The scenario

Jack, 35, received a $10-million inheritance and later an unexpected $10,000 employment bonus. A moderately aggressive investor with a 20-year time horizon, Jack is seeking to maximize capital accumulation while minimizing downside risk. 

We asked two experts to suggest investment options for Jack.

The expert

Justin Lim, portfolio manager with Echelon Wealth Partners Inc. in Oakville, Ont.

The philosophy

Lim seeks to mitigate the downside risks of the portfolio, while focusing on growth that’s aligned with the client’s investment timeline and objectives. He looks for companies that have demonstrated the ability to consistently increase sales and earnings, implement pricing power, and provide a reasonable return to investors. He may also choose fund managers or strategies that have a demonstrated track record of success.

The allocation ($10-million inheritance)

Lim recommends a “a set-it-forget type portfolio” because of Jack’s long time horizon. To remove single-stock risk, Lim selected ETFs and mutual funds. His focus is on achieving consistent present and future growth, and the portfolio is overweight in actively managed products and sectors with longer-term growth prospects.

The allocation is:

40% to income funds

The “stability” segment of the portfolio is designed to provide downside protection and diversification, in combination with growth, Lim said. The funds he recommended are 10% each to the:

  • Dynamic Equity Income Fund
  • Harvest Healthcare Leaders Income ETF (TSX: HHL)
  • Dynamic Premium Yield PLUS Fund
  • CI Global Leaders Fund

35% to long-term growth funds

This segment is designed to provide consistent growth over the long-term, Lim said. The real estate and technology sectors have generated “consistent growth over the past 10 years and will continue to do so for the next 10 years,” he said.

Among the investments he recommended are:

  • 5% to Centurion Apartment Real Estate Investment Trust
  • 5% to CI Canadian REIT Fund
  • 15% to Harvest Tech Achievers Growth and Income ETF (TSX: HTA)
  • 10% to Vanguard International Dividend Appreciation ETF (NASDAQ: VIGI)

25% to long-term high-growth sectors, such as fintech, artificial intelligence and electric and autonomous vehicles, consisting of:

  • 5% to ARK Fintech Innovation ETF (NYSE Arca: ARKF)
  • 10% to Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ)
  • 5% to iShares Self-Driving EV and Tech ETF (NASDAQ: IDRV)

The allocation ($10,000 bonus)

“Whether you have $10 million or $10,000, the strategy would remain the same,” Lim said. “The only thing that would differ would be less investment selection.” He recommeds:

40% to stability via the Dynamic Equity Income Fund

30% to long-term growth ETFs, consisting of:

  • 15% to Harvest Tech Achievers Growth and Income ETF (TSX: HTA)
  • 15% to Vanguard International Dividend Appreciation ETF (TSX: VIGI)

30% to long-term high-growth sectors, via the Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ)

The expert

Michael Sprung, president of Sprung Investment Management Inc. in Toronto. 

The philosophy

Sprung maintains a conservative value-seeking philosophy, aiming to preserve capital and provide a real rate of return to investors after fees and inflation over a five-year period. He invests in individual equity and fixed income securities, ETFs, cash and money market funds.

The allocation ($10-million inheritance)

Jack’s “reasonably long time horizon mitigates some of the risk in current market conditions,” Sprung said. As a result, Jack “can afford to be a little aggressive in meeting his investment goals.”

30% to cash and fixed-income securities, such as:

  • Royal Bank 91-day Bankers Acceptance, with a yield to maturity of 4.77%
  • TD Bank bond with a 3.226% coupon, maturing on July 24, 2024
  • TMX Group bond, 2.997%, Dec. 11, 2024
  • Rogers Communications bond, 3.1%, Apr. 15, 2025
  • Alta Gas bond, 4.12%, Apr. 7, 2026

49% to Canadian equities, in sectors such as:

Financials

  • Royal Bank of Canada (TSX: RY)
  • The Bank of Nova Scotia (TSX: BNS)
  • Manulife Financial Corporation (TSX: MFC)
  • Alaris Equity Partners Income Trust (TSX: AD.UN), a private equity firm.

Energy

  • Suncor Energy Inc. (TSX: SU)
  • Canadian Natural Resources Ltd. (TSX: CNQ)
  • ARC Resources Ltd. (TSX: ARX)
  • Tourmaline Oil Corp. (TSX: TOU)

Materials

  • Nutrien Ltd. (TSX: NTR), an agricultural crop input and services company
  • Agnico Eagle Mines Ltd. (TSX: AEM)
  • Teck Resources Ltd. Class B (TSX: TECK.B)

Consumer staples/discretionary

  • Loblaw Companies Ltd. (TSX: L)
  • Metro Inc. (TSX: MRU)
  • Alimentation Couche-Tard Inc. (TSX: ATD)

Utilities

  • BCE Inc. (TSX: BCE)
  • Fortis Inc. (TSX: FTS), an internationally diversified electric utility company
  • ATCO Ltd. (TSX: X), a logistics, transportation and energy infrastructure company

Industrials

  • Canadian National Railway Co. (TSX: CNR)
  • CAE Inc. (TSX: CAE), a manufacturer of simulation and modelling technologies
  • Aecon Group Inc. (TSX: ARE), which provides construction and infrastructure development services

11% to U.S. equities and funds, such as:

  • Johnson & Johnson (NYSE: JNJ)
  • CVS Health Corp. (NYSE: CVS)
  • General Dynamics Corp. (NYSE: GD), an aerospace and defense company
  • ARK Innovation ETF (NYSE Arca: ARKK)

10% to European and emerging-markets ETFs, such as:

  • Vanguard FTSE Europe ETF (NYSE Arca: VGK)
  • Vanguard Emerging Markets ETF (NYSE Arca: VWO)

The allocation ($10,000 bonus)

Sprung would put the entire bonus into a high-interest account to fund Jack’s current expenses.