Susan Brunner is a successful do-it-yourself (DIY) investor who has been investing in dividend paying stocks for decades. She was recently featured in the April 2012 edition of MoneySense magazine. Thanks to her investments, Susan hasn’t had a mainstream job since 1999. My Own Advisor recently contacted Susan to answer a few questions about investing in stocks, her thoughts on indexing, bonds and what advice she has for young Canadians.
My Own Advisor – thanks for taking the time to answer a few questions Susan. So, let’s start from the beginning….how did you become a do-it-yourself (DIY) investor?
I was probably always a DIY investor. When I started out with a broker and at that time you had to have a broker, I did not get much help. This was because I did not have much money, so a broker was not much interested in me. By the time I had some money put together to invest, I was not interested in having a broker.
My Own Advisor – describe your journey into owning dividend paying stocks for the long haul…
When I started to invest in the 1970’s interest rates were comparatively high and just got higher. I had read some articles on dividend investing and so tried this out. By first pick was BCE (TSX-BCE). I then bought Labatt and Bank of Montreal (TSX-BMO). I had also read about preferred shares and so bought Consumer’s Gas Preferred. I only held them for a couple of years as I realized there were greater potential to common shares then preferred shares. Preferred shares are sort of like bonds where at the end of the term you get your money back, but you have dividend payments in the meantime. Of course, the dividend amount and your capital did not increase like they do on common shares.
In the early 1980’s I started to use DRIPs (Dividend Reinvestment Plans) on BCE, Labatt and BMO, but I was getting odd number of shares and a lot of work was involved tracking shares bought with dividends. I got out of DRIPs around 1990. By then I had a few more stocks. I also held some mutual and segregated funds, although most of these were in my RRSP.
I had from the beginning a Trading account for my non-RRSP investments, but not for my RRSP investments. In 1994, I opened an RRSP Trading account and started to consolidate my investments. It took a lot longer than I had expected, but I finally started to buy stocks for my RRSP investments in 1995 and 1996. I had been successful in stocks with my stocks in my Trading account and used the knowledge I had gained to invest in stocks for my RRSP monies.
My Own Advisor – why are you so fond of dividend paying stocks?
You can get decent returns on dividend paying stock. Dividend paying stocks also are less volatile than other stocks. And, a lot of dividend paying stocks increase their dividends over time.
They are also a good place to be at the present time. If you are into profitable companies, you will be getting your dividends. Yes, the stock market is in a funk and it looks like we are probably not going to be earning much in capital gains now or in the near future. This will eventually change, but no one knows when.
My Own Advisor – what’s your take on indexing?
It is not that I haven’t tried them out because I have. It is also not that I do not use them because I have one in my US dollar account to shove in extra bits of money of the account. However, I cannot get excited about them.
My Own Advisor – what’s your take on bonds?
I was into bonds when interest rates were high. The problem with bonds is that their value can be quite volatile, especially when you have long term bonds. The other thing is that what you pay in fees to buy or sell a bond is not always transparent. Also, do not forget that one way that countries hope to reduce their debts are to inflate their way out of them. Bond investors lose with inflation because the $1 they get back tomorrow for the $1 they pay for bonds today is not worth the same.
My Own Advisor – what are your favourite personal finance and investing books?
I do not have a favourite, but I have read a lot. I also read a lot of economics books and history books. One of my favourite authors is Niall Ferguson who has written about history and finance. Ferguson is always interesting to read, whether you agree with him or not. What I like about him is that he makes you think. He gives you a different way to look at the world. It is always a pleasure to see him upset everyone which he invariably does. Ferguson writes a lot about economic history. The press tends to call Ferguson right-wing, but then in some reviews of his books says his view is almost Marxist on something or other. This is because Ferguson is all over the map in his views. Some time ago he recommended a book called “This Time is Different (Eight Centuries of Financial Folly)” by Reinhart and Rogoff. It was a great book. There is a BBC program on Ascent of Money, one of Ferguson’s Books. You can see what was shown on PBS.
My Own Advisor – have you learned more from your investing mistakes or successes?
I do not know. I tend to try out new stocks with a smallish investment and see how things go. If they go well, I might invest more. If an investment does not do well over the next 3 to 5 years, I might sell. However, this also depends on the current economic environment. If the current economic environment sucks, I will give a company more time. If the current economic environment is good and a company is not doing well, then it probably is time to pull the plug. If my investment is in a growth company, I often sell some when the stock doubles in price. This will lock in some profit. Companies that grow fast can also decline fast.
I have certainly learned that the recessions that follow bear markets have the most effect on your companies. If a recession follows a bear market, then 1.5 to 2.5 years later is the danger time as far as dividends go. This is when earnings go down and companies may stop dividend increases or even decrease dividends.
As far as investing goes I have not done anything I regret. It is not that I did not make mistakes or lose money in some investments. But I think that you have to look at this philosophically as you win some and lose some. You cannot make great choices all the time. It is not possible. What I think you should try for is not to make the same mistake again and again.
My Own Advisor – what advice would you give to 20- and 30-somethings investing today?
I think that if you want to be an investor, you have to come to terms with the fact that the stock market fluctuates a lot. If you are only looking at the value of your portfolio, you will be on a roller-coaster ride. You need to focus on the ability of your companies to make money, especially cash flow. You want to focus on their debt levels to ensure that they can survive the bad times.
My Own Advisor – will you keep reading My Own Advisor?
Thanks again to Susan Brunner for making the time to answer a few questions. Personally, I find these interviews helpful since they tend to reinforce where I’m going with my investment plan but also make a few tweaks to it based on what I learn and wish to apply to my own situation. I find the expertise and lessons learned of other successful DIY investors, extremely valuable. I hope the same applies for you.
Susan Brunner is a successful do-it-yourself (DIY) investor who has been investing in dividend paying stocks for decades. Thanks to her investments, she hasn’t had a mainstream job since 1999. Susan has a blog called Investment Talk where she provides detailed reviews of Canadian and U.S. stocks almost daily.
I think when Susan says, “They [dividend paying stocks] are also a good place to be at the present time,” she really means that they are always a good place to be. She was investing in dividend payers in the late 1990s, and at the time, they did poorly compared to the indexes. During the past five years or so, they have easily beaten the indexes. The point, I think, is to stick to a strategy. Having read what Susan has written about in this (and other articles) I can tell that she sticks to a sensible system through thick and thin. That’s the only way to good results. Unfortunately, many dividend investors are getting on the band-waggon now, and will abandon the method when it doesn’t “work as well.” This is silly, of course, but it’s human nature. Susan, keep convincing people that they need to stick to a plan and not bounce around chasing the strategy de jour. Many people can learn from you. You have done it right. And you are continuing to do so. Keep up the great work Susan…and Mark!
Always great to have you stop by and comment! Susan has always thought highly of dividend stocks, and if you have patience, like her I am convinced they are always a place to be.
Of course you’re right, a good system is a plan you stick to through thick and thin. I will continue to lean on the expertise and experience of Susan, she really knows her stuff and she has a great deal of wisdom to pass along. I am glad she is willing to share it! 🙂
Thanks for the support Andrew, you are always welcome on this site!
Great interview and real wisdom! Thanks Susan and Mark!
Excellent interview, Mark!
Thanks. Susan is rockin’ the dividend income.