Wednesday, December 23, 2015

Money Show 2015 - Derek Foster

Derek Foster was the last speaker I listen to at the Money Show for 2015. His talk was called "The Lazy Idiot Approach to Investing."

He read the Wealth Barber when he started to invest. He first got into Mutual Funds - Templeton Growth Fund. In that fund $10,000 would grow to 2M. However Warren Buffet in the same time period went from $10,000 to 5M. Why the difference? The answer to this is fees.

He put his life savings at 19 into this fund at $24 a Share, one year later it was $12 a share and then $6 and he bought more and lost. He sold off this investment. He read Peter Lynch who said that it was best to buy dividend stock achievers of Moody. He said you can plant a tree and when it grows you can chop it down for firewood or you can let it continue to grow and collect the fruit each year.

Most of Moody's dividend achievers grow their dividend each year. Colgate has given dividends for 117 years since 1989. For the last 54 years, it has increased their dividend each year. Invest in companies that are recession proof. Colgate and Crest (P&G) are the two biggest names in tooth paste and they have been so for a long time. This is a wonderful business.

How much do you need to stop working? The way you should think is in terms of income. What are your expenses? Your biggest expense is probably taxes. You can earn $50,000 in dividends and pay no tax. Also, if you do not work you do not pay CPP or IE.

Buy recession proof companies that are dominate in their field. There are 3 factors to look at: Rate of Return, How much you have to invest and time. If you are young you have time.

Grace Groner paid $180 for 3 shares of Abbott Laboratories in 1935. She never sold a share and reinvested all her dividends. She died in 2010 and left an estate of $7M. See her story is here. There is also an interesting take on this stock at Financial Uproar.

One thing to remember is that it is important to pay a good price for your stocks. If you want to pay $45 for a stock, sell an option to buy the stock for $45 and get a $1 premium. This is the only type of options he uses.

A stock he recommends is Visa (NYSE: V). Visa does not give you a card, your bank does. The bank pays Visa to issue the card. Visa gets a small cut on each transaction. The Bank charges interest and if you default, the bank is on the hook.

Derek Foster has written several books. He writes his books based on what questions people email him.

On my other blog I am today writing about Colliers International Group Inc. (TSX-CIG, NASDAQ-CIGI)... learn more...

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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