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Wednesday, January 10, 2018

Investing - 2017 Results

Quick update on my passive investment activity.
This all happens in my TFSA account (Canadian equivalent to a ROTH IRA in the US).
In the previous update, reflecting 2016 results, the performance of this account was a solid +24.53%. Article here for more details.

In 2017 the Canadian TSX index was not remotely as strong as in 2016, but it stilled grew +6.03%: from 15,287.59 to 16,209.13 points. The Canadian market by far under-performed the American market in 2017. It has been looking more attractive in terms of valuations for a while, but this hasn't been reflected in performance so far.

Because I am not a Canadian Permanent Resident anymore, I don't get to accumulate contribution room in the TFSA every year. I can only collect dividends, and buy/sell instruments with the money that is already in there. So, it will be interesting to see how this account will look in a decade of pure growth and no capital injections.

Here are the results:

2017 Starting Balance: $38,309.07
2017 Ending Balance: $41,357.40 

Account growth: +7.96%

For almost zero effort and monitoring, this is a decent result.

Here's the portfolio at the end of the year (2017)

Dividends collected: $1,414.70

Changes in the Portfolio:

- Closed RioCan REIT position (REI.UN.TO). Three years of the stock doing nothing and the dividend frozen. It was time to move on.

- Closed position in Potash Corp of Saskatchewan (POT.TO). Also tired of waiting and massive dividend cut. Although I didn't immediately exit after the dividend cut, which is usually the extreme down move and the bottom. I held it for a little longer until price recovered somewhat.

- Initiated position in Allied Properties Real Estate Investment Trust (AP.UN.TO)

 - Initiated position in Canadian Real Estate Investment Trust (REF.UN.TO). I would have liked CapREIT (CAR.UN.TO) but found it permanently expensive.

- Added a second telecom to the portfolio (BCE.TO)

- With the dividends collected, added a little capital to existing positions in Enbridge and TD. The latter being now my largest holding in the account.

- I also held the XIU.TO Etf from May to October as I didn't find attractive opportunities and preferred to not have cash sitting idle. This is why you see a couple of XIU dividend payments.

Going Forward:

I received a gracious letter from the CRA (IRS equivalent) in December saying that I had over-contributed to my TFSA account. According to the letter, I wasn't entitled to the last $5,500 dollars of contribution room corresponding to the year 2015, when I left Canada. The letter also communicated a nice penalty of around 1.5 grand, as a result of this "over contribution" and its permanence in the account, which was subject to "penalty interests" for thirty something months. I wonder how much bigger the penalty would have gotten had I been told ten years later instead of three.

I moved to the US on March 31st, 2015. When a year begins, it is always said that you automatically have $5,500 of new contribution room in your TFSA. In addition, the CRA website itself was reflecting my contribution room with the new $5,500 added to it when I left the country and had filed my taxes and everything. Right after I landed in the US, I transferred the funds from my bank in Canada to the broker, all through the Internet. Well, well, well,........after a few headaches and conversations with CRA officials, I learned that had I made the contributions a few hours earlier (before boarding the plane), none of this would have happened. I find it totally absurd, that just a few hours of difference caused all this problem and that my being physically present or not would have made my transfer to the broker illegal, even when the website of the tax authority itself was showing me that I had available contribution room. I mention this, in case a Canadian reader is thinking about moving to the US. Make sure you utilize that contribution room right before physically leaving the country.

Long story short, I must liquidate $5,500 and take it out of the TFSA account to comply, plus, of course, pay the penalties. The penalties are recoverable applying for Tax Payer Relief (Form RC 4288). It is not a guarantee, but it is a possibility due to "CRA errors" (showing I had contribution room available) and "CRA delays" (taking almost three years to inform me, and calculate penalties based on all those months, which was not my fault I wasn't told earlier). So, we'll see. 

Consequently, 2018 started off with me liquidating the ENB.TO, AP.UN.TO and REF.UN.TO positions and moving $5,500 out of the account. This will be reflected in this year's (2018) results in the future.

Investing brought me the best results in 2016. That was not the case in 2017, where Options trading (+20.27%) excelled. Still, the account grew nicely, spitting out a little river of dividends every month without doing much at all. Just being lazy.

Thanks for reading!

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Investing - 2016 Results

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