Starting off with Portfollio

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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ravinster
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Starting off with Portfollio

Post by ravinster »

Hello all

I'm new to the forum and I'm looking to start investing into stocks with Drips and preferably SPP. I'm 31 years of age with a background in Finance. I'm looking to hold strong stocks for decades to come (hopefully) in my portfollio and keep stocks only with good dividend growth.

My main question is should I hold the shares in my brokerage account under TFSA or should I hold the certificates myself and enroll in the company's SPP/Drip program that way.

My broker contact is giving me a headache when I told him i want to take out all of my monies out of my Mutual Fund TFSA and put them into my savings account (so I can move the monies into my brokerage account to buy stocks). He's heckling me saying why would I do that for the following reason:

- If I opened a TFSA brokerage account I could DRIP with the companies I have in my portfollio - and any capital gained and drip $ coming in would be Tax sheltered

He does have a valid point with regards to capital gains...

If I were to enroll into an SPP/Drip program with the company of my choosing - In the long run - is it worth taking the big capital gain hit when it comes time to sell my shares (or a deemed disposition) when I take my certificates to my broker to have them deposited into my brokerage account at the time of my choosing?

Or is it better not to enroll into a SPP and keep all my holdings within a TFSA. The real big downside is that if there is not enough cash to buy another stock - those monies would be just regular "cash" being held in the account until the next dividend is paid by the company - and who knows what will happen to the stock price in that quarter; I could potentially miss out on some good equity.

Mind you I'm not considering any fees that may come along with keeping an TFSA brokerage account... My choice will be Investorline with BMO cause it does seem like there one of the few who don't require clients to pay many fees.

Any insight you give will be greatly helpful!
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Mordko
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Re: Starting off with Portfollio

Post by Mordko »

1. TFSA or RRSP. Tax sheltered accounts should be used for stocks unless you actually want to pay more tax.

2. The impact of "fees" (commissions) should be very small as long as you buy in large enough chunks. There should be no other fees.

Do check though. Given your finance background you should be able to use Excel and run both scenarios for your situation.
pmj
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Re: Starting off with Portfollio

Post by pmj »

Whether you're DRIPping at the company plan, or in your brokerage account, the amount that might not be immediately invested each time would be less than the cost of one share, x the no. of different stocks you hold. Not a lot of cash to be worrying about missing out an equity gain for maybe three months ....
But what I do, at my brokerage account, is when the cash exceeds the min MF purchase ($50 at BMO, except $500 for first purchase) is buy a MF to keep that cash in the market. I use a div-oriented fund, cos that's my investment preference, others might propose an index fund. It's a relatively small amount of money, so even if the MF fees are "high", their gross amount is not significant.
Someone else will likely address the issues of tax-sheltered investing vs ?non-registered? company plans.
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Re: Starting off with Portfollio

Post by Quebec »

ravinster wrote: 30 Nov 2017 16:21 I'm new to the forum and I'm looking to start investing into stocks with Drips and preferably SPP.
Since you mention Share Purchase Plans (SPPs) I think you mean classic DRIPs, without a broker.

I did that for a few years with Canadian dividend stocks, non-registered. I even traded single share certificates with strangers by snail mail, for the closing price on an agreed upon date plus $10 plus a self-addressed stamped envelope. The idea being than you can use this starter share to enroll in the DRIP + SPP with Computershare or another transfer agent. I had two banks, two pipes, two REITs and a few other stocks. At the time, commissions were $30 at CIBC Investor Edge, and I was a student with very limited funds, so I felt quite good about my broker-less stock purchases and automatic reinvestment of dividends. Here are some reasons why I moved on, first to stock picking in a brokerage account and finally to an index (ETF) portfolio. In no particular order:

- 8 to 10 stocks in not enough, IMO. See Diversification: how many stocks.

- I've eventually managed to transfer all my non-registered investments to my RRSP and TFSA accounts

- there was a lot of bookkeeping involved in DRIPs. Each transaction, no matter how small, had to be recorded to keep track of the adjusted cost base.

- commissions are now $5 at Questrade and $10 at bank-owned brokers. And my portfolio is larger. So saving on commissions is less relevant.

- in my stock picking says I wanted to be able to buy any Canadian or US stock, not just the Canadian ones that offered DRIPs

- ETFs are simpler, and allow a diversified portfolio to be built with only 3 funds. That's a lot less work.

Cheers, -Qc
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OptsyEagle
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Re: Starting off with Portfollio

Post by OptsyEagle »

How were you planning on acquiring the original certificates. If bought through a broker it is very difficult these days to get the shares in certificate form. Most brokers stopped doing this a few years ago.

I would go with the broker accounts and drip through them. Just use a discount broker instead of a full service one. Make sure the broker you choose will facilitate DRIPs. Most do.
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deaddog
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Re: Starting off with Portfollio

Post by deaddog »

If trading costs are a concern I would suggest one of the Canadian Dividend ETFs with a QuesTrade account. You can buy ETFs commission free. Reinvest your own dividends.
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ravinster
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Re: Starting off with Portfollio

Post by ravinster »

Thanks for all the great advice folks!

I like the idea that pmj stated with when I have extra cash on hand and as long as I can purchase a MF - I can use those funds to purchase a dividend centric MF.

I'm not interested in ETF's - primarily in stocks

What do people think about Virtural Brokers? They offer a "DPP" program and they take a nominal fee of $1.00 per company. I haven't looked into Questrade but I will be doing that momentarily. I'm looking to only purchase about 5 companies and purchase a good 100-200 stocks from each company. I have a list of 15 companies I want to invest in but there is only 5 that I believe from my own analysis are worth investing in - the others are too expensive at this point in time.

I suppose I can always purchase an iShare if I have cash laying around for a quarter just so I don't have cash siting on the side not being put to work (or an MF).

The major downfall I see to this strategy (Staying within TFSA/RRSP and DRIP) is that I won't be purchasing any fractional shares - which in the long run - can potentially mean I'm loosing out on 50-100 more shares per each company. With the SPP (stock purchase plan) approach that is one great advantage - along with usually getting some sort of discount on each additional share purchased through the program (depending on the company). However the tax burden can become immense with capital gains - but who is to tell the companies I invested in would do stock splits (which would help with my ACB), and what legislation may change to stocks with relation to capital gains?
ravinster
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Re: Starting off with Portfollio

Post by ravinster »

Correction - I found out that Virtual brokers only charges $1.00/month per account - not per holding - which is insignificant in my opinion :D
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Re: Starting off with Portfollio

Post by BRIAN5000 »

which in the long run - can potentially mean I'm loosing out on 50-100 more shares per each company. With the SPP (stock purchase plan) approach that is one great advantage - along with usually getting some sort of discount on each additional share purchased through the program (depending on the company)
Carefully consider this, How many shares will you really get, how much savings from the discount will you really get with the amount of money being invested over what period of time. It sounds good but when I tallied it up for my portfolio it wasn't worth the hassle. IMHO NEVER DRIP in non-registered accounts. (wheres Adrian)

I did not know brokerages would not send share certificates anymore? Last I checked TDDI was $50 to send a cert., split with a few people not to bad :evil: :roll:

I used to do this, actually sold a few shares to someone on here when I was trying to clean up the mess. Took months and months of dealing with transfer companies that didn't want to give up accounts IMO so screwed it up numerous times. This would be a fun job for someone winding up your estate.
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kcowan
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Re: Starting off with Portfollio

Post by kcowan »

BRIAN5000 wrote: 01 Dec 2017 16:46...I did not know brokerages would not send share certificates anymore? Last I checked TDDI was $50 to send a cert., split with a few people not to bad :evil: :roll:

I used to do this, actually sold a few shares to someone on here when I was trying to clean up the mess. Took months and months of dealing with transfer companies that didn't want to give up accounts IMO so screwed it up numerous times. This would be a fun job for someone winding up your estate.
It is interesting that doing things the old way now costs more. I guess the investing industry has "jumped the shark" making it impractical to do things the old way anymore. I suppose it is akin to the cost of writing a paper cheque?
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AltaRed
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Re: Starting off with Portfollio

Post by AltaRed »

Paper is a very costly process for business transactions these days. As a shareholder of businesses, I would want them to charge for the added administrative and processing costs.
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Re: Starting off with Portfollio

Post by silverbug »

I think you're better off with an index dividend paying ETF (such as XDV or similar).

Personally I've been burned owning individual equities (a silver miner actually, won't go near that again), all it takes is one bad news story and poof, you couldn't spend that much money so quick...It doesn't seem like the paperwork and back and forth is worth it.

One point worth considering is that you may change your approach a few times depending on how long you've been at this. Simple, hands off, low cost, low headache and diversified is where I've ended up.
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