Today I said goodbye to almost all of my individual Canadian margin stocks. $CNR $CP $CSU $FTS A few months ago, the thought of selling these holdings would have never crossed my mind. I fudging love these mostly boring, beautiful companies. They were my CAD market “forever buy and holds”. The kind of companies you can hold for decades and not worry much about. Railroads are core infra with enormous moats, Fortis is a Dividend King 👑. CSU is one of the highest quality companies on the TSX imo. But after a couple months of heavy portfolio design pondering, and general retrospection, I am selling them. Three main reasons / goals: (1) Deleverage a bit (2) Reduce individual stocks (3) Reallocate partially to Bitcoin (1) DELEVERAGING I previously held all these stocks in my TFSA. But I refactored my TFSA to have zero individual stocks. So they ended up being bought in my margin account using leverage to be able to maintain exposure. They all have 100% Canadian eligible dividends. They are income producing investments, so I could claim the borrowed margin interest. They are a little on the more boring side in terms of equities, but that's by design. They are "safer" dividend stocks. I didn’t own these with the expectation of face melting returns. They were part of my Canadian geographic exposure, and acted as something of a barbell to the rest of my portfolio, which is very aggressive overall. I also believe in responsible leverage usage. I want my portfolio to be able to sustain any sort of nasty dropdown. I absolutely never want to be a forced seller. That's when the double edged sword of leverage works against you. Ultimately, I came to the conclusion that I was a bit over my skis with leverage based on our current life situation and shifting goals. (2) Reduce Individual stocks I am continuing to reduce individual stock exposure. I have a few theses I still want to see play out a bit longer, but it's only a matter of time until my registered portfolios hold ZERO individual stocks. I’ll go back to stock picking once my wife and I’s TFSA’s are maxed out, and other more important life goals are met like a house upgrade. Where I will likely employ a Smith Maneuver strategy with the kind of stocks I just sold. I kept $CNQ as the last CAD man standing though. (3) Partial reallocation to Bitcoin I am extremely bullish on $BTC. I would like to increase my exposure a little bit more. This relates to the leverage part also. I don’t want to increase my leverage ratio right now to buy more Bitcoin. One of the things I always do when making any sort of investment decision is comparing the alternatives. Usually it's compared to an index fund: - Would I rather own XXX stock or VOO? - Would I rather own YYY stock or QQQM? - Would I rather own ZZZ stock or BTC? Every decision needs to be evaluated with the opportunity cost of making a different available decision. In the next ~5-10 years I personally strongly believe Bitcoin will have superior returns to these group of stocks. If that thesis doesn’t work out, it will suck. But I’d rather express that conviction within a portfolio where the overall leverage is becoming lower, not higher. To mitigate for the worst case scenarios. Cheers 🍻
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26 Comments
Mr Financial
@mr.financial · 9d
A man with a reasonable plan! I wish I had your risk tolerance with all that BTC exposure. Maybe one day when I find out I married a princess or something.
Canadian Investor@canadianinvestor · 9d
This seems fake I don't see MSTE 🤣
John D@iamjohn_d · 8d
I've also thought about potentially moving more over into ETFs largely because I find myself having less and less time to stay on top of my individual holdings. But at the same time, I hold a lot of what I own because I trust the research I've done and trust management to deliver on what I said it would go out and do. Decisions, decisions...
