(Photo courtesy of Pexels) Please share with others on your social media if you find it informative, and if you have read my book please write a review on the site it was purchased. Please have a look at current reviews on Amazon. Much Appreciated. The theme […]
Preparing for radio! Fun 20 minute podcast discussing my book with Tellwell Publishing, the company that brought it to life. Key topics: Inspiration for the book. Examples of valuable investing lessons integrated into the book. Experience’s getting my kids started at ages 13 […]
*10-year growth compares 2017 to 2008. Example, Royal Bank’s 2017 dividend was 1.8 times larger than in 2008.
This blog is the 7th in my series with Grainews. It beings together all previous columns written. Please share with others on your social media if you find it informative, and if you have read my book please write a review on the site it was purchased. Please have a look at current reviews on Amazon. Much Appreciated. (Disclosure: My wife and I have interest in all the companies mentioned)
There is a lot of mumbo jumbo surrounding the stock investing field, and quite frankly a large amount of horse exhaust as well. Let’s cut through a bunch of that, in this and the next column, to illuminate what’s really important to us as independent investors.
I have taken the portfolio I described in my May 15 issue of Grainews and built a model as shown in the table, based on the maximum TFSA contribution. I used the closing price for each of the stocks on May 15 as the “purchase” price, and the closing exchange rate of 1.2878 Canadian dollars (CAD) per US Dollar (USD), for the international side. I added $10 to the cost of each purchase, to represent transaction fees. I followed portfolio percentages as described in my column, while rounding the number of shares “purchased” to the nearest five, with the exception of Berkshire Hathaway (BRK.B).
I prefer periodic investing to this lump sum approach, but this is the only practical way to track the portfolio I described. My plan is to follow its progress periodically in future columns, demonstrating how a simple long-term plan without due concern for day-to-day fluctuations can produce exceptional returns. This approach is the one I follow with investments, in my book and in my newsletter. I have read over 40 investment books and have never seen anyone track the success of their approach over time, with real bottom line results.
My confidence in my approach has been built over 25 years of success. While I am quite confident in the portfolio it is always important to be mindful of the fine line between confidence and cockiness. Confidence is important; cockiness can kill. This applies to many aspects of life including investing.
Please keep this chart for reference, as the next column will discuss the attributes and financial metrics used to make investment decisions. We’ll cut through a bunch of financial jargon, a.k.a. mumbo jumbo.
ABOUT THE AUTHOR
Stocks for FUN and PROFIT: Questions and Answers about adventures of an amateur investor Fans of this site will know for many years now, I’ve reviewed a host of personal finance and investing books. Over years, these books have improved my financial IQ, matured my […]
I came across two articles this past week that deal with housing affordability and values across Canada. They are very much worth reading. The first one is from the Royal Bank discussing affordability. Housing in Vancouver and Toronto are now at their record worst level of affordability, surpassing the peak of the last housing boom in 1989-1990. After that bubble burst it took until 2000-2005 for housing to get back to previous levels, in the Toronto area. All the stats are in the RBC article.
The second article from The Globe and Mail, discusses how Canadian housing is an anomaly in the world, and that ownership to rental costs have increased markedly. Both of these articles are a cautionary note for those considering purchasing in these two markets. Most other markets are still reasonable.
Despite lots of noise to the contrary, many stocks are still reasonably valued, especially in the Canadian market. Stock investing in a TFSA is a great way to save for a house while waiting for more reasonable valuations. History usually repeats itself, and an era of very high valuations is likely to be followed with a period of stagnating or declining valuations.
My book, “Stocks for Fun and Profit: Adventures of an Amateur Investor,” has numerous references to real estate, and one entire chapter dedicated to it. I have been an active real estate investor and wanted to share those experiences, in a similar way to the stock investing experiences. I do this in an effort to help others experience less knocks from the “School of Hard Knocks,” than I experienced in my investment journey.
(Photo: Pexels) This is an excerpt from my latest newsletter, expanding on how fear based media and marketing have become so prevalent. As I was leaving my book signing session on Saturday, the radio news featured a clip that went something like, “Experts predict that […]
(Photo courtesy of Microsoft Clip Art) This blog is the 5th in my series in Grainews. It beings together all previous columns written. Please share with others on your social media if you find it informative, and if you have read my book please write a […]
(photo courtesy of Pexels) This blog contains excerpts from my latest newsletter and an important message. Please share with others on your social media if you find it informative, and if you have read my book please write a review on the site it was purchased. Much Appreciated.
A phobia is defined as an extreme or irrational fear of something. I googled phobias and there is a fear of money officially called chrematophobia, but no official fear of stocks so I will just refer to it as stock phobia.
Why are so many individuals afraid to invest in stocks when they represent one of the best wealth creation avenues available? The fear of stocks was highlighted by a recent Globe and Mail article written by Rob Carrick titled, “There’s no such thing as a low risk way to invest in stocks.” I had previously been in email contact with Rob and had sent him my book. After reading the article I sent him another email which is copied below:
Hope all is well. It’s been a while since I checked to see if you had a chance to look at my book, but I was prompted by your article in last Saturday’s Globe.
While I generally appreciate and agree with what you write, I would like to debate “There’s no such thing as a low risk way to invest in stocks.” In the article “risk” and “volatility” are used interchangeably. In Chapter #28 of my book, “Is it Risky, Volatile or Both,” I argue that risk and volatility are completely separate entities, and in my concluding chapter I write, “The real risk resides in oneself and one’s reaction to volatility.”
I know you are very busy, but would you be kind enough to read Chapter #28, and my concluding chapter, to see whether it might influence your thinking on this matter. The reason I think this is important is that the perception of risk keeps so many people out of stocks, and accepting the very mediocre results of interest bearing investments.
By the way, I have pretty good company in my thinking. According to Warren Buffett, “Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments – far riskier investments – than widely-diversified stock portfolios that are bought over time … That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk.” (From article written by Dhirendra Kumar, April 28, 2016)
Thanks and I look forward to your response.
A disconcerting trend is that direct stock ownership by individuals has declined dramatically over the past few decades. What I find perplexing is that the advent of internet investing has made direct ownership of stocks much cheaper and more accessible than 30 years ago. So while the ease and cost of direct investment in stocks has improved dramatically, the number of people doing so is in dramatic decline.
There are a number of plausible reasons for this phenomenon including the constant bombardment of information that makes investing sound more difficult than it is, and focusing on the fear, or negative side of the story. Whatever the reason, scaring people out of the stock market is keeping the middle class from achieving financial security. The only way to build financial security is through the ownership of income producing assets. Stocks represent one of the key classes of income producing assets.
One interesting statistic and article I read was, “The Richest 10% of Americans Now Own 84% of All Stocks,” from Money magazine. So here is the chicken and egg question, did they become wealthy and then invest in the market, or did they become wealthy by investing in the market? I would surmise that many, if not most, became wealthy by investing in the market. That begs another question, which side of the equation would you prefer to be on? Do you need to overcome chrematophobia, or stock phobia?
(Photo courtesy of Pexels) This was the fourth column in my series for Grainews. There are many reasons to diversify outside of the country. My first three columns have covered a lot of ground, but there is more to cover. The stock market presents endless […]