Stocks for Fun and Profit

Stocks for Fun and Profit

Adventures of an Amateur Investor

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Re-Think What You Thought: Part 2

Re-Think What You Thought: Part 2

(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.  This article […]

MoneySense Article

MoneySense Article

I continued the journey of helping build better financial literacy by contributing my first guest column to MoneySense. Please click on the link to read the article and if you like it please share on your social media. The “Rule of 72” is critical in […]

THE GLOBE AND MAIL

THE GLOBE AND MAIL

LARRY MACDONALD

Herman VanGenderen published an investment book, Stocks for Fun and Profit: Adventures of an Amateur Investor.

Herman VanGenderen, 60, is currently pursuing a semi-retired lifestyle of travel, hiking and managing a seed business in Calgary. He also enjoys stock-market investing as “a great and productive pastime to help keep one’s mind active” – not only managing the family’s portfolios but also writing a monthly newsletter on stocks and publishing an investment book, Stocks for Fun and Profit: Adventures of an Amateur Investor. The book chronicles his investment journey of the past 35 years in the hope investors still in the early stages of their journeys might learn from some of his experiences and mistakes.

The Globe and Mail recently interviewed Mr. VanGenderen.

How are your investments performing?

At the end of 2017, my RRSP [registered retirement savings plan] had an 11.7-per-cent compound annual growth rate over the last 25 years and my TFSA [tax-free savings account] had a track record of 17.4-per-cent annual compound growth over the last nine years. My wife’s registered plans, which I manage, are not far behind.

 

But when you first began investing in the 1980s, things didn’t go well?

Correct. Back then, it was common to open an account with a stock broker and rely on their advice. This was not a good experience for me.

The first broker made a lot of recommendations that I acted on without any research on my part. It didn’t go well. My second broker said my portfolio was full of junk and dumped most of it. The junk then promptly rallied.

This broker subsequently had to leave his firm because he wasn’t bringing in enough business. My third broker got promoted and my fourth changed firms so that by the late 1990s, I was with a fifth broker. By this time, I was no longer accepting stock tips unquestioningly and had my own self-directed accounts.

What accounts for your outperformance since the 1990s?

I am 100-per-cent invested in stocks. Stocks of well-selected companies have performed far better than interest-bearing investments over the long term. I expect that outperformance to continue, especially in light of today’s very low interest rates.

 When it comes to selecting stocks, I like those that pay dividends, especially if they are well supported by earnings and are raised regularly. Research studies show that dividends represent a big part of overall stock market returns over the long term.

I also prefer companies with solid track records that I can hold for a long time. This reduces the workload and the stress of managing investments, which leaves me in a better frame of mind and seems to also enhance my performance.

I try to buy my dividend stocks when they are value priced. I like dividends but if the stock has a high price-to-earnings ratio, over 20, and a price-to-cash-flow yield over 12, I hesitate to buy.

Many investors fail at stocks because they are continually attempting to time the market but I just keep plugging away trying to find decent companies at decent valuations. I may also be a little more aggressive after big market drops and a little more cautious after big increases.

A big reason why my RRSP has done well is the shift I made into U.S. stocks in the years before 2014, when the Canadian dollar was trading close to par with the U.S. dollar and Canadian companies were selling at premium valuations to U.S. companies due to the resource boom. The weighting toward U.S stocks in our portfolios went to about 70 per cent, which served us well as the U.S. dollar and stock valuations recovered in recent years. I am now inching back toward Canada, despite all of the negativity in Canada.

Diversification is important. In sectors where I don’t feel confident about picking stocks, like gold and emerging markets, I use exchange-traded funds.

Tax efficiency is important, too. I like to minimize withholding taxes on U.S. dividends – I am willing to sacrifice some dividend yield for growth. I also hold U.S. stocks in our RRSPs, which are exempt from the U.S. withholding tax.

 

What was your best move?

One good move was not panicking during bear markets. For example, our TFSA performances are largely due to putting the contributions into the stock market during the bear market in 2009 and over the ensuing years when valuations were depressed.

What was your worst move?

I purchased Seadrill, an ocean driller, after it had declined significantly in 2014. It was making lots of money at the time but had lots of debt and ended up declaring bankruptcy. The enduring lesson was to really watch debt levels of companies in cyclical industries. Seadrill was in my wife’s TFSA, and without it, her performance may have been as good as mine.

This interview has been edited and condensed.

Larry MacDonald is an economist, author and financial writer.

Re-Think What You Thought

Re-Think What You Thought

(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 […]

FUN Podcast Episode

FUN Podcast Episode

    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 […]

Sorting Through the Mumbo Jumbo

Sorting Through the Mumbo Jumbo

*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

During a 35+ year career in ag sales and management, Herman VanGenderen became an active investor and stock and real estate, building portfolios in both. His latest book is “Stocks for Fun and Profit: Adventures of an Amateur Investor.” Visit his website at www.you1stenterprises.com or email Herman at you1st.stocks@gmail.com.

Calgary Presentation and Learning Opportunity

Calgary Presentation and Learning Opportunity

For those in the Calgary area, please sign up for this unique presentation and learning opportunity, Aug 29 at Westman Village. Start the fall with new resolve: https://bit.ly/2LxlZOx   Hope to see you!

Interview with My Own Advisor

Interview with My Own Advisor

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 […]

Housing Affordability at Record Worst Levels

Housing Affordability at Record Worst Levels

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.

Marketing Fear is Much Easier than Marketing Facts

Marketing Fear is Much Easier than Marketing Facts

(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 […]