Reviewing history, the Big 5 Canadian banks actually don’t have a high short interest, except for CIBC. The Big 5 Canadian banks are some of the most profitable businesses on the Toronto Stock Exchange.
For long-term investors who are looking for stable dividends and stable growth, it does not make sense to sell your stakes in the banks, unless you have a huge allocation, own a large stake in CIBC, or are worried about the health of the housing market in Canada. You’ve got to hold the stock to get the dividends!
We believe there’s a higher probability of slower growth or stagnant growth in the housing market than a meltdown.
Should You Sell Your Big Canadian Bank Shares?
Should you sell your bank shares? The short answer is “no” unless you own CIBC stock and are worried about the health of the housing market. Royal Bank has the least short interest, which indicates investors are finding it to be the safest bank perhaps because the bank is the leader and largest among the Big 5 and also has a focus on high net worth clients.
Here’s a longer answer to the question. Ultimately, investors should answer these questions for themselves and then make a decision on whether to buy/hold/sell accordingly:
Why did you buy the big banks in the first place? What’s your goal?
What’s your allocation in the Canadian banks or each bank?
Thousands of investors found the following articles useful last week; you might, too! In these articles, I talked about what I learned from the financial crisis of 2008 and how it applies to the current market downturn, tips for new investors, and what not to do in a falling market.
Top Article: What I Learned From the Financial Crisis of 2008
Investors who experienced the financial crisis of 2008 would remember the scary experience. For example, the Big Five Canadian banks fell 50% from the 2008 highs to the 2009 lows.
I bought shares of Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) after it fell about 24% from its 2008 high. Yet, it went on to fall another 30%. To learn how I reacted, what lessons I learned, and how I applied the experience to the current market downturn, read more at What I Learned From the Financial Crisis of 2008.
Top Article #2: Tips for Smart Investing
Investing is not exactly easy, but it doesn’t have to be complex either. New investors can start by buying only quality, dividend stocks when the market is down. That way, you’re not paying too much for companies; lower prices also gets you a higher income to start. How?
Just in October, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) cost as much as $102 per share and yielded only 4.4%. Today, after the pullback, it only costs under $88 per share and yields almost 5.3%. Immediate income boost!