Investing Success: Just Plain Luck?

 

In this post, we will access if our DIY approach is doing better than indexing in the long run. We will also try to determine to what it can be mainly attributed.

 

Many assume it can only be plain luck. They think DIY investors aka stock pickers can only beat indexing if they are lucky. Lucky to identify and cash in on big winners or to avoid big losses or even both.

 

In the end, the big question boils down to knowing if DIY Investing is worth the trouble?

 

We’ll have a look at our own investing situation to have a better idea.

 

To be clear, indexing is probably a better approach for most people. But we are trying to verify what’s better for us and it definitely may not be better for you.

 

Why Did We Get into DIY Investing?

 

Let’s get back to why we got into DIY investing in the first place.

 

Our initial DIY assumptions were to try to obtain similar capital returns (8%) as our expensive-on-fees mutual funds (indexing was not that accessible yet in those days) but to do a little better on dividends (4% instead of 3%) and fees (almost zero versus 2%). Here, we’ll note that indexing solutions, with fees around 0.5% or even under, are now quite easy to find. In that context, indexing is already much better than archaic mutual funds.

 

From the start, our overall objective was to make 12% long-term (8% capital + 4% dividends + 0% fees) instead of 9% with our old-fashioned funds (8% capital + 3% dividends - 2% fees).

 

In fact, doing 2-3% better seemed to be worth the hassle for us.

12-Minute Meetings (Revisited)

The 12-Minute Series was originally posted in 2012.

We’ve decided to republish it integrally because we believe it can still help as everyone aspires to make things better.

Let’s hope it stirs up the discussion and stimulates you to change the world 12-Minute at a time!

This article was originally posted on June 12, 2012

Sometimes, meetings can be a drag, especially when your boss likes to listen to himself for endless and countless hours. Furthermore, he’ll probably be upset afterwards because you missed some of his points and you lacked time to complete all your work.

Maybe someone could introduce him to the 12-Minute Segment Rule.

Use The 12-Minute Segment Rule

During a meeting, each speech or presentation should be limited to 12-Minute segments because for most people, the optimum concentration period is only 12 minutes. Beyond that, the average person won’t be able to focus and follow explanations.  

Hard Work No Guarantee of Success

Some people feel they can accomplish anything by working hard or that hard work is necessary to accomplish anything. They think hard work guarantees them good results and success.

We believe this is simply not true. In fact, we consider you can accomplish a lot and probably much more by working intelligently and doing things better.

We’re not saying to be lazy but, in the end, we are pretty sure there’s more to success than only hard work. In reality, working hard may simply not be enough.

Maybe your boss can be impressed by committed employees that work long hours. But maybe he could be impressed even more by happier efficient employees that accomplish more working less.

Doing the Right Things Right

Some people just don’t work on the right things. There’s no point on working hard if you work on irrelevant stuff.

Take some time to identify priorities and focus more on these tasks. You probably can’t accomplish everything so try to concentrate on realizing what’s truly important.

12-Minute Balance (Revisited)

The 12-Minute Series was originally posted in 2012.

We’ve decided to republish it integrally because we believe it can still help as everyone aspires to make things better.

Let’s hope it stirs up the discussion and stimulates you to change the world 12-Minute at a time!

This article was originally posted on May 12, 2012

Many believe that one of the most important keys to happiness is balance. Sadly, many lives equate to a never ending juggling act struggling in search of that so elusive concept.  

The 12-Minute Approach offers you simple yet powerful ways to achieve that so precious balance in your life.

Let’s hope that, by focusing on rhythm, order and harmony, these 12-Minute Ideas help you strive toward that balance so essential to your happiness and well-being.

Equal Balance between Needs and Activities

In order to stay happy yet still be effective, your life should be equally balanced between your needs and your activities.

Portfolio Update November 2020

 

Again, it’s DIY Portfolio report time!  As usual, you can expect our next update in about 12 weeks.

You can have a look at previous portfolio updates here:

All Portfolio Updates

Portfolio Update August 2018

Portfolio Update November 2018

Portfolio Update February 2019

Portfolio Update May 2019

Portfolio Update August 2019

Portfolio Update November 2019

Portfolio Update February 2020

Portfolio Update May 2020

Portfolio Update August2020

Note that the last words of this report have been written on November 1^st, before the US presidential election.

Despite all unprecedented events, our DIY Portfolio is still in the positive this year, which is surprising. Year-to-date capital return is around zero and are modest return essentially comes from dividends. Not that bad waiting for better days.

It would be doing even better if it were not for the last week of October where it abruptly went down by a little more than 4%.  We can sense markets are getting nervous about the upcoming US election. Contested results would probably cause the most turbulence. That’s why today, we’ll try to reason not giving into fear, essential for any successful investor.

After that, we’ll discuss our own portfolio management for the upcoming months and years. For now, let’s just say things are not getting simpler. We’ll conclude with our usual roundup of portfolio transactions. You’ll see we have been doing a little bit more lately.

Once more, I’ll remind you that I am not an investment or tax professional of any kind. The intent of this blog is not to give specific investing advice. Before investing yourself, we suggest you do all necessary research and consult a licensed financial professional if need be. 

Resist Giving into Fear

With all that is happening in the world, you may be tempted to give into your fear and cash in all your investments. We have to confess that even us, as committed investors, are sometimes afraid and have our moments of doubt.

We still believe you have to resist and remain patient as efficient investing always has to be approached with a long-term perspective.

When you are in a situation where your life is in immediate danger, your instinctive fear can help you get out of arms way. For instance, this is great when a bear is lurking, and you go away before it gets too close.

Unfortunately, our primal instincts may not serve us well as investors. In fact, they are mostly in the way.

To some extent, as investors, we should fear our instincts, not the next market crash. Being afraid can prevent us to embrace remarkable opportunities provided by every market crash.

Remember that people who loose money on the stock market often panic sell and buy in euphoria.

You can’t wait for perfect conditions to invest or reinvest in the markets because so-called perfect weather never exists in investing. Look at the last few years. There always have been good reasons to worry and not to be invested. Yet people who stayed on the sidelines listening to their afraid inner voice missed out on solid returns.

We expect occasional storms on the market and prepare for them. In fact, we like they can provide us amazing buying opportunities. So, don’t fear the upcoming big market crash. Just embrace it as it could provide you cheaper entry points in the markets for your favorite stocks.

Shuffling Positions

On a completely different front, a phenomenon has started to complicate our portfolio management even though we have been anticipating it for while. A lot a money is coming in and out of our various investment accounts.

Let’s give you some insight to let you understand better. For one thing, Lady C is now in college so that means RESP withdrawals have begun. In my case, because I work less, RRSP withdrawals are now a reality too. Soon, I will also have access to manage pension plan funds from a previous employer.

We don’t need much if any of that money to live. We still are making withdrawals from registered accounts for fiscal efficiency. It’s better to pay a little tax now that a lot more later. So, a lot of withdrawal money will be investing right back in TFSAs.

This all means quite a lot of juggling. We have to liquidate some positions before withdrawals and buy some of it right back after that money arrives in our TFSAs. We have to be extra careful with the timing of all those operations. For instance, a stock surging after we liquidated it could mean losing money if we don’t buy it back in time. And volatile markets are no help to avoid those risks.

So far, we have managed to use our available liquidities to move all that money smoothly. Most of the time, withdrawals and corresponding buybacks can be almost simultaneous. But we have to admit it can be a tad confusing and complicated.

In that context, maybe index investing could make things a lot easier for us.

Despite indexing would be much simpler, we have been reluctant to abandon our dividend stock investing strategy because we think it provides us better results. In our mind, indexing would give us long-term returns around 8%. Not bad but quite lower than our 12%ish portfolio return.

This may all change with some of our recent research and discoveries. We will look further into it in the next few months, but we realized luck and where we invest our money may be more important than our ability the selection individual stocks.

For instance, as we talked about in our August 2020 Portfolio Report, our Canadian content return as only been around 9% which is much closer to our benchmark indexing return. There is still a difference, but the gap is much narrower. Our US content did a lot better at about 14%. Yet again, is it much better compared to a US benchmark? We don’t clearly know.

In the end, maybe we were lucky to invest that much in the US and that boosted our overall return to a 12% mark. Did currency conversion also boost our US return? Maybe a tad.

Another point to consider is that because TFSAs are not that fiscally efficient for US stocks, maybe our US content will start to proportionally come down from now on.

We don’t have definite answers to all this. We now only can say it will require some additional reflection and inquiry.

Portfolio Additions and Subtractions

As we eluded to before, we did more than simple arithmetic this quarter with our complexifying situation. Note that equal or close to equal artificial stock transfers will not be discussed here.

Let’s talk about some of the recent moves we made.

Trying to diversify our financials, we initiated a position in Intact Financial (IFC). IFC is one of the dominant players in property and casual insurance in Canada and its financial metrics suit our prudent style. For a while, we were looking at life insurance companies to play that role in our DIY Portfolio but life insurers seem to remain too variable for our taste. They especially depend too much on interest rate levels.

We also looked into technology to diversify our holdings within different sectors. Many players in that industry now utilize subscriptions which means repetitive much more sustainable revenues. With that in mind, we initiated a modest position in Intel (INTC) on the US market. Intel, renowned microprocessor giant, has now diversified towards data-centric businesses and that portion of their revenues is growing fast. Using short-term lenses, INTC has been quite volatile lately as it’s not crystal clear how they are doing. But that robust corporation should still do very well in the long run.

On the Canadian side of things, we opted for Open Text (OTEX). OTEX is even a tad riskier play. Relying a lot on repeating subscriptions, OTEX is expanding rapidly and somewhat seems pandemic protected.

On a maintenance level, we sold some McDonald’s (MCD) because it had grown too much and occupied a too big portion of our portfolio.

We finally pulled the trigger on Pfizer (PFE) and Nutrien (NTR). They had been on our sell list for a while. Probably too long. They are simply fluctuating too much and don’t really fit our fairly conservative style.

In the telecommunications sector, we consolidated our position in Telus (T). We had a small position in Bell Canada (BCE) and bumped it up quite a lot.

In the present context, we also like utilities and boosted our participation in both Fortis (FTS) and Emera (EMA). The western Canadian economy has been suffering badly for a while and so did Calgary-based Canadian Utilities (CU). So, we gladly replaced CU with Alqonquin Power & Utilities (AQN) which is more into renewable energies.

Photo Credit

Housekeeping The 12-Minute Way (Revisited)

The 12-Minute Series was originally posted in 2012.

We’ve decided to republish it integrally because we believe it can still help as everyone aspires to make things better.

Let’s hope it stirs up the discussion and stimulates you to change the world 12-Minute at a time!

This article was originally posted on April 12, 2012

Living in a clean environment can contribute to your well-being and happiness but proper housekeeping takes time.

So, here are some 12-Minute Ideas to keep your house neat and tidy. Hope this helps make your home more peaceful, relaxing and inspiring.