# Classic Couch Potato Portfolio Five Year Return



## Belguy (May 24, 2010)

As of April 30, here are the annualized FIVE YEAR returns of the four components of the Classic Couch Potato Portfolio:

XIU: +0.73%

XSP: -1.44%

XIN: -7.99%

XBB: +5.80%

Over the past five years, the only component of this portfolio that would have resulted in reasonable returns was the bond portion. The equity returns for the Canadian, U.S., and International equity ETF's have been pathetic to say the least.

As we are only part way through a lost decade, at a minimum, for stocks, and bond returns going forward are not expected to be (as) positive, the next five years could very well look even bleaker.

All of a sudden, keeping your hard-earned life savings under the mattress doesn't look like such a bad idea after all.


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## moneyisfornothing (Feb 18, 2012)

belguy
i am going to ask one last time .
u say u are retired, meaning and i assume u do not work.
by the way u say u have money.
why in heaven u do not trade stocks.
i am just curious.
u surely can easily , even with several losses during the process make at least 10-15% /year.
just curious here.
u have time in your hands , therefore why not try and use it.
cheers


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## Belguy (May 24, 2010)

I have to try SOMETHING new because I have now lost faith in the Couch Potato approach to investing. That approach hasn't done well over the past five years and there is little indication that it will do better going forward given the world economic situation which is bad and getting worse.

At my age, and given a precarious worldwide economic situation, I don't think that I belong in the stock market any more--period!!

Even if one had started with the Classic Couch Potato formula and tinkered with it in an attempt to enhance returns, you would not have done much better and maybe even have had poorer results.

I used to be one of the biggest cheerleaders for index investing but I have lost the faith and don't have a long time horizon that would be required to prove whether this method would work out over the longer term.

Good luck to those who have the time to wait but the poor economic climate that we find ourselves in today has pretty much sunk our dreams of getting ahead the Couch Potato way.

Another dream crushed!!

And so, I have ended up coming full circle from when I started posting on this site.

I am admitting defeat.


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## moneyisfornothing (Feb 18, 2012)

i completely disagree with you .
I think that at this point in your life, and your age and with the time in your hands that i myself do not possess , this is the best opportunity in ur life.
of course u will have losses but ur gains in trading will surpass them.
i do think that u do belong to the stock mkt , but the couch potato style ATM is not the best approach.
there was a time that companies were traded based on their real fundamentals.
now HFT machines decide what their fundamentals are.
problem is to get started and trade the mkt the way it is presented to us.
just expressing my opinion.
do not take it the wrong way.
GL


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## marina628 (Dec 14, 2010)

Maybe try some good dividend paying stocks ?I have made 18% on TD Nasdaq Index from Aug 2011 -Present ,there are still some good products out there.


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## dotnet_nerd (Jul 1, 2009)

XIU is only +.73%? Really?

What about dividends, are those factored in?


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## moneyisfornothing (Feb 18, 2012)

Marina
u believe that the nasdaq index will go higher?
to what 4000 points?
just asking.
i think the index possibly topped for the time being.
ur real returns on above index on a 5 year period are actually about 7%.
therefore u r talking about mkt timing.
u timed it right.
so u must have taken some off the table


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## marina628 (Dec 14, 2010)

No I am actually considering selling my Nasdeq and taking my profits ,as of today I am up 18% based on my purchase Aug 8,2011.I am expecting things to be a bit flat with that index ,maybe 2-3% either way.I have 20% of my portfolio in that index but believe bird in hand is worth more than two in the bush so likely will sell within the month.


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## Argonaut (Dec 7, 2010)

"Classic" Couch Potato misses a key asset that should be in every portfolio. Gold. 

5 year gold is +139% even with the dip from September. This is a 19% annualized gain.

Am I saying gold will outperform in the next five years? No, I don't know that. But I am saying it should be an important asset class for everyone with a long time horizon.


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## andrewf (Mar 1, 2010)

I call cherry-picking!

10 year return on XIU is 7.15% annualized. Not all that bad. Unfortunately, equities are not without risk. And that risk means that every now and then, 5 year equity returns will be less than stellar. If you can't handle that, you probably should have less equity exposure.

As far as earning 15% returns consistently being just a matter of spending time, if that were true then all the pro traders would pull it off. Turns out they don't. So, it is either harder than that, or dear Belguy is supposed to be a better trader than more than half of the guys who do it for a living.


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## Betzy (Feb 7, 2011)

Belguy said:


> As of April 30, here are the annualized FIVE YEAR returns of the four components of the Classic Couch Potato Portfolio:
> 
> XIU: +0.73%
> 
> ...


I do feel for you BG. Here's a shot at a humble suggestion to think about and ponder over for even a second.

Pick your favourite dividend paying aristocrats and buy these at a comfortable low price(you will need to determine that one) when they make a gain of 5% then look at buying a LEAP PUT option as insurance for the next forceable months/year.
This way you guarantee good easy sleep at night since you locked in the profit with the PUT. You also keep collecting the div the entire time
When the world goes through its turmoil, as it will next month, in five months and next year, during that time of loss you keep collecting the div either in shares at better prices or the usual CH $$.
If the turmoil lasts months then you look at selling the PUT to gain additional profit.

It's not winning the biggest stuffed teddy at the ring toss during the fair, but walking away with the medium one is better than just walking away with the ring toss attendant smiling at you as you gave him all the cash

Wishing you all the best.


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## CanadianCapitalist (Mar 31, 2009)

XSP and XIN are not very good ways to capture foreign stock exposure. Look at their delta with foreign markets and also its much higher correlation with XIU.

I looked up performance of my version of the couch potato portfolio, which is real world (meaning expenses are incurred but not taxes). 

http://www.canadiancapitalist.com/1q-2007-report-card/
http://www.canadiancapitalist.com/sleepy-portfolio-1q-2012-report-card/

Up 3.7% over 5 years. Before you get dejected remember that the time frame is short for a 80% equity portfolio and there is the small matter of a huge stock market crash buried in that time frame.


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## moneyisfornothing (Feb 18, 2012)

marina628 said:


> No I am actually considering selling my Nasdeq and taking my profits ,as of today I am up 18% based on my purchase Aug 8,2011.I am expecting things to be a bit flat with that index ,maybe 2-3% either way.I have 20% of my portfolio in that index but believe bird in hand is worth more than two in the bush so likely will sell within the month.


i think that is an absolute proper way of trading.
i would never hesitate to take profit on a massive index move like we had on nasdaq.
good thinking and GL


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## moneyisfornothing (Feb 18, 2012)

andrewf said:


> I call cherry-picking!
> 
> 10 year return on XIU is 7.15% annualized. Not all that bad. Unfortunately, equities are not without risk. And that risk means that every now and then, 5 year equity returns will be less than stellar. If you can't handle that, you probably should have less equity exposure.
> 
> As far as earning 15% returns consistently being just a matter of spending time, if that were true then all the pro traders would pull it off. Turns out they don't. So, it is either harder than that, or dear Belguy is supposed to be a better trader than more than half of the guys who do it for a living.


*As far as earning 15% returns consistently being just a matter of spending time, if that were true then all the pro traders would pull it off. Turns out they don't. So, it is either harder than that, or dear Belguy is supposed to be a better trader than more than half of the guys who do it for a living. *
for the above part of ur statement , ur dead balls wrong IMO.
look at the stocks i have been trading lately , which i bouught at very low prices and sold close to the top.
my marginal gain was about 20% .
what fund gave you that return?
does it take balls to buy falling knives?
u damn right it does.
the only one i bought high and took a hit is gasfrac, but that one i said to PMR , it is a tough cookie, therefore i was wrong on that one.....for now.
did i average down yet.... some of it.
so the "PROS" that u mention out there also take hits and take commensurable chances when hitting the buy button.
trading is a very difficult thingfor anyone.
on a single daytrade in asingle stock i can make 1 to 1.5% gain , the same way i can loose my bet and get out of the trade.
no one here is ever sure that the stock can go higher.
JMO
cheers anyway


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## moneyisfornothing (Feb 18, 2012)

Argonaut said:


> "Classic" Couch Potato misses a key asset that should be in every portfolio. Gold.
> 
> 5 year gold is +139% even with the dip from September. This is a 19% annualized gain.
> 
> Am I saying gold will outperform in the next five years? No, I don't know that. But I am saying it should be an important asset class for everyone with a long time horizon.


gold will only rise with inflationary pressure= monetary easing = ECB monetary easing = qe3.
so far not a hint from none of the above.
the ECB just injected 1 trillion dollars in their system.
and what exactly have they achieved?
one thing ... for now... a major meltdown.
june's operation twist is just around the corner , and if the Fed does not announce another bandaid , where is the money to fund equities?
after this weekend and depending on elections in europe outcome, meaning a socialist president in france and anarchy in greece, it would not surprise me to see the dollar strenghtening and euro weakening.
.
gold solid support is in the 1540 area aND VERY strong support at the 1400 area..
silver is in the initial 26 bux area and very strong support at 24 bux.
i am a buyer at 26 bux in a heartbeat, but more damage will be inflicted in silver and gold equities.
time will tell


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## crazyjackcsa (Aug 8, 2010)

TD E-Fund 
Canadian Bond 5.6%
Canadian Index 0.9%
International fund -7.0%
U.S. -1.8%

Now, let's look at the 3 yr returns for each:

Bond 6.2%
Canadian 12.4%
International 4.7%
U.S. 11.5%

I'm not sure if you remember, since it was such a LONG time ago, but there was this recession thing around 2007-2008? Couple of really bad years, and things (as you noticed) have taken awhile to recover. This is exactly the kind of thing the Couch Potato is supposed to buffer against, trying to time the market and pick and choose winners.


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## mrPPincer (Nov 21, 2011)

As andrew and CC and crazyjack have pointed out, cherrypicking for 5 year returns includes one of the biggest stock market crashes of all time, going from late 2008 until early 2009 the market begins a slow recovery.

I have a rhetorical question for you Belguy, if the 5 year returns right now make you depressed enough to dump your equity now, would the stellar 5 year returns we could quite likely see in about a year and a half make you chose to get back into equity?

Keeping in mind that past returns aren't necessarily inicative of future performance, but if we look at long term trends my guess is this could be a better time to be in equity than out.


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## Belguy (May 24, 2010)

I must admit that I do not hold a 'Classic Couch Potato' portfolio but rather something along the 'Uber Tuber' line. That is, I also hold high yield bond ETF's, an emerging markets debt fund, a precious metals fund, a REIT ETF, and two small cap ETF's. I have also tilted my portfolio to a value bias. Thus, over time, my portfolio has evolved.

I guess that I was feeling a little 'down' last night when I opened this thread. However, I can't help putting two factors together and coming up with a less than positive feeling. Those are that the past five years have not been great for the indexes and there is a lot of economic uncertainty in the world today. Both of those factors should matter little to someone with a long time horizon but I am already deep into retirement and would never recover should we experience another crash. It's a little bit like sitting on a time bomb!!

Anyway, despite anything that I say, I am going to stay in it and either die a rich man or completely broke or something in between.

Buy, hold and ????


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## Sampson (Apr 3, 2009)

^ what andrewf said.

No one should care what the rolling period of returns is, only your personal returns. Did you invest the monies exactly 5-years ago? or was it 10- 15- 20- yrs ago? If so, then those would be the correct dates to exam returns.

The second FUNDAMENTAL problem is that there is no comparison with an alternative investment strategy. What would the returns of alternative portfolio be?

I have only one piece of advice Belguy. Go back to work. Clearly you want more money, so earn it, don't put your faith in corporations to use your money to growth their businesses. Earn it.


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## Belguy (May 24, 2010)

Too old and too tired to go back to work!! Also, after having been invested for many years, I have become a bit disillusioned because the 'Couch Potato' approach has not produced the results that I had hoped for.

By now, I had imagined myself on my very own tropical island but it ain't gonna happen!!


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## Sampson (Apr 3, 2009)

You returns should be judged based on the time you invested the money, not any random cherry-picked moment. It really seems apparent that you need to understand sequence of returns risk better.

Based on these types of threads you post, you should be ecstatic about the returns on equities obtained since March 2009. They have been fantastic. Alternatively, since I understand you have been investing in equity markets for some time, you should be even more happy with 25-year returns. Higher than 400% return since Black Friday.

Equity investors should be rejoicing based my numbers.


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## HaroldCrump (Jun 10, 2009)

Unfortunately, Belguy's situation represents what is so horribly wrong with the retirement system in our country i.e. the defined benefit pension system (or rather, the lack thereof).
Mr. Belguy was compelled to take on all risks theoretically possible - investment risk, inflation risk, longevity risk.
Because governments past and present have denied 80% of Canadians a defined benefit pension, which could have been easily provided via CPP, many are in this situation.
If anything, this situation will continue getting worse with each generation.

The only solutions for people already in this situation are either to reduce retirement lifestyle/expectation or to go back to work.
Saving more from earned income is unfortunately no longer an option for them.


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## doctrine (Sep 30, 2011)

While I use couch potato style investing in my TFSA and RRSP, my non-registered portfolio is a selection of Canadian dividend paying companies. I have done very well with this - since the TSX peaked at 14400 about a year ago, my portfolio of 25 stocks has returned an average of 5.3% in dividends and 7.5% in capital gains. I always take a 10 year time horizon, and if the TSX is still at 12,000 in 10 years, and my companies have returned no capital gains, I will still receive 53% in dividends. My strategy is to buy and hold monthly in Canadian companies that pay 40-70% of their net earnings in dividends and have a recent history of increasing dividends, with a small emphasis on smaller companies and a small allocation to oil companies for insurance. All companies must also have recent revenue and earnings growth as well as good prospects in the future based on analysis of financial statements. In particular, purchasing monthly has had the most dramatic increase in my returns, as anything I purchased from August to October is up 15-20% due to the fear that was in the marketplace at the time. I have also de-listed 3 companies as analysis showed that there was unlikely to be revenue and earnings growth in the medium term (1-5 years). 

Good luck on couch potato investing, but I honestly see it as more a wealth management tool than anything. 5 of my 25 companies have dramatic outperformances and that can make a portfolio in a way that owning thousands of companies cannot. I also have committed to not buy if I do not see any reasonable valuations, but in my current estimation based on historical stock prices, there are plenty of stocks worth owning at the moment.


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## Sampson (Apr 3, 2009)

HaroldCrump said:


> If anything, this situation will continue getting worse with each generation.


It is hard for me to comment on this since the perception of how one would support themselves has changed. Have previous generations been duped? From my understanding, government supported retirement is still a recent development (late '60s I think?). Was everyone on a company pension before?

I know many in my generation (X) either assume they have to fund their own retirement, or they have not begun to plan.

I'm not unsympathetic - but one can either chose to look for alternatives, to his buy and hold passive index investing approach, perhaps retirees alway have needed to cash in and hold only cash during retirement, or they MUST accept the volatility associated with equity investing.

I suppose there is a 3rd alternative, not look for alternatives, and just complain.


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## larry81 (Nov 22, 2010)

Belguy said:


> Another dream crushed!!
> 
> I am admitting defeat.


Finally ! 

you are too emotional to be anywhere near stocks, see your stocks and put it all in GIC.

go go go !


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## marina628 (Dec 14, 2010)

I think the one important thing I have learned over time is to learn to take some profits off the table so if your portfolio goes down you have a bit of a cushion.You also have to adapt to present situations ,My parents are prime examples ,after years of being out of the market with exception of 25% dividend paying stocks ,my father took his GIC and started buying more dividend stocks in last couple years because he can't live on 5 year 2% GIC.
I am first to admit I am novice investor but just listening to the conversations in this forum last year in Feb I sold all my precious metals holdings at TD and took my 32% profits.I put all of that money into ENB shortly after and today have 40% profit on my ENB stock. 
IMO earning 15% is tough to do every year ,even booking 18% and 40% profits I am holding some investments down 10%.My financial goals are all set on a 4% return so anything more than that is gravy.


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## moneyisfornothing (Feb 18, 2012)

marina628 said:


> I think the one important thing I have learned over time is to learn to take some profits off the table so if your portfolio goes down you have a bit of a cushion.You also have to adapt to present situations ,My parents are prime examples ,after years of being out of the market with exception of 25% dividend paying stocks ,my father took his GIC and started buying more dividend stocks in last couple years because he can't live on 5 year 2% GIC.
> I am first to admit I am novice investor but just listening to the conversations in this forum last year in Feb I sold all my precious metals holdings at TD and took my 32% profits.I put all of that money into ENB shortly after and today have 40% profit on my ENB stock.
> IMO earning 15% is tough to do every year ,even booking 18% and 40% profits I am holding some investments down 10%.My financial goals are all set on a 4% return so anything more than that is gravy.



marina
u are doing better than Paulson.
no sarcasm here:encouragement:


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## marina628 (Dec 14, 2010)

I split my time between poker stars and TDW  My losses CNQ -36% AND XCS -23% ,Not all pretty but only invested $4000 in each of these.


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## rassmy (May 7, 2010)

I don't know why I should invest in index etf that holds, some time, 1000 companies and if I filter those companies out, I would not invest even a peni in them. Back to 2009, I have converted my RRSP account into a couch-potato style, however my non-registered account invested mainly in canadian dividend paying stocks, now my RRSP is going nowhere and I have 60% return with the non-registered.

I would say for an average knowlegeble investor, he should analyze and pick 20 to 30 stocks that are well diversified and well distributed in a way not have more than 5% invested in one stock, then watch your investmnet and balance as needed. You should do well with such strategy.


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## marina628 (Dec 14, 2010)

I have 10 Stocks in my portfolio ,still need to buy CP or CN as I don't own a railway , my portfolio is a mess but makes sense to me lol.


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## Belguy (May 24, 2010)

Is there anyone out there in cyberland who still feels that the Couch Potato approach to investing is superior to holding a diversified portfolio of 15 or so dividend paying stocks from solid companies who you feel will stay in business and who have a history of increasing those dividends over time?

If so, why do you still feel this way?

Also, to larry81, why have you not put me on your 'ignore' list long before now?


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## Financial Cents (Jul 22, 2010)

marina628 said:


> I have 10 Stocks in my portfolio ,still need to buy CP or CN as I don't own a railway , my portfolio is a mess but makes sense to me lol.


Same, I need to own a railroad as well. 

Eventually, I want to own most of the stocks in XIU, XDZ and CDZ. That should work well long-term, and no fees.


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## Financial Cents (Jul 22, 2010)

Belguy said:


> Is there anyone out there in cyberland who still feels that the Couch Potato approach to investing is superior to holding a diversified portfolio of 15 or so dividend paying stocks from solid companies who you feel will stay in business and who have a history of increasing those dividends over time?
> 
> If so, why do you still feel this way?
> 
> Also, to larry81, why have you not put me on your 'ignore' list long before now?


I do a blend of both BG.

I index a big part of my RRSP, and hold about 20 CDN and a few U.S. dividend-paying stocks, the latter in my RRSP only.

So far, so good...although TransAlta is hurting of late. I still hold it even though it is down some 20%.


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## mrPPincer (Nov 21, 2011)

Belguy said:


> Is there anyone out there in cyberland who still feels that the Couch Potato approach to investing is superior to holding a diversified portfolio of 15 or so dividend paying stocks from solid companies who you feel will stay in business and who have a history of increasing those dividends over time?
> 
> If so, why do you still feel this way?


I've just recently converted my portfolio from a basic couch potato style portfolio with a lot of td e-funds to something more close to the Uber Tuber, but with much lower MERs, so I guess I'm more or less still a believer in the basic premises of the theories put out there by Fama and French.

Also I don't feel that 15 or so stocks gives me the diversification I'd want with such a high portion of my savings in equity as I have presently.

As well I don't yet have enough knowledge to feel confident in selecting many individual stocks, and I realise that getting into individual stocks will consume more time, not just in the selection, but in the monitoring, so there's the line there where how much time would I need to spend vs how much will the financial reward be, after I have gained the knowledge needed to do it right.

Anyways, best of luck with your investment strategy Belguy (and since I seem to be on a similar path atm I don't say that entirely altruisticly


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## scomac (Aug 22, 2009)

Belguy,

Rather than admit defeat and abandon your Couch Potato Portfolio, you would be far better served if you got rid of your computer and canceled your cable/satellite subscription. It's not so much that the historic returns have been bad, they've been what they've been and that my friend is fine provided you really understand the rationale behind passive investing. What strikes me as being your biggest stumbling block is that you are convinced the future is lost based largely on all the noise you are continually linking to from the various doom and gloom pundits. These people have no way of knowing, they're simply speculating and in many cases talking their positions. A lot of these folks get paid to create controversy; they really aren't your advisor, let alone your friend.

Rather than spending all your spare time fretting about the horrible future that no one can possibly be certain will occur, spend your time at a more productive activity like volunteering at a community organisation or charity or just get outside and engage in a physical activity and burn up some of that nervous energy that is being channeled into your forum activities.


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## webber22 (Mar 6, 2011)

GOOD answer scomac. I think that sums it all up.


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## boipinoi604 (Feb 13, 2012)

Belguy said:


> I have to try SOMETHING new because I have now lost faith in the Couch Potato approach to investing. That approach hasn't done well over the past five years and there is little indication that it will do better going forward given the world economic situation which is bad and getting worse.
> 
> At my age, and given a precarious worldwide economic situation, I don't think that I belong in the stock market any more--period!!
> 
> ...



I agree with you about staying away from equities.
Not because of the current state of the world but rather your investment horizon.
Unless you have 10-15years of time to invest, I suggest more stable securities i.e. bonds.
Historically, in the long run, return on equities is 6%.


Apparently, a cap-weighted index, because of market capitalization, will be overweight on growth stocks and less on value stocks.
An alternative approach to indexing, is fundamental index, which allocates stocks in a portfolio according not by market cap but by ecomic scale.
This approach is supposed to add 200basis point over the conventional indexing.
Again, this won't be instant gratification, this process takes time and if you have an investment horizon of 10-15years, by all means.


And I don't agree with being a day trader.
It's a zero-sum game minus trading cost.


/imo


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## 44545 (Feb 14, 2012)

Belguy et al,
5 years seems like too short a time window to judge a portfolio's returns on, though perhaps you can say something about its volatility through that lens.

Take a look at this link:
http://observationsandnotes.blogspot.ca/2009/04/stock-market-returns-by-year.html













> The apparent message here is that, over 10 year periods:
> 
> A little less than half the time your 10-year return will be between 0% & 10% per year
> A little more than half the time you'll make between 10 & 20% per year
> ...


I've seen other figures that show a couple of 10 year periods with _very small_ negative returns. I'll try to find those and post up.

Here's a thread I posted over on Bogleheads: http://www.bogleheads.org/forum/viewtopic.php?f=10&t=95915

The latest reply compares being engaged in the market with burying cash (under the mattress as you've put it.)

I'd rather accept the volatility, knowing we've had a 100 years of positive returns than accept a guaranteed loss due to inflation.


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## Four Pillars (Apr 5, 2009)

For those of you trying help/answer or respond to Belguy - you are wasting your time.

I have no problem with his incessant nonsense spam, because I find them entertaining, but I don't waste my time trying to converse with/convert him.

Ask yourself this - does he ever respond to anyone's good advice in a sane manner? Does he ever change?

Belguy spends his time looking around for negative things to post. That all he does and that's all he wants to do.


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## Eclectic12 (Oct 20, 2010)

HaroldCrump said:


> Unfortunately, Belguy's situation represents what is so horribly wrong with the retirement system in our country i.e. the defined benefit pension system (or rather, the lack thereof). [ ... ]
> 
> If anything, this situation will continue getting worse with each generation. [...]





Sampson said:


> It is hard for me to comment on this since the perception of how one would support themselves has changed. Have previous generations been duped? From my understanding, government supported retirement is still a recent development (late '60s I think?). Was everyone on a company pension before?
> 
> I know many in my generation (X) either assume they have to fund their own retirement, or they have not begun to plan. [ ... ]
> 
> I suppose there is a 3rd alternative, not look for alternatives, and just complain.



What's so hard to figure out? Regardless of what the situation used to be, the question boils down to what the gov't could provide versus what an individual is equipped to handle plus can afford.

Based on the lack of basic financial knowledge most people I know display, I'm not optimistic that individuals are going to do well at funding their retirement. I'd expect just between experts already employed in gov't plus the savings of the enormous economy of scale, the gov't could be much better.

IMO, the risk is to keep the politicians from siphoning off any surplus to their pet project and reacting in a timely manner to any shortfalls.


Cheers


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## eulogy (Oct 29, 2011)

> I have become a bit disillusioned because the 'Couch Potato' approach has not produced the results that I had hoped for.


The results of passive index investing are market returns. The market hasn't been that hot over the last 5 years. Did you not understand this when you got into it? The "couch potato" strategy didn't fail. The markets did. The strategy performed exactly as it was designed.

I think you're getting the perception that people are making big returns, while you're sitting on the passive approach losing. People like to talk. People like to talk about their big returns on investments that did well. They rarely ever talk about that trade that broke even, or that trade where they lost money. They talk about where they won. And this is especially true on the internet. Often these returns are over short spans that don't give you any realistic perception of long term growth. Someone in this thread said they earned 20% lately on some trades. As of a few months ago my US holdings were up over 20% for a short period of 6 months. The S&P500 was up over 20% at that time, which is the passive return.

I don't know about users here, but there is a thread at another Canadian personal finance forum where they talk about day trading. These people make great trades and earn great returns on those trades. But they sit on cash all the time. Great, they earned 10% return on a $4000 investment over a few months, while a $100,000 sits in a money market account earning nothing. They don't talk about TOTAL return in that case, which is pathetic.

And lastly, this wouldn't be a good thread if I didn't piss off some dividend players. I don't dividend invest because I've yet to get an answer for this simple scenario. If you have two companies that are identical in every way (market, profit, etc) except one pays dividends, why is the one that pays dividends better (return wise)? Simple math tells me my returns will be identical. Dividends have their place (like if you want to earn income), but I'm not convinced that there are superior returns.

The big thing you have to watch about dividends and the way people talk about it is the way they do their math. I'll give you a few examples. This one should be obvious, but I've heard this from people: "My dividends are up 30% so far this year!" This means that a 2% dividend has grown to 2.6%. They don't have a return of 30%. I don't know why anyone would ever do this type of math. It seems like it is nothing more than mental masturbation feel goodery.

Another example that is harder to see is when someone does their dividend returns based on original investment. This is a big distortion of what is going on. Something that has been said to me: "My dividends are paying 15% on my original investment while the TSX is down 9%." This person actually thinks they are outperforming the TSX. What is being done here is the equivalent of investing $1000 20 years ago. Today it being $5000 and you earned $100 over the year. It would be like saying you earned 10% (100/1000 * 100%), when you really only earned 2% for the year. If the TSX was up 3% on the year, you would probably be bragging about how you beat the market. Absolutely put the market to shame with your superior returns. Why anyone does this type of math is yet again beyond me. 

Anyway. Don't get discouraged. It's only 5 years you're looking at. Despite the perception people give, they're not earning the big returns. Stick with it. Calm down. Or reduce your risk if you can't calm down.


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## Belguy (May 24, 2010)

Figures lie and liars figure. You can tell just about any story that you want with statistics. I take it all with a grain of salt. Great post eulogy!! I couldn't have said it any better.


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## crazyjackcsa (Aug 8, 2010)

Four Pillars said:


> For those of you trying help/answer or respond to Belguy - you are wasting your time.
> 
> I have no problem with his incessant nonsense spam, because I find them entertaining, but I don't waste my time trying to converse with/convert him.
> 
> ...


My fear is that a new member might see one of his posts and think he has it all figured out. So I have to respond.


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## Belguy (May 24, 2010)

I no more have it all figured out than any single one of the rest of you do!!


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## CanadianCapitalist (Mar 31, 2009)

crazyjackcsa said:


> My fear is that a new member might see one of his posts and think he has it all figured out. So I have to respond.


Same here. Belguy has the wonderful ability to make two completely contradictory arguments often on the same day. Nothing we say is going to make a whit of difference. But hopefully occasional responses will be useful to newbies reading Belguy's posts.


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## Sampson (Apr 3, 2009)

^ same here.

I think our rational counter arguments show their most strength when Belguy choses NOT to respond.


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## Sampson (Apr 3, 2009)

Eclectic12 said:


> Regardless of what the situation used to be, the question boils down to what the gov't could provide versus what an individual is equipped to handle plus can afford.


Agreed.

But for me the debate is how much of this responsibility falls onto the government? My family has saved enough or has plans to save enough for ourselves. Should our hardwork be used (in the form of taxes dollars) to fund the retirements of others whom spent more frivolously during their lives? We are largely a socialist democracy, and I don't mind paying into coiffers for the benefit of others, but for someone whom should have AND could have saved, my sympathy is a little short.


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## webber22 (Mar 6, 2011)

I'm starting to think Belguy is a userid shared by the mods to increase web traffic and revenue. No human can contradict themselves that many times and still appear to make sense ....


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## indexxx (Oct 31, 2011)

eulogy said:


> If you have two companies that are identical in every way (market, profit, etc) except one pays dividends, why is the one that pays dividends better (return wise)? Simple math tells me my returns will be identical. Dividends have their place (like if you want to earn income), but I'm not convinced that there are superior returns.
> .


The reason is that you can set it up so your dividends are automatically re-invested in more shares, which then get re-invested into even more shares on the next dividend date, etc etc, compounding your position in the long term. Here's an example:

http://beginnersinvest.about.com/od/investingtips/qt/tip11.htm


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## indexxx (Oct 31, 2011)

BTW- to those who quote low five-year returns- remember the crash of 2008? That is within the last 5 year timeframe, skewing the results. There is nothing to say it can't happen again (or probably will...) but 5 years is too short. Start looking at 10-year moving averages and it's a different ballgame.


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## Belguy (May 24, 2010)

They call this site a FORUM, do they not? So, let's look that word up in the dictionary. It states "any public meeting place for OPEN DISCUSSION giving opportunity for debate". That's precisely what I feel that I do on this forum--introduce various topics and ideas for further debate. It doesn't mean that I necessarily agree with every idea that I present but am often interested in how others feel about something that I have come across in my research and reading. I am not contradicting myself--just submitting various points of view from various sources. I don't expect everyone to agree with everything that I say. Heck, I do not pretend to agree with every thought which I submit. Also, what is so wrong with making two opposing arguments on the same day? Doesn't that generate discussion which is what a forum is all about? I don't pretend to have all of the answers and I would wager that nobody else on this forum does either. As for the banning comment, I do not understand that either but, if I am banned for my submissions, then so be it. I just wanted to be clear about one thing and that is, just because I submit an idea for discussion does not, in any way, indicate that I necessarily agree with that idea unless I say I do. I am simply bringing it to "an open discussion in a public place to give further opportunity for debate" which is the very definition of what a so-called 'Forum' is supposed to be. And so, with that, go ahead and ban me if you wish because there are endless number of sites on the internet where a free exchange of ideas is welcome and encouraged. Also, there is nothing wrong with responding to any of my submissions by disagreeing with them and warning others about any ideas submitted--not that YOUR opinions are always correct either. None of us can be that smug!! Oh, and by the way, for as long as I am allowed to continue to participate in this "free exchange of ideas", please feel free to put me on your personal 'ignore' list although I will miss your thoughtful responses to the ideas which I submit. One added request is that you do not respond to my submissions with personal attacks as this is something that I feel that I have never done here and it always reflects in a negative way more on the attacker than it does the person on the receiving end. Take care.

Oil is down 7.74% in four days and 0.9% YTD. With weakening oil and commodity prices, buy plays that will benefit from the decline in commodity prices going forward.---Cramer

The world economic uncertainty and declining commodity prices might also favour large caps (any company that could benefit from declining input costs) over any small cap commodity players.


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## marina628 (Dec 14, 2010)

Belguy could be us in 30 years when we are retired and on a pension.Many can learn from his situation and I have never understood the personal attacks against him by other members.


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## crazyjackcsa (Aug 8, 2010)

You won't see me attack him. He's always polite, never attacks a person and isn't prone to ranting. That said, trying to follow his train of thought is nigh-on-impossible. Probably because (as others have noted) he contradicts himself at every turn.


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## andrewf (Mar 1, 2010)

I don't like to pile on either.


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## moneyisfornothing (Feb 18, 2012)

Belguy
i agree with a lot of ur arguments above, and then i ask you.
what have u done today?
u just talked about oil..above.
lets assume that oil actually hits the 95 bux area.
do u think it will be oversold for a possible bounce or are we going straight down to 75 bux?
why don't u buy oil?
any darn long etf would do for a quick trade.
that is a simple example.
lets say that between gains and losses u average 1% a day or even 0.5% a day .
how much money can u make in a year.
one has to work his *** off for that.
it is a traders mkt no couch potato or divvys .
if u have 2 million bux , sure live on divvys by all means .any good company is still paying good divvys and u do nothing , just collect it.
i find that u do post a lot of ideas , but what exactly have u done FOR YOU today.
i am very very busy and i place trades and leave bids on the table.
IT IS CALLED TAKING RISK.
just sat in front of my comp and went through THE FORUM.
had some dirty stinky bids filled in certain companies of my interest , and guess what i even bought oil today .
PBR at 21.75 and another ETF .
just as an illustration here.
can i get reamed in the short term?
by all means.
will PBR for example at one point go higher ?
i am damn sure it can.
anyway, ur posts bring discussion , but what have u done today.
cheers


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## sharbit (Apr 26, 2012)

I know my statement is contradictory to the point of the couch potato portfolio is that I've always found use in rebalancing to prune out relatively overvalued companies. It doesn't give you significant returns on the upside but it seems to mitigate downside.

One commenter asked about why favour dividend companies and I think there's a mix of reasons such as:
-cash now vs cash later
-cashflow vs cost: more successful investing requires cashflow to reduce the speculative component (example: land vs rentals). Cashflow also gives measures for payback and break even. It's not so important what they are however it is useful to know compared to what they've been historically. An example is REITs: I'd argue your lighting money on fire by investing in them right now.
-company information: the sustainability of a dividend and how management responds gives insight into the company
-clientele: some people require or prefer an income stream that they can quantify


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## larry81 (Nov 22, 2010)

Belguy i hope you sold your position because the true market crash is coming !


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## Belguy (May 24, 2010)

While I do post a variety of ideas and approaches to investing as I come across them in my research, I believe that I have made it clear that I am primarily a buy-and-hold index investor. I have also emphasized that I stay fully invested during all market conditions and am in it for the full roller coaster ride. Occasionally, I get disillusioned and post comments that I have lost faith in this approach but it is what it is and I am not about to change my approach now.

From the book 'The Investment Answer': We believe the most effective way to invest is to deploy your capital throughout the public fixed-income and equity markets in a broadly diversified manner designed to capture a global capital market rate of return. With the proper time horizon and discipline you can reach your financial goals and outperform most investors with less risk.

Remember do not focus on what you cannot control. You cannot predict the outcome of the mess in Europe for example. However, what you can control is your costs, diversify properly, establish the appropriate asset allocation to your individual risk tolerance and circumstances and maintain the discipline to stay the course (something that I admit to being somewhat wobbly about at times) and you will have done everything possible to stack the investment odds in your favour--but with no guarantees over all time periods.

Going forward, when you see the investment predictions in the latest financial periodicals, watch the talking heads make their forecasts on TV, and listen to others boast about their latest great investment ideas, you will understand that they are largely speculating instead of investing.

Now you know the better way. You have 'The Answer'.

---From 'The Investment Answer' by Daniel C. Goldie CFA, CFP & Gordon S. Murray

Please folks, whenever you feel that I am confusing you, will you kindly refer back to this particular post for clarification on my investment method and philosophy and in order not to be confused by the various alternative ideas that I contribute to this forum.

Thanks for hearing me out on this and good luck with your own particular method of investing whatever it may be.

With kind regards.


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## Cal (Jun 17, 2009)

Belguy said:


> Is there anyone out there in cyberland who still feels that the Couch Potato approach to investing is superior to holding a diversified portfolio of 15 or so dividend paying stocks from solid companies who you feel will stay in business and who have a history of increasing those dividends over time?


To move it back to the thread....

I never felt the couch potato approach was superior. I find it waters down my results. (I think Argo feels that way too) I watch about 20 stocks really closely and for the most part buy and hold them. Although I never seem to hold more than 15 at any given time.

Having said that, the couch potato is a great way for some to invest. Diversification, hands off for the most part, drips.....it is a great simplistic approach.


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## zylon (Oct 27, 2010)

As someone else pointed out (not sure if in this thread or elsewhere) the Cdn Couch Potato portfolio is *not* designed to maximize gains, but to provide a safety net. Belguy seems to have forgotten why he was pumping CCP in the first place.



> Fustey’s takeaway message is that standard deviation can’t model uncertainty. “Anything can happen in financial markets,” he says. “So you’ve got to somehow assess the likelihood of these bizarre, extreme events, both positive and negative.” In practical terms, this means that investors may want to consider some kind of safety net to protect them against sudden, unexpected drawdowns.
> http://canadiancouchpotato.com/













```
XIU $37,500 Jan 2 2001
XBB $37,500 Jan 2 2001
XSP $37,500 Jun 1 2001
XIN [U]$37,500[/U] Oct 1 2001
   $150,000 invested
   $198,500 current mkt value (May 7 2012)

Rebalance and dividends reinvested at the beginning of each year.
```


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## moneyisfornothing (Feb 18, 2012)

i was not going to post today Belguy , but here it goes.
i fully agree with ur statement above and i do respect buy and hold traders.
i am not a buy and hold trader as u can already have a feeling about it.
i also wish you much luck.
unfortunately the "stay invested moto" has nor been working for awhile.
nevertheless if it is a long time horizon 10/15 years u should be fine .
in ur case maybe not and i understand ur disilluysion with the mkts.
cheeers


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## Belguy (May 24, 2010)

Many of the equity markets have not had a particularly good run over the past several years which is why I have not met my goal of becoming a millionaire by now. However, there is still the hope that equities will again have their day and perhaps deliver superior returns over the next few years.

However, there are no guarantees.

The more a trader tries to outsmart the market, the better chance that the market will win.--Rob Carrick, Globe & Mail

http://www.advisor.ca/investments/market-insights/rebuttal-long-term-investing-alive-and-well-77957


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## clovis8 (Dec 7, 2010)

This is an insane argument. It's like plotting the number of office worker deaths per year in New York, including 2001, and then concluding working in an office is really dangerous. 

Perhaps the problem lies not in the Couch Potato but in the 2008 crash?


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## SlowandSteady60 (Feb 19, 2012)

I have a quick question and maybe someone can shed some light on it for me. I always hear "buy and hold" and although I have done well with real estate, my foray into stocks is a very slow process and although I understand much of it now, I still don't understand everything. So here is my question. In Feb of 2011, XIU was running at $12.32 and in Feb 2012, it was at $20.47. I haven't sat and done the math yet, but it seems if you were in it during those exact time periods, you would have made some serious coin on it. Now I realize it's all a matter of timing and no one can determine when that exact moment of high and low is, but the way I see it, we are headed back down the hill again somewhat like 2008. Not to say history will repeat itself so soon. So instead of leaving your money in this ETF, why would you not take it out and move it elsewhere and treat it like it was a single stock. I've read the Couch Potato books and over a long period of time, it makes sense. But why watch your money go down, when you can get out and get back in later. It just doesn't make sense to me. I get up in the morning to make money, not lose it. Buy and hold, No thanks. Maybe I'm thinking wrong, someone straighten me out. Otherwise, I'll stick with real estate and leave diversifying alone.


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## slacker (Mar 8, 2010)

@Slow: If you *know* your investment is going to go down, then yes you are correct. In fact, if one has the knowledge that stock will go down, one can massively leverage up and short sell and make hundreds of percents of return.

A related issue, is when to get back into the market? Will you observe the market go up consistently for a few months first? and then jump back in?

The risk of your idea is that in practice, you will be selling low and buying high.


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## Eclectic12 (Oct 20, 2010)

eulogy said:


> [ ...]
> 
> I don't dividend invest because I've yet to get an answer for this simple scenario. If you have two companies that are identical in every way (market, profit, etc) except one pays dividends, why is the one that pays dividends better (return wise)? Simple math tells me my returns will be identical. Dividends have their place (like if you want to earn income), but I'm not convinced that there are superior returns.
> 
> ...


I don't mean to be offensive but for the simple scenario - either the math is bad or there's a silly bias! :biggrin:


To be _identical in every way except dividends_, the share price is also going to be the same, tilting the total return in the dividend payer's favour.

The capital gain (CG) is going to be the same but the dividend paying stock also contributes the dividends collected. The simple math I was taught says $X + $Y is *always* larger than $X.

If the dividends are re-invested via a Dividend Re-Investment Plan (DRIP) - the situation is less clear but the CG can be higher, in addition to the dividends collected, which is again a clearly better return.


IMO, the scenario is simple and the conclusion should be just as simple. I'm not clear on how the returns could possibly be identical - unless there is some other factor in play.


Cheers


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## Barwelle (Feb 23, 2011)

Eclectic, I think in eulogy's thinking, the dividend payer's share price would have gone down each time it paid a dividend, to the equivalent amount of the dividend.

E.G. Company A and Company B are said identical companies. A pays no dividend, B does. Both are valued at $10.00.

B pays out a dividend of 20 cents. 

Company A's value is $10.00 (share price).
Company B's value is $9.80 share price + $0.20 dividend = $10.00.

Then, say both company's stock prices go up $0.40.

Company A is at $10.40.
Company B is at $10.20, + $0.20 dividend = $10.40.

Which is better? To have 100% capital gains, or some CG, some dividend income (in this example, 50% CG, 50% dividend)? What if 100% of the gains were dividend?

The way I see it, there are two considerations: tax, and what you need the investments for. (Long term investments that you won't need for a while, or do you need income from them.)

If it is in a registered account, tax makes no difference, so if you need income, you'd prefer the dividend payer (B) so that you don't have to incur trading fees to have cash. If you don't need the income, you'd prefer to have Company A. Unless B has a share purchase plan or DRIP, especially if these plans give you a discount on purchase price.

If it is in a taxed account... depends on your tax rate, I suppose. Maybe someone else can figure that out, I gotta go.


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## Eclectic12 (Oct 20, 2010)

Barwelle said:


> Eclectic, I think in eulogy's thinking, the dividend payer's share price would have gone down
> each time it paid a dividend, to the equivalent amount of the dividend.
> 
> [ ... ]
> ...


That's theory - and IMO, not practical. 

How often does the market move perfectly in step with theory? 
Market price is driven ... by the market - which at any given point, is influenced by all kinds of factors.

Then too, how many times can one find *identical* companies where one is paying a dividend and the other is not?

I'd love to see if the "flight to safety" where money is moved into dividend paying stocks during a down market has pumped up the dividend payer's share price, regardless of the dividend being paid. The problem is dividends seem to be largely sector based so it's tough to get anything close to comparable. 

As for considerations - I'm more interested in if it's a good investment before anything else. 

Even if the companies were identical except for dividends, I'd rather have the company that is better managed and the market likes over time - dividend or no dividend.

I'm sure I'll be more sensitive to the makeup when there is a potential for OAS being reduced but that's in the future.


As for the taxed account, in theory - since the total return is alleged to be the same then 100% CG should always end up with the better total return, after taxes. In practice, IMO there are too many factors that will affect the share price more than the drop after paying a dividend.


Cheers


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## doctrine (Sep 30, 2011)

The assumption that a company's share price will increase with earnings not paid as dividends is patently false. The book value is what is increasing, not the share value. The shares of the company may never, ever rise above $10. 

A stock is only worth the future value of its dividends. A company that is already paying back now is better than a company that never pays back. Even the king of non-dividend paying companies, Berkshire Hathaway, was forced to buy back shares (or at least threaten to) to maintain its share price because of market pressure, which had nothing to do with its book value. Fortunately they have earnings, for which make the threat valid. 

If a company isn't going to put cash in your pocket, why are you an owner? I wouldn't be.


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## boipinoi604 (Feb 13, 2012)

SlowandSteady60 said:


> I have a quick question and maybe someone can shed some light on it for me. I always hear "buy and hold" and although I have done well with real estate, my foray into stocks is a very slow process and although I understand much of it now, I still don't understand everything. So here is my question. In Feb of 2011, XIU was running at $12.32 and in Feb 2012, it was at $20.47. I haven't sat and done the math yet, but it seems if you were in it during those exact time periods, you would have made some serious coin on it. Now I realize it's all a matter of timing and no one can determine when that exact moment of high and low is, but the way I see it, we are headed back down the hill again somewhat like 2008. Not to say history will repeat itself so soon. So instead of leaving your money in this ETF, why would you not take it out and move it elsewhere and treat it like it was a single stock. I've read the Couch Potato books and over a long period of time, it makes sense. _But why watch your money go down, when you can get out and get back in later_. It just doesn't make sense to me. I get up in the morning to make money, not lose it. Buy and hold, No thanks. Maybe I'm thinking wrong, someone straighten me out. Otherwise, I'll stick with real estate and leave diversifying alone.



Simply because NOBODY knows if it will go down or up.


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## SlowandSteady60 (Feb 19, 2012)

> "Simply because NOBODY knows if it will go down or up"


I realize that the market is unpredictable and one cannot tell whether or not it will rise or fall, but you have to admit that in 2008, at some point, people should have been able to stop the bleeding when they seen their portfolios taking a nosedive. We protect our stocks when they rise by selling out before it's too late, so why should ETF's or mutual funds be any different. Right now the TSX is dropping like a rock and I don't see the upside to "letting it ride" and losing money on the way down. If you pull it and it starts to climb again, then you get back in. I don't know it just doesn't make sense to me. If you throw $1000 into an ETF and all it does is go up and down over the next five years, where is the gain? Like I said, I'm not experienced enough in this field to make judgements, perhaps I should look at it like real estate. I know I won't let go of a property when the market is down. But it is much harder to buy and sell houses than it is to do with ETF's.


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## boipinoi604 (Feb 13, 2012)

SlowandSteady60 said:


> I realize that the market is unpredictable and one cannot tell whether or not it will rise or fall, but you have to admit that in 2008, at some point, people should have been able to stop the bleeding when they seen their portfolios taking a nosedive. We protect our stocks when they rise by selling out before it's too late, so why should ETF's or mutual funds be any different. Right now the TSX is dropping like a rock and I don't see the upside to "letting it ride" and losing money on the way down. If you pull it and it starts to climb again, then you get back in. I don't know it just doesn't make sense to me. If you throw $1000 into an ETF and all it does is go up and down over the next five years, where is the gain? Like I said, I'm not experienced enough in this field to make judgements, perhaps I should look at it like real estate. I know I won't let go of a property when the market is down. But it is much harder to buy and sell houses than it is to do with ETF's.


It's good you have a different perspective but I too am a beginner. From what I gather, you want to sell when the equities are going down and buying when it's going up. I believe you're leaning towards the technical analyst approach. Well apparently, what could happen is what you 'think' is going up but is really is a crash or what you think is going down will might well be a rally. There had been instances in history where a technie had got out of market just in time for the bears but subsequently missed the bullrun. It's easy to analyze 2008 in hindsight. Also, one may consider the practically of trading in/out of equities ie trading cost, taxes.
But then again, it's your money and you do what you feel most comfortable.

/imo


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## Dibs (May 26, 2011)

SlowandSteady60 said:


> We protect our stocks when they rise by selling out before it's too late, so why should ETF's or mutual funds be any different.


In my opinion, you are correct in that you could take a technical trend approach and buy and sell ETFs just like you might buy and sell stocks. However, a buy and hold or index fund investor would have some problems with this strategy: 

First of all, as boipinoi604 and many others will tell you, 20/20 hindsight on 2008, 2000, or even 1929 is easy, but a lot harder when you are in the middle of things. Second, assuming that it is possible to sell on the downs and buy back in on the ups, wouldn't all the mutual fund managers be doing this? They should have made a killing in 2008. Alas, even the expert fund managers could not fully protect their funds and most of them dropped just as much as the index. So if fund managers have a hard time timing the market, what luck will we, as individual investors have? Finally, unless you have free commissions for buying your ETFs, buying and selling will build up over time and eat into your returns, on top of the MERs that are being charged in the underlying funds. 




SlowandSteady60 said:


> I know I won't let go of a property when the market is down. But it is much harder to buy and sell houses than it is to do with ETF's.


Do you hold onto your property because it is hard to sell when the market is down, or do you hold it because you think you can sell it at a higher value later on? Would this reasoning also extend to stocks that you hold?


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## 44545 (Feb 14, 2012)

eulogy said:


> ...I don't dividend invest because I've yet to get an answer for this simple scenario. If you have two companies that are identical in every way (market, profit, etc) except one pays dividends, why is the one that pays dividends better (return wise)?...


I've wondered that myself, even as an owner of several dividend paying stocks.

Dan of Canadian Couch Potato wrote an interesting article exploring the subject, here: 
http://canadiancouchpotato.com/2012...ividends-not-as-tax-friendly-as-you-may-think

My take on dividends is that they're an absolute. Company successes ebb and flow. Sure, you _try _to invest in companies for the long run (Coca Cola, Johnson & Johnson, if you're in the USA) but if a company tanks, the dividend you've been collecting for 10 or 20 years is value that can't be taken out of your pocket. ("Bird in hand" theory)



SlowandSteady60 said:


> ...So here is my question. In Feb of 2011, XIU was running at $12.32 and in Feb 2012, it was at $20.47. I haven't sat and done the math yet, but it seems if you were in it during those exact time periods, you would have made some serious coin on it. Now I realize it's all a matter of timing and no one can determine when that exact moment of high and low is, but the way I see it, we are headed back down the hill again somewhat like 2008. Not to say history will repeat itself so soon. So instead of leaving your money in this ETF, why would you not take it out and move it elsewhere and treat it like it was a single stock. I've read the Couch Potato books and over a long period of time, it makes sense. But why watch your money go down, when you can get out and get back in later. It just doesn't make sense to me. I get up in the morning to make money, not lose it. Buy and hold, No thanks. Maybe I'm thinking wrong, someone straighten me out. Otherwise, I'll stick with real estate and leave diversifying alone.





boipinoi604 said:


> Simply because NOBODY knows if it will go down or up.


Ditto what boipinoi604 said.

SlowandSteady60, it sounds like we're discussing market timing and the difference between "speculators" and "investors." The speculator buys and sells as the wind changes direction (irrational market sentiment).

As close to "market timing" as a long term "investor" should come is "dollar cost averaging." Buy something that's a good long term bet (index fund), between purchases keep some cash on hand, and when the market drops, buy more units of your index funds at a reduced price. 

Over the last 100 years, the market has shown a net positive gain. If you believe it won't over the next 100, sell everything, buy land in the mountains and stock up on survival rations. For my money, I'll stay in the game.


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## brad (May 22, 2009)

I think the issue in this case is the difference between "long-term performance" in the abstract sense versus the actual scenario that plays out during your particular investment lifetime.

If you're investing for a future goal like retirement, volatility doesn't matter when you're young. It's the long-term trend that counts. But as you get closer to the point where you will start using your investment money, volatility matters more and more. The actual scenario that plays out in the market becomes progressively more important than the general rule that stocks are the best performers in the long term. So you can "set it and forget it" in your 20s and 30s, but once you hit your mid 40s you may want to start paying closer attention. You can have great growth for 20 years, but if it's erased by one bad decade during your 50s, it won't leave you in a good position in your 60s.

I do think it's important to distinguish between long-term performance in the abstract and long-term performance over your actual lifetime (which of course you can only analyze retrospectively, you can't really predict it). Equities are the lowest-risk investment over the long term because they have the greatest probability of beating inflation, but as we've seen it's easy to cherry-pick "lost decades" where growth was stagnant or negative. People cry foul over cherry-picking, but to the people who are living those lost decades it matters. Lost decades don't contradict the rule that equities are the best long-term investment strategy, but they do offer evidence that not all long terms are created equal. Much depends on the specific events that unfold during your specific investment time horizon. So for the population at large the general rule applies, but for individual people the results can be very different.


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## uptoolate (Oct 9, 2011)

SlowandSteady60 said:


> So instead of leaving your money in this ETF, why would you not take it out and move it elsewhere and treat it like it was a single stock.


Agree with what others have already posted. Who knows when to get in or out? The 'experts' as a group have certainly demonstrated that they cannot effectively market time and as pointed out, every buy and sell costs in terms of tax and fees leaving even less money to invest. The Couch Potato method does have a mechanism which results in the selling of assets that have gone up and buying those that have gone down. It is called 'rebalancing' and is done periodically. Cheers.


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## Belguy (May 24, 2010)

The real question is, should any investor rely on the advice of a Toronto Maple Leaf fan?


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## uptoolate (Oct 9, 2011)

Belguy said:


> The real question is, should any investor rely on the advice of a Toronto Maple Leaf fan?


Well sure as heck not about hockey! In my defence, how was I to know as an impressionable child that they would win 4 cups in 6 years and then decide never (ever!) to win again. And remember that back then the pickings were pretty slim and I sure wasn't going to be no Habs fan! 

So how do you know it's spring? The Leafs are out!


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## Jungle (Feb 17, 2010)

What has underperformed the most, maple leafs of couch potato portfolio? lol


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## boipinoi604 (Feb 13, 2012)

As long as you have

Long investment horizon: historically, holding stocks for a long time will ride out the troughs and peaks to have a positive return 6%.

Risk tolerance: at the end of the day, you do what you need to do to sleep better at night.

Diversify: Holding assets uncorrelated with another. If an asset goes down %50 percent, the same assets needs to go up %100 in order to be in even teritory. Now unless you have uncorrelated assets that will mitigate your losses, you'll be a lot less worse. And also, rebalancing your portfolio, which resets your assets to their starting line. If your asset goes down %50 from 5k to 2.5k rebalancing it back to 5k will just need %50 rise instead of a %100 rise to back in even. Theorectically, this rebalancing approach will assets than gone up and buy assets that's gone down.

Anyways this just my thoughts, none of this should be considered an investment advise. One should seek an advice of a professional for investment decisions.


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## Belguy (May 24, 2010)

Indexers beware of the shortcomings of the TSX Composite Index:

http://www.theglobeandmail.com/glob...dex/article2430409/singlepage/#articlecontent


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## indexxx (Oct 31, 2011)

uptoolate said:


> So how do you know it's spring? The Leafs are out!


Funny!!:biggrin:


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## SlowandSteady60 (Feb 19, 2012)

Reply from Dibs


> Do you hold onto your property because it is hard to sell when the market is down, or do you hold it because you think you can sell it at a higher value later on? Would this reasoning also extend to stocks that you hold?


I understand what you're saying but selling a house is not as easy as unloading ETF's. For that matter, unloading stocks is not always that easy when the market is trending downwards either. So to say that 2008 is easy to look back at and say "I should have ...", I look at all the charts and think to myself that if I started somewhere near the bottom of that and got to the top and then it started to slide pretty quickly, I may want to get off the ship before it goes down any further. My education on this was courtesy of RIM and it was a tough one but buying and holding is not always a good rule to go by. One thing I have found on this forum is a great deal of diversity in knowledge and strategy, and everyone does things differently. I am guessing that until the Euromess is cleaned up, the TSX will still trend downwards overall and it may be better to have my money elsewhere for a bit and not in an ETF fixated on the TSX. Just my opinion but that's just the way I look at it. I may be wrong but I think somewhere, there is a fund making money and perhaps that is where I would want to have my money. As for the small fees for commissions, if you are making money, what does that fee really mean. If you are losing money, it's another bill.


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## brad (May 22, 2009)

SlowandSteady60 said:


> I look at all the charts and think to myself that if I started somewhere near the bottom of that and got to the top and then it started to slide pretty quickly, I may want to get off the ship before it goes down any further.


It all depends on your time horizon and when you will start needing your investment money. 

A lot of people seem to approach long-term investing as if it was a savings account earning compounding interest and their goal is to always be making more money. But of course that's not how the stock market works. The whole point of a long-term index fund strategy is that if you get in at point A and get out in 30 years at point B, the probability is that you will end up ahead even if at many points along the way you had losses. The probability of ending up ahead declines if you try to time the market, and it declines for many/most people who pick individual stocks. It doesn't mean individual stock pickers can't outperform the index even in the long run, it just means that their probability of succeeding isn't very high. We all know of people who beat the odds; we don't hear as much about the many more who don't.

"Trending downward" is only a matter of concern when you're within 5-10 years or so of needing the money. At that point the market's performance can have a huge impact on your ultimate returns, and hopefully before that point you started shifting the balance of your porftfolio toward less volatile investments (which are even riskier than stocks because they generally don't beat inflation, so your investment is almost guaranteed to lose value over time).


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## Eclectic12 (Oct 20, 2010)

doctrine said:


> The assumption that a company's share price will increase with earnings not paid as dividends is patently false. The book value is what is increasing, not the share value. The shares of the company may never, ever rise above $10.
> 
> A stock is only worth the future value of its dividends. A company that is already paying back now is better than a company that never pays back. [ ... ]
> 
> If a company isn't going to put cash in your pocket, why are you an owner? I wouldn't be.


Your assumption may also be just as false.

The last I checked, investors usually value the company based on a range of things with typically *future business prospects* a key factor. A stock is worth what it could make going forward, including any possible dividends.

As for why I'd own something that isn't putting cash distributions in my pockets - it's because I figure that companies business prospects are better than whatever dividend paying company was available at the time. 


Cheers


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## mrPPincer (Nov 21, 2011)

SlowandSteady what you seem to be talking about is trying to win by timing the market, and if that is the approach you chose, I wish you the best of luck, but I think you could be very well served by reading carefully this excellent interview with David Swensen (just post 2008/09 crash), which I've discovered in another thread here today, in which he explains the importance of asset allocation together with regular rebalancing..



Soils4Peace said:


> Consider David Swensen's ... http://www.yalealumnimagazine.com/issues/2009_03/swensen.html#sidebar.


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## Eclectic12 (Oct 20, 2010)

CJOttawa said:


> I've wondered that myself, even as an owner of several dividend paying stocks.
> 
> [ ... ]
> 
> ...


While the theory and question of "equivalent stocks, one pays a dividend and one does not" is interesting, IMO it is moot.

How many pipeline, electricity generating or financial companies that don't pay a dividend (or distribution) can one buy on the TSE? Similarly, how many software companies pay a dividend?

In the MF or ETF world, focusing on one or the other is possible but again the question is whether there is a close enough comparable.


+1 on the long term DCA on dips.


Cheers


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## doctrine (Sep 30, 2011)

> Similarly, how many software companies pay a dividend?


Two of the best in Canada do, Computer Modelling Group and Constellation Software.



> As for why I'd own something that isn't putting cash distributions in my pockets - it's because I figure that companies business prospects are better than whatever dividend paying company was available at the time.


Of course. But in the end, that assumption should be based on the fact that the company will be able to provide better dividends in the future. Otherwise, you are buying to sell your shares to someone else at a higher price. That means your returns depend on someone else, whereas dividends are real cash returns given today to owners, which is the most valuable return of all. (present day cash is worth more than future cash or especially future unknown returns).


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## Eclectic12 (Oct 20, 2010)

doctrine said:


> Two of the best in Canada do, Computer Modelling Group and Constellation Software.
> 
> 
> Of course. But in the end, that assumption should be based on the fact that the company will be able to provide better dividends in the future. Otherwise, you are buying to sell your shares to someone else at a higher price. That means your returns depend on someone else, whereas dividends are real cash returns given today to owners, which is the most valuable return of all. (present day cash is worth more than future cash or especially future unknown returns).


*shrug* - that's two of how many identical companies? 

Keep in the mind that comment earlier in the thread that questioned the value of dividends required identical companies (market cap, profit etc.) including a share price that performs identically, except for dividends. To be clear, my point is that I don't believe there are enough identical companies to be able to make such a comparison on a meaningful basis.

IMO, the result would likely be an unbalanced portfolio as the investor's bias will rule out major sectors. A couple of examples would be that a CG focused investor won't be buying any of the Canadian banks while a dividend focused investor would have avoided RIM or JDS in their hey day.


Dividends are the most valuable return of all? 

Odd, when I sold Agrium in 2008, I'd collected something like a total of $0.92 in dividends. The shares were sold for a per share profit of $77 so for this case, I'll disagree.


As for depending on someone else to sell the shares at a higher price - that's true for all shares. Most investors I know sell their dividend paying shares if they have concerns about the business prospects. Are they not depending on others (and their business forecast) as well?

Or are you thinking it would be better to keep a stock bought for $16 that's trading for $34 for the benefit of $1.08 a year dividends?



Cheers


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