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investor clinic

I have been following your model Yield Hog Dividend Growth Portfolio for a few years, but only now do I have the money to invest. I am considering some of the stocks in your portfolio such as Enbridge Inc. (ENB), BCE Inc. (BCE), Telus Corp. (T), Fortis Inc. (FTS) and Emera Inc. (EMA). However, they are all trading at or near all-time highs. Should I be waiting for a better entry point to invest in these stocks?

The problem with “waiting for a better entry point” is that it might never come. If the stocks you’re watching continue to rise, you’ll have to pay more for them, not less. What’s more, while you’re waiting for prices to decline, you’ll miss out on the attractive dividends these companies pay.

The fact that a stock is trading at or near a record high does not, in and of itself, tell you anything about where the price is heading next. Yet many investors tie themselves into knots because their biggest fear is that they will buy right before a pullback and “lose money” on paper.

But would that really be such a big deal? If you have a long investing horizon – which you should if you are considering stocks – a short-term drop in a stock price should matter little to you. Your goal as an investor should be to identify solid companies with growing revenues, earnings and dividends that will reward you over the long run – say five years or more. As the old saying goes, it’s time in the market, not market timing, that builds wealth.

So, instead of trying to pick your entry points perfectly – which nobody can do consistently – I suggest you focus on building a well-diversified portfolio, keeping your costs low and reinvesting your dividends to make the most of compounding. These are things you can control. As an alternative to owning individual stocks, you may wish to consider index exchange-traded funds. ETFs will give you instant diversification and help to limit the regret and anxiety that some investors experience when an individual company they own falls in price.

In a recent column, you said that when shares have dropped in value and they are transferred to a tax-free savings account, the investor cannot claim a loss for tax purposes. What about a situation where stocks that have gained in value are transferred to a TFSA? Will capital gains taxes be avoided in such situations?

No. Capital gains taxes still apply when you transfer a winning stock from a non-registered account to a TFSA (or any other registered account). The CRA considers this a deemed disposition, and the tax treatment is the same as if you had sold the shares.

This might strike some investors as unfair. After all, if you transfer losing shares to a registered account the capital loss is denied for tax purposes. Similarly, if you sell a losing stock and you – or a person affiliated with you such as a spouse or a corporation controlled by you or your spouse – repurchase the same stock within 30 days (before or after the sale date) it is considered a “superficial loss” and cannot be used for tax purposes.

Unfortunately, the rules are different for capital gains.

As a blog post on explains: “If you sell shares and realize a capital gain, but immediately repurchase the shares, can you call this a ‘superficial gain’ and defer the capital gain? The answer is no: you cannot defer the capital gain and there is no such thing as a ‘superficial gain.’ The capital gain is taxable immediately in the current tax year, even if the shares are repurchased within 30 days.”

I am about to come into a fairly large sum of money, a portion of which I plan to donate to charity. To donate in the most tax efficient way possible, I’m thinking of donating shares I already own that have a substantial capital gain. Can I immediately buy more shares of the same company or do I have to wait 30 days?

When you donate listed securities that have appreciated in value, you win in three ways. First, you get the satisfaction from helping a good cause. Second, you avoid capital gains tax. Third, you receive a charitable donation receipt for the market value of the securities. The only loser is the Canada Revenue Agency, which gets less tax revenue.

After you donate your securities, you are free to repurchase shares of the same company. There is no need to wait 30 days. The 30-day waiting period only applies if you are selling shares for a capital loss and want to repurchase them without violating the superficial loss rule.

E-mail your questions to I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.

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