Quote:
Originally Posted by Bill Bumface
Don't you think it's pretty dangerous to advise new investors to go completely into one sector in one geography? Sure, they have been stable for decades, but that means nothing and seems risk as hell to me.
I think the most important party of risk management is to be geographically and sector diverse.
Canada represents such a small portion of the world markets, it is home bias to have the majority of your portfolio invested in Canadian companies.
We've seen banking blow up elsewhere. There are no guarantees that doesn't happen here.
|
I was going to say that it sounds like a great plan to buy a bank and DRIP for decades. The returns are great and it's easy. Psychologically though, whole other story. First, it's the FOMO. You have a bank and it's not doing anything this year while someone else is making a killing in ABC sector. If that doesn't shake you, how about a 2008-09 financial crisis where people are convinced the world is collapsing. Dividends get cut, the share prices plummet and governments have to plow liquidity in to keep the system from completely freezing. Still holding? It's easy to say in early 2020 because 2019 was a dream, but it's possible. I am lukewarm on the banks though. I look at Toronto and Vancouver real estate and that combined with the rising debt levels of fellow Canadians makes me a little concerned for the banks. Everything is fine, as long as people are working and paying the bills, but things change.