Weekend Reading – The stock market is easy to beat
Hey Everyone,
Welcome to a fresh Weekend Reading…wondering if the stock market is easy to beat!?
Before that, some recent reads and reminders…
We posted our latest income update, part of our journey towards financial independence:
Canadians seem to be doing a lot of things right…including filling up that TFSA (Tax Free Savings Account):
Weekend Reading – TFSA contributions up and RRSP contributions down
Weekend Reading – The stock market is easy to beat
Is the stock market really easy to beat?
Heck no.
Let’s unpack.
My inspiration for this week’s theme came from this recent Globe and Mail (subscription) headline:
“Beating the stock market isn’t easy. Many Canadian investors act like it is”
The article goes on to say:
“Plenty of investors in recent years have awakened to the shaky track record of the stock picking business.”
And…
“The shift to passive investing has been driven, in part, by the relatively disappointing and inconsistent performance record of active managers,” Sean Freer, director of global equity indices at S&P Dow Jones Indices, wrote in a recent report.”
But that’s what active management is paid to do – perform. Otherwise, why would you invest with a money manager or financial advisor when you can index invest on your own?
I thankfully fired my money manager about 15 years ago, around the same time I started this blog, and haven’t looked back.
The case for indexing is very clear: get market-like returns less puny fees and ride the coattails of the big cap-weighted companies in a reputable index. Yet in Canada, there are ways to Beat the Index / TSX (BTSX) and you can read more about that approach in that link above. That said, I don’t know any investor that follows BTSX rules explicity year-after-year. This means, in any given year, a BTSX-related portfolio might trail or exceed the index.
In the U.S., my personal experience is it’s quite hard to beat the S&P 500 index over a long-term investing horizon. Even the TSX index is no match for the mighty U.S. index when it comes to returns.
Source: https://www.taxtips.ca/stocksandbonds/historical-investment-returns-stocks-bonds-tbills.htm
So, beyond a few U.S. stocks that we continue to own for income and some growth, we invest in the U.S. and beyond using low-cost ETFs – for lazy, passive returns.
That’s the essence of a 6-Pack or 12-Pack Canadian portfolio:
Whether you decide to go all-in on passive cap-weighted investing, become a bit of a hybrid investor like myself, or stay true to your own individual stock and bond-picking convictions, one thing is clear: the fees you pay to others in any money management activity is money you will never see again. So, choose wisely.
More Weekend Reading…
ETFs continue to grow in popularity. According to a Wealth Professional article I read:
“…Unlike mutuals though, ETFs saw net sales across asset classes with bonds leading the long-term funds with $1 billion, followed by equity with $334 million, balanced with $188 million, and speciality with $18 million.”
Congrats to Tawcan for some impressive dividend income!
Millennial Revolution wondered if millennials are the new Boomers.
Dividend Growth Investor shared some financial lessons after the Lost Decade.
Speaking of lost, has Cathie Wood lost her touch?
(Ya, it’s not easy to beat the index Cathie!)
A very healthy dose of Weekend Reading can also be found at Banker on Wheels:
Weekend Reading – Safe Withdrawal Rates Based On Inflation & Valuations
Save, Invest, Prosper!
As always, check my Deals page – partnerships and discounts to help you make the most out of your money – some of them you can’t find anywhere else!
Check out my partnerships with:
- Dividend Stocks Rock including a lifetime discount from Mike!
- 5i Research
- StockTrades.ca
- LegalWills
- Borrowell
- and more!
As always, you can also consider hiring me for some low-cost financial projections services – anytime.
Just reach out.
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Have a great weekend!
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
You titled this “the stock market is easy to beat”. Then you say “heck no”. But when you look at the chart you provide it looks like it’s not that hard for some investors to beat the indexes. (at least in this country)
In Canada we have some very safe stocks to invest in, banks, utilities, and telcos, that pay consistent dividends. The BTSX has surely beat all those indexes over a long period of time. Our own dividend portfolio still has an average of 11.8% gain over the last 20 years. Including these last two loosing years. So not that hard if you stick to your plan. For now.
All equity is still working for us.
Ya, I think the S&P 500 is hard to beat consistently. I’ve always felt that way.
When it comes to Beating the TSX, there are approaches IMO to meet or exceed the TSX returns over time.
An average gain of nearly 12% over the last 20 years is outstanding. 🙂
Mark
Hello Mark. Thank you for your post and thoughts on “beating” the market. In the current market condition with rising interest rates and stubborn inflation, shares in many interest sensitive stocks- like banks, telcos,and utilities- have experienced considerable price drops. In the short term, this could be a worry for some folks. But, dividends continue to be paid, and some even grow, so income focused investors in quality stocks held for the long term will have surely managed well. This is a buying / adding opportunity ; note the current yield average on the ” Beat The TSX” selected stocks of 7.35% ( although, I would not consider AQN) To me, this is an opportunity to improve the yield and /or the quality of a dividend focused portfolio ( with some capital gain potential). Always be careful and perform thorough due diligence before making an investment. There are risks. Take care Mike
I totally agree Mark. While valuations are down a fair bit for many of the quality blue-chip dividend growth stocks you mention, their isn’t much to worry about unless one needs to sell them in the near-term. The dividends in many cases are at or near historical highs making it a great time to add more to ones portfolio. This will boost income (short and long-term) and provide more capital upside potential which will be come once central bankers begin reducing interest rates. Of course, due diligence is important in selecting blue-chip dividend growth stocks to avoid those with unacceptable risk of cutting dividends.
Indeed, Paul. Prices are down a bundle but I don’t intend to change my plan!
Will be interesting to see what the rest of the year holds!?
Thanks for reading and sharing your thoughts.
Mark
For sure….for now… “dividends continue to be paid, and some even grow, so income focused investors in quality stocks held for the long term will have surely managed well.”
That is my hope coming into 2024, time to buy more over the coming months whether that is individual stocks or low-cost ETFs.
Take good care back!
Mark
“Canadians seem to be doing a lot of things right…including filling up that TFSA (Tax Free Savings Account)”
Me thinks that some of that has to do with demographics. The TFSA started in 2009 so the boomer generation had a lot of RRSP monies in the bank so to say and less time to max out the TFSA.. Hard to break old habits as well. Just keep on keeping on with the RRSP. Now the TFSA is much better known and also workplace pensions are not as prevalent. Many will take the company RSP to obtain the company contribution and max out their TFSA.
Both my sons are unionized and with the union pension I have several times mentioned to them to max out the TFSA and then see what contributory balance is left in the RRSP after the union portion. Much different optics now a days.
I had only the company RSP option and my own RRSP contribution for the majority of my working life.
Even then, at the beginning, I left management with the bank who obviously put the monies in to their own mutuals funds.
Now my losses and gains are my own.
RICARDO
That could be true, lots of Boomers and GenX should realize the tremendous wealth-building power that is the TFSA.
There is something to be said to be in control over your own investing decisions.
I hope all is well,
Mark