Limit any single sector to ~30% of your portfolio.
Why: Concentration magnifies risk, but within a sector (e.g., Canadian banks vs. insurers, or energy producers vs. pipelines), business models can still vary significantly. A 30% cap provides balance without being overly restrictive.
Example: Within Canadian financials, TD, Sun Life, and Brookfield all operate in different niches. A 30% sector cap lets you own them all without overexposure.

Maintain a margin of safety (cash buffer, avoid overleverage).
Why: Unexpected events happen. A buffer keeps you from selling investments at the worst time.
Example: Investors with emergency funds in 2020 avoided selling stocks to cover expenses during lockdown job losses.

Review your portfolio once or twice a year, not daily.
Why: Frequent monitoring leads to emotional decisions and short-term thinking.
Example: Investors checking portfolios daily in March 2020 often sold in fear, while those reviewing annually stayed the course and recovered.

Never invest in a company you don’t understand.
Why: If you can’t explain how it makes money, you can’t judge its future. Investing is about capturing, as best as possible, where the company is going and not where it has been.
Example: Many bought into Nortel in the early 2000s without understanding its business — and lost everything when it collapsed.

Avoid unsustainable payout ratios (over ~70%) or high debt.
Why: High payout ratios and debt reduce flexibility and risk dividend cuts.
Example: In 2015, many oil companies slashed dividends when oil fell — payout ratios were unsustainable.

Don’t chase yield — focus on dividend safety and growth.
Why: Very high yields are usually warning signs, not gifts. Active income investing with covered call ETFs is a different type of investing.
Example: Investors chasing 12% yields in risky income trusts often faced dividend cuts and capital losses.

Sell if dividends are cut or fundamentals break down.
Why: A cut signals management sees trouble ahead. Don’t wait for worse news.
Example: When GE cut its dividend in 2018, the stock dropped further as fundamentals unraveled.

Define your entry: fair valuation, yield, growth prospects.
Why: Buying with discipline avoids overpaying or chasing hype.
Example: Investors who bought Canadian banks at depressed valuations in 2009 enjoyed outsized gains and dividend growth.

Never sell just because a stock price drops.
Why: Price is not the business. Selling on fear often means realizing losses unnecessarily.
Example: Apple dropped nearly 40% in 2012. Those who sold missed its multi-trillion-dollar growth since.

Rebalance periodically, not reactively.
Why: Systematic rebalancing restores balance without emotional timing.
Example: An annual rebalance in 2021 helped investors capture tech gains and shift into undervalued sectors, without panic-trading during volatility.

Keep fees low.
Why: Costs are certain, returns are not. Compounding fees erode wealth over decades.
Example: If you start with $250,000 and earn 8% before fees, a 2% MER leaves you with about $1.44M after 30 years. Switching to a low-cost 0.1% MER boosts that to about $2.45M — more than $1 million extra just by reducing fees.

Use registered accounts (TFSA, RRSP, FHSA) strategically.
Why: Taxes can take more from your returns than market volatility. Smart account use maximizes after-tax wealth.
Example: Holding Canadian dividend stocks in a TFSA makes all income and growth tax-free — forever.

Hold U.S. dividend payers in an RRSP.
Why: This avoids the 15% withholding tax under the Canada-U.S. tax treaty.
Example: A U.S. stock paying 3% yields you 3% in an RRSP, but only ~2.55% in a TFSA after withholding.

Keep Canadian dividend stocks in taxable accounts.
Why: They qualify for the dividend tax credit, making them more efficient than U.S. dividends outside registered accounts.
Example: A $5,000 Canadian dividend could be taxed at a much lower rate than foreign dividends in a non-registered account.