Three bad investing habits I’m going to kick this year

A new year is here and there’s no better time than the present to start some new, good habits the kick the old habits goodbye.

We’ve set a few financial goals for 2016 but we don’t have any hope of realizing these goals unless we stop these three bad investing habits.

  1. Stop focusing on portfolio return

Nobody can predict the future with any accuracy, so the joke is on people who think they can.  In 2016 I’m going to try and stop focusing on portfolio return.  Instead we’re going to focus on maintaining a good savings rate – that’s pretty much it.  Pay ourselves, invest that money, pay our bills including mortgage debt then spend the money that is leftover to live our lives, have some fun.  I know a good savings rate over the next 10 years will take care of our early retirement plans.

  1. Stop obsessing about the non-registered account

I don’t like paying taxes any more than you do. I have a non-registered portfolio of dividend paying stocks.  Although Canadian dividend paying stocks are tax efficient I’m paying taxes on dividends earned every year.  While not ideal I don’t wish to incur capital gains either by selling of any those assets.  I will continue to hold these assets but instead of focusing on growing the non-registered passive income stream I will strive to continue maximizing all registered accounts (both TFSAs, both RRSPs) first.

  1. Stop thinking about how other people invest

It’s taken me some time to figure this one out but I need to stop worrying about how other people invest their money.  Our retirement plan is tailored for us and it’s getting us to where we want to be (month after month) thanks to reinvested dividends and distributions our income for retirement is on the rise.  The passive income we make from our investments will fuel a sizable portion of our fixed living expenses.  The more we can live off dividends and distributions the less concerns (and risks) we have about needing to spend our capital in early retirement.

In 2016 I hope to stop focusing on things I cannot control, such as portfolio returns and how other people deal with their financial matters, and focus on what I should be controlling, simplifying our finances and some of the tax issues related to it.  Less worry, more fun and let stocks and ETFs invested in the market do their thing.

Sometimes the easiest things to say (or write) are the hardest things to do.  I will keep you posted on my improvement plan.

What habits are you kicking the curb in 2016?  

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25 Responses to "Three bad investing habits I’m going to kick this year"

  1. Mark:
    Sound advice for everyone! I especially like #1. You have a plan so stick with it and what difference if its better or worse than market index’s.

    Reply
      1. Sounds good. I am sure you are getting better.

        “worry less about the things I cannot control”

        Familiar sounding statement. I think you know…..Something I’ve believed in and tried to practice for many years.

        Reply
        1. Yes, I recall you have mentioned that to me. It’s things we all know, and are aware of, but not so easy to put into consistent practice 🙂 We’ll see how 2016 goes for me. I will keep the folks that read this site updated.

          Reply
  2. Hi Mark,

    Just stumbled across your blog for the first time earlier this morning, and have been reading many of your past articles since. We’re like-minded investors and I love your candid style.

    Regarding this post, I quite like the overall theme, which is basically “stick to your routine and stop wasting time and energy thinking about things that don’t matter” – which is something I lose sight of on occasion, so a little reminder every now and then goes a long way 🙂

    I guess it’s part of my DNA, but I’m always trying to optimise everything in my life; from my work routine, to my exercise routine, to my investment routine – hell, even to my eating and dressing routine (can you tell I’m a creature of habit?).

    I’ve always felt that minimising and / or eliminating decisions in my day-to-day life frees up my time and energy to focus on things that matter – such as being in the moment with friends and family and generating cash flow.

    This blog post was a great reminder to do just that. Keep it up.

    Cheers from a new fan in Cape Town! 🙂

    Reply
    1. Hey Kosta,

      Thanks for reading from Cape Town! Regarding the last post, yes, I’m trying at home, work, play, etc. to worry less about the things I cannot control. I do see it as wasted energy. As I get older, the more my wife and I can simplify our lives, the better I think. That goes for investing as well. I guess this is why some indexing appeals to me more. It’s simple and effective and diversified all in one.

      Happy to hear you enjoyed my message, thanks for reading and see you here again soon!
      Mark

      Reply
  3. I like #3! There is a certain attitude one has to have when swimming against the stream and part of that is sticking to your investment plan. If it has worked and helped me this far – why worry about what someone else is doing and influence change? How would I get true results if I continued to fiddle with my system based on outside influence!? With that said – no more trying to time the market. When the $ is there and inside the account – pull the trigger and rebalance the portfolio. Don’t buy CDN Oil ETFs just because they are on sale…No buy them if they will be part of my maple allocation …Heh my personal habit I need to break. Don’t just buy a deal! Buy a rebalanced deal ONLY if it fits to my previous goal of a balanced portfolio.
    Have a great 2016 good sir! See you at TDPlace in the Spring!!

    Reply
    1. Good to hear from you! BTW – already renewed my REDBLACKS season tickets!

      I own a number of REITs so I might not add more this year, but I do like owning REITs. That’s the thing, I think you need to beat to your own drum and simply continue to do what’s working for you.

      Yes Sir, see you around TD Place in 2016! 🙂

      Reply
  4. Good article! I’m a dividend growth investor so I focus on growing income which is far more stable and predictable than focusing on capital gains (or losses). In 2015 I had my worst year performance-wise since the recession with a TR of 0.60% but I really could care less as my income grew 13% (enhanced by close to 5% from reinvesting dividends). This year while many were claiming the sky is falling during the market dip I calmly noted 9 dividend increase notifications already by mid January.

    Reply
    1. Good to hear from you Bernie. How is the investing going? I also focus on growing income, I figure this is a good way to preserve capital as the years go by and we can largely draw-down our portfolio on our terms – not forced into it like some folks probably feel now with the stock market correcting.

      I usually buy stocks at or below, where I can 52-week lows. Our portfolio value is down by year-over-year our income is rising which is a good thing, even with a few dividend cuts in the O&G sector over the last year.

      Reply
      1. It’s going very well Mark. Thanks! I think I mentioned before I’m retired but not yet in the distribution phase. I’m far ahead of expectations with my projected portfolio income stream so I think I’ll begin distribution in about 2 years, God willing. My portfolio is also growing nicely even without adding in any new money. Can’t complain!

        Reply
          1. I started my discount brokerage non-registered dividend stock account in 2007. The following year, in mid 2008, I opened an RRSP account at the same brokerage. I then released my financial advisor and transferred my entire RRSP over. Within a couple of months, which was close to the beginning of the 2008-09 crash, I had completely remodeled my holdings into a dividend growth portfolio. Times were tough during the crash but I hung in there and was well rewarded over the years. The majority of the 2/3 Cdn 1/3 U.S. stock holdings in my RRSP are mid-cap dividend growers which are on the CCC and CDAS lists. I have no direct exposure to oil but have several what I call infrastructure stocks, ie; pipeline companies & BIP.UN. Thankfully I’ve only had a handful of dividend cuts over the years, the latest one being CEU (2015) in my open account and small speculative holding BTE (2014) in my RRSP. Neither these or the other 3 cuts I had years ago diminished my income stream. There is strength in numbers, so to speak. I have 50 stocks combined in my accounts so dividend cuts have barely make a dent in my income flow.

            Nice to see you added 22%+ to your income growth in 2015. I imagine a lot of the growth is attributable to adding in new money. Rather than indexing in your RRSP have you considered Mawer Funds instead? They’re my backup plan for that time when either I pass on or lose my cognitive skills. Not that there’s anything wrong with index ETFs but Mawer’s excellently run offerings almost always beat market results. Take a look at their performance page: http://www.mawer.com/our-funds/snapshot/

          2. I also have many CDN stocks, close to 30 and 10 from the U.S. in my portfolio. Everything else is in indexed funds. I have some exposure to oil so recent dividend cuts for a few companies of 50% and 80% have hurt the income flow. I’ve learned my lesson with commodities and I’m putting more money into indexed funds in 2016 because of that. Even still, because new money has been invested over the years, yes, this is where the dividend income has grown + the fact that many companies hiked their dividend in 2015. I expect the same in 2016. I think our dividend income could be much higher than it is but I would also be taking on more risk – so I index anyhow. I’m rather conservative when it comes to investing; hence the desire to start retirement by only “living off dividends and distributions”. This is our goal and we’re 40% of the way there:
            http://www.myownadvisor.ca/dividends/

            I’ve considered Mawer in the past, they have a great all-in-one fund. Outside of my stocks I’ll stay with my couple of indexed ETFs for now but in the decades ahead I might sell some stocks and really simplify things – we’ll see. I find every year my thoughts gravitate more to simplifying our portfolio. Maybe that comes with age, maturity, the desire to relax more or all three 🙂

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