More Money Podcast - 309 How Not to Be a Fool When Investing in Stocks - Iain Butler, Chief Investment Advisor at The Motley Fool Canada

Episode Date: December 16, 2021

We all know I’m a hardcore index fund investor and love to talk about the benefits of passive investing for building long-term wealth. But I’m also often asked if I invest in individual stocks, to which I answer "Yes, I do actually." One of the ways that I learn about potential stocks to invest in is Motley Fool Canada, and Chief Investment Advisor Iain Butler joins me on today’s bonus episode of the podcast to talk stocks in-depth. Motley Fool Canada offers financial and investing research and education, and Iain has been an employee with them since 2012. He is a Chartered Financial Analyst (CFA) and the Lead Advisor on Fool Canada's flagship Stock Advisor Canada product. His investing interests are centered on scouring the market for interesting businesses that trade at under-valued prices and offer an appealing risk/reward relationship.  In this episode, Iain shares why you should still have your overall portfolio in mind when investing in individual stocks and how having a long-term strategy is key to earning a greater return and reaching your investment goals. We also talk about the feelings of FOMO when it comes to the growing popularity of NFTS, meme stocks, and cryptocurrencies, and why Motley Fool Canada is a great place to learn more about how to invest in today's market with their daily updates and research. For full episode show notes visit: https://jessicamoorhouse.com/309 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome back to the More Money Podcast for this special bonus episode. Hello. What a nice treat as we, well, there's only two more episodes of this season, then I'm taking a little bit of a holiday break over December. So this is episode 309. Hello, and my name is Jessica Morehouse, the host of the show. Welcome.

If you're new, yay. I'm so glad that you discovered this podcast all about everything that you can think of personal finance. And also, hey, shout out to all of my fellow Canadians. For this episode, we are going to be talking about one of my favorite topics investing, but also specifically, kind of Canadian investing. So I have the wonderful Ian Butler on the show you You if you're, you might already be familiar with his name, I certainly am and have been for years. So he is the chief investment advisor at Motley Fool Canada. He is also a CFA and the lead advisor on the Stock Advisor Canada service. That is a subscription that I've actually personally had

for a few years now. And so I always see his name on the newsletter. So I feel like I've known Ian for a number of years. It was kind of a treat to have him on the show. And we are going to be talking about, you know, his kind of interesting journey into where he is now as kind of like one of the main people at Motley Fool Canada and how he got into the investing world. But also just his thoughts on, you know, stock investing. I know I talk a lot about index

investing on the show, but I always get questions about, you know, what if I want to do some individual stock investing? What if I want to build my own, you know, portfolio, just sort of individual stocks or have a satellite portfolio in addition to my index portfolio, which I have, you know, mentioned on the show is something that I personally do as well. And so he's the perfect guest to be on the show to talk about all things stocks, but also specifically, you know, Canadian as a Canadian investor, the Canadian side of things, and how you know what we should take into consideration how to evaluate companies, some of the psychology that is kind of usually the main thing that we all forget about the psychology of it all and usually the main thing that we all forget about

the psychology of it all and all that good stuff. So I know you're going to love this episode. Now, I do want to just remind you that if you are interested in signing up to Stock Advisor Canada, which is a part of Motley Fool Canada, and you know, currently, there's over like 70,000 people subscribed. Well, if you go to fool.ca slash Jessica, you can save 66% off your membership. So again, who doesn't like a good deal? Again, if you want to go to fool.ca slash Jessica, you can get 66% off your membership. But anyways, without further ado, let's get to the good stuff. Let's get to that interview with Ian Butler. Welcome, Ian, to the More Money Podcast. So excited to have you on to talk about one of my favorite topics, investing, but also to really dive deep into Motley Fool Canada and what it's all about and stock investing. So welcome.

Wonderful. Great to be here. Been looking forward to this. Yeah. So I've been a subscriber to Motley Fool Canada for a few years now. And, you know, for people who maybe aren't so familiar with you and, you know, I feel like I know you because your name is always on the email newsletters and stuff like that. So I feel like I get an email from you weekly. Maybe even more often than that. Yeah, more often than that. That's right. That's right. You know, can you share a little bit about yourself and your background? I know that you're a CFA and you did work in financial services before joining Motley Fool Canada.

Share what was your background and how did you get into the world of financial services and investing? Totally. Yeah, I can go right back to the beginning of my career. I came out of university sort of thinking that I wanted to be in the Canadian financial industry and knew that I was – I'd done a couple of projects in university. I did a business degree, and they were sort of along the lines of exploring companies, like figuring out what sort of makes companies tick, and I really enjoyed that kind of work. So it translated nicely into the world of stock picking and stock advice. So that was sort of the target coming out of school.

Now, coming out of school, I didn't really have any experience. I didn't really have any connections. I'd grown up in a small town, sort of rural community, so I hadn't been exposed to the high financial world of Toronto. But moved to Toronto, got a job in a call center for a mutual fund company, Templeton, which I've sort of lost track of. It was a pretty big mutual fund company at the time. I don't actually know. It still exists. There's a big building in Toronto, but I don't know anyone who's heard that like no one talks about it. It doesn't have the

cachet that it once did. I think there was a Templeton growth fund and John Templeton is a very famous investor historically. So call center got my foot in the door, so to speak. It was sort of a fun environment, young people kicking around, sort of all in a similar boat. But again, sort of had that trajectory in mind that wanted to get into an analytical role. So moved from there into a custodian, a company by the name of CIBC Mellon, which, and a custodian is a company that sort of takes care of a lot of the back office work that nobody really knows exists, but sort of trade settlement. And it got me talking to the investment industry, sort of the institutional investment industry. It was not a great job, I must say. It's a pushing paper around, very routine, mundane.

Not glamorous at all, huh? Yeah. Sort of, I kind of likened it to a factory assembly line. But again, it served a purpose in that one of the customers that we had ended up having an opening, sort of an administrative role opening within the investment department of an insurance company. So that plucked me out of the custodian role into an investment management shop and sort of, again, got me closer to the role that I had envisioned all the way along. And I was there for a couple of years, got a break through another connection, again, sort of making connections along the lines. Self-educating along the lines, I think, is a very important theme to sort of convey. As you mentioned, the CFA program was part of that.

I think I started it in around 2002 or so. Took a few. I got stuck on level three there. I mean, that's like one of the hardest programs out there. It was not fun, I got to say. And I wasted a lot of, I wouldn't, I shouldn't say wasted. I spent a lot of time, probably more than anybody else I know. I was never very good at exams. And I mean, that's the whole program. You got to be ready for an exam. So it wasn't a great fit just in terms of how I think. But anyway, got through it. And it's a very, it's an important designation, I think, just again, from a career perspective. It's hard to know what is really learned there. But there's a ton of volume. And again, I've kind of lost track of the program. I don't know how it's evolved over the years, but I know that that exam is still paramount.

So working on that in the background. And also came across a company called The Motley Fool while I was at the insurance company. So again, this is sort of early 2000s. The Fool was just sort of finding its way. The Fool's been around for close to 30 years now. And I can get more into the fool in a moment, but, um, very, just the tone of the fool hit home, especially relative to the textbooks that I was reading for the CFA curriculum. Um, the, the message of, of education, um, was, was clear throughout. So it really just resonated and become a, became a frequent destination for me as I,

again, sort of self-educating through this administrative role. Ended up, again, through a connection, getting a junior analyst role with an investment management company in about 2003, and really have just sort of progressed as an analyst and gaining experience since then. So The Fool came about sort of in a crazy way for me professionally. So lifelong fan. But in around 2010, 2011, an email, we are big email. It's a big email company. So an email landed indicating that the Fool was looking to start a blog to sort of supplement their regular stream of contract writers in the US. And I was kind of like, yeah, kind of doing this work anyway. Maybe I can get a bit of a side gig going here and put some submissions in and get them published and whatnot.

So did that for a period of time, unbeknownst to my employer. And then my employer, I did let my employer know after about six months or so, they weren't very happy that I was doing that. So I had to end my relationship with the fool and thought that was the end of that. But then a couple months later, a couple months after that sort of cut occurred, another email landed, this one more personalized, and they were indicating that they were looking to start a Canadian operation and would I be interested in getting involved sort of in starting that up. So that was sort of mid 2012. I became an employee in November 2012, excuse me.

So just crossed the 10 year mark. And then we, so the first step of the business was to sort of establish an audience um and and so publishing a lot of free content and then we we began stock advisor canada which is sort of our our original and i call it flagship service i guess um in october 2013 um and we've we've built upon that since and it's we had a great run in Canada. And I think we've been pretty well received. And I think it's been a lot of fun. That's amazing. Wow.

Honestly, I love hearing stories like this. This is why I always ask people, what's your kind of background? How did you start? Because I think it's so important to know that it's like, oh, no, no one just gets the job. And here they are. It's like you started literally from the ground floor. And it took years and years and years to kind of get to maybe like your ideal role that you made. It didn't exist, you know.

And then it kind of poof came to be. I mean, that's my story as well. I didn't realize I wanted the job that I currently have because it didn't exist. I created it myself. Totally. I know your story sounds very similar or along similar themes, I guess. Yeah, exactly.

No, if somebody would have tapped me on the shoulder in 2001 and said in 11 or 12 years, you're going to be employed by The Motley Fool, I would have probably not believed it, but here we are. Yeah, that's amazing. So yeah, I want to kind of talk a little bit more about The Motley Fool for people who don't really know.

And like you mentioned, The Motley Fool has been around for 30 years and in Canada now for almost a decade, which is really exciting. Where's the name come from, first off? Because most people are like, what the heck does that mean? And what is kind of, you know, like, why did it get started? How is it maybe different than some of those other websites that are also, you know, have research and analysis on stocks and investments? For sure. So it was, it began in literally in a garden shed in, again, 30 or so years ago. I think we're at 28 or 29 years total. Two brothers, David and Tom Gardner, uh, very much, uh, involved in the business still and, and have sort of ridden it through the ups and downs over the years.

And, um, so they, they were English majors. Uh, they were, so they would have been associated with Shakespeare and the, and the fool was a character from a Shakespeare play. And the, their, their love of the fool was because the fool was the only one that could speak to the king in sort of layman's terms or felt comfortable enough or confident enough to be direct with the king and tell the king how things really were. So the genesis of the fool was to sort of fly in the face of Wall Street and really the sort of the mainstream investment world and sort of tell people the truth. This is how to invest. Don't listen to all the garbage, I guess, that exists out there. The high fee, highly complex.

The financial industry wants to make things seem very, very complex, very complicated. I see on your blog, you mentioned that you maybe felt intimidated going on the ground floor. And I think that's it. We see that all the time. It's a very consistent theme. So their goal was to sort of unwind that ball of complexity and make things right in terms of ways that people can actually understand, right ways that make sense, and really focus on long-term investing as opposed to the short-term games that go on out there and that have maybe even become more prevalent than they were even back then.

I think so. So that was the genesis. And I mean, and then the companies just sort of evolved from there. It's always been sort of rooted in a newsletter-oriented service. That's how they signed up. Some of their parents' friends were their

first members, and they literally hand-mailed out a typed-up newsletter, which was the first edition. And yeah, it's evolved from there over the past 30 years. And I think you're right. You mentioned sort of the prevalence of other research that exists out there. And I think it's probably The Fool was sort of a groundbreaker on that front. And maybe people have tried to, other organizations have come up that have tried to pattern themselves after the Fool. But I think at its core, the principles remain. It's a long-term investing mandate, three to five-year horizon on any stock ideas that we put out there. I think one of the best pieces of advice that I've ever come across anywhere

in the investment industry was put forward by The Fool and it's that not a single dollar that you foresee needing within the next five years should be in the stock market. And if you sort of run with that mandate, investing actually becomes a whole lot easier because it's a very mental game.

Money is a very emotional thing. But if you can sort of keep things in perspective, it really changes things and makes it a whole lot easier. Yeah, and I feel like that's, it's so funny because it's like, for me, I started really learning about personal finance and investing when I started just my own personal finance blog as a hobby 10

years ago. And it's so interesting just to see the kind of evolution of how people are talking about investing and thinking about it. Back, you know, then I started to, you know, I was very intimidated by investments and people were just talking about mutual funds. Really, that was kind of the core kind of investment product. People were like, oh, if you want to invest, you do mutual funds, of course. And that's all i thought existed and then start people started talking about oh there's things called like etfs and you can build your own portfolio of index etfs and stuff like well that seems cool what's the self-directed investing all about and then robo advisor started coming up you're like oh there's another new way online that you can

invest and i feel like now in the past really i feel like because of the pandemic these past two years um what i've seen is like there was so much talk about long-term investing boring index investing for i feel like a long time and it could just be the bubble that i'm stuck into because i you know it's one of those like confirmation bias i'm just reading stuff like that but i feel like so much so many of the conversations and things that i'm seeing online is kind of going back to this idea of getting rich quick or the the short-term gains through things like you know meme stocks and or just you know oh i bought tesla and bam look at me now or uh cryptocurrency especially i i hear from so many listeners especially young investors oh i'm so glad you talk about things that aren't just cryptocurrency because I feel like that's all I see.

And I feel very pressured into putting all of my money into cryptocurrency. Right. It's kind of intimidating for young investors. You're like, where do I go? You know, there's almost too many options and too many routes you can take. It's like, what do I what do I actually do? Totally. Well, it's been an unbelievable market for the past. I mean, since like really coming out of the financial crisis, there's just been no, and I'm talking mostly the U.S. market, the Canadian market's had its issues with more of the resource sectors and energy and so on struggling. But I mean, the past decade has been just an unbelievable market for especially growth-oriented stocks and sort of multiple

expansion. And it's, I mean, frankly, as a Canadian investor, that's seen some different investing climates over the years. I sort of began just as the tech bubble was bursting. So I was early on in that one, but certainly came through the financial crisis through the thick of that. This is the only market that a lot of, as you say, sort of younger investors know, and it will change. Again, with timing as a factor, it gets really, really hard trying to figure out when. Nobody knows when it's going to change. The market does move in cycles. And I think, again, if you stick with that long-term perspective, you realize that you don't have to feel rushed to do anything. You can

take your time, understand it, feel comfortable and go slow. Yeah. And I feel like unless you have that, you know, like me, I'm in my mid thirties now. And so it's like, I experienced the, you know, I graduated university in 2009. And so that was very front of mind, the crash and then the subsequent recession. And then, you know, over the years of being an investor, seeing all the ups and downs, I feel like that has given me a really good perspective on just like, okay, the future. Like I can kind of see decades in front of me because I have that kind of experience in my back pocket of like, things aren't always going to go up. They're going to go down.

And sometimes they'll stay down for a long time like years but so many people the the first kind of big downturn in the stock market they've experienced was in march 2020 and then it rebounded so quickly so i think their then experience or just their kind of the truth that they uh know is just like oh it'll go down but very you know it'll go back up really quickly and it's just like i'm i'm kind of concerned actually for lots of young investors who are being so aggressive with their investments and like you said maybe are investing money that they do need in the short term but they're like it's okay i'll cash out when you know things are high and then i'll you know be able to finally buy a house or whatever it's like we just don't know what's gonna happen and it's it's to me it

kind of is worrisome because no they, they haven't experienced a recession or times of some real economic hardship. Yeah, no, there's certainly, and I mean, this has prevailed for the history of the stock market. There's a gambling mentality that is involved. And certainly there's, I wouldn't even say corners. I might even say the majority of the market sort of lives with that gambling mentality and all or nothing type thinking when I think from our perspective, and it should be the way it is, I think we've seen enough evidence that long-term investing, going slow, taking your time, being conservative, managing risk are key components to being successful over the long term. And I mean, the scariest or even saddest thing is when, I mean, we have forms within our

service, so I sort of can see what people are talking about. And I mean, the first real evidence, we came through the marijuana years with the Canadian market and it was just bananas how everybody was just what's the next pot stock let's let's go let's let's get really long heavily invested in pot stocks and I mean it's it was I felt our role to sort of be pushing back against that and saying no this is not a great corner of the world to invest um but it but it's it's tough when when sort of those animal spirits are fired up, but people don't want to hear that. There's like one or two examples of people that have really made some money, but most of the people I know, myself included, have lost money.

That's right. Yeah. There is, I think, a moment where you couldn't go wrong for a few months anyway, but then everything I think has gone really wrong. And that's the perspective to sort of have in mind, not trying to jump on a train for a couple months and make whatever you can make. It's that long-term mentality that I think carries the day. And that's where the real magic of investing comes into play. There's no magic. It's a guessing game when you're talking in terms of months or even one or two years. It's a total speculative guessing game. The magic of investing is really keeping your head about you and keeping that long-term picture in mind. No, and that's definitely something that

I talk a lot about on the podcast. So I want to kind of talk because obviously, you know, I'm a boring index investor, but I do also invest in individual stocks, you know, which is why I'm a Motley Fool subscriber. I like reading the research and then I like, you know,'m a boring index investor but i do also invest in individual stocks you know which is why i'm a motley fool subscriber i like reading the research and then i like you know for kind of my satellite portfolio you know choosing stocks that i believe in for the long term that you know align with my values i believe that they will grow over time but again it's still boring passive investing because i i'm not judging them and that is honestly i will say the hardest thing it's so much easier being an index investor because the volatility is way less than just an individual stock. So right now, obviously, we're in a time where market's a bit down, pretty much all the stocks that I own are down. And the just like, psychological pain, and I always remind myself, like, you know, this happens, you know what you're getting into and the risk that you're taking, it is so difficult to do nothing and to just see, you know, the red, you know, in your account. So, you know, for people who, you know, want to kind of, you know, invest in some individual stocks and they know there's

more risk, but then that also could be, you know, you know, more benefit, more, you know, higher returns in the future. What would you say to them during maybe a time right now where it seems like a great time to buy, but then almost everyone I talked to, they're like, I bought my first stock. Oh, and then immediately lost value. That is a very constant theme. Again, through our forums, you can see, well, people will come in and they'll say, well, I just bought some shares, expect it to go down. That's sort of the mentality that people have. And let me just say, though, that a lot of people should be following the same strategy that you're following.

It's almost like too many try to go all in on individual stocks when passive investing is probably a better fit, certainly for their level of experience, if they're just getting in tune with the market and maybe graduate into more individual stock selection as you go and are able to better sort of mentally navigate the markets. But I certainly want to support your strategy and pursuit that you're following. I think, though, when it comes to picking individual stocks, I mean, our services certainly volley up a lot of ideas. And frankly, we're not quite 10 years in, but you go into Stock Advisor Canada and there's like 100 ideas on the scorecard and it can be sort of overwhelming.

So we do our best through sort of a monthly feature, Best Buys Now, trying to highlight what we think are good ideas for new money right now. Our newest ideas come out monthly. But I think it comes back to personal taste personal risk tolerance personal situation in life how the person's portfolio is constructed so there's a lot it's not just about picking an individual company or a couple companies it's it's really about sort of having a whole portfolio mindset in in mind and being in tune with with where you're at because I mean another tool big tool I find is sizing a position in a portfolio. So you can, you can pick the riskiest, I don't know what the riskiest stock is in Stock Advisor Canada, but

whatever. Pick the riskiest stock. If it's a 1% position in your portfolio, it's not going to hurt that much if it's, if it's a down 20%, down 30%. If it's a 15% position, then he got some issues. And that really brings the mental game into play. So I think that's a huge tool when it comes to managing one's own finances as well, just that portfolio construction avenue. And again, that's just something that I think it's a personal taste and something that people have to sort of get in tune with on their own. Yeah. Now, the question that I get all the time, especially from new investors who do want to start investing in individual stocks is, yeah, where do I start? Because like you mentioned, there's so many options. There's so many recommendations. It can seem like there's

too many options. And so people just don't make a decision. So where should people start when they are kind of thinking about their overall portfolio construction, thinking about, you know, cause I know Motley Fool is all about like diversification as well, not just picking one or two stocks, but having, um, a good variety, where should they start in terms of building that kind of portfolio for them and, uh, you know, making that list. We certainly suggest a portfolio. If you're, if you're going the all stock route, sort of a portfolio of at least 25 companies. And again, through our service, so I'm going to speak from a Motley Fool perspective. Maybe that's the best way to address. But through Stock Advisor Canada, we have created a collection of 10, we call them

starter stocks. So people that are coming into the service, it's one of the first things they're going to see, this list of 10 companies. And I think we've made an attempt anyway to sort of put some like just blue chip, bedrock, don't worry about this company ever ideas in there, maybe about half of them. And those are the kinds of things where, again, back to position sizing, you can sort of feel pretty good about putting a 5% position on. And if you have five or six of those in your portfolio, you've got a nice bedrock sort of 30% allocation to some companies that are going to do fine over the long term. They're not going to beat the market, especially in this environment that we've been in, where high growth gambling speculation is ruling the day.

But there are companies that are going to let you sleep at night. And then we've sort of put on top of those little growth here, companies that we still like a lot, like the prospects of. again. So, maybe people come in, they see 10 starter stocks, maybe pick six or seven, four or five sort of bedrocks and layer on a couple other companies with more growth prospects. And then, yeah, it's sort of about building out the roster, getting comfortable with the companies in the service. And again, I don't think a lot of people are walking in with sort of just an empty account. So I think people are coming in with already some experience, a lot are anyway, and they've probably got some allocations, and then it's hard. They've kind of got to navigate on which to punt out,

which to bring in from the service on their own. The other thing that's sort of evolved with The Motley Fool over the years is that there are prepackaged portfolios that come through. So, I mean, The Fool in the U.S. actually does have an actual ETF. But this would be come in, instead of buying an ETF, here's your list of 23 stocks or whatever, 25, 27, whatever the number is. Here's the allocation. That's it. You follow our allocation guidance.

You follow our company guidance. You transact when we tell you to transact. So there's also that sort of level of service. So a couple approaches, I guess. Yeah, no, that's awesome. I think that's great. I mean, I always tell people when you don't know where to start, especially if you want to get into self-directed investing, but it, again, it's like, there's so many options. It's like,

find a model that makes sense to you and then just copy it. You don't have to build, you know, you don't have to like reinvent the wheel. I think so many people feel like they have to, they don't want to copy something and they just want to, you know, build something unique. You're like, why? You don't have to. And there's always the missing out. Missing out is a big thing that we come across all the time. You see a company that's gone up 200% in the last three years and you're like, oh, that's done. Or even 20%.

Whatever the number is, people seem to find more solace in investing in those stock charts that are high on the left and low on the right type thing, when in reality, that's the sign of a company that's probably not working. It's a bad company. The reality is people should be looking for those situations where the stock price is lower on the left side of the chart and rises over time.

That's a sign of a winning company. And that's certainly been one of David Gardner's sort of taglines over the years. He's a guy that likes to buy high and then buy higher, which is sort of a crit and trarian bit of advice, but it's worked pretty magically for him. Well, yeah, I remember when I, you know, some of the first stocks I bought, was just starting honestly not too long ago just a few years ago and um it was looking on the website and obviously like Shopify was I'm like oh you know what this is a you know a company I really like like I knew a lot about I was familiar with it um but the price I think I bought like literally one stock like four hundred dollars

and I'm like oh gosh that was a that was a big uh investment for me doing one stock um and then i remember that it kept on going up and then people were like oh now it's 700 is this too crazy or is it going to go up and now it's like 1700 or something today and so it's one of those things where it's like yeah fomo was so real and you always feel like you're never going to be buying at the right time and that that's, I mean, you probably won't. But again, if you come at it from the perspective, like, you know, holding for the long term, it doesn't really matter if you buy it today or tomorrow, you know? Totally. If the company is of the ilk that we think it is. Now, all of this is qualified by the company doesn't always turn out to be what you think it is. So not everything works in five year stretches, but the beauty is the ones that do work with that timeframe in mind far exceed the

ones that don't because the stock can only go down a hundred percent and the upside is infinite. So you get, you get a few sort of Shopify's in your life and you're a, you're a winning investor, regardless of how many bad ones you pick. It can, it can sort of smooth over a lot, a lot of the bad ones. So yeah, if the company's going to work and you give it five years to work, it's going to generate a return that far exceeds the companies that don't work. And we all pick ones that don't work there. There's no getting around that mistakes are prevalent. And that's another thing that you have to become comfortable with that you're going to make mistakes and things are going to go wrong. It's not even obvious mistakes. It's just like things, unforeseeable

things happen that it's just part of the game. Yeah. Like that's, I think, yeah, you have to be comfortable with those losses. If you're taking risk, risk doesn't just mean like, you know, forever returns. And again, like we're in this environment where so many people, that's all they've experienced. It's just like, it keeps going up forever. It's like, it won't always. The more risk, the better, frankly, over the past, yeah, five years anyway, maybe longer. So from my, it's, I get frustrated by that because we're trying to balance risk and reward and suggest these companies that have not been going up 100% a day type thing. And the ones that are going up leaps and bounds up until recently, there's certainly been some

pullback on the growth year portion of the US market, especially. But it's hard to balance that relationship, especially in the environment that we've been in absolutely so you know i i think you know one thing that's uh beneficial from you know reading the motley fool and subscribing is obviously all of the information and research um but i think that's also a place where um especially new investors kind of get stuck they don't know really what information they need like how do I guess, evaluate a stock or a company to know if it is something worth holding on for three to five years? What would you kind of say to them? Yeah, that's a huge, it's huge. Because you're right, I think a lot of people's research begins and ends with a stock chart. And that's almost the worst place that one can first turn when

they're considering an idea. And I'm as guilty as anybody of doing the same thing. But if you just take the stock chart out of the mix, focus on the company and evaluating the company without that sort of bias that the stock chart immediately creates, that's a great first step. So ignore the stock chart, go to the company. We're pretty big fans of... So now Motley Fool, we've got different investing teams. So our Canadian investing team might have a different taste than sort of some of the US teams that are... We have a rule breaker service that's very focused on like ultra high growth companies. So we sprinkle that in, but we tried to take a more sort of balanced...

I don't know if balanced is the right word, but more diversified approach to the suggestions that we put forward. So we're rooted in company fundamentals. So a cash flow statement is, I think, the first place that I go to. And this is something that's evolved over the years. Statement of cash flows is hugely important because the earning statement still gets the bulk of the attention out there, but earnings can be sort of gamified. Cash flow is cash flow. So if you see a positive cash flow situation, it means the company's doing something right, and they can then take that cash. They can do good things with it. They can pay down debt. They can make acquisitions and grow. They can give it back to shareholders through dividends and buybacks. So cash is really a lever that we look for across the spectrum. It's not always, always the case. I mean, when we recommended Shopify, it didn't necessarily have an attractive cash flow profile,

but the opportunity was such that it was sort of worth straying from that. But in a lot of cases, we recommended recently a company by the name of Nuve, which is a Canadian payment processor provider. Lots of ties in the online gaming world and online gambling. Growing like crazy. But again, there's growing like crazy and then there's growing like crazy with cash flow. And we contrasted Nuve with Lightspeed, which is another higher growth Canadian company, both growing the top line big time. The difference was Nuve's growing their cash flow profile as well,

along with the top line. Lightspeed's cash flows are actually going the other way. So the more revenue Lightspeed generates, the worse its cash flow situation looks. And that just doesn't make any sense. So we're focused on that cash flow situation. It could come with the high growth companies. It can come with a stodgy old slow growing company. But that's the first place we turn. We think a lot about balance sheet risk, the financial profile. I was taught in one of my earlier gigs that there's three sort of primary risks out there.

There's cyclical risk. There's operational risk where the company sort of stubs its toe for a period of time, but they tend to be able to work that out. And there's financial risk. And financial risk you can't come back from. If the company has too much debt, that can kill a company. Cyclical risk can't kill a company on its own. Cyclical risk with financial risk can kill a company. Cyclical risk can't kill a company on its own. Cyclical risk with financial risk can kill a company.

Operational risk can't kill a company on its own. Operational risk with financial risk can kill a company. So we really, we want to avoid companies that are dying. Sounds obvious, but that's a big part of our analysis as well. And again, that too comes back to a cash flow statement analysis. A company that's generating positive free cash flow is harder to kill than one that's not, essentially. Well, yeah, because one thing I see a lot in some of the forums

or in Facebook investment groups and stuff like that is people just talking about stock uh you know stock dividend yields like oh this this stock has such great yields and i think people just get so again caught up in like wow this means i could make so much money if i buy all these stocks because of their return in the the dividend yield but they may not actually know well why is the yield up could it be that this generally that's a tell that something's like the market's not dumb there's you can sort of fly in the face of the market from time to time and find opportunity but the market is not dumb it's you should listen to what the market's telling you and if that stock has a 12 dividend

yield the market's telling you something that it's not a good that that dividend is not likely sustainable yeah yeah yeah but i think yeah a lot of people, when you get really into it, it can be especially just with seeing if you've been lucky or, you know, you did an investment that did pay off. It builds your confidence, maybe makes you a bit overconfident and will make you kind of just see what you want to see, I think. And depending, too, also in what kind of communities, especially online investment communities, you just kind of everyone's just like goading each other and be like, yeah, you should do that. And then it's just, I mean, it's a wild, sometimes it's like the wild west out there. It really, and I think you mentioned confirmation bias earlier. It's huge. It's a huge thing. And again, I'm as guilty as anybody, but we tend to read what we want to read or at least interpret things as we want them interpreted. Like if, go back to Nuve, if I see a negative article on Nuve, they're wrong. Yeah, they're just jealous. I'm going to pay attention to a positive Nuve article and help justify my decision there.

So yeah, our brains are a huge part of the investing process. Again, there's been lots of great literature written about that. But the more people sort of can get in tune with their emotions, again, the better off they are. The fundamentals and all of the complexity has to do with our brains. There's nothing overly complex about reading a cash flow statement. You can look at cash flow operations. If it's positive, great. If it's negative, okay. There's some levels to the analysis there, but it's navigating emotions and managing our brains is where the real trick in investing comes into play.

Absolutely. I'm curious from just your perspective, you know, and how Motley Fool Canada has grown so much in the past decade, have you seen a shift in who the subscribers or audience are? Was it initially just people who were already investors and already knew how this all worked? Have you seen a looks like. But I would say that the on sort of forum comments that I would see. Just people that really don't have a clue were appearing. They heard from someone, it's a good time to buy, so I'm here. Yeah, exactly. So that was a period of market froth and sort of that attracts newbies. And we've, I mean, since the pandemic,

I think it's been pretty, as you mentioned, it's really kicked into, now it's slowed up a bit, but I mean, for the first 12 months after the pandemic hit, like it was clearly a go-to activity for people. And again, how many of those are sort of long-term investors? I would say not the majority, but I mean, ideally our message sort of was able to break through. But so I think the market environment dictates who's coming through the door. Frothy periods tend to attract the faster money newbie people that might not be there in a month, let alone a couple weeks. But I think we've definitely got a base that's been, whether they were Fool followers prior to even the Canadian operation coming to be or have been with us for a number of years. There's definitely that following out there as well. Do you also have like, I'm not sure if you do, but do you have information about the people who are, you know, part of like the Motley

Fool community and just like how their investments have gone? I guess maybe you can kind of get a sense of that in the forums and how they're kind of speaking. But I'm always so curious. It's like, are people, you know, learning this information from Motley Fool and then applying it and then, you know, sharing kind of their results? Somewhat, but again, it's a tough thing to generalize. Nothing, I can't point to any sort of direct data that I see anyway. And I know this has been another evolution of the business. I know, and especially in the US, they're really sort of trying to dig into that level

of information and sort of better understand, frankly, the membership base. And I think technology is helping with that a lot. There just hasn't been the technology to do so for much of the company's existence. So we're getting there, but we don't have that kind of granularity. Fair enough. Yeah. I think it's always just interesting to find out like, okay, who are the people subscribing then? What are they, you know, what are they actually doing? Because that's the hardest thing I find for, you know, older investors and new investors as well is finding out what are other people doing? And what, you know, and what are their actual results? Because, you know, as I tell everybody, people will talk about their gains, they'll never talk about their losses. And that's why it's important to not get sucked into certain conversations or just certain like online investor communities. Cause then you'll just, you know, you'll just get certain biases and just, you know, think certain things and stop thinking really for yourself. You'll start, start just kind of that group thing kind of thing. I think that's right. And, um, former colleague and he, he's written a book that's, that's done

very, very well. Uh, Morgan Housel. I don'tel. I don't know if that's a familiar name for you. But I will look that up. The Psychology of Money is his book. Oh, yeah. Oh, I have that on my bookshelf. I'm going to read it in the next couple of weeks when things kind of die down. So it's a fantastic book. And it's so great that he's done so well with it.

But his chapter in there is about there's so many different games in the, in the financial industry. Everybody's got a different game. So you're, so it gets tough when you start trying to compare your results to somebody else's because somebody else might have a completely different, be playing a completely different game than, than you're playing. And I mean, age comes into play there. Somebody that's 70 years old is going to be playing a different game than somebody that's 30 years old. So there's, there's just, it's an infinite, it's infinite how everybody's, everybody sort of needs to come up with their own sort of personal game and stick to it, which, which again, is where our brains come

in and becomes very, very challenging, especially when you start seeing all these different opinions that fly around out there. Yeah, no, absolutely. Now, I want to kind of hand things off on a positive note. So you've, you know, been doing this for a very long time, and I've seen probably a lot, especially all the kind of subscribers and conversations you've been having and just your own personal experience working in financial services. What would be some of your kind of, you know, best advice for someone just getting started? Or I mean, honestly, a lot of the people that I talked to on a day to day basis, they've been investing for a while, but usually they just don't have that, like that knowledge or that confidence. And so they're like, I actually don't know what investing and I started with the bank five or 10 years ago, I think it's in mutual

funds, I have no clue. And so I want to actually take this time now to educate myself and really become empowered and more informed. What is some of your best kind of advice for just like a person who wants to really take control of their investments and again, investing for the long term? For sure. So three things come to mind. I'm going to go back to pumping Morgan's book, The Psychology of money. It should be on everybody's list to read. It's fantastic. Again, it's, it's all about our brain, our brain on investing type thing. And, uh, it's, it's, it's wonderful. So anything you can sort of ingest that, that allows you to better understand and get in touch with sort of your, your brain, your emotions and, and your emotions, and understanding how

important emotional control is. The other thing I would suggest is having a handle on financial history, understanding how the market has performed over the long term, understanding that the market's only appreciated about an 8% before inflation over the very, very long term. So that too helps to sort of govern what to expect and manage expectations. So I mean, if you're able to generate a return beyond 8%, you're going to be better than like 90% of investment professionals out there. As opposed, I mean, people just want 500%, but they don't have that context. So I think understanding financial history, understanding that stocks go down faster than they go up,

that's another David Gardnerism. Stocks always go up, but they go down a heck of a lot faster. So be wary of the declines because the worst, again, back to I think what I mentioned before, it's terrible to see people getting scared out of their pursuit of becoming a seasoned investor. And I think that happens all the time. It's a financial history. Morgan Housel is wonderful. He's a wonderful resource, period. He writes for the Collaborative Fund. We do miss him at The Fool, but he's still putting his content out to the world. And another source that I love, and I don't think gets, certainly not these days,

maybe it did a decade or so ago. I mean, Warren Buffett remains a wonderful, wonderful resource. He's still with us. Read his annual letters dating back, and this can help with the financial history end of it too. Berkshire Hathaway has annual letters published back. And this can help with the financial history end of it too. Berkshire Hathaway has annual letters published back to, I think maybe 1960-ish. So maybe you don't have to take them all in, but a sampling throughout time. I've found it an invaluable resource just to, again, understand the different business climates, how he thinks about business, which I think is where you want your understanding to be. You want to be able to look at a company, be able to evaluate the

business, how to think about that business. And then again, let the stock sort of take care of itself over the long term. But yeah, I completely agree that the psychological aspect doesn't get enough attention, but that is like the thing that'll make or break you as an investor. It's easy to actually make a trade, but the hardest part is to feel good about it after you've made it. That's right. Holding is the hardest part of investing. Buying is actually the easiest.

Selling is also very difficult, but just holding on to something, whether it's doing well or poorly, is really, really, really hard. Because it's like you feel like you should be doing something. Sure. Yeah. But you're not supposed to. That's the whole point. Doing nothing is a perfectly acceptable, if not the best strategy. Exactly. What I've been saying for years. Thank you so much for coming on the show. It was such a pleasure having you on. Where can people find more information? I mean, I'll include some

links, you know, for people to check out Motley Fool Canada, but where can, you know, if people want to find you online, where can they find you? What are some other kind of resources that might be something that you want to look into after this episode? Sure. I mean, yeah, we, I mean, sort of the flagship site is fool.ca. That's where we provide some market commentary, ongoing market commentary. If you like the message there, the idea is to sign up for one of our services. Again, I sort of lead the investing team in Canada, but I spend a good chunk of my time on Stock Advisor Canada, which again is sort of our flagship service. We've got some other ones. Again, we've got a smaller cap service

by the name of Hidden Gems run by my colleague Jim Gillies and a dividend investor service as well. And then we've got some of the portfolio, sort of pre-packaged portfolios that I mentioned as well. But that's sort of once you get comfortable with the Fool, that's where we sort of want you to migrate towards or think generally works for people to migrate there

after they get comfortable with the message. In terms of social media or anything like that, I've tried to get a Twitter account going. I don't have a great Twitter voice, though. I haven't been able to sort of get into the rhythm of posting to that Twitter account. So it's a little bit sporadic in there, but there is a Twitter account, TMFO Canada, I think is the handle on that one. But again, it's kind of quiet. I get you. I've been on Twitter for like a decade and I'm just like, I'm just not, it's not my, I'm not good at it.

Like some people are amazing at Twitter. Oh, big time. And frankly, it's become a wonderful resource, actually. If you're able to, again, there's a lot of noise in there, but if you're sort of able to block that out and pay attention to the messages from the great poster, like, it's a great resource, even in terms of sort of article sharing or information sharing that goes on out there. I've really taken to it over the past five or six years. Yeah, that's pretty much why I still do it, just to see what other people that are better at Twitter are sharing.

Because I'm like, oh, wow, that's a great resource. Definitely a lurker. And also just to see what's trending. That's a great way to find out what's going on in the market right now. Sure, sure. No, it's a great tool. I wish the stock could be doing better. Yeah.

That's one that we've recommended. And it's done okay for a bit. It's kind of pulled back here recently, though. But that's a huge platform, and I think they've just got to figure out how to monetize it better. And I think it's going to be an interesting investment. You'd think they'd figure that out sooner, but no, they haven't. Hopefully it happens. We'll see.

There's big optionality there if they do. They quit, so I don't know. Maybe that's a good thing. Maybe not. Yeah. I think the market's sort of been waiting for a dedicated CEO to come in, so we'll see there's big option quit so i don't know maybe that's a good thing maybe yeah yeah that's i think the market's sort of been waiting for a dedicated ceo to come in so we'll see what happens there but it's a i'm intrigued by it from an investing perspective as well as a user yeah yeah me too awesome well again thanks so much for for dropping by on the

show it was a pleasure having you on fantastic happy. Happy to be here, Jessica, anytime. And that was episode 309 of the More Money podcast. You can find Ian Butler on Twitter if you want, because he is there and I have followed him, at T-M-F-O-H Canada, which stands for The Motley Fool O'Canada. Oh, I get it. Clever. Love it. Anyways, you can find them on Twitter.

Otherwise, make sure to go to the fool.ca. A lot of great resources for free on there. But also, again, like I kind of mentioned, if you did want to get a subscription to Stock Advisor Canada, all you have to do is go to fool.ca slash Jessica to get 66% off your membership. Once again, you know, go to fool.ca slash Jessica to get 66% off. I think honestly, that's I found someone else's promo link or something a few years back. And that's how I got into into it. And then I just kept on subscribing. Here we are several years later. So also make sure to check out the show notes for this episode, JessicaMorales.com slash 309 will include a bunch of helpful uh you know resources and links that we mentioned throughout the episode in there also a reminder if you uh did not listen to yesterday's episode

or maybe previous episodes again we well here's the big deal uh next week is going to be the final episode next wednesday will be the final episode, which means there's limited time for you to enter to win my big book giveaway. I'm giving away a ton of books. And yeah, they're amazing books, and they're free. So go ahead and do it. Just go to jessicamoraz.com slash contest. If you also just go to the show notes, jessicamoraz.com slash 309, you will find also the link to take you to that book giveaway but i will be drawing uh winners at the end of december basically and so this is the time to enter and i think i've mentioned this on previous episodes um probably have not been promoting the contest as well as i should have because there's you know not as many entries as normal which honestly sucks for me good for you

your odds are very good to win a book so uh make sure to check that out and uh now let's uh t is next week because next week is the last episode i think i did mention this on a previous episode i can't remember i don't know uh but anyways i've got the wonderful andrew halem back on the show for i believe is i believe the third time i'm gonna have to check i feel like i've had him on the show a few times i've done a lot of things with him and he's wonderful he's a he's obviously the author of Millionaire Teacher, but he has a new book coming out called Balance. And I will be giving away that book as well. So make sure to subscribe and follow this podcast and, you know,

come back next week for the final episode. I will not be doing a special solo episode like I usually do to kind of wrap up kind of the end of my you know, this the fall ish, you know, winter season, I'm actually going to leave that and do a special solo episode at the beginning of next season when I'm in my new place, because I feel like I'll just have so much more interesting stuff to share with you. So that is it for me. Thank you so much for listening. I will see you back here next Wednesday for what is it the finale of this season 13 of the more money podcast. Thank you so much for being here. A big shout out to my wonderful podcast editor Matt ride out and I will see you back here next week. This podcast is distributed by the women in media podcast network

find out more at women in media.network