I remember opening my first investment account – an RRSP with CIBC almost twenty years ago. You could tell I didn’t really know what I was doing by the contents of that account – high MER mutual funds that were better for my advisor’s wealth than mine . . . . ugh. But I had to start somewhere.
Just like we all have to start somewhere with investing, blogs have to start somewhere too. I began this one when I was asked to take over writing the “Beating the TSX” series for The Canadian Moneysaver. Given the growing popularity of that series over the last several decades, I figured it was about time the Beating the TSX strategy and portfolio were made available online. Now that my first “Beating the TSX” article has been published, this site has seen quite a bit of traffic and subscribers. Clearly there was a need and I am honoured to be in a position to help fellow DIY investors.
So, this is me introducing myself, my values, and my vision for this site.
Who am I?
First of all, my name is Matt. I’m a husband and a father of four and a physician by training. Perhaps when I mention the ‘doctor-thing’, images of long hours, big houses, and fancy cars flash through your mind. I want to set the record straight – that’s not me. My amazing wife stayed at home to raise our four kids while I worked in a lower-paying specialty (ER) for thirteen years. Several years ago I decreased my hours to spend more time with family and pursue other interests.
I like money just as much as the next person, but I don’t care to be the richest man in the graveyard. I feel strongly that money is a means to an end. If we aren’t intentionally organizing our financial lives around our values, then we aren’t being financially responsible – even if you have millions in the bank.
A good investment plan starts with values
If you don’t set your priorities, someone else will. We’ve worked hard for our money, so we should use it to create the kind of life we want. Here is what is important to us:
- financial security
- shared experiences/adventures with family and friends
- self-improvement/skill development
- health and fitness
- contributing to a cause larger than ourselves
While I understand the financial realities of professionals, we have chosen a lifestyle that is less about luxury and more about our values. This was achievable because we did three simple things:
- Avoided debt
- Spent less than we earned
- Invested the difference using a solid investment plan (Beating the TSX)
Financial independence = choice
Beating the TSX has been so effective for us that we achieved our version of financial independence (FI) about a year ago when I was 41 years old. It changed everything. I quit my job, we sold our house, and took the kids out of school to travel the world for a year. What’s next? Hard to say – financial independence means freedom to make life decisions independent of job constraints. What we do with financial freedom is up to us. Our family felt compelled to do something epic – and we blog about our travels HERE – but the point is that financial independence is about choice.
The path to FI is paved with dividends
I believe dividend investing, and Beating the TSX in particular, is an extremely powerful and effective tool to achieve financial independence. There are plenty of great FI blogs out there touting the benefits of index investing, plenty of others diving deep into fundamental analysis of dividend-paying companies. But there is a group of DIY investors who are looking for an alternative to both mutual funds with high fees and the lackluster performance of index funds, but are apprehensive about getting started.
12.33% over 30 years
The Beating the TSX strategy has been around for a long time. In fact, thanks to Professor David Stanley who originated the series, and his successor, Ross Grant, we have thirty years of data to look back on. The most important and striking number that emerges from this data is the 30-year compound annual growth rate: 12.33% (vs. 9.4% for the benchmark index). I am not aware of a single Canadian mutual fund with a track record like this. In real terms, over the last thirty years, $10 000 would have turned into $230k using BTSX, compared to $106k investing in the benchmark index (see Fig 1).
But I’m also a realist. Just because the BTSX method has produced superior returns over 30 years, doesn’t mean the last five, ten or twenty year intervals have been similarly impressive. So, I ran the numbers for the last article.
Is BTSX too good to be true?
Turns out, the Beating the TSX method has consistently outperformed its benchmark index and the S&P/TSX over each of these time periods (Fig 2). Can we expect this to continue? No one knows, but here’s why I am sticking with the BTSX plan:
- Very low cost – less than $100/year in trading fees
- Very low maintenance – just a few hours per year
- Portfolio contains big, quality companies with durable economic advantages (wide economic “moats”, as Ben Graham would say)
- No performance drag by lesser-quality companies (Indexers are, by definition, buying positions in struggling, unprofitable companies that make up a large part of the index)
- steady stream of dividends PLUS capital gains
- the strategy is easy to stick to because dividend yield is much less volatile than stock prices
Getting started with dividend investing
Beating the TSX may not be for everyone. Some people can’t sleep without the security of a financial advisor to turn to; others distrust any method other than indexing. That’s okay! The best investment plan is the one you can stick to. For many of us, dividend investing is the foundation of that plan.
My hope is that this site will give you clear and practical information that will help get you started with dividend investing. How you use this information is up to you but I’m genuinely excited to be sharing it. Feel free to subscribe, share this page with your DIY investor friends, and send me a message with questions, post ideas, or just to say hi.