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Tuesday, January 10, 2012

Feel like getting a capital gain booster? Go with Agrium Inc. (AGU)

My non-registered portfolio is at a very good 116 821.84$, my TFSA is at 4 203.75$. The stock part of my RRSP is at 20 737.97$. Everything is performing well. When the stock market is on the high, everything goes. And when the stock market is on the high, the only thing I want to do is to invest more. And... guess what, tomorrow at midnight is... pay night! Fun, but I have a problem: I have a 7k RRSP contribution that I want to do before Mach of this year. 7k is a massive amount. This is a 7k investment that I won’t be able to enjoy freely inside a non-registered account. Does it really worth it?

I don’t like the idea of investing 7k inside my RRSP account, but on the other hand, I need a tax break. In 2011, I really didn’t work that much in term of monetary work. Strangely, 2011 has been the year of all the fantasies. I boost my dividend income as well as my debt level, I trade, trade trade. In silver, in blue chips etc. etc. etc. In other words, in 2011, it was the F off attitude and I trade and I never stop. It was truly a fascinating year, of all of the extravagances, the year of 31 years of F life. lol.

I feel almost sad to invest 7k in my RRSP. That’s a 7k that will be detach of me forever. I won’t be able to withdraw it (I could, but I will face enormous penalties if I do). I could use all the money on a house but welcome trouble in 10 years from now when the money needs to return in. Like F-F-F. :)

And this problem is being even worst: in where to invest the money that will sleep in for more than 30 years?!!

RRSP? Definitively boring and depressing.

But, I find a product to invest 2 500$ and best of all, I can contribute by using my American Express credit card. I find that one in Derek Foster latest book The Worried Boomer: No Pension? Not wealthy? Here’s your plan! Simply go at the page 103. There’s you go, now you know in which product I will be investing 2 500$ of my own money. I have a close to 700$ contribution coming from my employer. That’s cool, but I still have a 3 800$ to go. I don’t know if you agree, but 3 800$ is quite of an amount. I think I simply put the money in my TD Waterhouse account and invest in conservative stuff. I want the RRSP money to be there when I need it. I will probably be living until 80 years and up, maybe more, maybe less but chances are I will be living until at least my seventies... See, that’s exactly why I don’t like RRSP because it makes me think about the future and I really don’t like that. Not at all.

BMO Bank of Montreal is showing off once again sign of little intelligence. BMO Bank of Montreal (BMO) upgrades Agrium (AGU). I knew from the start that Agrium is ABSOLETELY HUGE. This girl knows the stuff for sure right. BMO Bank of Montreal is a little late on its update. Me the Dividend Girl, I invested in Agrium Inc. (AGU) on December 14, 2011, when AGU stocks were at 67.13$. AGU closed today session at 75.16$. This make a direct and very real profit of 8.03$ per STOCK on a very short period of time. BMO Bank of Montreal has just waked up now. Wow. I am not impress.

I am a genius or almost. That you like it or not, there’s some stuff like that who will just never never change.

Of course, it’s not all of the multiple stocks I hold in my portfolio that are performing that well but remember, I am still a genius, focus on the overage, not on a one and single stock situation. Or it could kill you.

Tomorrow, we’ll discuss why my investment portfolio is X-LARGE and why I decided to invest in many multiple companies instead of having a portfolio of 5-10 companies. We’ll see all that tomorrow so stay tune ok.

And by just thinking now, investing 7k for my RRSP by March 2012 is going to be quite of a challenge. 


Ruth said...

HI Sunny , if i may be so bold to ask what do you do for a living? Also , i know how you feel about RSP's as i used to feel that way too. I also would like to ask you just how many stocks do you have and how about adding to your Agrium if you find it so profitable.

Sunny said...

Hi Ruth,

It's ok to ask but I won't tell what I do for a living as its top secret.

I have more than 30 stocks in my portfolio, not to include the ones that are from the mutual funds I hold.

The trick is not too invest that much on the same company.

There's many great opportunities on the Canadian stock market and it would be too bad to focus on the same thing over and over again.

Fact is, never invest again on the same company. AGU is doing well now, but something could eventually happen and AGU could drop. This is true with any other stocks.

It's to protect myself from that something that I over-diversify in different sectors and different companies.

The stock market is the most rewarding and the most at risk place to invest your money. You need to be aware of that and the only way to protect yourself while investing in stock is to over-diversify and be X-LARGE.

There's no other way.

Never invest in a company because at the present time the company is doing well. That well status could changed.. Absolutely everything can happen.

Need to always be prepare for the worst.

Anonymous said...

PAY DOWN YOUR MARGIN before putting it in your rsp. The market could fall 50% AT ANY TIME like in 2008 !!!!!!

Anonymous said...

Overly diversied is not good.

Anonymous said...

The benefits of diversifying are nearly maximized once you have around 12 different stocks from a variety of sectors. The difference in variance from holding about a dozen stocks and holding every stock on the entire exchange is negligible. Going from a portfolio of 12 stocks to a portfolio of 50 stocks doesn't have any significant diversification benefits.

Anonymous said...

It would make sense to invest in AGU if it went up that high right now.

That being said you bought at a lower price and the share price increased a lot.

Anonymous said...


"I find a product to invest 2 500$ and best of all, I can contribute by using my credit card. I find that one in Derek Foster latest book The Worried Boomer: No Pension? Not wealthy? Here’s your plan! Simply go at the page 103. There’s you go, now you know in which product I will be investing 2 500$ of my own money."

So rather than just include it in your article I have to go to the library, to the book store and then most probably order the book just to figure out what the hell you invested in?

Reading your post is 5 mins of my life I will never get back. It won't happen again.

High on Dividends said...

BS. you need 40-50 stocks to properly diversify. If one goes bankrupt or severely cuts div, u only lose 2% of your portfolio.

SPBrunner said...

If I was starting to invest now, I would put my maximum in a TFSA before contributing to my RRSP. The problem you have when you stop working and have large amounts in RRSP accounts, is that you really feel the taxes you have to pay.

Sunny said...

Thanks for commenting Susan! Very good advice.

Anonymous said...

RRSP makes sense if you're in a very high tax bracket and you will be in a much lower tax bracket at retirement. If not, all you're doing is delaying paying the taxes. And the tax rate will probably be higher in 30 years from now. So if you save 35% in tax today and have to pay 37% later on your original amount plus gains, you're no further ahead.

I agree you should grow money in your TFSA first. Another option is to take your tax refund from your RRSP investment and invest it in your TFSA.

If you invest in an RRSP, you should invest in safer stocks or bonds and keep riskier stocks in your non registered account so you have the ability to deduct a loss on your income tax when it happens (EX. TIM).

The accountant

Anonymous said...

High On Dividends: You are sorely mistaken if you think you need 40+ stocks to properly diversify. The variance of a portfolio of 12 diverse stocks and 50 diverse stocks is almost exactly the same. You can learn this in an introductory Finance class and demonstrate it mathematically.

Anonymous said...

Sorry, but I don't see how you can properly diversify with 12 stocks. You like to hold a few small cap stocks, and than invest in various sectors in Canada, US and Internationally. Imagine going into 2008 with only BAC as your US bank or Nortel as your Canadian tech.
The accountant

High on Dividends said...

anonymous: The reson u r anonymous is because you flunked finance101. I am putting my money where my mouth is. My portfolio of 60 blue chips from US, UK, and Canada is up 13% for 2011'including dividends.

How much is yours? Don't lie!

The accountant and I have the same philosophy, and it is the correct strategy to make money.

When 1 of your 12 stocks tank, you lose 8%, while I lose less than 2. Who wins? Me!

If this is what they taught u, you must have gone to a bad community college. I have a degree in Statistics (Masters) from a Canadian University, so do not spout nonsensical theoretical BS.

I see your prof teaching, while I in the real world am making money. Those who can't do what they say end up teaching.

Yes, your strategy may work on an unlimited trial size approaching infinity, but if u lose 8% on the first roll, u will never catch up. U can twist stats any way u want, and still be wrong!

High on Dividends said...

Hey Anonymous who is talking about 12 stocks.

You are way off, and have no clue about what you speak.

Statistically you may be correct, IF and only IF, you had an unlimited sample size. ie. if you threw the dice unlimited times, and the odds averaged out.

Look at it this way, say you are guaranteed to win $100K within 10 games, but you have to pay $10,000 each time you play. You only have $30K in your pocket, not unlimited funds. The odds are against you that you will get the $100K before you have to stop playing, since you ran out of cash. The same analogy applies here.

In the real world, if you drop 16% on 2 stocks while I drop 3% on the same 2 stocks, you lose, and will not catch up. That is p<0.05 that you would. Why? Because if you start down, you will not recover. A 50% drop requires a 100% gain, but you already know that.

This is not theory, this is real life using real money. Quite a different strategy applies, which is also very consistent with statistical analysis. The odds are against you playing with a small sample size. (ie. 12 stocks).

A similare analogy from biology. Everyone knows that a small population (e.g. Galapagos tortoises) has a very hard time recovering with a few individuals. Some may be too old (bad stocks), some sterile, and others die (dead companies). A sample pool, once too small, goes to extinction, just like your stock holdings.

Do you know that many of the dividend aristocrats from 20 years ago no longer exist? If you held those 12 darling blue chips on the aristocrat index and held on, you would not have much left. If you held a bunch more, you would have averaged to a great profit.

You are also assuming that you can stock cherry pick the 12 that will not become extinct. I say you can not do it. You are not that good, because none of the pros that do this for a business are that good (or arrogant).

And, you are insulting Warren Buffet, Bill Gates, and almost every mutual fund and ETF manager out there who holds more than 12 stocks in their portfolio by stating what you stated.

Do you think you are a smarter investor than them? How many stocks does Buffet hold? I will give you a clue. More than 12 (you only see top holdings for most funds on disclosures published on the net).

If you could pick 12, and retire rich, everyone would be doing it.

You either read this BS somewhere on the internet, your stats prof did not explain it to you correctly, or you are just making it up. If not, prove what you are saying is true. Otherwise I am calling BS.

Most funds hold somewhere 40-60 stocks/bonds/debentures.

The Accountant nailed it. He always does, and is a HUGE asset to this blog and people who take advice from it.

Hope this puts an end to this nonsense.

High on Dividends

Anonymous said...

High on Divs: You sound like you understand basic statistics but have never studied finance. Here's a quote from Buffett since you brought him up: "Wide diversification is only required when investors do not understand what they are doing." Buffett's preferred level of stock holdings is between 10 and 12 stocks.

I don't know if I can post links here, so just google "diversification of unsystematic risk." More than 90% of the maximum possible benefits of diversification are obtained from an equally weighted portfolio of 12-18 stocks. Adding additional stocks beyond that point has virtually no impact on unsystematic risk.

Systematic risk on the other hand cannot be diversified by any number of holdings. Diversifying unsystematic risk is the best you can do, and it can be very nearly maximized with less than 20 holdings. This is the basis of the entire Capital Asset Pricing Model (CAPM).

Anonymous said...

(sorry I posted that in the wrong thread)

Anonymous said...

Berkshire hathaway holds shares in about 15 publicly traded companies.It also wholely owns about 78 private companies. Warren buffet obviously believes in investing in more than 12 different companies.You read him wrong. BTW I own BRK.B for over 10 years, its a dog. Sold and bought CNR and it pays a dividend too.

High on Dividends said...

Buffet normally holds about 25 public companies ( as of 2010), and tons of private companies.

I think the 15 u mentioned are just his top holdings.....

I understand finance just fine, thank you. Anonymous, you are correct to say "wide diversification is only require when you ....", but I would suggest to you that neither u or I know what we are doing. If we did, we would not be here blogging, but enjoying the same success as Buffet.

THAT is the reason we need to diversify. Very few are smart or lucky enou to win with 12 stocks. You are no exception. Neither am I. That is the sore realityn of stats AND finance.

Spouting this nonsense endangers financially naive readers into a false sense of security, and under-diversification.

Stop it!

High on Dividends said...

Sunny please move my reply to this, also posted IN THE WRONG THREAD.

High on Dividends said...

I see Buffet now has 33 stocks in his portfolio....

Explain yourself please Anonymous with the 12 stock portfolio. You are spouting mis-truths again.

Anonymous said...

BRK.B holds 33 companies. Grant you the top 10 holdings makes up the majority of his portfolio. But this is Warren Buffet and the exception. In 1998, Coke which is the top holding at 85$, today it's trading at 67$. In the mean time, Pepsi which was trading at 41$ is trading at 64$. Now I don't know when he bought Coke, but if I would want to buy today with both being reasonably priced, I would like to split the risk and buy both.

I would have hated to hold 10% in a stock like Leehman or Bank of America in 2007 which back then where considered pretty safe investments. Bank of America was the biggest bank in the US and a core holding for most.

Also, Buffet lives in the US the biggest market in the world, while we live in Canada a very small market. We like to add Canadian companies to take advantage of tax advantage on dividends, but we can't take such large position in our companies as we don't have companies considered leaders throughout the world. The closest I can find for leaders are Nortel, Rim and maybe Manulife. And we all know what happened to those 3 companies.

Diversification comes in many level, you can hold 40 small cap and although diversified you still have a high level of risk vs if you would hold 20 of the largest companies in the world. If you want to hold some small cap for their upside potential, you would hold more, but if you want to stick to the biggest companies in the world, you probably don't need 40, but I would at least want between 24 and 30 for 70% of my portfolio and the remaining 30% in bonds. For me, I have even more holdings because I also use some low cost mutual funds for international exposure and my RRSP are low cost balanced funds. My non registered account and TFSA are my stocks picks. And the main reason for that is like High on Dividend mentioned, I'm not Warren Buffet and don't have his resources or his knowledge. Also as your portfolio grows, that's a lot of money and if I do make mistake, I don't want to screw up my savings. I don't believe in shooting for the star as you're more likely shooting yourself in the foot.

The accountant

Anonymous said...

I wouldn't want be Warren Buffet for all the money in the world. He doesn't have much time left. If he took all his private companies and made them public, he would have shares in more than 100 companies.

Anonymous said...

See a more detail list of warren Buffett's holdings from annual reports


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