Benjamin Graham’s value investing with an emphasis on margin of safety to prevent overpaying for any company.

Discover your own investment style

The good thing about maintaining your own portfolio is that you can look at each individual holding and determine how it fits into your unique portfolio. You don’t have to choose just one style because you have the freedom to combine them if you so wish to.

Ultimately, your stock portfolio should allow you to sleep well at night. I take a blended approach, but my core portfolio is made up of dividend stocks that I aim to buy at a margin of safety.

However, occasionally there are excellent businesses such as Fortis Inc. (TSX:FTS) that I’m willing to pay a fair price for. In my eyes, the quality and stability of the business is a different kind of margin of safety.

Some investors would say that Fortis grows at too slow a rate to warrant an investment. However, it plays the role of adding stability to my portfolio.

Fortis is primarily a regulated utility with predictable and stable returns. I can count on it to appreciate in price steadily and to pay a stable, growing dividend. In fact, Fortis has increased its dividend by more than 40 consecutive years–one of two Canadian companies to do so. It also aims to increase its dividend by 6% per year in the next few years.

It’s my job as the investor to buy it at a fair or discounted price to maximize my returns. At about $42 per share, Fortis is close to fully priced based on its 10-year normal multiple. Whenever Fortis yields 4% or higher, I’d consider buying more shares.

If I want to boost my portfolio returns, I can buy high-growth investments such as Alimentation Couche-Tard Inc. (TSX:ATD.B) and iShares NASDAQ Biotechnology Index (NASDAQ:IBB). The reason I mention the biotech index fund is because some investors might be uncomfortable holding individual biotech stocks, but they might believe there’s more growth to come from the industry, so the exchange-traded fund is a lower-risk way of gaining exposure.

What kind of stock portfolio should you maintain?

You should maintain a stock portfolio that makes sense to you. Know what you want out of each holding. For example, one holding might be for stable dividends, another might be for growth, and yet another might be for a blend of income and growth. It’s up to you.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of ALIMENTATION COUCHE-TARD INC and FORTIS INC. COuche-Tard is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »