RY vs the US market

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monk127
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RY vs the US market

Post by monk127 »

Hi all,

Back last spring I bought a large amount (for me) of RY in my CAD RSP intending to Norbert Gambit it to buy more VTI. Well, I never got around to phoning in at TD and having the shares journalled over to the USD part of my account and in the meantime, the position has gained over 20% :) . Well I was about to call in today to TD but then I (maybe dangerously) compared a few graphs of RY vs the S&P 500... the longest duration I could find was back to 1984 and it seems that RY generally has outperformed the US market. So of course, now I'm dreading taking the currency exchange hit on CAD and wondering if I should just keep the shares of RY.

I've generally been an ETF indexer since I started investing about five years ago and have a pretty boring portfolio of ETFs but now I'm wondering what to do? Anybody have any thoughts on the matter? I'm curious.

Thanks!
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Re: RY vs the US market

Post by Spudd »

One stock is pretty undiversified. What % of your portfolio does it represent? If it's a small %, I don't see a problem keeping it, but if it's >5-10% I would personally not feel comfortable with that, regardless of how well it's done historically.
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Re: RY vs the US market

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Spudd wrote:One stock is pretty undiversified. What % of your portfolio does it represent? If it's a small %, I don't see a problem keeping it, but if it's >5-10% I would personally not feel comfortable with that, regardless of how well it's done historically.
It's a large portion. 14%. I bought more at some point early this year because I need to buy vti vpl and vgk to rebalance.
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Re: RY vs the US market

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monk127 wrote:It's a large portion. 14%. I bought more at some point early this year because I need to buy vti vpl and vgk to rebalance.
Then follow the original plan and enjoy the extra gravy!
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Re: RY vs the US market

Post by Peculiar_Investor »

adrian2 wrote:Then follow the original plan and enjoy the extra gravy!
Completely agree.
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Re: RY vs the US market

Post by deaddog »

I would keep RY until it started to underperform the S&P.

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Re: RY vs the US market

Post by adrian2 »

Will Rogers wrote:Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.
Simple, eh?
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monk127
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Re: RY vs the US market

Post by monk127 »

Thanks all for the feedback! I still haven't acted but I suppose I'm supposed to follow the plan and sell RY in USD. Or gamble just a little and hold. Hehe, I think next time I'll probably just sell immediately so I have no decision to make. I find it interesting though that RY, TD, and BNS all appear to have beaten the US market for over 30 years.

Love the Will Rogers quote! Very funny.
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Re: RY vs the US market

Post by kcowan »

You need to develop an IPS. Without that you will become a trader/speculator. Although there is nothing inherently wrong with that, you need to adopt a strategy.
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Re: RY vs the US market

Post by pmj »

Are you measuring those stocks vs the S&P in C$, US$, or a mixture?
IOW, if you invested say C$10000 20 years ago in either CDN banks, or in the S&P using the exchange rate at that time, how much would the alternatives be worth today in C$, converting the S&P at today's rate?
Alternatively, you could use the NYSE US$ prices for the banks at both ends, and eliminate any distortion right away.
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Re: RY vs the US market

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pmj wrote:Are you measuring those stocks vs the S&P in C$, US$, or a mixture?
IOW, if you invested say C$10000 20 years ago in either CDN banks, or in the S&P using the exchange rate at that time, how much would the alternatives be worth today in C$, converting the S&P at today's rate?
Alternatively, you could use the NYSE US$ prices for the banks at both ends, and eliminate any distortion right away.
I didn't do any math at all, just eyeballed charts at TDDI for the CAD & USD versions of the bank stocks.
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Re: RY vs the US market

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kcowan wrote:You need to develop an IPS. Without that you will become a trader/speculator. Although there is nothing inherently wrong with that, you need to adopt a strategy.
You're definitely right. :) I've been mostly Couch Potato style indexed with ETFs 80/20 stocks/bonds for the last five years or so up until now.
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Re: RY vs the US market

Post by zeno »

monk127 wrote:Hi all,

Back last spring I bought a large amount (for me) of RY in my CAD RSP intending to Norbert Gambit it to buy more VTI. Well, I never got around to phoning in at TD and having the shares journalled over to the USD part of my account and in the meantime, the position has gained over 20% :) . Well I was about to call in today to TD but then I (maybe dangerously) compared a few graphs of RY vs the S&P 500... the longest duration I could find was back to 1984 and it seems that RY generally has outperformed the US market. So of course, now I'm dreading taking the currency exchange hit on CAD and wondering if I should just keep the shares of RY.

I've generally been an ETF indexer since I started investing about five years ago and have a pretty boring portfolio of ETFs but now I'm wondering what to do? Anybody have any thoughts on the matter? I'm curious.

Thanks!
I'm laughing because I did exactly the same thing, bought some RY with the intention of Gambiting a la Norbert, but for some reason never finished the move. Likely work distracted me and by the time I got back to it, the market had moved to such a point that I no longer needed to buy more VTI to meet my asset allocation.

In my case, I'm just letting it ride, but it's not a significant amount, less than 1% of my portfolio. I was vaguely amused to see that it was among my best performers last year, but I won't cry into my keyboard if it retreats before I need to convert to USD.

If it were enough to through my asset allocation significantly out of whack, I would sell immediately and rebalance.
If having it sitting there in my account was leading me to single stock to index comparisons and the slippery tempting slope to stock picking and market timing, I'd also sell immediately.
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Re: RY vs the US market

Post by always_learning »

monk127 wrote:
Spudd wrote:One stock is pretty undiversified. What % of your portfolio does it represent? If it's a small %, I don't see a problem keeping it, but if it's >5-10% I would personally not feel comfortable with that, regardless of how well it's done historically.
It's a large portion. 14%. I bought more at some point early this year because I need to buy vti vpl and vgk to rebalance.
I recommend selling for USD as per your original plan. In the past, I've had individual stocks constitute that kind of % of my portfolio. I found that, as theory predicted, my portfolio slightly underperformed the total market.

Any individual stock will probably underperform a broad-based market index, because a disproportionate amount of the total market's return comes from a handful of stocks that go up >10x, and you probably won't own one of those.

a_l
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Re: RY vs the US market

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always_learning wrote: Any individual stock will probably underperform a broad-based market index, because a disproportionate amount of the total market's return comes from a handful of stocks that go up >10x, and you probably won't own one of those.

a_l
If you happen to own one, why would you sell it?
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Re: RY vs the US market

Post by always_learning »

deaddog wrote:
always_learning wrote: Any individual stock will probably underperform a broad-based market index, because a disproportionate amount of the total market's return comes from a handful of stocks that go up >10x, and you probably won't own one of those.

a_l
If you happen to own one, why would you sell it?
I'm not convinced that the OP has found an outstanding investment (one that will thrash the overall market) going forward. I think RY -- or any individual stock you could name -- will probably not be an outstanding investment in that sense going forward.

A counterargument to selling and reinvesting the proceeds in a broad-based ETF is that the OP would have to pay capital gains taxes now in order to achieve the extra diversification of a broad-based ETF. Based on my experience, I am recommending selling it and putting the proceeds into a broad-based ETF. YMMV.

Cheers,
a_l
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