Portfolio Update: I’m Selling Everything!

Fish does condos

I’ve been very busy over the past few weeks. Since my last post I’ve bought a condo and sold off a large portion of my portfolio. I plan to utilize the Smith Maneuver (Million Dollar Journey has some good articles on the topic here). Part of this process means selling all of my investments and using the proceeds to come up with a large down payment. I expect the whole process to take around 2 months as I have some DRIPs that have to be transferred and make selling quickly difficult. I started this process by selling the following shares on June 20, 2014.

I thought you were a buy and hold investor?

I am, but in order to come up with a sizeable down payment I had to sell my stocks. I purchased the condo for $420,000. In order to avoid the CHMC insurance ($12,569 if I only put 5% down) you need 20% down. This meant coming up with at least $84,000 to avoid the insurance. I haven’t been investing much recently as prices were too high, so I’d been saving up some cash, but I still didn’t have that kind of cash. This meant selling some investments.

Another reason I’m selling my shares is that I plan on using the Smith Maneuver. This strategy shifts a portion of the mortgage debt on the condo which isn’t tax deductible to a line of credit that is used to invest with. In general if you invest in income producing assets like dividend paying stocks in a taxable account with borrowed money the interest is tax deductible. The process is meant to pay down your mortgage faster while also growing your wealth.

I don’t really want this article to turn into a post about the Smith Maneuver, so I’ll just say that because I chose this strategy I have to sell all my stocks, and then when the condo purchase closes in August I can start investing again with the line of credit. After the condo purchase closes, I plan to get back to my regular strategy of investing in high quality dividend growth stocks and holding them for their increasing stream of dividend income.

Side note: I don’t recommend borrowing to invest unless you have at least two years of experience investing in the stock market. Borrowing to invest is risky!

The results

One of the reasons that it was easier to start selling off my portfolio is that both the Canadian and US markets have reached all-time highs. Psychologically it is easier to sell when your investments are reaching all-time highs. I don’t really compare my results to an index, but in the back of my mind I usually have an idea of where I am compared to the overall market.

I mostly focus on growing dividends, but I was pleasantly surprised with my results. Of the shares I sold on June 20th I’ve managed about 23-24% CAGR excluding dividends. I figure my average yield was around 3%, so my total return CAGR is actually higher, say around the 25% mark. I’m very happy with these gains. Below are the individual results for each stock. In some cases I had to estimate the purchase date, but I was conservative with my estimates, so in reality my CAGR returns are likely a bit higher than shown.

CAGR Table

I have been fortunate with my timing, as when I needed the money the market happened to be very high. Because of this I expect my results are skewed. I don’t expect average annual returns in excess of 20%, but I was lucky in this case. I think a more reasonable expectation for a long term investor in stocks is average annual returns around 6-10%.

My worst performing stock (no surprise here) is Blackberry with a 64.7% loss … ouch. Thankfully I only invested a small portion of my portfolio in this stock. My best overall gain was with Medtronic, where I was able to double my money. From a CAGR perspective though, Suncor was my best investment with 44% CAGR. Potash Corporation of Saskatchewan came in a close second place with 42.6% CAGR. The Altagas returns didn’t really have anything to do with me, as this was Ms. DGI&R’s investment (Thanks babe!).

What’s next?

I still haven’t sold all of my investments, so over the next 2 months expect a few more portfolio updates as I offload the remainder of my DRIPs. I still have Bank of Nova Scotia [BNS.TO Trend], Telus [T.TO Trend], TransCanada [TRP.TO Trend], Fortis [FTS.TO Trend], Enbridge [ENB.TO Trend], Johnson & Johnson [JNJ Trend], and Procter & Gamble [PG Trend] to sell.

Had I not just bought a place I would likely be buying shares of Target [TGT Trend]. Target increased there dividend some weeks ago by about 20%. When I first analysed Target I decided I’d buy at $50 or less, but with the dividend increase my target buy price is likely closer to $60 now. Hopefully the price stays down and I’m able to pick up some shares after I move into the condo.

I’ve updated my portfolio and you can see it here.


Photo credit: kevin dooley / Foter / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

20 comments to Portfolio Update: I’m Selling Everything!

  • Grant

    Good luck…and you were wrong, borrowing to invest isn’t risky, it is EXTREMELY risky.

  • Mridul Sharma

    what’s CAGR stand for!

  • Dipen

    Did you purchase condo for investment purpose or is it your primary residence of place?

  • Executive Guy

    Sorry to see you sell… but one must do, what one thinks it’s best. Are you planning to continue posting articles on the blog, or will you be discontinuing it?

    • I’ll still be posting articles. Once the condo purchase closes in August, I’ll be looking to invest again, so I’m only getting out of the game temporarily.


  • UCB

    Man I hope it works out. You did a great job with your blog. I really liked the work you put in your spreadsheets – very comparable to David Fish. Remember, housing is like the stock market too. Same greed and fear drive that market to extremes. All markets is based off demographics. Baby Boom was a demand driven market. Competition for goods and services lead to higher prices and wages for everything. This market (housing and stocks) is not demand driven. There is fear in the air. Fear of missing out, fear of low and lower ROR on income securities. I hope you really understand what the Smith Maneuver is all about. It works really well in a falling interest rate environment but will sting you on a rising interest rates. Couple that with a correcting housing market and stock market ….it worked well for MDJ as the timing was right. Just pay attention to your LTV ratio in the end. Good luck, young man.

  • Mridul Sharma

    Hi Newly weds (Sorry I still don’t know your name):

    You have an uncanny gift of making complex issues simple and understandable, by your articles I got inspired and collected enough courage to handle my wife’s retirement accounts. As long as we get 5% dividend income we would survive. Is there any other blog like yours who focuses on Canada!

    Very likely you might have to move again, why, generally newly weds in couple of years have children and kids do need living room and backyard as their playground, in that era of life you be chasing diapers and milk. In the interim enjoy your treadmill and swimming pool as much as you can. With best wishes.
    Mridul Sharma

    • I’m hoping I don’t have to move with kids, but I could be a bit naive of the space I need to raise kids. I think I’ll be able to make it work as we back onto a large park.

  • Erich

    I know the point of this article is not all about the smith manouevre, but I just wanted to share a link to a spreadsheet calculator I found extremely helpful to consider the possible results based on growth, dividend yield and HELOC interest rate assumptions you can adjust yourself:

    There is a link to the calculator there (I use version 2).

  • KGC

    BAD mistake instead of selling everything you should feed it

  • kev

    Instead of selling everything U should feed it! (buy more of what U have). Putting your money back to risk in R.E. is not a good idea

    • Erich

      Just like the stock market, real estate is only a (relatively) short term risk. If you are forced to sell in the short term basically. Most people don’t plan on a short time in the real estate market. Since he will be using the Smith Manoeuvre he will end up with a portfolio anyway, and have the mortgage paid off faster. Hopefully before rates climb too much.

      • kev

        I partially agree, but the Smith Manoeuvre is a little “To good to be True.” The banks benefit the most from the concept and U will be no further ahead in long run. I would keep on renting and buy a place in the sun for retirement.

  • Good luck with the condo purchase. This is a first among all the dividend blogs I have been reading… a total liquidation of a portfolio. It’s sounds sacrilegious but I guess you have a plan borrowing from your condo to invest back in the market. Look forward to your updates about this transaction. Thanks for sharing.

  • Aki

    Again commenting on old article.Did you use HBP from RRSP ?

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