Happy renter, happy indexer, happy life – Q&A with Holy Potato (John Robertson)
Fans of My Own Advisor will know I’m a fan of taking a balanced approach when it comes to our personal finances. That means a little bit of saving, some investing for our financial future, and lots of good ol’ fashioned fun and downtime spent on experiences. In working through our balanced approach to money stuff I continue to be inspired by the blogging community I interact with, and John Robertson (aka Canada’s Holy Potato guy) is one of those people.
For those that don’t know John, beyond the informative blog he runs (Blessed by the Potato), he is the knowledgeable and respected author of The Value of Simple, a practical guide to index investing for Canadians.
He has developed and currently manages a comprehensive and appealing online course along the same lines called Practical Index Investing for Canadians (affiliate with John).
Then he has a day job or day jobs.
John is really Dr. Robertson who owns a PhD from Western in Medical Biophysics so he writes about that – stuff I haven’t taken (nor understood) since my early undergraduate days!
I wanted to interview John (about a year ago!), talk about his journey into all things personal finance and basically catch up. Here is our interview together.
John, welcome to the site!
Thanks for having me on the site Mark and the interview – it’s a good way to virtually (if publicly) catch up, as I missed seeing you at the CPFC in Toronto last year. Also, thanks for your understanding in how very long it took me to get back to you about this 😉
No sweat John, we all get busy and life gets in the way of little things like these interviews! I hope to make it to the next Canadian Personal Finance Conference (CPFC) and re-connect with you and others. I couldn’t go there and miss The Grey Cup last year here in Ottawa!?
OK, let’s back up. How the heck did a doctor in medical biophysics get so passionate about money stuff?
To some extent it’s always been there. On my way into undergrad I accepted admission to University of Toronto for the Bachelor of Commerce program; it was only when I was picking my courses that summer that I had physics, biology, math, and chaos theory on my slate for electives… and no room left for my core commerce and economics classes! So, I switched into science. The whole time I was learning stuff from my dad, who ran his own business and is an active investor, but only sort of paying half a mind to it, and figured I could always pick up business stuff later, outside university. I had been budgeting throughout university; avoided debt by living at home, so I came out of undergrad in good shape.
It was in grad school when money stuff really started to click for me. I had a scholarship for my doctorate, but it was only for 4 years and there was no chance I’d be done that fast (it took just over 5 years in the end). This was like a miniature version of the work-then-retire problem for everyone else: I had to save some of that money over the first few years to carry me in the future.
Sounds like you learned the value of money early on. How did you get started in investing? How are you investing today?
My dad got me into investing at a fairly young age. Talking about stocks and broker reports was just typical dinnertime conversation in the Robertson household. He picked a few initial investments for me as soon as I had five grand or so free to invest at the end of undergrad. But it wasn’t until my doctorate years that I really started to get genuinely interested and reading. I read the classics: Intelligent Investor, etc., and got clued into the blog scene (about the same time you’ll see Blessed by the Potato swings to becoming almost exclusively a personal finance blog). Then I could start to intelligently talk about stocks: read balance sheets, try to figure out value, etc.
I also learned about index investing and diversification and realized I’d just never have a properly diversified portfolio with the amount I had to invest. So, I started with a hybrid approach: indexing part to get diversified cheaply and control the hubris of thinking I could out-smart the market (which carries the risk of under-performing), and actively investing part in what interested me. The 2008/2009/2010 years were a very exciting time to be an active investor. I was up late almost every night reading balance sheets or learning more about investing.
I still have a few of those individual positions, but am more and more of an index investor these days. As my active positions work out (or fail) and get sold, that money goes into the indexing positions for me. The thing about active investing is, it takes time and attention, and I just don’t have enough of those to go around, particularly not since becoming a daddy. Plus, if I want to end the year with more money, my time is better spent on freelance opportunities to earn more income than active investing to try to get higher returns on my portfolio.
I could see that – time is money! Index investing using low-cost Exchange Traded Funds (ETFs) seems to be a sensible way for most investors to invest. Why are you such a fan (so much so that you wrote a book about it?)
Indexing is simple and that’s the biggest reason I’m a proponent of it. Investing is hard and scary for people who are new to it, and it’s all too easy for people who have been doing it for a few years or for whom it just came naturally to forget just how hard it is to get started as a newbie.
Indexing takes many complications off the table so you can address other important things like risk tolerance and how to actually do all this (from placing trades to reporting on your taxes). Plus, I’ve found a lot of people starting off don’t care too much for arguments for what style is better or might have the potential for higher returns or different risk profiles or whatever – they just want to be told something that’s going to work so they can get going. If there’s a portfolio that’s only going to have 3 or 4 moving parts and then they can focus on the rest of their lives and not do a tonne of research, that’s a huge benefit.
Good argument. So, can I assume you hate dividend investing then? (Big reminder to John: I invest this way!)
Look, you can look up the academic evidence and arguments for the superiority of index investing and the challenge of out-performing, but frankly I don’t care much about that aspect of it. I’ve tried to teach people who have middling interest in investing how to pick stocks and it’s hard. If someone is not currently a do-it-yourself investor and is looking to start, then indexing is the one and only thing I’m going to show them because anything else is overwhelming and adds so much complexity.
But there are no points for purity in the world, and if you’re passionate enough to do the research (and even write a blog) on dividend investing then all the best to you. Indeed, there are some behavioural benefits to dividend investing: those steady dividends can help keep people from panic selling in a downturn, you get really invested (pun intended) in your positions so you’re not about to sell in a panic at the first sign of trouble. And really, no matter what style you pick, sticking with investing for the long term is the most important thing, and dividend investing works for that even if we can have some debates about diversification and the like.
However, dividend investors do need to keep in mind that it does take more skill and effort than indexing. So, overall, indexing is better for diversification and ensuring you don’t under-perform markets. Win-win.
Let’s switch topics. Housing – why are you renting right now? What do you make of the housing market?
I’m renting because it’s cheaper than owning, has less risk, and I expect more from investing in equities than in real estate. Pretty short and simple, but there are a lot of assumptions that go into that. Given all the risk in owning in this market, that seemed like a poor bet. I chose to rent.
Plus, we really wanted a detached house to raise our family in, and because renting is cheaper, we were able to do that and fit it in our budget – we didn’t have to save and invest the full difference, we also had the choice to spend a bit more to get what we wanted. And because the cashflow commitment was lower, we weren’t completely dependent on two incomes to stay in the house (and we did actually lose one income for a long time – even if we would have made more money with a leveraged bet on GTA real estate several years ago, we’d also have been forced to sell and move).
When it comes to the GTA housing market, I don’t think it’s going to end well, but I also don’t think it’s going to be a sudden crash that fixes the problem overnight (and I’ve been saying that for years, FWIW). Even a crash will take years to play out.
You seem very content and happy overall John, which mirrors your indexing approach, financial goals and that more carefree renting thing. As an author, blogger, investing coach and more – what words of financial wisdom do you have for readers – saving, spending, investing, debt, other?
Content and happy? Whose blog are you reading?!
I mean, the grand façade is working!
Er… I mean, yes. Yes I am. A-hem.
Your readers are a smart bunch, and your archives are deep, so there isn’t likely much I can say for them except by accident.
However, they probably have friends and family that need more help with financial literacy. Even if we do get financial literacy in the school curriculum, it won’t be a panacea, and it won’t help the people who are already out of school. I guess I would advocate to start having those money conversations and breaking the money taboo. You don’t have to have all the answers – sometimes there aren’t any, sometimes it can be good to have some books or websites or courses to point to (and not just my course, there are lots out there from local libraries, schools, as well as online).
And as bloggers and blog readers we tend to be huge on do-it-yourself solutions. But for lots of people out there paying marginally more for a robo-advisor may get them investing sooner and more successfully than trying to teach them about dividends and brokerage accounts. And while I love Excel more than a man should be able to care for a piece of office software, lots of people who don’t read PF blogs for fun would gladly pay a money coach or planner to help them if they only knew that such things existed.
Well said John.
Thanks for taking the time with me and I hope you and family enjoy the summer. I want to thank my friend John Robertson for this interview and sharing his money perspectives. A reminder you can follow John’s site, check out his book, his course in the links enclosed in this article.
What do you make of John’s advice about removing the money taboo? Thoughts? Discuss with me in a comment below. Thanks for reading.
John Robertson also tries to maintain a current list of fee-only financial planners in Canada:
You can sign-up for his Practical Index Investing for Canadians here (affiliate with John).
re: I’m renting because [i] it’s cheaper than owning, [ii] has less risk, and I [iii] expect more from investing in equities than in real estate.
It’s all relative, and depends heavily on the when & where of your house. I’d be a fool to sell and rent at this point: i) I bought my house at a 20% market value discount (foreclosure), so I have a 20% “free” gain baked-in, and ii) current rental rates are ~$1,000/mo more than my current monthly mortgage payment, not to mention current in-kind vacancy rate is 0%…so I’d end up with something really crappy and really expensive if I rented relative to my current owner situation.
Renting doesn’t have less risk, just different risk.
Expecting more from equities than real estate is an apples-to-oranges argument. You’d have to compare an equity ETF to a real estate ETF of similar composition (e.g. Canadian, emerging, etc.) to even bring them into the same orchard. Academically, it’s still foggy as to the correlation (if any) between equity and real estate. (p.s. I’m not a RE cheerleader.)
Other than that, some very level-headed and rational points made by the author (expect anything different from a math-based scientist?).
To John, and on a completely different topic, but taken from the Blessed by the Potato blog, re: Never Weight.
As a biophysicist you might want to look into a low carb/high fat(/med protein) diet. Short version, if you have a low-med physical intensity lifestyle, your body will choose fat as its fuel. If you throw carbs into the mix, your body will still choose fat to burn and store the unused carbs as…fat. I can tell you from anecdotal experience (as well as testimonials from friends), cutting carbs is brutal, your brain is addicted to the sugar and it’s akin to heroin withdrawal. If you want to eat carbs you need to add high-very high intensity activity into your lifestyle, no other way around it. But lots of pluses with that scenario: you’ll be more healthy, the intense activity will ramp up your metabolism even long after the activity is complete (i.e. burning more calories), and most importantly, you’ll still be able to eat a cookie…or two! Summary: low intensity activity burns fat; high intensity activity burn carbs. Match your lifestyle to the diet/diet to lifestyle (there is no wrong answer!) and enjoy!
I had a very good (and very effective) experience with a ketogenic diet earlier this year (dropping weight for a wedding). I shed 30 pounds in 3 months with very little exercise. If done right insofar as meal planning, being on a keto diet helped with cravings and hunger in general. It’s not for everyone, but it was definitely for me!
re: being on a keto diet helped with cravings and hunger in general
You had no cravings because there was no sugar in your body or brain; you weren’t hungry because you were using the correct fuel (hunger is your body telling you it needs more energy and fat contains the most energy thus you had more energy for a longer period of time).
re: It’s not for everyone
I’m sure there is some PF analogy here. I prefer to side-step dietary labels and fads and deal with the science. Your body is burning fuel every second of the day and there are two fuels from which it can choose — fat or carbohydrate. Simply match your fuel intake with your physical output. If you have a low-intensity lifestyle, choose fat as fuel; high-intensity lifestyle, choose carbs as fuel (e.g. I shed 30 pounds in 3 months with very little exercise). It really is that simple.
As an aside, when I was on a fat-as-fuel diet, I naturally drifted to also eating an immense amount of vegetables, so don’t worry about becoming “unhealthy”. 🙂
Lots of veggies and fruits are great for you SST. I’m trying to eat more myself.
Off topic….TDDI has a new feature “Projected Income”. Just looking at it now, seems pretty cool!
Do you have a link Lloyd?
It came up as a message when I logged onto the accounts. Here is a cut and paste of the message…
Great news for income investors! We’re pleased to introduce an exciting new feature to the Account Details section in WebBroker – the Projected Income tool!
The Projected Income tool offers a comprehensive view of the dividend and interest income your holdings generate each month (based on historical information). You can use it to:
View a projection of the dividend/interest income your holdings generate each month in either Canadian or U.S. dollars.
See which of your investments pay dividends/interest and when.
Set a monthly income target for individual or grouped accounts and compare it with their monthly average projected income.
Watch the Projected Income video to learn more about this new feature. You can also watch Bryan and Ryan’s recent webinar, in which they discuss the new tool and other ways WebBroker can help you evaluate the performance of your portfolio.
Some important notes about the Projected Income tool:
The tool assumes that each security’s dividend/interest payment will remain constant. If a security changes its dividend/interest payment, the projection will change after the ex-dividend or payment date.
You cannot view projected income for securities you do not own.
When you buy or sell a security that pays dividend/interest, your projected income will update by the trade’s settlement date.
The tool only displays projected dividend/interest payments. Payments already received will be excluded from the current month’s projection.
For historical data on your dividend/interest payments, visit the Gain & Loss tab in Account Details.
If you require assistance, please call an Investment Representative at TD Direct Investing, available 24/7 at 1-800-465-5463. Thank you for choosing TD Direct Investing.
There’s a short video….hope this works…
Thanks for sharing. Just wait until the dividend increases over time 🙂
That’s a very interesting tool Lloyd. I plan to poke my broker about this.
“buying makes sense.”
Yup, it depends on circumstances. When our daughter wanted to go back to university in Winnipeg, she mentioned that her and a couple of her friends were looking to rent a house. I decided if they wanted to rent, they could rent from me (the house was in her name) so I bought a house used the rent as income for her. There are countless reasons for buying or renting, many of which are based on personal situations.
It absolutely can make sense. Like everything else in life, “it depends”. 🙂
Interesting interview. Some great points. One thing would be nice is some additional background on the interviewee (age) just for context. Mr Robertson’s academic background is incredibly impressive and embarrasses the heck out of me (grade twelve drop out).
If I was starting out, I’d likely use nothing but TD e-series funds and have no problem suggesting this path to the nephews/nieces. As to renting v. owning. Likely a location/desired lifestyle kind of thing i.e. depends on personal circumstances and there is no one recommendation fits all situation.
On thing Mr Robertson mentions that lit off a bulb for me was his comments about his father. I too realized early on that dear old Dad did some things that imprinted on me. I started RRSPs at 19 not because I was financially astute (far from it) but because Dad had them. Dad also got me to invest my spare money early (1980 when I was 20) in the property we live on now (40 acre farm). Got it at a very attractive price from a neighbour who carried the mortgage. I had to make payments every six months and that kept me from blowing those funds on wine, women and song. No brains on my part.
That’s a good story Lloyd ?
Housing is cheap in my part of Northern Ontario so buying makes sense.
Agree on Mr Robertson with some great points and a strong acedemic pedigree.
Love the story Lloyd. I’ve done ok but with a little nudge like that from my folks etc might have been luckier.
Pretty obvious you have brains too.
That’s the interesting thing about investing and financial success. It’s a persons behaviour that most often makes the difference. Good habit & behaviour = successful. The highest IQ or even strong investing knowledge doesn’t equal success.
“It’s a persons behaviour that most often makes the difference. Good habit & behaviour = successful. ”
Funny you mentioned your Dad about RRSPs – my Dad told me to “buy RRSPs” in my early 20s (I chuckle at that statement now because I know better what he was trying to say) because they can help “grow your money”. His comment has always stuck with me.
Hi Lloyd, I’m 38. and absolutely it depends on circumstances: your own, the market you;re in, etc. And no matter what the math says, people can always choose to pay more for one or the other for non-financial reasons.
Great interview, I really appreciate John’s perspective on housing, there is a lot of pressure to purchase a home and it’s great to see someone doing it differently. I love the freedom, flexibility and simplicity that comes with renting (plus the reduced risk, it is a lot of leverage after all). At the same time I think buying a home was the right decision for our family. With two children the stability that comes with owning your own home is worth quite a bit to us (friends, school, stable routine, not being forced to move etc). It’s great to see it from another perspective though!
I have seriously considered renting instead of buying last year when I upgraded the house. I eventually decided that I still want to own my home due to exactly the reasons you mentioned with also two young kids.
Also, rent was up a lot for last decade. I think even financial wise, it’s uncertain which option will win in long term.
Thanks Owen. I got your email, will reply 🙂
I too was contemplating the Robo Adviser path when I came across John’s blog and bought the Value of Simple. At the time I was with TD Wealth Management and the Value of Simple gave me an easy to follow blueprint using TD Direct Investing to go the DIY path.
Thanks John – it’s worked out great for me.
Nice to hear about that Marko. Well done.
It’s great that’s working out so well for you.
I have read the book and have reviewed it on another site (now defunct) I used to run. Great simple advice for those just starting out. As an income investor I still love re-investing dividends into more DG stocks. It’s just what I like to do. I only hold an ETF for US exposure. Nothing else, I’m now a stock guy!
I don’t use TD efunds either but I’m a fan of John’s book for simplicity. I too, as you may know, am also a dividend investor but I also use some low-cost ETFs to grow our retirement bank. Thanks for being a fan.
I had initially started down the Robo-Investor path a couple of years back, when I was just scratching the surface on investing. As I learned more and more, I became increasingly adventurous and tried some experiments that more or less didn’t work out (peer-to-peer lending, the bitcoin mania, a penny stock that failed spectacularly).
I came across some You Tubers extolling the virtues of DG investing and was intrigued. I was already leaning that way because of the great feeling I got by watching my ETF dividends getting re-invested automatically, and a couple months ago I decided to make the switch. Opened a TFSA self-directed brokerage account, transferred my holdings, and my fledgling dividend portfolio was born! A few weeks ago I did the same with my RRSP account (mostly US dividends in that one to avoid the withholding taxes). I’ve yet to get any new dividends in that one, as they are all quarterly paying, but I eagerly await the first paydays!
I’ve been considering the rent-over-own strategy, as I own my home mortgage free(!), and I’m tempted to invest that equity as capital in stocks/ETFs. Something I would have to discuss with my wife, naturally. My job has me moving every 4-6 years, and renting over owning might be easier on the administration (me!). Any thoughts or reverse mortgages/home equity LOCs?
Renting can definitely appeal if you have to move every 4-6 years, especially in areas with high land transfer taxes — that alone can be a few years’ worth of rent in some cities.
Reverse mortages/HELOCs to invest? I’m not a fan of reverse mortgages — the costs tend to be too high when a HELOC or regular mortgage would do.
For borrowing to invest, it’s a really personal decision. A HELOC (or a traditional mortgage if you’ll stick to it for a few years) is reasonably cheap way to leverage. But why was paying off the mortgage a priority in the first place? Did your risk tolerance change (maybe, or someone may not have known that investing was an option, etc.). And if borrowing to invest isn’t for you, there’s always just redirecting the cashflow from what was the mortgage payment to new investments.
I set up a LoC years ago and started using leverage in late 2008 when the market looked so cheap. Wasn’t really for me, and i delevered pretty quick as the market recovered in 2009!
I am very fortunate not to have need a mortgage (thanks to financially prudent and successful parents)! So mortgage payments weren’t a thing for me. My initial thinking was that paying it off was paramount until I read about the advantages of low cost leveraging. I’ve put the bug in my wife’s ear about renting/mortgages to kickstart the portfolio. I’m just trying to weight the pros and cons of renting vs mortgage now. In my line of work (military), my moving costs (including land transfer, lawyer/realtor fees, mortgage repayment penalties) are covered as long as I’m moving due to work, so I’m not sure whether that swings the advantages towards renting or buying with mortgage. I’m wary of the prospect of rising interest rates that might make renting the way to go for the long term.
Given you’re likely on the move every few years I’m not sure it would make too much sense to buy a house. Again, always pros and cons to every decision. Do you have to make your decision soon?
There’s a chance every year that I could move, and that chance increases for every following year. I’ve been in my current location for 2 years. If I were to guess, I might move in 2 to 3 years. Nothing imminent (I think!).
Funny comment about DGers on YouTube. I guess that’s partly true 🙂
Personally, I love seeing the income flow in vs. the hope of capital gains.
As for the reverse mortgage thing I’m not a fan:
1. higher fees for that product, why go there if you don’t HAVE to?
2. you don’t own the house but you still have some maintenance costs? Might as well rent.
3. In terms of estate planning, you don’t own the house – the bank does. Therefore hiers don’t get the house nor the gains involved.
There are many other reasons I wouldn’t do this but that’s just me. Your mileage may vary!
Why not rent, sell the house if you move every 4-6 years, and simply get that capital flowing (and growing) cash to you instead?
There are 2 or 3 youtubers who actually do a decent job of explaining the factors of good DG strategy (vs just going straight for high yield junk stocks). There’s one who referenced dividend stocks in a TFSA as being a kind of personal tax-free pension, and as long a you pick the long term growers and hold forever, it’s as safe of a bet as you can have with equities.
I can see reverse mortgages are not the way to go for us. Still weighing pros and cons of renting vs buying with a mortgage (reference my above reply to “Potato”). I suppose it would be the difference between locking in long term debt with rising interest rates vs the insecurity of not “owning” our own small kingdom.
That’s my game plan Daniel: using the TFSA as a dividend growth machine. You’ve probably read these updates:
Owning vs. renting there are definitely pros and cons. I think for John and his family they made a wise choice but of course hindsight is 20/20.
I have seen your updates, I just discovered your blog a couple of weeks ago and I’ve been steadily chewing my way through your very substantial content! I’ll be following your posts/articles with great interest! Your updates give me hope that I can achieve results.
Ha, great stuff Daniel. Feel free to visit and comment as much as you like. I learn from readers too! Cheers, Mark