📅 Hey it’s me: This article was written in 2013, back when passive investing was just starting to go mainstream in Canada. Since then, ETF options have exploded, MERs have dropped, and bank profits have soared. The idea of buying and holding dividend-paying Canadian banks? Still rock solid. Only now, it’s even easier to automate it with modern DRIPs and online brokerages.
About 7 years ago I wrote about Advice: Listen to a Comedian Sometimes, where I pointed out that you get financial advice in some very interesting places.
The exact quote that inspired my investing idea was:
I don‘t remember the comedian, but I remember someone saying (maybe it was a financial advisor, I mix them up with comedians a lot ), that said, you would do better to buy stock in Banks than it would to put your money in them.
Since that post, I have altered my investing methodology and gone with a mostly passive investing methodology, where I mostly own Index Funds and have introduced a few ETFs as well. I have however held onto the bank stocks that I bought back then, mostly because they keep:
- Appreciating year over year value
- Creating very nice dividends, which are now part of a DRiP set up with TD Waterhouse
Investing Compromises
I guess my investment method is a hybrid with both Passive and Active parts, however, given I don't plan on selling the Bank stock that I have (i.e. following the old buy and hold investing idea, which is one of the tenets of passive investing) I still think I am a Passive Investor.
Red flags newbies miss:
- Buying bank stock and forgetting about it isn’t a strategy if you’re also carrying credit card debt at 19.99%.
- DRIPs are great but they work best when fees are zero. Some brokerages (still) charge per transaction.
- Passive investing doesn't mean ignore forever set it, but check in annually.
📚 Resources:
TL:DR Passive?
I've seen every investing fad roll through town: crypto waves, stock-picking bros, and meme stonks. Most of it is and was crap. What works, year after year? Buying reliable assets, holding them, and letting dividends quietly snowball while you live your life.
Canadian bank stocks have long been boring, consistent winners. Add in a DRIP and low-fee ETFs and you’ve got a dead-simple portfolio that outperforms most “hot tip” nonsense. People overcomplicate investing because they think it should feel hard. It doesn’t have to. It just has to work.
FAQ
It’s a long-term strategy where you invest in broad-market index funds or ETFs, rather than picking individual stocks or trying to time the market.
Kind of. If you buy and hold blue-chip Canadian bank stocks for years and reinvest the dividends, you're following the spirit of passive investing even if technically it's stock-picking.
DRIP allows you to automatically reinvest dividends from a stock into more shares of that same stock, growing your investment over time without additional contributions.
Financial Advice of a Comedian may be right in the cases of big banks but not for all. There are some big banks which is giving good dividend to their share holder year by year. On the other hand some banks are survival to run successfully so this financial tip does not work with all banks.
Banks make waaaaaay too much money. No wonder they can keep increasing their dividends year after year
I am going to put more money in to bank stocks this year. I also have a Drip with TD but mine is held in my TFSA.
I have some money in Shoppers Drug Mart that may shrivel to nothing but I can count on my bank stocks. More bank stocks in my future once I get my debt under control. Transfering money to an investment account is much more satisfying than paying debt but I can’t do one until I take care of the other.
Actually that is a great idea, to buy some bank stocks in my TFSA, just need to find some extra money to do it with!