# ﻿Would like your help to make selling decision



## PuckiTwo (Oct 26, 2011)

Our Background: retired, no new monthly income except for small CPP/OAS pension and dividends/distributions from our portfolio. 

We think we are overweight in Pipelines and REITS. We haven’t rebalanced them up to now because they give us good income but would like to cut them back in order to raise some cash to diversify if/when the market goes further down.

1. With the REITS (AP, AX, REI) we are probably not so much off as they reflect 10% of the total portfolio which according to some earlier CMF threads would be appropriate.

However, if we add in our investment property we actually have 18% RE of total portfolio - and are afraid that with the Reits we will lose capital when interest rates rise and wonder if we should push back to maybe 10-13%? 
And if so, would you reduce equally across the board? AX and REI are roughly equally weighted, AP is 10% more. Or would you reduce one more than the other? Or would you not sell at all?

2. Pipelines - ENB, IPL, PPL, KEY, TRP reflect approx. 22% of portfolio. PLUS: if we add to that the other Oil&Gas holdings (ARX, BTE, CPG, BP, VSN) the whole sector would reflect 28% of our portfolio. We would really like to reduce that but we don’t know where to start and how much. 
IPL, PPL, ENB, KEY, ARX are the largest positions, followed by ARX and CPG. BP, BTE and VSN are only very small positions which we rather would like to built up eventually.
Should we simply reduce/get rid of the ones which give us the lowest income or how would we approach that?

Other problem we would have: if we sell any of the REITS/Oil&Gas/Pipelines we will be prone to some substantial capital gains tax as they were all bought late 2008/early 2009.

Some suggestions would be very much appreciated.


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## Just a Guy (Mar 27, 2012)

Not sure what your tax bracket is, or if the securities are jointly owned...but, capital gains are only taxed on 50%.

So, if we say that, in canada, we don't pay taxes on the first 20-25k of income, you should be able to sell about 100k of gains (over your purchase price) on which 50% is not taxed. From that 50k, if you each claim only 25k in income, you should get about 100k+ your purchase price nearly tax free...


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## PuckiTwo (Oct 26, 2011)

Thks, J a G. Unfortunately, we are not so lucky. Realized already some capital gains earlier in the year. Also, in this case, the securities are not in a joint acct. So, we know that we are in for paying CG tax if we sell.
Remains the question, if we cut back, what do we cut back. My spouse thinks Riocan because in a downturn shopping malls will be less frequented. But Riocan’s portfolio looked pretty good, assuming that Walmart and Canadian Tire will stand up when things go down. 

With the pipelines I really don’t have a clue and would like get some advice from the forum


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## lonewolf (Jun 12, 2012)

PuckiTwo Congrats on buying low near bottom in 09 & if you get out now near the top you will have done amazing, Job well done. For most the rally of the 09 low is going to be a suckers rally. I use GICs from the Manitoba on line credit unions for most of my income. Unlike the banks most of the time there is @ least one of the credit unions that offers interest that is paid monthly. Bonds are in a bubble so it is better to hold off on putting some money into annuities for income till interest rates rise


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## Synergy (Mar 18, 2013)

REITs and Pipelines are interest sensitive so re-balancing your portfolio at this time may not be a bad idea. Even if they end up soaring to new highs, at least you have some peace of mind knowing that your portfolio is properly diversified.


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## Pluto (Sep 12, 2013)

This is interesting. To me it sounds like you are doing really well without any advice. They all seem like really good companies, and since you bought at a very opportune time, the odds of any capital loss is remote. But if I read you correctly, you want to lock in some profits out of concern that current paper profits may melt away. You don't have any dog to get rid of, so why not just sell a little of each?


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## PuckiTwo (Oct 26, 2011)

Thanks to Everyone!



Pluto said:


> ...... To me it sounds like you are doing really well without any advice. They all seem like really good companies.....





lonewolf said:


> ...Congrats on buying low near bottom in 09 & if you get out now near the top you will have done amazing, Job well done. .....


﻿I cannot take any credit for it. Only role I played in 2008 that I got scared, sold a fair amount of securities, fired the advisor, hired a new one who rebuilt the portfolio in 2008/2009. Sheer luck. Sometimes I feel like somebody gave me a truck and I don't know how to drive it. 



lonewolf said:


> I use GICs from the Manitoba on line credit unions for most of my income.


 that's probably what we have to resort to but it also means that we lose more than half of our income on the replacements. 



Synergy said:


> REITs and Pipelines are interest sensitive so re-balancing your portfolio at this time may not be a bad idea. Even if they end up soaring to new highs, at least you have some peace of mind knowing that your portfolio is properly diversified.


 Thks for the re-assurance/advice. That would suit us. Capital preservation and income are our main concerns.[/QUOTE]



Pluto said:


> 1. .........But if I read you correctly, you want to lock in some profits out of concern that current paper profits may melt away.
> 2. You don't have any dog to get rid of, so why not just sell a little of each?


1. absolutely correct
2. I have presently approx. $5000 worth of dog-material - not in REITS or Energy, small positions. Some of the REAL dogs were in the TFSAs (courtesy of the last advisor). The real dogs were already sold in the last two years. 

However, what I gather from all three of you is that selling wouldn't be wrong and I tend to Pluto's suggestion, to cut the top off of each.

Question is how much? Should the REITs be cut back from presently 18% to 10 or even more to 5?
And where I am with the pipelines and other energy? What is reasonable? It's at present 28% of portfolio. Should it be rather 20 or 15?

Thanks for the advice. Pucki


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## Pluto (Sep 12, 2013)

Only you know your situation well, so it is hard to say what the % should be. Since you are happy with your last advisor, I'm inclined to say to keep the same original % allocation that was set up in 2009. Keep in mind, that as a rule, get rid of the dogs first, and pair back the quality ones last. (as to the tax issue, you might be able to hang in until next year to do your rebalance.)


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## My Own Advisor (Sep 24, 2012)

Maybe trim some winners a bit but I wouldn't do too much of a haircut.

Many of these companies pay not only steady dividends but tend to increase them as well.

Anyway you can take the income from the stocks, and redeploy the cash into new companies outside of these sectors?


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## PuckiTwo (Oct 26, 2011)

Thks again. 
*Pluto:* that makes sense. In regards to the allocation we should have some consumer stuff (PG, NSRGY), some Medical (JNJ- too expensive, Astrazeneca, Novartis, Roche), for Industrials maybe GE or Siemens, Daimler. The original allocation didn't include such sectors and was all-Canadian, so I am working slowly on it. Sat there all year looking at the prices, found them always too high and then they climbed even higher. :stupid:
*MOA*: we can't take income from stocks and redeploy it - we have to live from it Need to eat and have to have some fun too. Except in the RRSPs which are relatively small, we accumulate cash and need to re-invest it. Which of course means preferrably no nice Canadian dividend-paying stocks. 

In regards to the percentages of cut back: As all of you not screaming "sell Riocan, sell Riocan, sell REITS" I assume that I am somewhat ok there.

Thanks to everybody for all your advice - I am a big step further than I was before I posted this thread.


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## blin10 (Jun 27, 2011)

problem is, let's say you sell, what are you going to buy with that money? everything seems pretty high at these levels


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## PuckiTwo (Oct 26, 2011)

blin10 said:


> problem is, let's say you sell, what are you going to buy with that money? everything seems pretty high at these levels


As suggested and discussed in the thread, I would probably look for a 1-yr GIC, a high paying HISA such as Peoples Trust, keep it basically as cash. The stocks I am interested in I have mentioned in post 10. Some European blue chips are not too bad, there is thought that Europe still has a lot of upside (haha......but the EU economy could have also a lot of downside. Merkel vs. Draghi). I am really split in what I want to do. Pull it all and put it under the mattress (mine has more space than Humble's Kano?? bed) or wait if we get a further pull back.

Edit: also waiting that MCD goes further down. Sold KO but would add to MO depending on what happens with their SabMiller involvement.


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## humble_pie (Jun 7, 2009)

Pucki i feel very cautious replying to you because i remember you from the beginning & now you have done so extremely well as a self-directed investor, which is what i'd always expected!

i think you could, because of the retirement status, lower some exposure in pipelines, then a little in REITs. I'd probably sell less than you might wish to sell (ie don't sweat the zoroastrian forecasting.)

i'd tend to conserve the energy common stocks because they've already taken a big hit, they are a volatile group but a core canada group, which fact you knew going in. If i were transitioning to a more conservative portfolio with a more income-oriented tilt, as suitable for many retired investors, i would not be adding to energy common stocks at present, though. Despite the fact that some of their prices are beginning to look tempting.

here is a technique to reduce, or rather to smooth out, capital gains taxes. Alas it requires to be worked at year by year by year, so sudden sales with big gains will be taxed albeit at the beneficial capital gains tax rate, which means that only 50% of actual gains will then be subject to a taxpayer's marginal tax rate.

the technique i'll propose will mostly benefit your heirs, who might otherwise face a massive estate capital gains tax bill. What one does is sell a few shares of a highly-appreciated company every single year. One then immediately re-buys said shares, there is no 30-day wait period when gains are involved. If one manages one's pair trade correctly, one will be able to do this on a downswing, ie sell 200-300 shares while price eases or drops, then re-buy at a lower level that will offset the small commissions involved.

this manoeuvre will boost the cost base while never adding huge capital gains to an investor's taxable income in any one tax year. It does have to be practiced every year, though, a little at a time.


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## PuckiTwo (Oct 26, 2011)

humble_pie;3893211. said:


> 1. i think you could, because of the retirement status, lower some exposure in pipelines, then a little in REITs. I'd probably sell less than you might wish to sell (ie don't sweat the zoroastrian forecasting.)
> i'd tend to conserve the energy common stocks because they've already taken a big hit, they are a volatile group but a core canada group, which fact you knew going in. If i were transitioning to a more conservative portfolio with a more income-oriented tilt, as suitable for many retired investors, i would not be adding to energy common stocks at present, though. Despite the fact that some of their prices are beginning to look tempting.
> 
> 2. ....the technique i'll propose will mostly benefit your heirs, who might otherwise face a massive estate capital gains tax bill. What one does is sell a few shares of a highly-appreciated company every single year. One then immediately re-buys said shares, there is no 30-day wait period when gains are involved. If one manages one's pair trade correctly, one will be able to do this on a downswing, ie sell 200-300 shares while price eases or drops, then re-buy at a lower level that will offset the small commissions involved. this manoeuvre will boost the cost base while never adding huge capital gains to an investor's taxable income in any one tax year. It does have to be practiced every year, though, a little at a time.


1. HP, thks - yr comments are great re-assurance. I have now a much better idea what to do.
2. I have seen you mention this before but forgot. Great strategy. 
Much better than what I did a few weeks ago. Sold some REI from non-registered and bought immediately back in TFSA. Of course, the damned stock went down ever since. Should have waited buying it back. Hate to see those minus-signs in front of the figures. Have to remind myself every time I look at it that it had a nice profit when I sold it. Again, thks. Pookh.


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## HaroldCrump (Jun 10, 2009)

PuckiTwo said:


> Sold some REI from non-registered and bought immediately back in TFSA. Of course, the damned stock went down ever since. Should have waited buying it back. Hate to see those minus-signs in front of the figures.


In this case, you can do an in-kind transfer.
You will be on the hook for the capital gains in either case, but you will save the round trip commissions (i.e. sell in non reg. and buy in TFSA).
You can also pick the high or low of the day as your transfer price for the deemed disposition.


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## Beaver101 (Nov 14, 2011)

HaroldCrump said:


> In this case, you can do *an in-kind transfer*.
> You will be on the hook for the capital gains in either case, but you will save the round trip commissions (i.e.* sell in non reg. and buy in TFSA*).
> You can also pick the high or low of the day as your transfer price for the deemed disposition.


 ... isn't this considered a swap also - which isn't allowed anymore (at least technically at BMOIL)?


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## humble_pie (Jun 7, 2009)

HaroldCrump said:


> In this case, you can do an in-kind transfer



however if all contribs to TFSA have already been maxed, then an in-kind transfer is not allowed (as the beaver says, swapping is no longer permitted)

maxed parties wishing to contribute in kind have to wait for the next contribution date opportunity je pense


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## HaroldCrump (Jun 10, 2009)

Beaver101 said:


> ... isn't this considered a swap also - which isn't allowed anymore (at least technically at BMOIL)?


No, this is not a swap.
This is an in-kind contribution, which is still allowed.
For it to be a _swap_, something that has come out of the registered account (TFSA or RRSP).
Nothing is coming out in this case.

Of course, as humble_pie mentions, this has to stay within the contribution limits of TFSA/RRSP.
If you have no room available, but have free cash inside the TFSA, then this cannot be done.


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## PuckiTwo (Oct 26, 2011)

Thks for all the fantastic advice you guys and gals are churning out. CMF at its best. *Harold* thank you. In my Riocan case it's too late because it was done a few weeks ago. (by the way, I still had contribution room). Hope that my age-shrivelling brain will keep all the advice somewhere so that it pops up when do the next transactions. :biggrin:.


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## humble_pie (Jun 7, 2009)

PuckiTwo said:


> (by the way, I still had contribution room [in the TFSA])



pucki may i post a PS ...

you've mentioned that migrating to more HISA/GIC ladder type investments will reduce income for yourself & spouse, while at the same time bringing about the desirable feature of increased security.

everyone is in the same boat. So far, so good. One way to cope is to reduce expenditures. I'm pretty sure that, with respect to a resourceful person like yourself, this is fairly easy done.

believe it or not, i'm actually getting to your TFSA, so if you're still reading here thank you so much for your patience.

a painless way to cut some costs is to max the TFSAs for both yourself & your spouse. As in ASAP, PDQ, max all right now. Long term, this could/should reduce income taxes payable.

recently cmf member Siwash has been telling us about people's trust, it seems they have perpetually had a 3% interest offer for TFSA accounts. Might you consider sending your spare cash to a new TFSA that you'd open at people's? since you are planning to do the HISA hike anyhow?

however please do find out people's transfer-out policy first. Do they charge fees for transferring a HISA out to another institution?

even if they do have transfer-out fees, this doesn't make them a non-candidate. There are ways of closing & moving TFSAs without paying transfer fees. More later if necessary, as do not want to write a book at the mo.

PPS perhaps also start getting ready the $20k in contributions to 2 TFSAs next january, if those 10k rumours are correct


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