Diversifying out of energy - timing the exit

[ExtraSlow]

Timing the market is a fools errand, but I've decided to greatly reduce my exposure to energy stocks. Been thinking that the day WTI passes $60 I'd just sell it all and put it into my diversified fund and stop worrying.

Of course, that $60 is kind of an arbitrary number. And many energy stocks lag the oil futures market by weeks months or quarters.

Most of my holdings are inside an RRSP and its my plan to keep them inside.

So, what say you oh wise investors of beyond?

[RealJimmyJames]

Yep get out at the bottom lol.

[Gestalt]

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Timing the market is a fools errand, but I've decided to greatly reduce my exposure to energy stocks. Been thinking that the day WTI passes $60 I'd just sell it all and put it into my diversified fund and stop worrying.

Of course, that $60 is kind of an arbitrary number. And many energy stocks lag the oil futures market by weeks months or quarters.

Most of my holdings are inside an RRSP and its my plan to keep them inside.

So, what say you oh wise investors of beyond?

I would split it up, some ethical, but real eastate is great if you don't have any.

[killramos]

I think on a cash flow basis energy is still somewhere I am comfortable with my money. Don’t try to time the market.

[max_boost]

Marijuana cuz you know you wanna!

HMMJ - ETF
Aurora - ACB
Aphria - APH
Canopy - WEED

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Yep get out at the bottom lol.

True story of so many people I know!

Also agreed, time in the market, not timing the market. If it dips, buy more! haha

Index investing FTW

[ExtraSlow]

Well, I wasn't looking for what to get into, I've got that covered with a couple diversified funds. Energy is a core sector in them, like it is in the Canadian market as a whole. I sure as hell don't want individual stock suggestions.

Overall, this may very well be something like exiting at the bottom, which is why I'm looking for a strategic exit point. Like I said, I was picking WTI=$60 as a point to start discussion. There may be something smarter.

Also, considering my career and my home are both highly dependent on the performance of energy companies, it'll be really hard to diversify totally away from the sector with my current life-track. So I'm well covered for the upside if the energy industry booms again.

[Feruk]

I work in oil & gas and almost never hold anything in the energy sector (outside of diversified market ETFs such as XIC). Living in Calgary and working in energy means that's already your prime investment. Buying more is extremely poor diversification and should be avoided unless there's a very specific reason not to. I'm not gonna tell you when to get out because that's the wrong way of looking at it IMO. Instead, find what you want to get into, and dump the energy weighting at that time to fund another investment.

[taemo]

Been thinking about exiting the energy stocks as well for a while now considering that I'm working for an upstream O&G company already and they are already giving me shares on a regular basis, it makes sense that on the personal side I should diversify to other sectors.

Now, the question when to exit all depends to you, your strategy and metrics.
Myself, I'm looking to exit sometime next year, most likely sometime in Q1 or Q2 when O&G stocks are usually valued higher.
What will be my trigger point, I don't know, probably when I'm up 10-20%

But if you believe the Canadian O&G will bounce back in 5-10 years, then keep your stocks.

EDIT: I'm only exiting the upstream side, midstream and downstream I will still keep the stocks as they havent depreciated as much and dividends are nice.

[suntan]

My wife has a shit ton of RDSA so I've deliberately steered the rest of our money away from O&G as much as I can. Unfortunately her DC pension is all index funds so there is too much exposure there.

The Canadian O&G sector sucks, so I've stuck to actively managed funds and passive ETFs that steer clear from it (Mawer and ZLB).

[Manhattan]

For the majority of people - yeah go the index route.

For the OP's specific question of when to get out of energy - since you're already in it you might as well hold on to them for now. Energy is cyclical and coming out of a down cycle. Canadian producers especially are really out of favor given we're the most expensive oil in the world. Hold on to them til that trend inevitably reverses a bit. Who knows maybe the Saudis break out into all out civil war and it'll be good times in Alberta again lol.

Energy is a commodity and definitely not a great vehicle for long term investment. If you bought into energy a decade ago and held on you likely wouldn't be a cent richer today. I've known more people who have lost their shirts in energy than on the financial and dot com bubbles combined (being in Calgary probably skews it quite a bit but you get my point).

[suntan]

Just lookup XEG. It will make you cry.