A few weeks earlier, I asked you what you thought I should do with the $3500 I had put into my Tax Free Trading Account with Questrade.
I was deliberating between buying some BMO bank stocks (I currently only own 45 shares) or adding more HSE Husky Energy (I recently bought 100 shares). My TFSA portfolio included about 10% in ETFs and the rest of the portfolio was dividend producing stocks. Needless to say, the allure of dividend investing really attracts me.
However, this quickly changed when I realized that I hadn’t balanced my ETF portfolio for the year. When I looked at the pie chart of my portfolio, I saw that the ETFs were a teeny tiny portion of my entire portfolio. I’m a visual person and seeing this helped me realize that I needed to incorporate more ETFs.
Also, looking back at my investing journal, I had sold an entire ETF from my lazy couch potato portfolio (it was recommended by Money Sense) which included 25% proportions in each XDV, CYH, CPD, and XTR. When I read my investing notes, it seems like I sold XTR in 2010 to get enough capital to buy some dividend stocks. At the time, I probably told myself that I would just buy them back… but it seems like I never did.
So being the good ETF investor that I am, I bought more shares of XDV, more shares of CYH, more shares of CPD, and I bought shares of XTR to make sure that everything was balanced (about $1000 in each). This took up $2000 of the $3500 I had allocated to my Tax Free Trading Account this year.
Now, my ETF portion of my portfolio takes up more of a respectable proportion. Although it’s so tempting to add to my positions in the dividend stocks (that means more dividend payments weeee), I realized that most of these stocks were already taking up room in 10-15% of my portfolio. That’s a lot!
The great thing about these ETFs is that they pay out a monthly dividend as well. The downside is that there is an MER with ETFs (though not much). I think the peace of mind of a diversified basket of stocks within that ETF is well worth the small price tag of the MER. Stocks are volatile and although they’re enticing and alluring, a prudent investor should make sure they have a good proportion of both.
I left the $1500 in my account so that in case “Sell in May and Go Away” fulfills itself in the summer, I will still have some cash to use in case there’s a dividend stock sale going on or if I was tempted to average down. This is the probably the first time that I’ve been disciplined enough to leave cash in the account and not buy immediately for the sake of buying because I have money to invest.
I know, I know. I’m learning!
Readers, which ETFs are you a fan of? Would you have gone the dividend route or the ETF route if you were me?