Grab your coffee and read about the most important behaviour in the land of investing – the ability to do nothing. Yup, it appears that the less you do, the better. Less is more. Not thinking beats thinking. Sloth-like behavior beats extensive research and guesswork.
If only there were more areas in life where the less you do the greater the pay off. Students and workers would certainly rejoice. But that’s not the norm with most aspects of life and success. Normally you have to work very hard to get results. All of the successful folks I’ve known worked very hard and they deserve their success.
Fortunately investing works in a different way. It suits me fine. While I can work hard at times, I am also very good at doing nothing. But I’d have to admit that it took me many years (OK decades) to learn that the secret to successful investing is to do as little as possible. Successful investing is usually quite boring.
We need to get a simple plan and execute without emotion or guesswork (or second guessing). And it does not matter if you are an indexer who embraces ETFs and simple model portfolios or if you hold a collection of individual stocks. Many self-directed investors will hold a mix of of individual stocks and funds. The key is that you stick to your plan like glue and that you get out of your own way.
I’ve been writing on the passive subject on Seeking Alpha in recent weeks, and I detail my own experiences. For our US holdings we have 18 individual stocks. It is centered around 15 of the largest cap companies from the Dividend Achievers Index. Those 15 companies essentially track the index for us; we have some very slight outperformance. But the key is that I simply buy and hold and add. I trusted the smart beta index construct when I purchased the 15 companies, I did not time the entry points in early 2015. Previously we held the total index fund, ticker VIG.
From 2015, I simply added to some of the companies over the last few years. In fact I only added to the companies when they were out of favour and the stock prices were declining. Please have a read of Can You Simply Add To Your Quality Dividend Growth Stocks When They’re Down, Because They’re Down? (If you are unable to access that article signing up at Seeking Alpha is easy and it’s free. You do not have to sign up for any premium service even though it is offered.)
There’s the no-look pass in basketball, how about no-look investing. I did not guess about whether a company was in real danger, or whether the market makers were over-reacting to recent news or speculation. I simply hit that buy button. Most of the companies have recovered or are starting to recover. And I simply let the winners run.
And certainly holding individual stocks can present much more volatility and angst compared to buying an index fund. This article has been very warmly received. Here’s Individual Stocks Can Teach Us Even More About Investor Patience.
Of course most investors should stick to a well diversified, low cost ETF Portfolio, and that may even come by way of a Canadian Robo Advisor that will combine advice along with low fee investments. Please understand the risks before investing in more concentrated stock portfolios. But no matter how you build your investment wealth remember that patience and consistency are the keys to success.
Recently Benjamin Felix answered a Gen Y Money reader question on the Globe & Mail in A Contrarian argues against building wealth and creating income through dividend stocks. On Twitter (you can follow me at 67_Dodge) Mike from the very popular TheDiviendGuyBlog announced that he will write a counter post to that article demonstrating the many clear benefits of Dividend Growth Investing.
Stay tuned, this should be very interesting.
I know that Mike will be very measured and respectful.
I don’t have enough money to invest.
Parameter Insights shared some research on why many investors choose not to invest with Canadian Robo Advisors. Surprisingly, the most common answer was they they felt they did not have enough money. Josh Book, found and CEO of Parameter Insights, states that this is a common barrier not exclusive to the consideration of investing with a digital wealth manager and that even those with salaries in the $100,000 plus range will suggest that they don’t have enough to invest. Yes, we certainly need to change that line of thinking.
And here’s a great podcast with Larry Bates author of Beat The Bank on The Personal Finance Show.
On Jonathan Chevreau’s FindependenceHub one of my favourite bloggers Fritz Gilbert offers Is The Fire Community Full Of Hypocrites?
The MoneySaverPodcast looks at the financial abuse of seniors.
Warren Buffett admits he was an idiot for not buying Amazon. That idiocy has been rectified. I am happy to see that. We hold Mr. Buffett’s Berkshire Hathaway (BRK.B).
This week on Cut The Crap Investing I suggested Canadian investors need to stop being so Canadian, and I posted an update on the continued underperformance of high fee mutual funds in Canada.
And not investing or personal finance related but please have a listen to Joe Rogan who looks at the importance of proper sleep with Mathew Walker the professor of Neuroscience and Psychology at the University of Berkeley. It is the most fascinating podcast. On a societal and business and personal and educational level we are getting this sleep thing wrong.
The easiest and simplest path to greater success might bring us back to doing nothing – sleep.
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Contact me, Dale @ firstname.lastname@example.org or better yet, leave a message.