Friday, November 14, 2014

Money Show 2014 - David Stanley

On Saturday, the Money Saver Magazine has presentations filling the whole day. The Firth one was called "Beating the TSX - It Works". This presentation was done by David Stanley.

This presentation is on YouTube starting here. There is also a website talking about David Stanley here. David Stanley says he believes in Share Clubs. There is information on these clubs here.

There is a lot of turmoil in the market, but you do not have to be in turmoil. The market is currently overpriced. The risk premium over bonds is very high. There is an overreaction to Ebola. Interest rates are very low.

Your real return is what you get after inflation. GICs give you safety. Safety can be a factor in how well you sleep at night. You can go talk to your bank manager to get a better 5 year GIC rate. It will be difficult to get the economy to grow with an aging population.

Buttonwood says that future returns from a stock/bond portfolio will be barely positive in the future. (Buttonwood seems to be a blog by The Economist.) Short term will be bad. However, the median and long term will be pretty good. The Canadian economy is in not bad shape. We are back into a secular bull market.

You should read Nassim Nicholas Taleb book called Antifragile: Things That Gain from Disorder. There is an entry for this book in Wikipedia.

We need to buy blue chip stocks; these are stocks that pay dividends. With dividend stock we can take advantage of steady, increasing payments. Dividends will account for 90% of your return. We can also take advantage of compounding with dividend stocks if we use DRIPs or reinvest the dividends. Over the past 10 years the TSXT returned 144.09% and the TSX returned 65.1%.

We can do the same by buying plain vanilla ETFs. There is a site called This site has a lot of data for investors. (This site only seems to have data on US listed stock.)

He held a portfolio if ENB, TD, BCE, NA, CAR.UN, JNJ, POW, EMA and TA for 15 and had Annual Total Return (ATR) of 12.13%. Annual dividend growth over 5 years was 8.04% and over 10 years was 14.07%. The best sector is TURF that is Telecoms, Utilities, Real Este and Financials. Pipelines are included in utilities.

His theory of beating the TSX is based on Michael O'Higgins' book called "Beating the Dow" or the "Dogs of the Dow". What David Stanley does is use the TSX60 but excludes the former income trust stocks. Note all stocks in the TSX60 are blue chip stocks. He orders the stocks from high to low dividend yield. He takes the top 10 dividend yielders and puts the same amount of money in each stock.

There are disadvantages. If you invest in stocks you have no one to blame buy yourself. There could be dividend cuts and tax code changes. There could be problems with the index itself. For example in 1999, Laidlaw was 94% of the index.

There was an article in MacLean's calling seniors old, rich and spoiled. See the article here. It is easier to make money than to hold on to money. Dividends help to hold on to money. There is less risk and higher returns in passive investing. Get an ETF of Blue Chips stock. You could get low Beta stocks. There are no REITs in the TSX60, so it is a good idea to buy some REITs.

It is a good idea to join a Share Club. Read Ross Grant's book called Destination: Early Financial Independence. It is on Amazon.

On my other blog I am today writing about Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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