How would you start a portfolio in today's environment

[Foodstamp]

If you were starting from scratch today which would be your first few purchases and why?

[hendi_alex]

I would start with an ETF that reflects my favorite theme. For instance VIG, DVY, SDY are all solid dividend funds. The funds give instant diversification and holdings provide a nice list for future consideration. So you get an instantly diversified basket of stocks, stocks which you can begin to get familiar as you prepare for the eventual purchase of some individual names. VIG is an example of a dividend growth ETF: has very low expenses of only 0.1%, has very familiar names in the top ten (JNJ KO PEP IBM WMT XOM QCOM UTX CVS MMM), and gives a yield of about 2%. There are other ETF's that focus on higher yield, world wide diversification, country specific exposure, or most any theme in which an investor may be interested.

Anyway, my suggestion to to start out diversified with an ETF pick, then gradually enrich some of the positions in the ETF by buying a few shares of some of its favorite holdings. Go very slowly, and learn as much as you can about the companies before taking much of a plunge. Along the way you will learn lots more about sectors, about specific companies, about different investment vehicles. There is so much to learn. What is an ETF? What is a CEF? What is a growth stock versus value or income stock? What are mlp's, REITS, BDC's? The amount of info is overwhelming. So go slow, keep it simple, and learn one little bit of the market at a time. IMO, starting with the proven big cap dividend growth stocks is about as sure a step as a novice could take.

[Jago]

Oil and commodity companies in general (Glencore, BHP) would be a pretty obvious choice.

[Roadmap2Retire]

I think what hendi_alex said is spot on. Start with an ETF that gives you instant diversification. Once you understand investing and have a base to start exploring individual companies, start investing in blue chip names that have a track record. Cant go wrong with companies like XOM, JNJ, GE, T etc (all of these are DJIA names - and belong to DJIA for a reason).

[DividendGarden]

It would depend on how much I were starting out with, am I rolling over some other investment, how often will I be adding new funds, what's the time horizon, is it $1k, or $10k, or $50k? Lots of questions.

I would first focus on a solid core, maybe KO, JNJ, XOM, WMT. Once that is solid, I would focus on saving up to make an additional purchase, maybe $1k or $2k at a time and just focus on CCC companies (I prefer a 10 year minimum dividend growth streak) that were on sale at the time. Keep it simple, live below my means, invest the difference in DGI that's on sale.

[Dividend Watcher]

Foodstamp, that is a tough question to answer without more specifics. You age? Is this for a retirement account (IRA or Roth) or a taxable account? What are your goals? Do you have a big lump sum to start with or are you planning to save a little at a time? Do you have the intestinal fortitude to watch your holdings drop in half and continue with your plans?

Without any of that above, I'll answer as if it were me under the age of 40 starting out with only a little amount of money but plan to save a little out of every paycheck in a retirement plan.

I disagree with starting out with a mutual fund or ETF for several reasons. 1.) If you are truly saving for the long term and planning to stick with it, you'll end up diversified enough to protect yourself from a company going kaput in your portfolio. 2.) You have no choice on what the fund purchases, sells nor what percentage of the portfolio each security holds. 3.) They skim off the management fee every year. You won't notice it but as the value of the fund grows, it gets bigger and bigger in dollar terms every year. A brokerage commission only happens once. 4.) The psychological effect of thinking you are protected in a market swoon. False! The fund will drop just as fast as the rest of the market and your portfolio. It doesn't take a genius to build an enduring portfolio on your own, on your terms, with less fees taken out over the long term.

The only time I'd want to include a fund was for something that is harder to research or the financial reporting rules are lax such as emerging markets. Since this is the Dividend Growth Forum, I'm assuming you're not planning to branch out into these riskier fields yet.

All that being said, I'd open an account with Fidelity or Vanguard since they're a mainstream brokerage with commissions a little below the big boys, TDAmeritrade & ETrade, but will reinvest dividends. ScottTrade has suspended the FRIP program for new accounts and the other brokerages I know little about. Loyal3 doesn't do IRAs as far as I can tell and you're limited on what you can invest in.

Save up your shekels and when you get to around $1000, buy one of the large dividend growth stocks and reinvest the dividends from day one. Make sure the brokerage has you set up to do that. I forgot once in my mother-in-law's account and missed the first dividend payment. When you're first starting out, I like DRIPping since it adds to your holdings without incurring fees. When the account gets larger, you can selectively save the dividends in cash for the next investment if you prefer but the compounding of dividends can really help the growth of your investment.

I'd suggest you start building up a core of 5 -10 great companies that will be the foundation of your portfolio for the long term. Then you can branch out from there. Try to get them when fairly or undervalued. You can find ideas on valuing them here and on Seeking Alpha.

My suggestions for this core are (ones that I think would be OK to buy now are bolded):

Healthcare - JNJ, BDX, ABBV
Energy - XOM, CVX, COP
Consumer Staples - KO, PEP, PG, CL, GIS, SJM, K, UL
Consumer Discretionary - MCD, WMT, GPC
Financials - AFL, TRV, RY, BMO, TD (the last 3 are Canadian banks)
Industrials - EMR, GE, UTX, PH, GWW, HON
Telecom - T, BCE (the last a Canadian telecom)
Info Tech - AAPL, MSFT, INTC
Utilities - SO, D, WEC, LNT, NEE

You asked why these? Because I think they are good, lasting companies that will reward the shareholders over the long term. Some are better values now but some will be better priced with a correction, recession or rise in interest rates but none will go broke on you.

Lastly, I'd recommend you introduce yourself in the Introductions section of DGF so we have a little more to go on. Welcome to DGF!

[daat99]

(02-11-2015, 12:39 PM)Dividend Watcher Wrote: Save up your shekels and when you get to around $1000, buy one of the large dividend growth stocks

Eh?

This is exactly what I do BTW (without the DRIPs, I prefer accumulating the dividend in order to diversify more when I get the next chunk of $1000)...

[Dividend Watcher]

(02-17-2015, 07:30 AM)daat99 Wrote:

(02-11-2015, 12:39 PM)Dividend Watcher Wrote: Save up your shekels and when you get to around $1000, buy one of the large dividend growth stocks

Eh?

Ooops. Showing my age.

Shekel

[daat99]

(02-17-2015, 08:44 AM)Dividend Watcher Wrote:

(02-17-2015, 07:30 AM)daat99 Wrote:

(02-11-2015, 12:39 PM)Dividend Watcher Wrote: Save up your shekels and when you get to around $1000, buy one of the large dividend growth stocks

Eh?

Ooops. Showing my age.

Shekel

I got confused for a second because I'm saving my "New Shekels" until I can purchase $1000 and then buy shares in a single stock paying $7 commission in my IRA account.

[cannew]

(02-11-2015, 12:39 PM)Dividend Watcher Wrote: I like DRIPping since it adds to your holdings without incurring fees. When the account gets larger, you can selectively save the dividends in cash for the next investment if you prefer but the compounding of dividends can really help the growth of your investment.

I'd suggest you start building up a core of 5 -10 great companies that will be the foundation of your portfolio for the long term. Then you can branch out from there. Try to get them when fairly or undervalued. You can find ideas on valuing them here and on Seeking Alpha.

Great advice for the beginner, someone who has limited funds or can only invest small amounts periodically. Started DRIP's for the grandkids in 2008 and they've seen their dividends grow from $35 per Qtr to $155 per Qtr. We have not added a lot of money but with dividend reinvestment and compounding their dividends are growing steadily as has the capital and number of shares. If they begin to contribute later I'm sure they will accumulate a considerable sum in their future.

[rayray]

If you have a work retirement plan such as a 401k I would use that as a starting point.

[rapidacid]

Edit: I'm bad at reading