Starting a pp - sell everything before starting?

[metta2006]

Hi,

I'm trying to start a pp. I have about 10% invested in stocks. The stocks I bought last summer somewhat recovered although they are still in red, but with dividends, I'm almost even. Is it better to sell them slight loss and start a pp by buying each asset 25% each at once or DCA over 10months also. Or should I keep whatever I have, and buy the lagging assets to bring all up to 25% each? Sorry for my repeated questions. I have asked this question before but at that time I wasn't willing to sell the stocks at a loss. The stock indexes I have are Canadian covered call bank ETF with high dividends and preferred shares (also high dividend) and one broad market index. Without dividends, I would be seriously in red.
Why dividend stock ETFs are not recommended by PP? In Canada, we have dividend tax credit, which is great for taxable accounts. Thanks so much!

[MediumTex]

I would just try to migrate into the PP allocation as quickly as you are comfortable doing it.

I wouldn't necessarily "sell everything" to start with, but just ease into the allocation as you are able to.

Of course, you could just sell all non-PP assets and jump right in, but you need to go at a speed you are comfortable with.

[metta2006]

What's your opnion on dividend stocks? Are they acceptable in pp?

[MediumTex]

What's your opnion on dividend stocks? Are they acceptable in pp?

No. 

First, you shouldn't be buying individual stocks in the PP. 

Second, you don't get enough volatility out of dividend stocks as a class for PP purposes.

[metta2006]

If dividends are counted, dividend stock ETFs oftern perform better in prosperity, not only there is dividend tax credit. And in bad times, they don't go down as much. So why is it bad? I have a hard time understanding it. I wouldn't use prefered shares ETF for a stock portion in pp as it is really not volatile enough. But CDZ and XDV (Canadian dividend stocks) performed way better than XIU last year not even including dividend. 

[Gosso]

Why dividend stock ETFs are not recommended by PP? In Canada, we have dividend tax credit, which is great for taxable accounts. Thanks so much!

The dividend tax credit in Canada is a great deal.  However, I have noticed that in general Canadian dividend paying stocks are usually over-priced, since everyone wants that tax break, especially if you are in the lower income bracket.  So really the market has already priced this in to the valuation of the stock.  Plus you would have very poor diversification since the high dividend stocks are almost all financial companies.  If you look at XDV, over 50% of the companies are financial, and you are paying 0.50% MER instead of 0.25% for XIC.  Also with with all this talk of a housing collapse in Canada, I would feel very uncomfortable with over 50% of my stocks in the financial industry.

[metta2006]

Gusso, are you still not tempted to buy CDZ or REITs ETF? I do feel so strongly I need to construct a variable pp consisting CDZ and REITs. XIC has been so terrible. I feel that I would be more diversified holding these along with XIC as it seems to lower volatility while giving me higher return.

[Gosso]

Gusso, are you still not tempted to buy CDZ or REITs ETF? I do feel so strongly I need to construct a variable pp consisting CDZ and REITs. XIC has been so terrible. I feel that I would be more diversified holding these along with XIC as it seems to lower volatility while giving me higher return.

The beauty of the vp is that you can put whatever you want in there.  Just realize that this is money you can afford to lose.

If you really want to hold cdz and reits then go nuts.  If it also helps you sleep at night, then that's another reason to do it.  Personally I think it's a bad move (the reason are listed in previous post).  It is possible that I'm being too negative regarding the Canadian housing market, and it will continue to grow to the moon, but i doubt it.