Investing

Trading idea- Based on Graham (TSX)

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  • Oct 17th, 2020 9:33 pm
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[OP]
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Dec 14, 2010
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threadhead wrote: This may not be the correct forum to ask this question, but I'll give it a go anyway.

I have a large unused capital loss to consume, so among other strategies for drawing it down I'm looking for securities that have a larger proportion of their distribution assigned as return of capital rather than taxable dividends. I expect most will likely be REITs, but not necessarily all, and I don't want to overlook anything -- not to mention that some diversification would be welcome.

I could try a brute force approach and hunt down and examine all the potential candidates one by one, but I was wondering if someone else had already been through a similar exercise, or knew of any shortcuts that might be helpful for constructing a working list
I think you need to start a new thread if your goal is to find quality stocks with high ROC. REITs and income trusts have the highest ROC.

I’m assuming that finding growth stocks so that their capital gains in the future can offset with your capital loss is not an option? And that it’s not worth it to apply your current capital loss to offset taxable capital gains in the previous 3 years?

I’m trying to understand the logic on ROC. A ROC is not taxable unless it exceeds the original investment. Wouldn’t be better to find ways to recover what was lost? Or are you after income only? Probably a discussion for a separate thread.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
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Jan 23, 2018
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Coruscant
rodbarc wrote: I think you need to start a new thread if your goal is to find quality stocks with high ROC. REITs and income trusts have the highest ROC.

I’m assuming that finding growth stocks so that their capital gains in the future can offset with your capital loss is not an option? And that it’s not worth it to apply your current capital loss to offset taxable capital gains in the previous 3 years?

I’m trying to understand the logic on ROC. A ROC is not taxable unless it exceeds the original investment. Wouldn’t be better to find ways to recover what was lost? Or are you after income only? Probably a discussion for a separate thread.

Rod
Thanks for replying. Good idea to create a new thread, nothing to lose.

Since you took the time to contemplate an answer, let me give you the courtesy of a reply before I get off your thread.

Re: growing my way out of it, at my age I'm somewhat averse to taking the long term approach as a first course of action if I can conjure up a shorter term strategy, and with less risk. Easy for me to say, however.

Re: carrying the loss back, that's not an option for me.

Re: why go for ROC, you pretty much guessed it -- I'm very focused on income. Ergo, acquiring positions in ROC-heavy distributors to consume the tax loss seemed like a "kill 2 birds with one stone" approach.

Thanks again for your thoughts, you've got a great thread here. I will now go back to lurking

EDITED to add link to new thread posting -- dividend-payors-return-capital-roc-comp ... #p32952449
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Feb 25, 2018
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Would you recommend buying into your model now, or do think a correcting is coming?
[OP]
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Dec 14, 2010
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DaveVentura wrote: Would you recommend buying into your model now, or do think a correcting is coming?
Impossible to say. The model uses an earnings timer to stay in or out of equities, and right now, there’s nothing suggesting that it will change, it’s fully invested.

Starting now will mimic the model performance. You can be fully invested from the start and mimic the posted performance on day one, at the risk of exposure to short term corrections. Or you can do a dollar-cost-average approach, deploying 25% of funds now, and adding another 25% whenever the model or the market drops 10% or 15% or after 3 months went by, which ever happens first. This way, you are either buying when it dips or you are adding as time goes by, in a consistent manner, but at cost of not being fully invested on day one.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
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Aug 26, 2004
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Toronto
Jim Simons a mathematician whose Renaissance Technologies fund has averaged phenomenal returns over the long term by relying on models. Jim in his interviews often will stress not to go against the model by adding any discretion. Assuming this was backtested to 2008 and 2001 you should have an idea on the drawdown if there is a correction. Jim himself as successful as he was was often tempted to use discretion and regretted it everytime or was appreciative when someone at his firm talked him out of it.
rodbarc wrote: Impossible to say. The model uses an earnings timer to stay in or out of equities, and right now, there’s nothing suggesting that it will change, it’s fully invested.

Starting now will mimic the model performance. You can be fully invested from the start and mimic the posted performance on day one, at the risk of exposure to short term corrections. Or you can do a dollar-cost-average approach, deploying 25% of funds now, and adding another 25% whenever the model or the market drops 10% or 15% or after 3 months went by, which ever happens first. This way, you are either buying when it dips or you are adding as time goes by, in a consistent manner, but at cost of not being fully invested on day one.


Rod
[OP]
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Dec 14, 2010
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September 13, 2020 signal:

Sell: WPK, SJ, CGY, RPI.UN, HDI, RCH, SIS, KL

The market timer based on earnings plummet below the threshold, so the model is 100% in cash. The objective of this trading model is to minimize risk based on the earnings timer, so if earnings guidance is declining across the board, it's has shown to be prudent staying in the sidelines until guidance improves. This doesn't mean that the market will plummet for sure, in 2016 it continued higher. But since the goal is to reduce risk, the model stays on the sidelines until guidance for the companies in the index to improve beyond the determined threshold. Even if the market continues higher, the model is exiting at all time high locking a nice 37% profit for the year so far, while TSX is down around 2%. It will be back into equities once the market timing on earnings threshold signals another entry. I'll keep posting weekly signals, as calculation is done weekly.

If one doesn't want to hold cash, one can hold CSAV ETF, although the signal might be short lived, so take into account fees / commissions if choosing this route (CSAV pays so little nowadays, not sure if it's worth it).


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Newbie
May 5, 2007
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Wow. I was actually looking to hop in and try this out this week after the rebalance. I guess it's a good time since it's now 100% in cash and I can follow the exact allocations on the next buy signal.

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