# Why I Hate the Stock Market



## tygrus (Mar 13, 2012)

1. Identify strong company in growth mode, undervalued, strong past earnings, expected strong growth, low PE.
2. Buy said stock
3. Analyst recommendations at $10 higher than current trading levels.
4. Company reports strong Q1 earnings, beats street, raises dividend
5. Stock falls $4 :confusion:
6. wtf?:grey:


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## TomB19 (Sep 24, 2015)

If you were an investor, you would be pleased to find a well run company in good shape and you would be happy to own it.

... As a gambler, you're disappointed to have put your money in the slot, pull the handle, and didn't win.


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## Beaver101 (Nov 14, 2011)

^ So what went wrong with tygrus' investing steps 1 to 6? Maybe it's a just a timing thing than a gambling thing ...


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## like_to_retire (Oct 9, 2016)

tygrus said:


> wtf?:grey:


Growth stocks are volatile and usually without a lot of history to back up assumptions.

Analyst recommendations (buy or sell side) are worthless. If earnings expectations or price recommendations aren't met, don't blame the company - blame the analysts. My advice is to stop reading the drivel that is written by analysts.

ltr


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## none (Jan 15, 2013)

The efficient market hypothesis is a reasonable assumption for the VAST majority of investors.

If there was real evidence the stop would take off the price would already reflect that (assuming insider trading is not occurring and that you're part of it)


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## james4beach (Nov 15, 2012)

tygrus said:


> 1. Identify strong company in growth mode, undervalued, strong past earnings, expected strong growth, low PE.


tygrus I think it helps to view the stock market as a mostly irrational place. Stock prices very rarely trade at fair value ... studies by Shiller showed that the stock market (as a whole) spends the majority of its time far away from fair value.

Stock move for various reasons other than fundamentals. And they can spend 10, 20 or even 30 years severely disconnected from fundamentals.


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## none (Jan 15, 2013)

james4beach said:


> tygrus I think it helps to view the stock market as a mostly irrational place. Stock prices very rarely trade at fair value ... s


This makes no sense. If people are willing to buy something at a certain price then it, by definition, is being sold at fair value


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## james4beach (Nov 15, 2012)

none said:


> This makes no sense. If people are willing to buy something at a certain price then it, by definition, is being sold at fair value


Well it's a fair price if you define fair as "what two parties are willing to negotiate" but that negotiated price varies wildly from one day to the next.

But the stock market doesn't trade at fair prices if you define fair as "book value" or "a moderate constant multiple of earnings". By this last definition, the US stock market hasn't been fair valued since about 1992, with the exception of the span of a few days in 2008.

With stocks overvalued for about 25 years now, we habituate to this and call it normal, but in my opinion it's another illustration of how stocks can go very long stretches away from fair value. Similarly, we could have 30 years of under valuation.


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## tygrus (Mar 13, 2012)

First time I have bought an individual stock in more than 5 yrs. Usually buy only ETFS. Now I know why.


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## none (Jan 15, 2013)

tygrus said:


> First time I have bought an individual stock in more than 5 yrs. Usually buy only ETFS. Now I know why.


Yup - GENERALLY, for long term successful investing you want to avoid buying individual stocks and focus on baskets of stocks via ETFs. Of course, buying stocks does give you the possibility of hitting a jackpot but that's not so much investing as gambling.


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## gibor365 (Apr 1, 2011)

All stock markets are


> not so much investing as gambling.


, regardless of ETF or Individual stock, or you guess trend coorectly or not


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## Oldroe (Sep 18, 2009)

Don't know your stock but if it's that good and at a 25% discount BUY!

Most likely you missed something and would be wise to learn what.


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## Eclectic12 (Oct 20, 2010)

none said:


> ... GENERALLY, for long term successful investing you want to avoid buying individual stocks and focus on baskets of stocks via ETFs. Of course, buying stocks does give you the possibility of hitting a jackpot but that's not so much investing as gambling.


It does ... though some of the +780% stocks in my account are key parts of the index, where the index (or a reasonable proxy) aren't at that level.


Bottom line is that fundamental value, strong prospects mean nothing until the market notices/reacts. Some of my best short term gains are ones that the market took a while to catch up on.


Cheers


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## Mookie (Feb 29, 2012)

Steps 1 - 6 tend to happen over a short time span right before and right after you purchase an investment. Over a short time horizon, you might as well flip a coin or roll the dice to determine what will happen next in the market. Nobody knows - even the so-called experts.

If you've bought a quality investment (be it an individual stock or ETF), then time will reward you, and 15 years from now you will have long forgotten that the price tanked by $4 the day after you bought it.


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## canew90 (Jul 13, 2016)

Exactly, one has 50% chance a stock will drop after buying. Worrying because it dropped means you didn't have faith in the company when you bought it and shows short term thinking. If one invests for income and finds a good company at a good price, buy it. If the price drops, buy more and earn more.


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## Eder (Feb 16, 2011)

tygrus said:


> 1
> 3. Analyst recommendations at $10 higher than current trading levels.


If there was a grain of intelligence to analyst recommendations we would all be trillionaires. Anyway if its a decent company buy more...if you were pulling the lever then you lost ...dump it.


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## Parkuser (Mar 12, 2014)

tygrus said:


> 1. Identify strong company in growth mode, undervalued, strong past earnings, expected strong growth, low PE.
> 2. Buy said stock
> 3. Analyst recommendations at $10 higher than current trading levels.
> 4. Company reports strong Q1 earnings, beats street, raises dividend
> ...


Would you mind to share the ticker so we can piggy-back on your research?

My experience is, this is a normal and regular occurrence. What happened, the momentum investing people sold; gamblers sold, because nothing to gamble short term; not enough value investors to maintain the price. Now bargain hunters will move in, new momentum guys will move in, and new gamblers; price will go up from there. Three months from now you will not remember this has happened, or it will happen again but on a higher level.


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## like_to_retire (Oct 9, 2016)

none said:


> Yup - GENERALLY, for long term successful investing you want to avoid buying individual stocks and focus on baskets of stocks via ETFs. Of course, buying stocks does give you the possibility of hitting a jackpot but that's not so much investing as gambling.


Nonsense. 

Buying blue-chip Canadian stocks that have a history of dividend increases spread out over all sectors will result in _long term successful investing_, without any MER to get in the way. It's the route to beat the index hands down.

ltr


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## none (Jan 15, 2013)

like_to_retire said:


> Nonsense.
> 
> Buying blue-chip Canadian stocks that have a history of dividend increases spread out over all sectors will result in _long term successful investing_, without any MER to get in the way. It's the route to beat the index hands down.
> 
> ltr


This has been shown to be incorrect in the long term


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## like_to_retire (Oct 9, 2016)

none said:


> This has been shown to be incorrect in the long term


Believe the propaganda if you want........... 

I'll continue to beat the index.

ltr


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## none (Jan 15, 2013)

like_to_retire said:


> Believe the propaganda if you want...........
> 
> I'll continue to beat the index.
> 
> ltr


Possibly. But long term you probably won't.


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## jargey3000 (Jan 25, 2011)

yes tygrus...I've found myself in much the same situation from time to time.
care to share which stock?


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## like_to_retire (Oct 9, 2016)

none said:


> Possibly. But long term you probably won't.


The BTSX method  has handily beat the index for over 25 years. What do you consider long term?

ltr


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## tygrus (Mar 13, 2012)

AGT Foods


Dog


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## zylon (Oct 27, 2010)




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## Eder (Feb 16, 2011)

none said:


> Possibly. But long term you probably won't.


Not too hard to beat the S&P TSX long term. Who knows about the future though...BCE could go broke and Barrick could hit oil digging for gold in Chile. I like my chances long term though.

btw AGT...1 bad quarter...fugedaboutit...buy buy buy (if you got cohones) just put it on a 5 year graph compared to the TSX...time in the market etc etc


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## none (Jan 15, 2013)

Eder said:


> Not too hard to beat the S&P TSX long term. Who knows about the future though...BCE could go broke and Barrick could hit oil digging for gold in Chile. I like my chances long term though.
> 
> btw AGT...1 bad quarter...fugedaboutit...buy buy buy (if you got cohones) just put it on a 5 year graph compared to the TSX...time in the market etc etc


Who invests in a single index?


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## My Own Advisor (Sep 24, 2012)

I'll bite 

Stock pickers CAN be the index over time but it's rare. BTSX is a proven strategy but few investors have the discipline to stick to it. 
http://www.myownadvisor.ca/can-beat-index-yes-ross-grant-proves/

If you're not sure, not convinced, don't know, doubt whether you can stick to any individual stock strategy then by all means like none suggests index invest. At least you're putting indexing odds (i.e., market like returns) in your favour. Even then, your bad behaviour can get in the way!


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## Eder (Feb 16, 2011)

none said:


> Who invests in a single index?


I have only invested in TSX stocks since 2002. Thought that was common knowledge.


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## lonewolf :) (Sep 13, 2016)

tygrus said:


> 1. Identify strong company in growth mode, undervalued, strong past earnings, expected strong growth, low PE.
> 2. Buy said stock
> 3. Analyst recommendations at $10 higher than current trading levels.
> 4. Company reports strong Q1 earnings, beats street, raises dividend
> ...


 Have to look @ the DNA of price nothing else really matters. If see structure in price in a certain stock or index play when timing is right if not stand aside.


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## Just a Guy (Mar 27, 2012)

When I do a quick look at the company's books I don't see how you can say they had a good quarter, they lost a significant amount of money even though they sold more than last year. 

So far, I can't see why they are losing money, which is also a big warning sign for me. If there was a simple explaination, such as a one time write down, that would be something else. 

Of course, it could simply be market manipulation...happens all the time. Deep pockets dumps a lot of the stock to drop the price as people panic. Big pockets buys back in near the bottom as people realize that there is no reason to fear and makes way more than if they'd held on. 

I've bought plenty of stocks that have lost money after I bought in, but my analysis usually proved true and they recovered and made great gains as expected later on.


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> I'll bite
> 
> Stock pickers CAN be the index over time but it's rare. BTSX is a proven strategy but few investors have the discipline to stick to it.
> http://www.myownadvisor.ca/can-beat-index-yes-ross-grant-proves/
> ...


Canadian Couch Potato had this excellent article on the topic:

Why Isn’t Everyone Beating the Market?

Many of us say _it's so easy_ to beat the index, yet few investors achieve index-beating performance.


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## Rusty O'Toole (Feb 1, 2012)

To get back to the original question - this is what is wrong with pure fundamental investing. Warren Buffet has said in value investing you have to be ready to watch your investments drop by 50% and not worry about it. I can't do that. When you pick out a good stock, and it goes down, that is supposed to be an opportunity to buy more cheaper. I don't see how anyone can have that much confidence today.

Maybe that was possible in the fifties but today there is so much chicanery in the markets a fundamental investor can never be sure where he stands. Look at a company like Theranos, a leader in medical diagnostic technology selling at a high price. Then it came out the whole company was a fake, that they never did what they purported to do and their advanced diagnostic technology did not exist. Anybody who is familiar with the market could name a dozen more examples.

So, that brings us to technical analysis. You don't have to believe in charts and graphs but they do tell a story to those who know how to read them and it can be a very simple task. If your stock is rising in price on increased volume it shows it has a lot of support. A lot of other people see the same thing you see. Large volume also means institutional buying which is the best kind of buying. They buy in large amounts, they tend to move in herds, and they hang on to their stock for years if they can. All the strongest stocks like Facebook, Google, Apple have strong institutional support. They own a lot of stock and they are not shaken out by every breeze in the market.

On the other hand if the stock is falling in price on high volume, get out as you would from a burning building. You may not know why it is falling but chances are in a few weeks or months the bad news will come out. Next time you see a bad announcement in the news, that has caused some stock to crash, look at the chart. In 9 cases out of 10 that stock has been dropping for weeks or months. Somebody knew the bad news before it became public.


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## Just a Guy (Mar 27, 2012)

To be fair, warren buffet would never have bought theranos. Part of value investing is recognizing established companies who've fallen out of favour, not the latest hype stock du jour. 

Buffett wouldn't buy Facebook, google, twitter and other such companies who don't really make money, are overpriced and overhyped. Not to say people can't or won't make money with them, just they don't fit into the strategy. He buys companies that make things he understands and uses, not to mention have been around a long time (coke, Dairy Queen, banks, etc.). 

Somehow "value investing" became corrupted to mean any company which is experiencing a downturn...as a value investor myself, I can say that was never the intention, it's only part of the strategy.


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## mordko (Jan 23, 2016)

Google and Facebook have operating profit of $10bn USD each. I wish I wasn't making money like them. 

Buffett doesn't buy technology because he doesn't understand the business - in his own words - but regrets it.


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## twa2w (Mar 5, 2016)

Rusty O'Toole said:


> .....
> So, that brings us to technical analysis. You don't have to believe in charts and graphs but they do tell a story to those who know how to read them and it can be a very simple task. If your stock is rising in price on increased volume it shows it has a lot of support. A lot of other people see the same thing you see. Large volume also means institutional buying which is the best kind of buying. They buy in large amounts, they tend to move in herds, and they hang on to their stock for years if they can. All the strongest stocks like Facebook, Google, Apple have strong institutional support. They own a lot of stock and they are not shaken out by every breeze in the market.
> 
> On the other hand if the stock is falling in price on high volume, get out as you would from a burning building. You may not know why it is falling but chances are in a few weeks or months the bad news will come out. Next time you see a bad announcement in the news, that has caused some stock to crash, look at the chart. In 9 cases out of 10 that stock has been dropping for weeks or months. Somebody knew the bad news before it became public.


Not sure I agree. If there is large volume, whether the price is going up or down, there is an equal number of shares being sold and being bought.
The people selling think they are getting a good price and so do the people selling. (I accept that some need the money or are simply rebalancing)

If institutions are buying in large volume, who is selling to them?
When the growth guys are selling the value guys are buying?

Most intitutional money has to stick to larger companies that appear in an index. So when a stock is removed from an index, they have to sel it. The opposite when a stock is added.
Based on your comments you would think a stock added to index would rise and a stock removed would fall in price. But on average the opposite happens over the year following the change.


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## Rusty O'Toole (Feb 1, 2012)

I disagree. Rising or falling price on low volume means little. On high volume it signals large buying pressure or selling pressure. This has to come from somewhere and indicates someone with a lot of money has an opinion and is willing to back it up.


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## Nerd Investor (Nov 3, 2015)

If you're investing on fundamentals, and the fundamentals haven't changed (or have actually improved) then why worry?
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” Benjamin Graham.


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## hboy54 (Sep 16, 2016)

Hi:

OP sees a bug, I see a feature. If on some level investing is "buy low, sell high", then it seems to me more volatility is a good thing, it provides both more "low" and "high". 

Of course for almost every investor out there, job 1 is to reduce volatility. The primary variable to control is volatility, and the secondary variable is long term return. This is rational for them as it is nothing more than applied "fear a loss more than value a gain".

I am not the least​ bit surprised that most investors do not do well long term, it isn't their primary goal. So they set out to achieve their primary goal, and succeed. They just wish they had more money in the end. Or retired younger.

This really is the power of index investing, doing an end run around intrinsic brain wiring. It isn't 5000 companies vs 25, an index of 25 companies​ will track over the long term very closely to 5000.

I also see the above as a viable explanation, other than luck, of how some people long term can beat an index and the average investor. If you make your primary goal long term returns, while most everyone around you has a primary goal of low volatility, well isn't this just a sandbox in which to prosper.

Hboy54


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## Pluto (Sep 12, 2013)

tygrus said:


> 1. Identify strong company in growth mode, undervalued, strong past earnings, expected strong growth, low PE.
> 2. Buy said stock
> 3. Analyst recommendations at $10 higher than current trading levels.
> 4. Company reports strong Q1 earnings, beats street, raises dividend
> ...


If you bought a $6 stock and it fell 4, that's signficant. but if it was a $100, its just a meaningless blip. 
Stocks often sell off a bit upon good news - traders unloading into a strong market. If you are confident in it, buy more at the lower price. If you are a buyer, you should buy on weakness, and as a seller, sell into strength. 
Did you buy it immediatly after a run up in price to new highs? In other words were you chasing a hot stock? Bad idea as they invariably consoldate...which means they will pullback below your buy price.


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## Eclectic12 (Oct 20, 2010)

hboy54 said:


> ... Of course for almost every investor out there, job 1 is to reduce volatility.


Most ... sure ... "every" - not so much. Volatility has worked well for me at times.




hboy54 said:


> ... I am not the least​ bit surprised that most investors do not do well long term, it isn't their primary goal. So they set out to achieve their primary goal, and succeed. They just wish they had more money in the end. Or retired younger.


True ... as seen in the conversation with my aunt.

Aunt ...


> I have had RRSP since they were invented yet have little growth, I don't understand.


Me ...


> What sorts of things have you invested in?


Aunt ...


> I don't want to lose money so GICs, CSB and deposit savings account.






hboy54 said:


> ... This really is the power of index investing, doing an end run around intrinsic brain wiring.


That ... plus lack of time, lack of interest and a lot of other things.




hboy54 said:


> ... I also see the above as a viable explanation, other than luck, of how some people long term can beat an index and the average investor.


Which matches up to what Buffett said when asked "stock picking or indexing" at the end of a talk at a US university. Where one has the time, interest etc. - stock pick. For everyone else (including his wife), keep it simple and index.

Half the challenge IMO is to ignore what others will try to say everyone should do then match what one can do up to the many different ways of making money. IMO being comfortable with what one is doing is worth a lot versus being stressed about it and/or being intimidated into lining someone else's pockets/retirement.


Cheers


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## Jaberwock (Aug 22, 2012)

james4beach said:


> Canadian Couch Potato had this excellent article on the topic:
> 
> Why Isn’t Everyone Beating the Market?
> 
> Many of us say _it's so easy_ to beat the index, yet few investors achieve index-beating performance.


Market indices measure the combined performance of all investors. It is therefore impossible for everyone to beat the market, to have that happen everyone would have to be above average.


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## Eclectic12 (Oct 20, 2010)

^^^^

??? ... there is stock that is traded but not in the index as well as changes to the stocks in the index so I am not convinced the "combined performance of all investors" is valid.


Cheers

*PS*

The TSX in March 2017 is reported to have 2,207 stocks listed. The TSX composite index is the benchmark with about 250 stocks in it. The TSX S&P60 has 60 stocks in it.

The S&P500 is the benchmark made up of stocks on the NYSE & NASDAQ. The NYSE has about 2,800 stocks listed while the NASDAQ has 3,100 stocks.


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## kcowan (Jul 1, 2010)

Stock picking takes work. Some enjoy that work but it is work nonetheless. Even for guys like me who have been doing it for 20+ years, I loath rebalance time because I have to work.

The only time I look at analysts is to get a sense of how deeply the stock is watched and what trends there are among them.


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## james4beach (Nov 15, 2012)

none said:


> This makes no sense. If people are willing to buy something at a certain price then it, by definition, is being sold at fair value


HCG was "worth" over $22 yesterday and is under $18 today.

That's the stock market for you. A 20% price change can happen in the blink of an eye.


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## tygrus (Mar 13, 2012)

Everything about AGT was pointing to a solid pick. It was even hovering a few bucks above its 52 weeks low. The it broke its 50 and 200 day MA and poof gonzo down $4-5 in a few days. Going to take a long time to recoup that. I dumped it and took my hit. Need to have some pain so I remember the experience.


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## Eclectic12 (Oct 20, 2010)

^^^^

Part of the work is figuring out when to keep going versus when to cut & run.

One of the mining stocks I picked then had a labour dispute plus a fall in material prices. Long story short, it still looked good so I cut my costs by buying more. End result was instead of a 20% loss, it was a four fold gain. It took work and perseverance.

Other times, cutting & running worked out better as the stock is going sideways for a couple of years.


Cheers


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## Eder (Feb 16, 2011)

tygrus said:


> I dumped it and took my hit. Need to have some pain so I remember the experience.


I'm looking at this one closer...I love these kinds of businesses. Thinly traded, arguably reasonably cheap,pays a dividend. I don't like the idea they're invested in Turkey though.


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## tygrus (Mar 13, 2012)

Eder said:


> I'm looking at this one closer...I love these kinds of businesses. Thinly traded, arguably reasonably cheap,pays a dividend. I don't like the idea they're invested in Turkey though.


I think they just have end use facilities in the ME. Their main buying and processing is here in Sask.


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## Karlhungus (Oct 4, 2013)

tygrus said:


> Everything about AGT was pointing to a solid pick. It was even hovering a few bucks above its 52 weeks low. The it broke its 50 and 200 day MA and poof gonzo down $4-5 in a few days. Going to take a long time to recoup that. I dumped it and took my hit. Need to have some pain so I remember the experience.


This is actually a great example of how hard it is to stock pick. You did the exact opposite of what you should do, but the funny thing is that you probably knew that already, and going in you knew that you shouldnt do that but you still did. All these signs point to the fact that you have not mastered the psychological part of investing, which is like 80% of the battle. A lot of what I got out of The Intelligent Investor was about just mastering emotions. 

A couple days in movement means absolutely nothing. IF you did your homework, that movement doesnt change the fact that it is still a solid pick, its just a little cheaper now. When oil crashed, I was like sweet, theres a sale on oil stocks. COS went down to 9.30 and I bought a bunch. It went down to 7.30 and I bought more. Went down to 6 something and I put in a limit order but it never went through. Should have just bought market price. The point is not that im bragging, but that you need to view these things as going on sale. When that stock goes up, you will be kicking yourself for letting your emotions get in the way and probably buy back in. The cycle continues. 

BTW, what was your buy price and sell price?


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## Eder (Feb 16, 2011)

tygrus said:


> I think they just have end use facilities in the ME. Their main buying and processing is here in Sask.


I'm having a hard time finding out what percentage of their business depends on Turkey,South Africa & China...I don't want my dollars in any of those countries...did you find this info already? No divy increase for 6 years or so is another flag but debt is going down.

Minoc,ND,rail lines,Saskatchewan are awesome spots....I love lentils, ...who doesn't? Just kinda weird they are packaging pasta in Turkey...wtf. They need to spin off the overseas crap and then would be a goldmine...maybe an activist investor here can buy a few seats on the board and monetize this company.


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## peterk (May 16, 2010)

none said:


> Yup - GENERALLY, for long term successful investing you want to avoid buying individual stocks and focus on baskets of stocks via ETFs. Of course, buying stocks does give you the possibility of hitting a jackpot but that's not so much investing as gambling.


You're 100% right. Just forgot the most important perks of indexing...

- Never having to face the possibility that you aren't really as smart as you think you are.
- Getting to believe that being average is actually being above average.
- Having someone else to blame if your money doesn't work out the way you'd hoped.
- More free time for internet trolling.


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## like_to_retire (Oct 9, 2016)

peterk said:


> You're 100% right. Just forgot the most important perks of indexing...
> 
> - Never having to face the possibility that you aren't really as smart as you think you are.
> - Getting to believe that being average is actually being above average.
> ...


You're 100% wrong. Just forgot the most important perks of individual stock investing...

- Never having to settle for paltry index returns.
- Never having to spend time with T3 slips that include ROC, foreign income, interest income, re-invested capital gains, etc.
- Never investing in companies embedded in the index that I would never consider in a million years.
- Having lots of extra money that the indexers failed to realize.

ltr


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## none (Jan 15, 2013)

^ - _whoosh_


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## zylon (Oct 27, 2010)

Eder said:


> I'm having a hard time finding out what percentage of their business depends on Turkey,South Africa & China...I don't want my dollars in any of those countries...did you find this info already? No divy increase for 6 years or so is another flag but debt is going down.


Maybe this helps.

(click on thumbnail for larger view)


source: http://www.4-traders.com/AGT-FOOD-AND-INGREDIENTS-1408945/company/


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## Eder (Feb 16, 2011)

Thanks...perfect. I think I pass...too much business in unethical areas for me.Thanks Zylon.


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## Oldroe (Sep 18, 2009)

How could etf be long term most are under 10 years old.

I've had TD stock for 30 years don't care to work out how much I've made.


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## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> You're 100% wrong. Just forgot the most important perks of individual stock investing...
> - Never having to spend time with T3 slips that include ROC, foreign income, interest income, re-invested capital gains, etc.


YMMV ... for this to hold true, the investor would have to at minimum avoid almost all REITs, some split share corps and similar.

What is specific to Canadian ETFs would be ...
- Never having to search a Canadian ETF web site to figure out if a phantom distribution that increases the cost base was paid.



Cheers


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## Eclectic12 (Oct 20, 2010)

Oldroe said:


> How could etf be long term most are under 10 years old.


While it is true that there are many new ETF providers as well as ETFs in Canada, some ETFs have been around a long time.

Funnily enough, a US ETF "Index Participation Shares for the S&P 500" was launched in 1989 but was quashed in a Federal Chicago court. 
The TSE in 1990 then launched the Toronto 35 Index Participation Units, which would later become an iShares ETF.
The ASE then in 1993 launched the S&P 500 Depository Receipts (aka SPDR or spider for short).

BlackRock iShares, used to be Barclays where a few ETFs has been around a long time. Examples include XSP as well as XIC that have 2001 start dates while XIU has a 1999 start date.

BlackRock bought out Claymore but I seem to recall them having some ETFs competing with iShares early on.
First Asset has at minimum a REIT ETF with a 2004 start date.


So while there is a lot more choice now that may have a shorter run time ... ETFs have been in Canada 27 years.



Cheers


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## Eder (Feb 16, 2011)

Heres the thing that sticks in my craw...if iShares charged 1% on my profit rather than 1% of all my money each year I'd be OK with owning a few substandard companies. As it is I'll be damned if I have to actually pay someone to buy crap like TransAlta for me!


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## My Own Advisor (Sep 24, 2012)

james4beach said:


> Canadian Couch Potato had this excellent article on the topic:
> 
> Why Isn’t Everyone Beating the Market?
> 
> Many of us say _it's so easy_ to beat the index, yet few investors achieve index-beating performance.


James, I'm not saying it's easy to beat the index. Like it's easy to count to 10. I'm saying investors CAN beat the index if they select a good strategy, stick to it, get some luck and follow it over many, many investing years. BTSX is one such strategy but again, any strategy depends on behaviour.

I would argue there are some indexers out there that _far underperform the index_ because of bad investor behaviour.


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## james4beach (Nov 15, 2012)

I agree it's possible to beat the index, but there are practical impediments. One of them is a routine management style... sticking to a system and carrying it out reliably. We're all very busy with things in our personal life.


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## gibor365 (Apr 1, 2011)

> I would argue there are some indexers out there that far underperform the index because of bad investor behaviour.


 To tell the truth I doubt that majority of passive investors continued rebalance their portfolios as they intended during 2008-9 big recession. imho, it's easiar to add to some solid blue chip 10K than to take 100K from bonds and dump it into index ETF. Some probably changes their AA on the fly ...
On the other hand, dividend investors who were invested into dividend kings (50+ years of increased dividends), continue to get higher income. AFAIR, only 1 of dividend kings stop increasing/cut dividends


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## peterk (May 16, 2010)

like_to_retire said:


> You're 100% wrong. Just forgot the most important perks of individual stock investing...
> 
> - Never having to settle for paltry index returns.
> - Never having to spend time with T3 slips that include ROC, foreign income, interest income, re-invested capital gains, etc.
> ...





none said:


> ^ - _whoosh_


Heh. Sometimes you get me none. Not sure if I'd like you or hate you if we ever met. lol


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## james4beach (Nov 15, 2012)

gibor365 said:


> To tell the truth I doubt that majority of passive investors continued rebalance their portfolios as they intended during 2008-9 big recession. imho, it's easiar to add to some solid blue chip 10K than to take 100K from bonds and dump it into index ETF.


Good point. We all know the theory, but implementation is very difficult.

I like the permanent portfolio, myself. I'm sold on the methodology. In December 2008, this would have required that I sell a bunch of my gold and bonds -- the two assets that saved my butt -- and aggressively buy stocks just when they are the scariest. Would I really have carried through with this? (It's what the permanent portfolio methodology demands...)

I hope I could, but I think this illustrates the challenge with sticking to a method. It's also why paper results always look so much better than what someone achieves in reality.


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## none (Jan 15, 2013)

peterk said:


> Heh. Sometimes you get me none. Not sure if I'd like you or hate you if we ever met. lol


I'm sure you'd like me. I'm actually pretty fun. Maybe a bit to edgy but it's with an air of fun trouble making.  I do appreciate a decent tongue in cheek sarcastic joke.


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## none (Jan 15, 2013)

My Own Advisor said:


> James, I'm not saying it's easy to beat the index. Like it's easy to count to 10. I'm saying investors CAN beat the index if they select a good strategy, stick to it, get some luck and follow it over many, many investing years. BTSX is one such strategy but again, any strategy depends on behaviour.
> 
> I would argue there are some indexers out there that _far underperform the index_ because of bad investor behaviour.


The problem sometimes is (and this is true in life and boardgames) that you can make all the right decisions and end up getting burned. The opposite is true as well, you can do absolutely retarded financial things, like buy a condo in toronto is 2015 and make a KILLING. That makes it hard to communicate and stick to sane financial strategies. I used to play a board game called 'Settlers of Catan". I would play with the BRILLIANT people who had a TON of education and I would win far more often than not. For the stage I was in in my life it was a very helpful and necessary ego boost. Anyway, at the end of a game, I would gauge my performance really not on whether I won or lost but rather when I made the correct decision at each turn based on the information i had on hand at a time. Luck with ALWAYS influence outcomes of a largely stochastic processes (at least in the short term) that is observed imprecisely (here being the stock or ETF value). For me, my strategy is to engage in the method that maximizes the probability of ending a time period with the most amount of money - i.e expected value is maximized (in a statistical sense). To me, all the research for this points to indexing. Of course, there will be those that roll triple 6's a few times in a row that you will hear from loudly, those that roll a lot a snake eyes.... not so much.


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## gibor365 (Apr 1, 2011)

> would have required that I sell a bunch of my gold and bonds -- the two assets that saved my butt -- and aggressively buy stocks just when they are the scariest. Would I really have carried through with this? (It's what the permanent portfolio methodology demands...)
> 
> I hope I could, but I think this illustrates the challenge with sticking to a method..


I'm just sure, that I wouldn't be able to do it ... Probably I would be able to add JNJ, MO or FTS, but sell a lot of bonds in order to buy crushing indexes?! No way....



> It's also why paper results always look so much better than what someone achieves in reality


 I always win at rouletta or black jack when playing with "paper money" , never with real ones


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## james4beach (Nov 15, 2012)

gibor365 said:


> I always win at rouletta or black jack when playing with "paper money" , never with real ones


Well said!


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## Oldroe (Sep 18, 2009)

And that's about my memory. 3 to 6 etf's isn't a history.

And I read that XIU pay's 2.8 % where the rest of the div. money going. Seems like a .5 mer is a scam.


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## mordko (Jan 23, 2016)

In 2015 S&P/TSX earnings yield was 2.8%. Me thinks that XIU paying 2.8% is not a "scam". 

If someone is charging 0.5% mer for XIU then it is a scam. Because XIU charges 0.18%. And XIC charges 0.06%.


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## mordko (Jan 23, 2016)

gibor365 said:


> I always win at rouletta or black jack when playing with "paper money" , never with real ones


I have a 100% success rate when playing roulette with real money. Played once - in Monte Carlo. Bet on my age at the time, except with all the excitement I got it wrong by 1 year. And won.


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## gibor365 (Apr 1, 2011)

> Because XIU charges 0.18%. And XIC charges 0.06%.


 Who knows, maybe except MER, there are some very well "hidden" fees


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Good point. We all know the theory, but implementation is very difficult.
> 
> I like the permanent portfolio, myself. I'm sold on the methodology. In December 2008, this would have required that I sell a bunch of my gold and bonds -- the two assets that saved my butt -- and aggressively buy stocks just when they are the scariest. Would I really have carried through with this? (It's what the permanent portfolio methodology demands...)
> 
> I hope I could, but I think this illustrates the challenge with sticking to a method. It's also why paper results always look so much better than what someone achieves in reality.


It also illustrates that index, permanent portfolio, stock picking or allocating income a manager .... the challenge is there.


OTOH, having sold some before the stock fell and bought a bunch Dec 2008 through June 2009 - I know I did and profited from it. I also skipped the "losses are too much, everything must be sold to be moved into GICs" that a co-worker did then regretted.


Cheers


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## Eclectic12 (Oct 20, 2010)

gibor365 said:


> I'm just sure, that I wouldn't be able to do it ... Probably I would be able to add JNJ, MO or FTS, but sell a lot of bonds in order to buy crushing indexes?! No way....


Thought you were a stock picker which would mean you'd be buying individual stocks (which is what I did). :biggrin:

James is an indexer so I suspect he go the "No Way" route for stocks and buy indexes. 
The lack of mention of buying indexes suggested the permanent portfolio is more recent but I don't know. 





Oldroe said:


> And that's about my memory. 3 to 6 etf's isn't a history.


Not sure what you are looking for ... I am at 17 years with XIU so to me that's history.

If the newer ETFs truly follow the same index, with no discretion for the manager and reasonable fees - being unpopular then dissolved or sold off are the reasons I can think of that one's performance would differ from XIU.




mordko said:


> Oldroe said:
> 
> 
> > And I read that XIU pay's 2.8 % where the rest of the div. money going. Seems like a .5 mer is a scam.
> ...


Personally, where one likes the index ... being charged 2.5% for the index is more the scam to me.


Cheers


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## Pluto (Sep 12, 2013)

mordko said:


> In 2015 S&P/TSX earnings yield was 2.8%. Me thinks that XIU paying 2.8% is not a "scam".
> 
> If someone is charging 0.5% mer for XIU then it is a scam. Because XIU charges 0.18%. And XIC charges 0.06%.


Only 2.8%? what seems to be the problem? Why pay those fees year after year just to have those cyclical dogs in there and a lower yield?


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## Pluto (Sep 12, 2013)

Eclectic12 said:


> Thought you were a stock picker which would mean you'd be buying individual stocks (which is what I did). :biggrin:
> 
> James is an indexer so I suspect he go the "No Way" route for stocks and buy indexes.
> The lack of mention of buying indexes suggested the permanent portfolio is more recent but I don't know.
> ...


What did 17 years wuith xiu get you? 20 - 30 % ?


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## hboy54 (Sep 16, 2016)

none said:


> For me, my strategy is to engage in the method that maximizes the probability of ending a time period with the most amount of money - i.e expected value is maximized (in a statistical sense). To me, all the research for this points to indexing. Of course, there will be those that roll triple 6's a few times in a row that you will hear from loudly, those that roll a lot a snake eyes.... not so much.


Yes expected value is the bees knees. But there are two expected values at play: One based purely on the investment, and the other that is based on the investment interacting with an investor's behaviour. I argue that the latter one is the reason why most people should index and the former is why others do other things and do better not based upon luck.

Let's set up a quick example. Suppose an investment has a 90% chance of returning $100 and a 10% chance of returning nil. The EV of the investment without regard for investor behaviour is is (0.1 * 0) + (0.9 * 100) = $90.

Now let's put "fears a loss more than values a gain" into play. Suppose the investor triple fears the loss situation and so effectively assigns it a 30% probability. As the probabilities must by definition sum to unity, by implication he also assigns the other positive outcome a 70% probability. Now the EV of the investment WITH regard for investor behaviour is is (0.3 * 0) + (0.7 * 100) = $70.

So this particular security happens to be trading down one day as the fear of the loss situation starts to take hold in the marketplace and he sells me the security for $80. As far as he is concerned, he got $80 for a $70 EV stock and is happy. As far as I am concerned, I got a $90 EV stock for $80 and am also happy.

The thing is which investor is more likely going to have more money over 20 or 30 years?

I am sure someone much smarter than me can model this idea and actually estimate how much better over a lifetime of investing a strictly rational investor will do as compared to a fear biased investor. james4beach? none?

I have a very fine 15 year return record and it is I have come to believe based upon exploiting this truth. I have stunningly bad times as discussed here in say February 2016, and stunningly good times. But the long term average going back at least 15 years is well above TSX.

Consider TECK.B. Many won't go anywhere near resources for fear based reasons, the sector is cyclical and volatile. The thing is, they miss a truth that it makes no sense for a large century old company that makes long term useful things to range between $60 and $4 or $5 in a 1 or 2 year period not once, but TWICE. I don't know if TECK.B has a long term intrinsic value of say $20 or $30, but am quite sure it is neither $60 nor $4. I have not and do not ever intend to read a TECK.B annual report. Whatever is the summary numbers presented by TDDI is as far into things as I need to see. A good 5 minutes invested there. Maybe a few hours of reading reports and analysts over the past few years, mostly for entertainment value. I began buying at around $24 late 2014 IIRC and the last buy was under $5 early 2016 for an ACB of just under $10. In total, what a stunning mismatch between my EV on this one, and that of many others. I made a great amount of money not because I am smarter than others but because I am lucky enough to not be fearful and have a more realistic take on EV. If I were smarter, I'd skip the $24 buys on down and start out at $5 around the local minima price.

This is why I like stocks. if I were an index investor, how much excess returns can be made if I am trying to exploit it's wanderings up and down of 10 or 20%? If my EV estimate is out by 10% points, well that can mean being on the wrong side of actual EV. Things are much clearer in a situation like TECK.B. If I stick a finger in the air and come up with EV of $20, then buying more at $5 to get an ACB at $10 works nicely as does selling at various points between $12 and $34. Yes, selling at $12 was a poor move from an EV point of view. However it made sense from a portfolio weight point of view at the time.

Just to be clear, I have never in my life sat down and calculated an EV for a stock. I just make use of the fact that there is one out there and use the idea in the abstract.

hboy54


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## Eclectic12 (Oct 20, 2010)

Pluto said:


> What did 17 years wuith xiu get you? 20 - 30 % ?


Less than some of my individual buy / holds, more than some bad moves or timing issue ... more than GICs.

I am eclectic after all. :wink:


The part I was answering was the idea that ETFs are new to Canada / less than ten years old.


Cheers


*PS*

Using buy & hold where the buy was in 2000 & the sell was 20 April 2017, for Compound Annual Growth Rate I get:

XIU ... 3.97%

Selected top index stocks range from 13.46%, a bunch seem clustered around 8% and the outliers are -100%.


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## james4beach (Nov 15, 2012)

Pluto said:


> What did 17 years wuith xiu get you? 20 - 30 % ?


Since inception in late 1999 (a little over 17 years), XIU returned *7.16% per year*.

$10,000 in XIU back then would have grown to $33,700

I don't understand where you guys are getting these low figures for XIU.
http://quote.morningstar.ca/QuickTakes/ETF/etf_performance.aspx?t=XIU&region=CAN&culture=en-CA
https://www.blackrock.com/ca/individual/en/products/239832/ishares-sptsx-60-index-etf


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> Using buy & hold where the buy was in 2000 & the sell was 20 April 2017, for Compound Annual Growth Rate I get:
> 
> XIU ... 3.97%


This number isn't right. Say we're looking at 2000-04-20 to 2017-04-20. The best source of this is through the iShares site since it will consider all reinvestments. Open the performance chart and plug in start date 2000-04-20.

That shows an initial 10,000 grew to 25,242. The CAGR return is (25242/10000)^(1/17)
17 year CAGR = 5.6%

Additionally, you can see on that morningstar link in my post above that the 15 year return til today is 7.45%

Another noteworthy point is that XIU has had the same performance as the S&P 500 since 2000. There is nothing disappointing about the long term return of XIU.


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## Eclectic12 (Oct 20, 2010)

Part of it seems to be that I started with Jan 10th, 2000 (I did say it was a 2000 start date).

Adjusting BlackRock's charting to start on that date, the growth of $10K drops from $33,778.88 (+236.48%) down to $26,919.71 (+168.94%).


I'll have to check the rest as usually Yahoo's Adjusted for splits/dividends have been accurate ... so I'm not sure where the rest of the issue is coming from.




james4beach said:


> ... Additionally, you can see on that morningstar link in my post above that the 15 year return til today is 7.45%
> Another noteworthy point is that XIU has had the same performance as the S&P 500 since 2000.
> 
> There is nothing disappointing about the long term return of XIU.


Maybe ... unless whatever is wrong drops the stock that is in the index that came out to 12 and 13%, I am just as happy to have bought those ones instead of the index.


Cheers


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## james4beach (Nov 15, 2012)

Yahoo, Google and Stockcharts are not a good idea for calculating ETF returns because they don't know about internal distributions. They can adjust for dividends, but not internal reinvested distributions.

As a result the web sites will give accurate figures for stock returns, but will under-represent ETF returns.

At the end of the day, we know that the S&P 500 index has had spectacular returns -- pretty much one of the best in the world. And XIU has performed as well as the S&P 500 index since its inception, which means it's a great index fund.


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## Eclectic12 (Oct 20, 2010)

^^^

How do internal reinvested distributions for a Canadian domiciled ETF change performance?

As I understand it - there are no additional units granted, just a CG bill for that tax year and the need to bump up the cost base to avoid double taxation. I can see it affecting the after-tax return but the performance numbers don't take taxes into consideration that I am aware of.


Cheers


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## james4beach (Nov 15, 2012)

As I understand it, the reinvested distribution is a real distribution. You are receiving a real benefit, it's not just a tax record keeping issue. So you get a real distribution, which gets reinvested internally inside the fund. You adjust the ACB as a result, but that's a side effect.

If you use one of these web sites like yahoo or stockcharts, you are not even aware that you have RECEIVED this new money, so it's missing from performance calculations.

http://www.theglobeandmail.com/glob...by-phantom-etf-distributions/article18225076/

From that article: "When a fund automatically reinvests a distribution, it’s essentially the same as if you received the money and then reinvested it yourself. In both cases, you are effectively putting new cash to work. (This is similar to what happens with a dividend reinvestment plan, or DRIP.)"

I **think** this means that performance calculations need to be aware of the reinvested distributions to be able to accurately measure total return. The reason we must update ACB is just for that reason, so that the ACB calculation is true to actual performance.


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## Spidey (May 11, 2009)

It could be that you bought a good stock at the wrong price. I find analyst recommendations worth very little and I find analysts are, in general, just as subject to human emotion due to recent market activity as the rest of us. If it was as easy as following their recommendations we would all be very wealthy. That being said, I do like watching the experts on BNN market call but I very rarely follow their recommendations. But sometimes they peak my interest in something that I wouldn't have previously considered and I put it on my watch list. I don't do very much investing in times like now. If you invest after 20% or greater corrections, you already bought the stock 20 + % cheaper than someone who bought it a few months ago. If you stick to stocks of companies that we are going to need regardless of the economy and will likely still need ten to twenty years from now then you won't go too far wrong. Some CDN stocks I might consider if there was a 20% + correction - TD, RY, FTS, BAM.A, CAR.UN, ENB, EMA, FCR, CSW.A.


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## tygrus (Mar 13, 2012)

Unfortunately, I will have to reconcile my distaste for the market because when I exit my business in the next few yrs, I will have no choice but to park some funds there for ongoing income.


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## Just a Guy (Mar 27, 2012)

I'm still thinking you missed something...

http://www.theglobeandmail.com/globe-investor/markets/stocks/summary/?q=AGT-T

These numbers don't look good at all to me...


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> As I understand it, the reinvested distribution is a real distribution. You are receiving a real benefit, it's not just a tax record keeping issue. So you get a real distribution, which gets reinvested internally inside the fund. You adjust the ACB as a result, but that's a side effect ...
> 
> From that article: "When a fund automatically reinvests a distribution, it’s essentially the same as if you received the money and then reinvested it yourself. In both cases, you are effectively putting new cash to work. (This is similar to what happens with a dividend reinvestment plan, or DRIP.)"
> 
> I **think** this means that performance calculations need to be aware of the reinvested distributions to be able to accurately measure total return. The reason we must update ACB is just for that reason, so that the ACB calculation is true to actual performance.


The ACB adjustment must be made ... otherwise, say XIU pays $2 per unit, one would pay $2 CG tax plus another $2 when the units are sold.

The challenge is that for a common stock, there would be more stock. For the ETF, the market is likely not aware of it either - so I am not clear on how/when the increase would be noticed.


Cheers


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## james4beach (Nov 15, 2012)

This is something I really don't like about ETFs. They seem to be good at transparency in most ways, except for this issue of funny adjustments with ROC and reinvested distributions.


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## Beaver101 (Nov 14, 2011)

^ I look at ETFs simply as mutual funds that have better liquidity and cheaper investment fees but not necessarily better investment vehicles. Good/acceptable for registered accounts but not so much for non-registereds for the reasons you have described as far as the tax clarity/efficiency goes.


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## Oldroe (Sep 18, 2009)

My 10 stocks are way better than XIU at 2.8.


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## spdr1812 (Apr 8, 2016)

Tygrus , did you buy right before a market correction combined with coming up to a dividend payout , say around March 16th-18th / 28th-30th .. ? I dont follow AGT , and I'm a fairly new investor so probably other factors involved .


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## protomok (Jul 9, 2012)

I'm curious how this BTSX strategy did when oil started crashing in 2014/2015 and if it is still beating the TSX? All of the BTSX comparisons vs TSX60 seem to end before oil crashed.


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## harpreetslater (Jul 10, 2020)

Stock market is dependent on how that company is going and what is going on in the world. With the current pandemic the stock market is kinda down... I am a trader, and my life depends on trading and my savings. Now I live only from my savings which I accumulated from 3 years of trading. My job is awesome, I love it and enjoy it. It needs constant updates, I need to learn and find every piece of information that is new. I read a lot about traders, investments, fees/taxes, everything about dividends. All of this information I find on this course: Do Index Funds Pay Dividends? | How it Works - InvestoTrend . As an experienced trader I totally recommend it. I knew that the stock market will go down because of this pandemic and I knew when to stop. In the next 2 weeks I will start trading again, I am really confident about this.


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## MrMatt (Dec 21, 2011)

3 years later, you'd be up a small amount, add in dividends and the return isn't bad at all.
Myself I'm up YTD.

This "pandemic crash" was just a bunch of people panicking.


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