My adventures in the Canadian Stock Market

   I guess I should start with a bit of background about how I became interested in the stock market...

   In the Spring of 2012, I was having lunch with some friends, one of whom was a retired railroader. He mentioned that CP Rail had an employee stock purchase plan whereby the company would match the amount of company stock he purchased. If he bought 10 shares, CP would match them and give him 10 shares. Talk about a sweet deal, and he'd instantly double his money. There were probably restrictions involved concerning how long he had to wait before he could sell the "free" shares. He had been buying CP shares for years and apparently has a healthy dividend showing up every 3 months.

   So, being completely stock market stupid, I asked ...don't you have to worry about the stock price and be watching it all the time? He said something like... nope, I don't care what the stock price is... the prices go up, they go down, who cares?... dividends are paid x number of cents per share and aren't tied to the stock price... my dividends keep rolling in. No sweat.

   I couldn't believe it was that easy - talk about an eye-opening bit of info from the real world. No need to pour over funny looking charts, study stock histories, read tea leaves or consult a Ouija board.

   Note: I found out later that dividends don't always get paid. Exchange Traded Funds (ETF) can follow slightly different rules. If the Net Asset Value (NAV) of the ETF, which is typically the combined share price of its Common (aka Class A) and Preferred shares, drops below a specified value ($15 in the ETF's that I know of) then their dividend payments may be temporarily suspended. Dividend payments for common shares may also be suspended if a company experiences decreased revenue or profits (as happened during the summer of 2020).

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   A few months later I decided to look deeper into this beast called the Stock Market.

   I started off by checking out the websites of a few so-called "experts". Most of them seemed to want/need to have followers gushing over everything they said and would go on and on about their "special tricks or methods" or the contents of their finely-tuned portfolios (neither of which they would divulge). All to keep their fans mesmerized by their special abilities. Their websites usually had affiliate links, advertising, promoted paid services or books/subscriptions for sale. It took me about 4 months to figure out my own way of doing things and ignoring most of the so-called experts.

   Some advisory sites run by these experts suggested it was better to spread your stock purchase across several buy orders. For example, instead of buying 2000 shares of ABC in a single transaction, they'd claim it was better to buy 200 shares per day over a 10-day period. The theory behind this strategy is the stock price will bounce around, and you'll get in at an average price. The big problem with this idea is that is doesn't take into account trading fees and the fees were $29.99 per trade way back in 2012 at TD. TD eventually dropped their trading fees to $9.99.

   I noticed Canadian banks were paying a reasonable dividend, and they probably aren't going away anytime soon. Like everyone else I knew at the time, my investments were handled through a bank and held mutual funds that the bank offered. By buying bank stocks instead, I could get a good return and avoid the bank's investment management fees. In addition, I'd get a tax break since the dividend income was coming from a Canadian stock. Note: The tax break only applies to unregistered accounts.

   Did you know that GIC's offered by the bank may have a slightly lower return than the same GIC's offered by the bank's investment division? A customer rep with TD Investing (then known as TD Waterhouse) told me that TD Bank "buys" their GIC products from TD Investing, "resells" them to the bank's retail customers at a slightly lower rate and keeps the difference.

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Here's what I've been doing...

• Use a stock screener (usually included with your brokerage acct) to produce a list of possible stocks.
• Then do some research (how long have they been in business, have they paid their dividends regularly over a long period of time, are they profitable, etc).
• Depending on the company, dividends will be paid either monthly or quarterly. I prefer stocks that pay dividends on a monthly basis since it evens out my cashflow. *NOTE* Not all companies pay dividends.
• Start buying (buy enough shares so your first dividend payment is greater than your trading fee).
• I usually don't buy a stock if it's near its 52 week high. After all, it probably has nowhere to go but down.
• Ignore market tips by the experts. By the time you and I hear about something good it's already too late.
• DON'T bother trying to "time" the market!
• DON'T panic! When Covid arrived in 2020 the value of my portfolio dropped by 40% and many companies temporarily suspended or reduced their dividend payments. I didn't sell anything and the market recovered by year-end. It's good to keep some cash on hand, that way you won't be forced to sell in a down market.
• Speaking of Covid and the Summer of 2020... I had a few stocks which continued to pay full dividends while others were cutting back. When looking for new stocks to buy I now check if dividends were paid during that period.
• Use limit orders! Limit orders give you control over how much you'll pay or receive. I got caught a few times by sudden price changes before I discovered limit orders.
• I usually avoid stocks that have a relatively low daily average trading volume. You may have difficulty getting your asking price when you try to sell them.
• Try to buy/sell stocks in full (or half) lots. A "lot" is 100 shares.
• I don't subscribe to any DRIP plans. With a DRIP you receive a mixture of dividends and stock instead of 100% dividends. The stock is normally offered at a slightly discounted price and there usually aren't any trading fees involved. I'd rather have the cash to do with as I want.
• I've been sticking with Canadian stocks because of the tax benefits on eligible dividends from Canadian companies. EY (formerly Ernst & Young) have current Canadian Tax Rate Tables and tax calculators. You might find it interesting to see how low the tax rates are on eligible Canadian dividends.
• Speaking of taxes... did you know you can hold stocks in your TFSA/RIF/RRSP accounts? Canadian stocks held in those accounts are exempt from capital gains and losses. Dividends (& cap gains) received in a TSFA aren't taxed, while dividends (& cap gains) received in a RIF/RRSP will be taxed as regular income when funds are withdrawn from those accounts.
• Speaking of taxes (again)... you need to keep detailed records of all your trades if you're trading in a non-registered (cash) account. At tax time you'll need to know the capital gains (or losses) for each stock held during the year as well as each stocks Return of Capital (RoC). Not all stocks are affected by RoC and a RoC summary is usually produced in Feb or Mar by your brokerage firm. All this info is used to calculate the Adjusted Cost Base (ACB) for each stock. Don't worry, it's not as scary as it seems at first glance. A spreadsheet is a good way to keep track of RoC and ACB.
• Speaking of taxes (last time, I promise)... I only hold stocks from Canadian companies and I don't know what the tax implications are when holding foreign investments.
• I don't use a margin account. From what I've seen you can easily run into problems if don't keep a close eye on how the market is behaving. Besides, I'd rather be outside enjoying the great outdoors instead of stuck indoors sitting in front of a screen or worried about a possible margin call.
• I spent some time looking into options and decided against it. You need to have a deep understanding of the market to be any good at options trading and as I've mentioned elsewhere, I'd rather relax and be doing other things.

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   By keeping things simple, I've been able to get a very good return every year since 2013 (except in 2020 when Covid showed up and my dividend payments temporarily dropped by about 30%). I'm more of a "buy & hold" investor rather than a frequent trader and only do about 50 trades per year.

   You don't need a brokerage account to start exploring. TMX Money and Yahoo Finance are both free services and good starting points to begin learning about the world of stock "stuff". TMX Money also offers a free stock screener and Adjusted Cost Base.ca have a free ACB calculator and Capital Gains tracker. Investopedia is a good site for financial terms and their definitions, but keep in mind that it's US-based.

   TMX Money also has several Top Ranked Stock Lists which are updated daily. Their Top Dividends list might give you a good starting point. A couple of things to keep in mind with these lists are that they don't take into account whether the company is making any money or not and if the dividend looks too good to be true, it probably is. That's why I prefer to use a stock screener where I can specify my own parameters.

   CBC's Go Public had an interesting story a few years ago about the difference between an Advisor and an Adviser. It turns out there's a huge difference between spelling it with an "o" vs an "e".

   Get Smarter About Money's site has a lot of good information, and it's managed by the Investor Office of the Ontario Securities Commission (OSC) which means it's Canadian based. Their Investors and Tax page has a summary outlining the amount of tax you pay on your investments depending on the type of investments you hold, and the type of account they are held in.

   Have you heard of CNBC's Jim Cramer? Here's a video of his from 2013 where he explains how the Stock Market can be manipulated. The video gets pulled down and reposted every once in a while, so you may need to search for it.

   Gizmodo published a short video on Dec 17/22 about online financial influencers. Eight Financial Influencers Indicted in Massive Pump and Dump Scheme.

   MoneyTalk/DIY is Canadian and has a lot of useful information for new investors. Such as:
   • How I learned to love metrics. What's in a number? A lot it turns out.
   • The curious investor: How to research stocks. Where do investing ideas come from?
   • Why do earnings per share matter? Earnings per share can be useful to help evaluate the performance of publicly traded companies.

   Investing.com has all the usual financial stock info, plus historical high/low & closing prices are available based on several time frames (daily, weekly or monthly). It's the only website I've found that offers historical information in an easy to read format. (Dec 31/22)

   Advisor's Edge has an interesting article titled "How inflation affects OAS timing". It's surprising how much of difference it can make if you postpone your OAS start date. (Jan 30/23)

   Be wary of articles written by "experts" that are recommending specific companies. This recent article from BNN set off warning bells for me. This financial expert is recommending a couple of companies. According to the disclaimer at the bottom... "He, his family members do not own any of the stocks mentioned above, however his firm and investment banking clients hold all three". That type of disclaimer sets off warning bells for me. (Feb 8/23)

   This isn't market related, but I found it interesting. I've met a few people who pay off their credit card purchases within a day or two of making any purchases. The idea is that paying off their purchases quickly will help improve their credit rating. According to a blog written by a former Equifax employee, that practice apparently has no effect on their credit rating because their month end credit card balance will always be zero. What they should be doing is leaving the charges on their credit card until a statement is produced, then pay off the account balance in full before the payment due date. (Jun 24/23)

   I mentioned earlier that I only hold stocks from Canadian companies due to potential foreign tax implications. I recently remembered that the IRS (US) treats Canadian RSP's/RIF's the same way as the CRA does and wondered about holding US stocks in a Canadian RSP/RIF. A few weeks ago I bought some US stocks in my CAD RIF and as expected (hoped?) the dividends showed up without any US withholding taxes being deducted. The only drawback, as far as I know, to buying US stocks in a CAD account is the CAD/USD conversion penalty. As near as I can figure, the bank adjusts the exchange rate by about $.02 (in their favour). I'm not worried about the penalty because I'm not planning to trade these stocks, just collect the dividends. (Dec 3/23)

   BNN Bloomberg had an interesting article today about regulating financial "advisors". You may want to read this related story from CBC about "Advisor" vs "Adviser" and the big difference between spelling it with an"o" vs an "e". (Jan 26/24)

   Another interesting investigation by CBC's Marketplace. Their people were equipped with hidden cameras, visited several banks and spoke to current and former bank employees. I wasn't surprised by what they uncovered. (Mar 17/24)

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   I can't believe I forgot to mention this little nugget of tax information until now. Everyone's familiar with assigning a beneficiary to your bank accounts, right? Did you know there's a successor option available in some cases? Do you know the difference between beneficiary and successor when it comes to bank and investment accounts? I came across the successor designation a while ago and someone at a local TD branch told me they meant the same thing (they aren't).
   Here's a very simple example of the differences between the two:
   ∗ If person A and person B are married, are beneficiary's to each others accounts and A dies:
      • A's non-registered accounts are transferred to B.
      • A's TFSA is cashed in and the funds transferred to B.
      • A's RRSP's/RRIF's are cashed in and the proceeds are taxable. Person B gets whatever funds are left over after taxes are taken into account.
   ∗ If person A and person B are married, are successor's to each others accounts and A dies:
      • A's non-registered accounts are transferred to B.
      • A's TFSA is transferred intact into B's TFSA.
      • A's RRSP's/RRIF's are transferred intact to B's RRSP/RRIF and are not subject to income tax at that time.
      • No probate fees.
   TD has a detailed video available explaining the differences between the two designations. (Sep 27/24)

   Dividend History maintains a comprehensive list of Canadian dividends, payout calendars, announcements and stock information. Their main site also includes US traded stocks. (Jan 3/25)

   Did you know you could contribute to a RIF? Normally, you will contribute to your RRSP, then at some point convert the RRSP to a RIF and be told that once it's a RIF you can no longer contribute to it. I converted my RRSP's to RIF's as soon as I could because the cash withdrawal fees when pulling money out of my RRSP were nuts, while there aren't any withdrawal fees when withdrawing from a RIF. Here's the "trick": open a new RRSP, make your contribution(s) then at a later date convert that RRSP into a RIF and have the funds moved into your existing RIF. The only downside to using a RIF is that a specified minimum amount must be withdrawn each year and could be subject to income tax. (Jan 10/25)

   I mentioned earlier that I'm more of a "buy & hold" investor. Here's an example of why this method is working for me. In Dec '23, I bought shares of 3 stocks for $17,366 and as of Dec 31/24 they were only worth $12,334. Some people might get nervous about the $5,032 loss, be tempted to sell and cut their losses. But in 2024, those investments returned $10,328 in dividends and their current dividends are about $1,000/month. If you think those returns are imaginary, you should have a look at YieldMax's website. (Jan 12/25)

   It's Wednesday Jan 29/25 and the Clown In Charge (Trump) is continuing to rant about penalizing Canada (and Mexico) with 25% tariffs being imposed as of Saturday Feb 1st. At this point I'm thinking about selling everything just in case the world goes for a shit like it did when covid arrived. I started selling on the 30th (Thursday) with plans to be finished by 4pm on Friday. Things were going as planned until the markets started tanking at 3pm on Friday. The asshole (Trump) announced his tariff plans at 3pm on Friday instead of waiting until Saturday as he said he would do. No one in their right mind (oh yeah, we're talking about Trump) makes a major announcement like that while the stock markets are open. I'm hoping the markets will bounce back a little bit on Monday after the initial panic dissipates and I'll finish selling my remaining stocks.
   At the moment I'm thinking of staying in a cash-only position for at least 3 months and buying back in once things settle down. I know I'll miss out on dividends while I'm out of the market, but with any luck I'll be able to get back in at lower prices.
   It's Thursday Feb 6/25 and here's what ended up happening. I cancelled my remaining sell orders on Friday afternoon and started buying back on Monday morning. Everything was "on sale" on Monday, the markets did recover and I ended up with a pretty good bonus. I think I did almost a year's worth of trades over the past few days, not something I'd want to repeat anytime soon.

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   Here's something I've been playing around with... It's a way to use your unregistered account along with your TFSA to reduce your taxable income without reducing your overall income. I've been using this method for a while, and it seems to be working. Note: It only works under a specific set of conditions, when your monthly earned and/or other income is less than your monthly expenses, and you have enough dividend income from your Cash and TFSA accounts to cover the shortfall. As was my situation when there were cut-backs at work due to Covid and an eventual lay-off.

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   Why is the page here? Some friends were curious about the stock market and knew I had been dabbling in it for a while. It was easier to create this page instead of explaining things many times, plus I'd usually forget to mention something during the conversation. The other big advantage to having it all written down is I can provide links to relevant websites and update them as needed.


   Whew... what started out as a simple summary just keeps getting bigger....


  Have fun...

  I am not an investment or tax professional and I'm not responsible for the content of external webpages. The information in this document is not intended to be educational, nor does it constitute financial or tax advice. It is simply an outline of my personal experience, investing philosophy and things I've learned along the way. Please let me know if something needs to be corrected - thanks.