Thanks to many of my dedicated readers for your excellent comments and feedback on my recent post: Part 1 – My Favourite Takeaways from The Investment Zoo. I enjoyed writing that post and it sounds like quite a few of you enjoyed reading it 😉
No doubt, few octogenarians have the wit, wealth and smarts of Stephen Jarislowsky. He is definitely a Canadian icon. I guess it’s not surprising given Jarislowsky’s stature that he and another financial icon, Warren Buffett, have a lot in common. From their approach to investing to living a frugal life (living in the same, small, unpretentious home for decades is just one example), these billionaires share many of the same philosophies.
Another thing these mega-rich 80-somethings have in common is their love of metaphors. Maybe that’s because metaphors are the language of business or maybe that’s because metaphors can pack a powerful punch to any message. Regardless, these are the pros-pros at it and Jarislowsky certainly demonstrates his mastery of this in The Investment Zoo.
For a parrallel of what I mean, first check out what Warren Buffett said in his 2008 letter to Berkshire Hathaway shareholders:
…He likened shareholders who lost money when the stock market plunged by more than 50% to “small birds that strayed into a badminton game”, resulting in being “bloodied and confused”.
He went on to say that “economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel”-referring to the massive bailout package costing trillions of dollar to save the economy from collapsing.
Humm, sound familiar to today’s markets anyone? 🙂
Now check out one of Jarislowsky’s comments in The Investment Zoo – one of my favourite takeaways from the book I might add:
“A good investor has the courage to make choices. The stock market is a bit like a zoo. There are all kinds of animals, there, from elephants to tigers to snakes to monkeys. You only need a few of the best species to build a good diversified portfolio that will provide sustainable, low-risk, high compound earnings. All you need to do is find them, buy them at reasonable prices, and make sure they stay on track.”
Priceless and timeless stuff really.
The Investment Zoo had a host of great messages and then some. Like I said in Part 1, just like a great Canadian stock, I would recommend The Investment Zoo as a strong buy for every DIY investor, especially those who are focused on dividend-paying stocks. Give it a read, you won’t be disappointed!
Here are my other favourite takeaways from The Investment Zoo:
“I am equally suspicious of mutual fund salespeople and financial advisors. I am not part of the current mutual fund vogue, which through slick advertising sucks in all kinds of small, unsophisticated investors. Assume the average mutual fund (and there are as many as there are stock market listings) earns the 100-year average return in stocks of an annual 5 to 6%. Now if you operating costs plus commissions absorb 2%, you take all the risk for a 3 to 4% average real return and this is eventually taxable even in a deferred tax plan. Thus between 33 and 40% of your return after inflation, but before tax, goes to the manager. Simply put, most mutual funds are very expensive, with up to half your expected long-term gain siphoned off in fees at no risk to anyone but you. In a bull market mutual funds may make sense – but in a bear market or flat market these are usually poor vehicles.”
“Once your initial plan is underway, anything you earn later can be far more readily spent, since once you have sown the seeds of a good investment plan, compound growth will take care of the rest. Why this is not taught in high school I will never understand, because it is far simpler than most of the things – totally useless later – that you have to absorb and regurgitate in class.”
“The stock market day-to-day is like the ocean: sometimes calm, sometimes stormy. But all you see is the surface not what goes on below. Clearly, real underlying values don’t change that much – but the “herd’s” perception does. One year gold is all the rage; the next it is junior oil stocks or real estate empires. In the short term, the market simply mirrors greed and fear, and the perceptions emanating from these two emotions. In the long term, however, it manifests growth “on average”, reflecting the performance of the companies that continue to grow, earn more, and pay even higher dividends.”
“Panics, once you examine the reasons for them, are rarely justified. But panic, by definition, is irrational. Panic is a short-term emotion. And as such an investor should not give way to it.”
“The crux of your success will be selecting leading companies’ stocks and then holding on to them for many years. While you cannot go to sleep, and there is a place for monitoring, there is no reason to panic if a firm has earnings that fall short in a given year or two. This is quite a normal phenomenon.”
“Out of the many thousands of stocks I can choose from worldwide, I therefore really only need look at 50 at most.”
“I also do not believe in buying companies that do not pay attractive dividends. Nobody can forecast the future. But it’s obvious that companies that have a strong uninterrupted record are more interesting than those that have not.”
“Stay disciplined and stay on the main highway – don’t look all around. You are not seeking an emotional fix – unlike at the casino, you don’t invest for the entertainment value but rather to make safe and sound money in the long term.”
Well said Stephen 🙂
OK, your turn, share your comments!
Great review MOA!! This book is my absolute favorite. I’ve referred to it countless times!
Thanks very much for the kind words about my review, and yeah, this was a great book eh? 🙂
Mark, this is another post of yours I will be coming back to re-read again and again. You have probably picked up and presented the best of “The Investment Zoo” for us, and we thank you for it. Sometimes, I think how nice it would be if I accidentally ran into Stephen or Warren and had a chat or a lunch together with them. How much could I learn in just thirty minutes? But it’s not only the investing knowledge and expertise one can learn, but also get truly inspired and motivated by these two great individuals and their lifetime jorneys
What you wrote made me chuckle because in times of market turbulence, I often find myself re-reading the books I have (like this one, The Investment Zoo) for reinforcement.
I’ve often wondered the same thing, how great it would be to meet these guys and simply “shoot the breeze” with them. I bet I could learn so much from them in just 30 minutes; maybe enough to last me a lifetime. I guess for now, I’ll just have to read the books and use them as my guide. As an investor, a small one at that, it’s hard not to marvel at these guys for their success. Phenomenal is the only term that comes to mind.
As always, I appreciate your comments!
MOA, Your book reviews are always exceptional! I’m looking forward to picking this one up soon and reading 🙂
The Dividend Ninja
Geez, very kind words and high praise! I hope you do read it. I think you’ll like it 🙂
JF got smoked straying from the plan of buying “only if they have an attractive dividend”…RIM.
I also took the RIM plunge, and though I still hold, JF bailed taking the hit.
JF have redirected the funds to BCE, indicating that they will be better served via the Service Provider rather than the end product (also gets them back to the “attractive dividend”).
Yeah, the JF Equity Fund (if that is what you are talking about) got whacked a bit by straying off course. Just goes to show, that sticking with a plan is the best plan of all.
Appreciation given for the insightful information. Well, it’s time well spent reading your write up so much so that I’ve add to my favourites and will visit regularly and read what you have published. Well written piece of post. Keep it up!
I get so frustrated with my parents and their mutual fund choices. They implicitly trust in the bank advisers, and from the advice they are given I’m not sure if the advisers are only self-interested, or if they are actually that dumb. I try to convince them of the errors, but as usual, your kids are the last ones you’ll listen to right? I don’t propose that they do anything crazy with their money, like go picking small-caps or anything, but at least use index funds!
As far as your comment about 50 companies, I definitely agree. Simply by investing in giants like Johnson & Johnson, and Wal-Mart, you get exposure to the majority of the world and its growing middle class. When you invest in Royal Bank, they are so exposed to the rest of the financial sector, that you don’t need to buy another bank from 8 different economic zones or anything.
You too eh? 🙂 I love my parents very much but I wouldn’t have made many of their investment choices. Doesn’t make them wrong per se, just different and they feel they are doing what is good for them; which is good, but you can’t complain about something unless you are willing to do something about it. This point of mine goes far beyond investing.
I think there is something inherently wired into parents, when they become one, not to listen to their kids 🙂
As for the 50 companies comment, I would be only so happy to own that many dividend-payers; all established companies like you’ve said. My long-term goal is to own about 30 dividend-paying companies in Canada, and maybe another 10 or so from around the world including the U.S. That would be plenty for me, making me almost indexed to the likes of a XDV or a CDZ. I will be posting my thoughts about that eventually, this summer.
Thanks for your comment, now I need to read your latest blogpost! Cheers!
@ Dividend Mantra: Well said. Sticking to a broad, diversified plan is key. I can sleep easily at night because of it!
@MOA: I love the quote you mentioned regarding mutual funds. They really do eat the souls of investors [that’s a bit rash isn’t it? :)] and the only real way you have a prayer in winning is with bull markets. The fees in Canada are very high and if there’s one word I would like eradicate from the investment world is ‘segregated’.
Nice post! I’m going to have to pick up a copy of The Investment Zoo.
Your comment made me laugh! Do pick up a copy and tell me what you think of it after you read it – ok?
I’m happy to see your favorite takeaways from the book.
This is all really timeless advice and I’m trying to follow just about all of it in my own personal journey.
Stay disciplined, stick to your plan, have patience, be confident, invest in your circle of competence (which probably includes 40-60 stocks), be diversified, don’t panic and always monitor. And..of course, stay away from mutual funds.
I like the part about the market being like the ocean and underlying values not changing that much. I couldn’t agree more.
Timeless advice indeed…I just need to continue to practice the advice given 🙂
Thanks for checking in and glad you liked the post!