Weekend Reading – Most stocks are duds edition
Welcome to my latest Weekend Reading edition.
You can read my previous editions below:
My approach and thoughts to core and explore investing.
Enjoy this weekend reading edition – see you in the comments section!
Most stocks are duds?
Interesting reading material from the Evidence Investor: most stocks are duds.
The article cites a study covering the period of 1926-2015, which found that:
- “Over their full life, only a minority (49.2 percent) of common stocks had a positive lifetime holding period return, and the median lifetime return was -3.7 percent.”
- “Even at the decade horizon, a minority of stocks outperformed Treasury bills.”
So, the premise of the study sounds great, as a bias to indexing, but sensational headlines only tell part of the story.
The study included “all stocks on the NYSE, AMEX and Nasdaq” but to my knowledge, no other market. As such, you may or may not be able to make any similar claim for our Canadian market let alone other markets, but potentially the same conclusions might occur. Beyond that, it’s quite true that some stocks would be duds given the premise behind index investing, the alpha must be a zero-sum game. There are many stock losers to offset many stock winners. One of the compelling reasons to index invest is by being the market – you don’t have to guess who the stocks winners are. You own all the winners (and losers) as a collective. This makes indexing investing for the masses, all fine and good – to a point. Finally, not sure how survivorship bias plays into this but the analysis of stocks that remain since 1926 is hardly relevant. Did Apple exist in 1926? What about low-cost ETF world-leader BlackRock? You know the answers. Alas, take any study with a grain of salt. The time period, the scope, the story that someone is trying to tell is all very important to consider.
I’m a huge fan of index investing but it’s not indexing or nothing as some folks may lead you to believe. There are other ways to build wealth.
The challenge for me with an all-indexed approach over the years as a DIY investor has always been – I like the optionality and motivational thrill that dividends and dividend growth provide. I like seeing cash flowing into my account. I also like owing companies, that pay dividends, and demonstrate year-over-year cash increases. It’s real money I see, I can use, I can reinvest as I please.
Can I own the market and get the same or better result? Maybe. A reminder I will own “dud” stocks with indexing – you get it all: losers, winners and everyone in between.
The reliance on just capital gains or growth from my portfolio, from the winners, offers little in the way of personal confidence when it comes to my income needs as I approach semi-retirement. Sure, there never any guarantees with dividend investing. I’ve mentioned that on my site about 984 times over the last 12 years. But dividends are very good!
Besides, as primarily as a DIY stock investor, I’ve done rather well. When benchmarking my 10-year returns in Canadian stock ownership against low-cost ETF titans like XIU, XIC, and VCN over the same period, I’m up.
Will this always be the case? I have no idea although I hope so.
That said, I am a fan of investing beyond Canadian borders. For well over a decade now, I’ve owned U.S. dividend stalwarts such as Johnson & Johnson (JNJ) and Procter & Gamble (PG) as key dividend growth plays. In recent years, I’ve added Blackrock (BLK) to my U.S. portfolio. Beyond that, it’s about low-cost ETFs for simplification. I’m a hybrid investor – that’s an approach I remain comfortable with.
In closing, I have full confidence I wouldn’t be where I am today, with my portfolio overall, without taking some risks with my DIY approach, owning the odd stock “dud” and learning from it but also buying and holding many successful picks along the way. I’ve learned about investing for myself as My Own Advisor and I am better for it. Lucky or biased or not, that’s been my journey.
More Weekend Reading!
Nice update by critical care nurse by profession, entrepreneur, and blogger Rommel Faunillan. He has a very long list of stocks on My Prudent Life – holdings approaching 100 in total. Although I wouldn’t own that many stocks myself (I prefer some form of a consolidated portfolio), I totally agree with the punchline about striving to save and invest enough to enjoy some meaningful dividend and distribution income in semi-retirement, without relying on government benefits.
“Finally, our ultimate goal is to live off passive income from our dividends without harvesting the capital. Additionally, whatever other sources of income during retirement such as work defined benefit pension plan, Canada Pension Plan (CPP), Old Age Security (OAS) will be such a huge bonus and icing on the cake. However, it is something that we will not solely rely on, as these are sources of income, guaranteed it may seem but are beyond our control.”
In case you missed it, I posted my latest monthly income update on my site here. Onwards and upwards and hopefully I can earn $11 per hour from part of my portfolio later this year!
A big thanks to GenY Money, one of my favourite Canadian blogs, for her review of our new site and services to Canadians at Cashflows & Portfolios.
“For a very reasonable price you can get peace of mind and feel empowered knowing the best way to draw down your portfolio in order to preserve your estate (if that’s what you want), maximize government benefits like OAS, and minimize taxes paid. Also, you can pick the mind of two of the most knowledgeable Canadian personal finance bloggers for their unbiased takes on how they are preparing for early retirement themselves.
I think that this is a service that is a great unmet need across Canada for those nearing retirement, planning years in advance of retirement, or even those who are currently in retirement and want to optimize their withdrawals from their retirement portfolio.”
On Reverse the Crush – I read this recently:
“Think about what you value. Think about the important relationships in your life. Pursue those things. Don’t be distracted by or attracted to the false summits you see along the way. Make sure you have enough rope, anchors, clips, and supplies for the ascent. Keep yourself grounded as you climb. Look ahead, not behind. The summit is just beyond the horizon.”
Those words align well with my thoughts when it comes to wrestling with the emotional side of early retirement.
Boomer & Echo highlighted a new book: Die With Zero. I should put that on my reading list, but I have more books to giveaway first – stay tuned readers!!
Cashflows & Portfolios shared everything there is to know about the Locked-In Retirement Account (LIRA), including some Life Income Fund (LIF) withdrawal options – read on!
What do you make of this? Pretty cool, I think.
Source: The Laws of Wealth.
Dividend Stocks can Rock as Mike Heroux outlines his top-holdings in this video. Keep it up Mike!
Quite the story on Dividend Growth Investor: how an investor built a $500,000 portfolio on minimum wage. Without stealing the entire story:
“One of the largest misconceptions people have is that they need to earn a high income, in order to save. The important thing is to be able to live within your means, and manage your income and your expenses at the same time.”
Here are some Weekend Reads from Cut the Crap Investing – including more inflationary guidance.
Good stuff on How To Save Money when it comes to federal and provincial tax brackets.
Other great, free, My Own Advisor content:
Looking for free calculators, tools, or even my support? Check out my Helpful Sites page here.
I might be approaching 30 free, retirement case studies you can learn from here. More to come!
Reminder – Watch and Listen at the 2021 Canadian Financial Summit for FREE!
The Canadian Financial Summit is back once again for the 2021 edition with a great line-up of 35+ personal finance experts, including yours truly, to discuss a host of personal finance and investing subjects.
Beyond Kevin and Mahima above, I have the honour to speak alongside the following in the personal finance space again this year:
PWL Capital’s Ben Felix, Millionaire Teacher Andrew Hallam, The Globe and Mail’s Rob Carrick, consumer advocate Ellen Roseman, as well as long-time personal finance bloggers and friends Barry Choi, Tom Drake, Robb Engen, Bob Lai, Stephen Weyman and Jonathan Chevreau.
- Buy back your family time with FIRE
- How much does it cost to travel FOREVER?
- Are dividend stocks in a bubble?
- The risks of investing in cryptocurrency
- Should I have Bitcoin in my Portfolio?
- Maximize the New Aeroplan and Post-Covid travel plans
- Don’t let FOMO ruin your investment returns
- Maximize Work From Home tax tips in a Post-Covid World
- Will the Canadian Housing bubble finally pop?
- How to setup a corporation, invest within it, and then pay yourself
- The BEST ETFs in Canada
- Why self-made dividends are better than ordinary dividends in every way!
- And more!!
My session about my journey and my thinking behind setting up my corporation goes live on September 24th alongside some of the best in this space:
- Mahima Poddar – EQ Bank’s Group Head of Personal Banking to share the best solutions for your RRSP and TFSA, as well as EQ’s new USD accounts.
- Ed Rempel – on how to reliably maximize your retirement income – is the 4% rule really “safe” and a few retirement rules of thumb!
- A MoneySense panel with Jonathan Chevreau, Ben Felix, Kornel Szrejber – who discuss the Best ETFs in Canada for 2021 and more!
- Peter Hodson – considered one of the “Warren Buffetts of Canada” who shares his top lessons learned from over 30 years of professional investing, including his best stocks to own in 2021-2022!
- Kristy Shen and Bryce Leung – Canada’s original FIRE couple stops who discuss the rewarding side of financial independence.
- Barry Choi – learn how to optimize your post-covid travel plans. (I mean, who doesn’t want to get out and explore?!)
How do you sign up?
Just head on over to the Canadian Financial Summit and sign up for free with my link here.
This way, you’ll be automatically entered to win one of the free Premium All Access Passes they will giving away when the event goes LIVE.
When the Summit starts, you’ll be sent an email each day with the link to the sessions that go LIVE for the next 48 hours. That’s it. There’s no paperwork. No need to put in payment information that you have to cancel later. No worries.
The Summit will kick off with a live webinar on September 22nd and is absolutely free to view for that weekend.
If you want to check out the videos after their free window has passed (and get access to a whole smorgasbord of bonus resources and video sessions) then you’ll want to sign up for the All Access Pass. Don’t miss out on the Early Bird Pricing, as the price jumps up as the Summit begins!