# Any suggestions for TFSA please?



## RedRose (Aug 2, 2011)

I have about 13K in cash sitting there now with the 5500 contribution this year.:confused2:

Thank YOU. :eagerness:


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## My Own Advisor (Sep 24, 2012)

Personally a fan of owning dividend paying stocks (typically found listed in XIU ETF) and CDN REITs (typically found in ZRE and XRE ETFs) in our TFSAs.

I suspect it depends what you're using TFSA for; short-term saving, long-term saving or retirement income account. After you figure out that, get the products to match the plan.


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## marina628 (Dec 14, 2010)

If it were me I would probably split it in USA and International index funds OR Pick up something like ENB ,Telus or one of the banks.


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## LOST (Aug 30, 2010)

What I've done is bought into TA ( Transalta) TSX. If the last ten years mean anything, it will stay around the $8-10 range and provide you with a 8 3/4 quarterly dividend.
This would be tax free and could provide you with some minor capital gains along with it. 2000 shares would provide you with $1750 per/year.


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## Sherlock (Apr 18, 2010)

If you find individual utilities too risky you can go with XUT which is an ETF that holds many good utilities and pays a nice dividend.


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## GoldStone (Mar 6, 2011)

My Own Advisor said:


> I suspect it depends what you're using TFSA for; short-term saving, long-term saving or retirement income account. After you figure out that, get the products to match the plan.


+1



LOST said:


> What I've done is bought into TA ( Transalta) TSX. If the last ten years mean anything, it will stay around the $8-10 range and provide you with a 8 3/4 quarterly dividend.
> This would be tax free and could provide you with some minor capital gains along with it. 2000 shares would provide you with $1750 per/year.


TA earnings don't cover the dividend. They issue new shares to pay the dividend.... year after year. This is "sustainable" for now because most people DRIP the new shares. Those who take their dividends in cash see their share of the company constantly diluted.


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## asdes (Oct 25, 2012)

Just bought some Suncor (SU). Many positives for that company (2% dividend growing fast, seems rightly valued, recently backed by Berkshire) I bought it for the long term.


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## the-royal-mail (Dec 11, 2009)

Just to be clear, the OP is retired right? In that case, preservation of equity is pretty important. Be careful as your original post does not contain any info about your investor profile and the responses may not be considering your situation. Can you afford losses incurred on a short or medium term basis? Do you need your money? How much time can you wait to recover from loss?


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## RedRose (Aug 2, 2011)

Thank YOU ALL.
This is really terrific of you all to contribute to my question.

*Royal Mail,* Yes, I am retired. What does OP mean?

So far I haven't used any of the money earned by dividends as it is all in RRSPs so just rolled back, is that DRIP?

I still have another $350K to invest it is sitting in money market earning only 1.25% if I am lucky.

Is there a way that I can have this site linked to my email to alert me to answers? I only just saw this today.

Thanks again everyone.


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## al42 (Mar 5, 2011)

Original Poster


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## andrewf (Mar 1, 2010)

At the top of the page there is a button called 'thread tools'. Click on it and select subscribe to thread. It will email you any responses you receive here.

RedRose, if you are interested in managing your own retirement portfolio, I suggest rather than getting the random advice you've seen in this thread, you read a book or two. I would suggest the MoneySense Guide to the Perfect Portfolio. It's pretty cheap and you can probably find it at your local library. There's lots of great advice in there, and it helps to clarify your thinking. Getting stock tips on the internet is not a good idea, in my book.

www.rogerspublishingestore.com/prod...ense-guide-to-the-perfect-portfolio/si6436723


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## Video_Frank (Aug 2, 2013)

marina628 said:


> If it were me I would probably split it in USA and International index funds OR Pick up something like ENB ,Telus or one of the banks.


Isn't the foreign tax charged unrecoverable if it's inside a TFSA?


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## My Own Advisor (Sep 24, 2012)

I would avoid using the TFSA for holding US or international products for that reason. Paying any tax defeats the value of a TFSA. 

I prefer to keep the TFSA for CDN content only. I use the RRSP for international content.


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## warp (Sep 4, 2010)

There has been a lot of back and forth on this site about buying US and INTL stocks/etf's in your TFSA.

Like you, I have always hesitated buying these in my TFSA because of the withholding taxes that will happen on dividend payments.

However seberal posters make the point that if want US/INTL exposure. and are in ahigh tax bracket already, it may make sense to buy these in TFSA's and just accept paying the 15% tax...which will presumably be a lot lower than what you would pay in cash accounts.

Using the Foreign tax credits help..but only on foreign tax paid in a cash account...and at high income levels, it seems to be less valuable.


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## warp (Sep 4, 2010)

As well. note that you can buy UK dividend stocks in your TFSA, (as ADR's in New York), and there will be no taxes withheld.

A few quick examples would be Astra-Zenenca ( AZN) , Unilever (UL), Glaxo (GSX),Vodafone (VOD), BHP Biliton (BBL), Ensco (ESV) etc.


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## My Own Advisor (Sep 24, 2012)

Good to know warp, I didn't know specifically about those.


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## HaroldCrump (Jun 10, 2009)

RDS.B is another UK based ADR (Royal Dutch Shell).
Make sure you buy the .B and not the .A (which has a withholding tax).


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## andrewf (Mar 1, 2010)

I think this is somewhat off-topic (though it probably merits another thread).


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## HaroldCrump (Jun 10, 2009)

I'll let the mods decide, but IMO it is worthwhile to point out that unlike regular US-based stocks, it is okay to hold UK based ADRs inside TFSA because there are no withholding taxes.
For those with no (or limited) RRSP room, this opens up nice international diversification possibilities.
Companies like Royal Dutch Shell, Unilever, Vodafone etc. are international giants with business in every continent and every major currency.


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## marina628 (Dec 14, 2010)

So TDB906 ,TDB911 and TDB902 are bad in TFSA?


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## Eclectic12 (Oct 20, 2010)

warp said:


> ... However seberal posters make the point that if want US/INTL exposure. and are in ahigh tax bracket already, it may make sense to buy these in TFSA's and just accept paying the 15% tax...which will presumably be a lot lower than what you would pay in cash accounts.
> 
> Using the Foreign tax credits help..but only on foreign tax paid in a cash account...and at high income levels, it seems to be less valuable.


Using the Ontario 2013 tax tables, at just under $70K income, the non-eligible dividends are taxed at 17.81% compared to the IRS taking 15%. At just over $87K, this jumps to 28.82% on dividends.

http://www.taxtips.ca/taxrates/on.htm

So the question becomes how much of a reduction does the FTC give? 
If it's not working out to effectively the difference between the IRS 15% and what is being charged - then likely one is better off only paying the IRS a flat 15%.


Cheers


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## My Own Advisor (Sep 24, 2012)

Eclectic,

Are you saying the higher the income, the better off someone is in using the TFSA for ADRs? Because the withholding taxes paid (15%) is effectively lower?


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## Eclectic12 (Oct 20, 2010)

marina628 said:


> So TDB906 ,TDB911 and TDB902 are bad in TFSA?


TDB906 lists Apple, Google ... so the IRS will be taking 15% on the dividends.

If your tax rate plus the FTC results in more taxes than 15% - then the TFSA is fine. Otherwise, one is likely better holding this in a cash account.


The other too I'm less familiar with so I'll leave that to others.

Here are some links:
http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/
http://www.moneysense.ca/columns/foreign-withholding-tax-explained
http://canadiancouchpotato.com/2012/09/20/foreign-withholding-tax-which-fund-goes-where/


Cheers


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## Eclectic12 (Oct 20, 2010)

My Own Advisor said:


> Eclectic,
> 
> Are you saying the higher the income, the better off someone is in using the TFSA for ADRs?
> Because the withholding taxes paid (15%) is effectively lower?


I'd add the requirement that the ADR is subject to the IRS 15% withholding tax as I suspect everyone would agree that the UK dividend paying ADRs listed on New York that were mentioned up-thread such as Glaxo (GSX) are better in a TFSA.

But yes ... that is the idea.

Avoiding taxes is good but sometimes one has to look at the bigger picture.

For someone in Ontario for 2013, in a cash account whose taxable income is $85K - in a cash account the tax tips web site says they will pay 23.82% on their dividends, reduced by the FTC. 

The part I haven't fully worked out is how the FTC affects the tax rate but I did find on tax tips:


> The foreign taxes are often not completely recovered by the foreign tax credits.


http://www.taxtips.ca/filing/foreigntaxcredit.htm


Bear in mind as well, particularly for ETFs that hold a lot of stocks - how much is dividend income? 

Given the run up of the US index over the last several years - using hind sight, if the ETF is paying 6% of which is 4% dividends (to randomly pick numbers), is the 15% on the dividend portion much of an issue compared to the capital gains avoided when held in a TFSA?


Cheers


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## RedRose (Aug 2, 2011)

Thank YOU *andrewf* I will continue reading. I do have a subscription to MoneySense Magazine but I didn't know that they had books too.

Thanks for the thread tools feature.

Thank you All again.


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## marina628 (Dec 14, 2010)

My taxable income is $xxx,xxx in 2013 and probably in the $95,000 range moving forward.But my TFSA is stuff with US stocks and so is my husbands ,what to do ....


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## humble_pie (Jun 7, 2009)

My Own Advisor said:


> Eclectic,
> 
> Are you saying the higher the income, the better off someone is in using the TFSA for ADRs? Because the withholding taxes paid (15%) is effectively lower?



advisor it's not like that at all each:

there have been many threads recently about foreign-ADRs-how-they-work.

for a TFSA, one should first distinguish among these foreign tax subsets:

1) plain vanilla US stocks. Their dividends will be subject to 15% NR withheld tax in tfsa. For canadian high income earners whose rrsp are maxed already, this 15% rate is likely less than marginal tax rate. It may not be a perfect halcyon solution, but getting taxed at 15% via tfsa could be better than getting taxed at a higher rate.

2) (a) foreign ADRs that trade in US markets, meaning ADRs consisting of overseas companies. These will normally deliver, not the standard US 15% NR tax, but rather the NR tax that gets withheld by the host country of origin. There are a couple of exceptions in section (2) (b) below.

most foreign ADRs contain host country NR taxes that are not recoverable by any means. Neither in tfsa nor in rrsp nor in non-registered account. The swiss NR rate is 35%, for example; the spanish rate hovers somewhere around 20%; the brazil rate appears to be split, with some or at least one type of security being exempt from withholding tax when it is held by a foreigner but other types of securities having a fairly high brazilian NR tax rate.

(b) two (2) countries stand out among foreign nations in that they do *not* levy NR withholding taxes when securities publicly traded by their leading corporations are held by foreigners. By foreigners i mean us canadians, in the sense that we are foreign to these overseas nations.

the 2 countries with no withholding tax are great britain & reportedly hong kong, although no one in cmf forum has ever done the hong kong research to confirm whether & why this is the case.

among UK securities, there are a number of leading names whose shares are available as US-traded ADRS.

here is a link to a complete list of UK stocks that are already bundled into ADRs & trading in new york. I've posted this link many times; i'm pretty sure this website came from liquidfinance originally (thank you liquid.)

http://topforeignstocks.com/foreign-adrs-list/the-full-list-of-british-adrs/


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## Longwinston (Oct 20, 2013)

So Humble, does that mean I can buy the BP ADR on the NYSE in my TFSA and get 100% of the dividend with no withholding from GB or the US? If so then that is freaking awesome!


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## humble_pie (Jun 7, 2009)

Longwinston said:


> So Humble, does that mean I can buy the BP ADR on the NYSE in my TFSA and get 100% of the dividend with no withholding from GB or the US? If so then that is freaking awesome!



haroldCrump has recently posted a note - it's either upthread or else search his posts via his username - saying that BP has 2 different ADRs that both trade on new york & only one of them has no NR tax that is withheld. 

sorry i don't remember HC's details but in the case of BP it's obviously crucial to know these.

PS it wouldn't surprise me to find out that the BP ADR with zero NR withholding tax commands a slight price premium (would-be investor doing the research would have to find out how BP is bundled in the 2 different ADRs, then compare their prices to the london price of BP in british pounds but convert price to USD ... quite the chore)


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## Longwinston (Oct 20, 2013)

Thanks humble. In thinking about it, I am probably overweight energy so would love to get UL in the TFSA with no withholding if that's a fact. I will have a look. Thanks again


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## Longwinston (Oct 20, 2013)

warp said:


> As well. note that you can buy UK dividend stocks in your TFSA, (as ADR's in New York), and there will be no taxes withheld.
> 
> A few quick examples would be Astra-Zenenca ( AZN) , Unilever (UL), Glaxo (GSX),Vodafone (VOD), BHP Biliton (BBL), Ensco (ESV) etc.


If this is a fact then that is amazing. In essence UK stocks in your TFSA are more desirable than US ones.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> haroldCrump has recently posted a note - it's either upthread or else search his posts via his username - saying that BP has 2 different ADRs that both trade on new york & only one of them has no NR tax that is withheld.


It is actually Royal Dutch Shell, another large integrated energy company.
Tickers are RDS.A and RDS.B.
RDS.A has Dutch withholding taxes, RDS.B does not.
We should buy only RDS.B.

More details here:
http://www.shell.com/global/aboutshell/investor/share-price-information/difference-a-b.html



> PS it wouldn't surprise me to find out that the BP ADR with zero NR withholding tax commands a slight price premium (would-be investor doing the research would have to find out how BP is bundled in the 2 different ADRs, then compare their prices to the london price of BP in british pounds but convert price to USD ... quite the chore)


Yup, the B class share trades at a premium to the A class.


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## humble_pie (Jun 7, 2009)

it's an interesting concept. At one point i started going through the list of UK ADRs in liquidfinance's linked website (link is upthread) to check out what kind of US options each one had. 

i only checked 5 or 6 but they turned out to be outside my criteria - either US option market was too illiquid or else the price of the underlying ADR was already sky-high ... vodaphone for example ... glaxo might be a candidate though & perhaps UL as well ... i'll have to take another look-see ...


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## HaroldCrump (Jun 10, 2009)

Vodafone is only about $39 USD - is that too high?
Isn't it better to have a higher nominal value stock for options trade?
For a given amount of investment, you will pay less commission because you will need to buy/sell less contracts.


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## humble_pie (Jun 7, 2009)

of course one could also buy british stocks in pounds on london exchange & one would not be charged any withholding tax on their dividend or distribution income either!

it's said that the mother country, this sceptre'd isle, this england, learned to behave herself so generously after the American revolution, which was in part a revolt against taxes imposed by london on the colonies. Great britain learned to never again tax her nationals who had permanently departed, or any other nationals who lived elsewhere on the planet.


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## humble_pie (Jun 7, 2009)

HaroldCrump said:


> Vodafone is only about $39 USD - is that too high?
> Isn't it better to have a higher nominal value stock for options trade?
> For a given amount of investment, you will pay less commission because you will need to buy/sell less contracts.


no, one wants a high-beta stock w high volatility - high enough to drive significant premium into the options prices each:

of course, someone like myself doesn't want em too volatile, because i like to short options near the outer edges of the trading bands. One looks for options that are not too sleepy, not too volatile, but just right like goldilocks said.


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## HaroldCrump (Jun 10, 2009)

In case someone doesn't feel like reading the legal mumbo-jumbo on that link above about the Royal Dutch Shell shares - in a nutshell, the dividend source of the class A shares is the Netherlands (hence the withholding), and the dividend source of the class B shares is the UK (hence no withholding).


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## humble_pie (Jun 7, 2009)

HaroldCrump said:


> In case someone doesn't feel like reading the legal mumbo-jumbo on that link above about the Royal Dutch Shell shares - in a nutshell, the dividend source of the class A shares is the Netherlands (hence the withholding), and the dividend source of the class B shares is the UK (hence no withholding).



ah. but to finely split a hair, do u think there might be some sort of withholding imposed by netherlands upon the london-traded shares or at the very least, might there not be some sort of currency conversion FX fee when euro dividends from dutch shares are converted to british pound dividends ...

we've learned all this firsthand - to our sorrow - with the FX fees charged by canadian brokers on various kinds of USD dividends.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> ah. but to finely split a hair, do u think there might be some sort of withholding imposed by netherlands upon the london-traded shares or at the very least, might there not be some sort of currency conversion FX fee when euro dividends from dutch shares are converted to british pound dividends ...


RDS declares its dividends in USD.
Holders of ADR traded on NYSE receive the dividends in USD$.
No conversions by anyone on either side of the Atlantic.

Here is the relevant section from their website:
http://www.shell.com/global/aboutshell/investor/dividend-information/historical-payments/2013.html

Royal Dutch Shell appears to be a rare gem in this mire of FX conversions...



> we've learned all this firsthand - to our sorrow - with the FX fees charged by canadian brokers on various kinds of USD dividends.


Canadians holding this security in any type of CAD$ account (TFSA, RRSP, non reg) will get hit with a USD to CAD FX conversion.
However, from RDS webpage above, it appears that neither EUR nor GBP conversion is involved.

Side note: RDS also has a scrip dividend program.
I am not sure whether Canadian brokerages are able to participate in it or not.
We discovered during the Spanish Telefonica scrip dividend payment sometime in 2012 that some Canadian brokerages were not able to avail of that facility.


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## humble_pie (Jun 7, 2009)

quick look: unilever US options are anemic, not to bother with.

vod options look lively & healthy but look at the stock chart, share price has gone to the moon. To think i turned my back on vod when it was waffling in the high 20s, tch. Because at that time, the outcome of the vod/verizon story was looking iffy.

glaxo options are reasonably liquid imho. I've held these in the past. There are only a couple of US option specialists i imagine. I found them hard to deal with (ie get a good price) since most series/classes in GSK are not that liquid.


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## humble_pie (Jun 7, 2009)

HaroldCrump said:


> RDS declares its dividends in USD ... Royal Dutch Shell appears to be a rare gem in this mire of FX conversions


financially it looks so ... but there's also the politics, the long history of pollution, torture & minor warfare practiced by Shell in the nigerian delta & offshore in nigeria ... the name of ken sarawiwa who was killed for leading opposition to this oilco comes to mind ... his son, who if i recall correctly is a british-trained lawyer, still carrying on the struggle ...


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## HaroldCrump (Jun 10, 2009)

Oh yes of course, those are important investment selection decisions.
Tax efficiency is just one of the factors, and some would say it should only be a minor factor.

Anyone considering any of these UK-based ADR stocks should still due all the required due diligence, fundamental analysis, etc.


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## warp (Sep 4, 2010)

Not to interrupt.

But I would like to ask what companies anyone here would reccommend for purchase in our TFSA accounts right now.

Personally I have too much cash sitting in our TFSA'a ( and earning very little)...and am having a bit of a tough time finding suitable candidates with reasonanble valuations for purchase.

Any ideas?......all are appreciated


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## Video_Frank (Aug 2, 2013)

If you want to hold cash only then open up a People's Trust TFSA. They are offering 3%.

FWIW I hold XBB, XRE and XSB inside my TFSA and RRSP.


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## humble_pie (Jun 7, 2009)

warp i'm totally disrecommending royal dutch petroleum ADRs each:

US options are dismal.

surprisingly, between the US ADRs, the A shares are the volume leader although these are the shares subject to NR withholding tax. Perhaps this is because the A shares are cheaper so americans buy em, although they don't understand that the A shares are subject to withholding tax while the B shares are not?

there are a few other things wrong with the outlook for royal dutch shell, according to reuters this am:

http://finance.yahoo.com/news/insight-deep-shell-problems-weigh-175440747.html


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## My Own Advisor (Sep 24, 2012)

If using TFSA for "retirement" account, long-term account, personally a fan of owning dividend paying stocks (typically found listed in XIU ETF) and CDN REITs.

I'm starting the process to unbundle REITs typically found in ZRE and XRE. I can avoid the fees altogether by owning 4 or 5 of them. I think these are great investments for the TFSA. Actually, my recent blogpost was about that - REITs. 

I got screwed being a landlord, so I don't intend to go back.
http://www.myownadvisor.ca/2014/01/looking-income-dont-want-landlord-try-reits-101/


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## humble_pie (Jun 7, 2009)

also disrecommended in tfsa at this point in time: canadian banks, bombardier, chorus aviation, all US aviation, thermal coal, most REITS, dollar store chains, 3-D printers, microcap pharmas trialling new drugs.

still early days: dry bulk shipping, coking coal, gold miners, crowd-sourced tekkie 3-D printers.


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## newtothegame (Jan 2, 2014)

Blackberry?










Just kidding! Usually drinking and driving the self directed brokerage account ends poorly, but once in a while you get lucky!


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## the-royal-mail (Dec 11, 2009)

^ Sell now! :tongue-new:


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## newtothegame (Jan 2, 2014)

the-royal-mail said:


> ^ Sell now! :tongue-new:


Buy & Hold!:glee:


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## LOST (Aug 30, 2010)

I personally would hold something with low beta that pays a good growing dividend. I would also drip the dividend. Some stocks will give you a discount up to 10% when repurchasing via drip method.
I have personally followed this method for nice double digit returns in the last 3-5 years.


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## andrewf (Mar 1, 2010)

To be fair, you didn't have to do anything fancy to get a double digit return over the past 3 - 5 years, other than be invested.


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## avrex (Nov 14, 2010)

LOST said:


> Some stocks will give you a discount up to 10% when repurchasing via drip method.


Really? 

Please name _'some stocks'_.


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## liquidfinance (Jan 28, 2011)

humble_pie said:


> of course one could also buy british stocks in pounds on london exchange & one would not be charged any withholding tax on their dividend or distribution income either!
> 
> it's said that the mother country, this sceptre'd isle, this england, learned to behave herself so generously after the American revolution, which was in part a revolt against taxes imposed by london on the colonies. Great britain learned to never again tax her nationals who had permanently departed, or any other nationals who lived elsewhere on the planet.



Humble. 

This would only be true if you could buy on the LSE inside a registered account whilst holding GBP. If there is a broker out there who will do that then please let me know. 

I'm considering IB for non registered but otherwise ADR's seem to be the only cost effective solution for UK stocks.


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