Before today, I didn’t own any Canadian equities, other than the high dividend yielding ETF, XDV.
In fact, I didn’t buy that one until a full year ago. Content to add to my bond index (for my Canadian exposure) I didn’t buy any Canadian stocks because I didn’t understand any of them.
I have to fully understand a business before I buy shares. Fully. I’ll order at least 5 years worth of annual reports, and I read every word, starting from the back pages, where all the juicy stuff gets stashed. I trust no one when making buying decisions. It’s OK. You can call me anal.
With the annual reports, I bring out my valuable book on accounting shenanigans and I look for “truths” that are fudged. And I always find them—with nearly every business I’ve researched.
One year ago, because I was perhaps too lazy to learn about a Canadian business, I bought shares in the high yielding index, XDV. When dumb money acknowledges its limitations, it ceases to be dumb, right?
But I just sold those crazy shares, and I hardly ever sell anything (unless I’m selling bonds to take advantage of deliciously low stock prices—God I miss 2009).
OK—I made a nice, tax free 11% gain in one year on XDV, with about 2.5% further, after taxes, in dividends. (As a Singapore resident, I pay dividend tax but not capital gains) Yet, I just put my prehistoric brain in first gear and figured something out.
If I continue owning this silly index, I’ll have to pay 0.55% annually in expense ratios. That’s just plain….dumb. And for what? Most of its holdings (the vast majority) are comprised of only about 8 stocks. So why not buy the eight? Sure, it’s a leap of faith, somewhat, but it’s no more a leap than buying the ETF. And in the process, I’ll save money.
I just placed an order for 620 shares of the Royal Bank of Canada. Total leap of faith. And I’m going to start collecting them. So I hope they (and all the Canadian banks, for starters) get absolutely crushed. May the stock markets get pounded, and offer me cheap cheap nuggets.
Light candles with me my friends. Perhaps we can call the markets down in unison.