The Canadian Investor - Are Share Buybacks Better Than Dividends? - TCI Rewind

Episode Date: August 14, 2023

In this episode of the Canadian Investor Podcast we discuss the following topics: The advantages that DIY investors have Returning capital to shareholders. The differences between share repurchases and dividends How slow and steady compounding can make a huge difference over time Ways to save money to allow you to invest more Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca. Again, eqbank.ca. Hey everyone, the episode you're about to listen to was first recorded in March of 2022. We decided to use it for today's release as a TCI Rewind because we were not able to record a fresh episode last week due to a couple of unforeseen events. However, we will have a fresh episode coming up Thursday, which is really important because it's a milestone for us. It will be our

300th episode and you can rest assured that we would not miss that for anything. So Brayden and I will be back next Thursday with a fresh news and earnings episode. In the meantime, whether you've listened to this already or not, I do hope you enjoyed this episode. It's some great content. And we'll see you next Thursday. Live from the Great White North, this is The Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger. The Canadian Investor podcast today is March 2nd, 2022. My name is Braden Dennis, as always joined by Simon Belanger. If you are new to the show, welcome in.

We have two episodes a week and today we're talking investing concepts and the other release on the week we talk news. All right, so I just wanted to come out of the gate here with, I tweeted something, follow me at Brado Capital, just talking about the advantages of being a self-directed investor. A self-directed investor is completely unconstrained. This is the best part, right? And when I say that you're completely unconstrained is that you have no short-term performance pressures. There's no one breathing down your neck that you have to produce good returns on a monthly or even quarterly, dare I say, annual basis. Because

for a long-term investor, those time horizons don't actually matter as much as most people think they do. You have no arbitrary mandates on portfolio construction. There's no one saying you can't only be in tech. Say you're a software engineer and you know tech really well and your entire portfolio is in tech names. No one's telling you you can't do that. There's no one being like, oh, you have to have 20% in industrials, 30% in consumer staples. There's no mandates on portfolio construction and that can be a great thing. No management fees. Maybe the biggest one, right? If you're listening to this podcast,

maybe, maybe you're, maybe you're a professional money manager, but a lot of people don't want to pay those fees anymore. And, uh, that's just the reality of the landscape and you have no friction to information anymore. Simone, this is the best part. You have this podcast like this. There's websites like stratosphereinvesting.com. Easiest plug ever that I'll ever get. These websites have financial statements, press releases, graphed out all the margins, metrics, the balance sheet. All of that stuff used to be really difficult once upon a time to gather in one place.

And the friction to information has never been better. And so these are some just real structural advantages that you have as an investor today in 2022. Probably the only thing I think I would go against here is the management fees. Because technically, if you're putting time, obviously, if you're enjoying it, time has value, and clearly, time can be money. So obviously, if you're putting time into researching and so on, I mean, I know it's a stretch, and obviously, it gives you more control. But aside from that, I totally agree with it. It's just the one thing where obviously, it all depends how you value your time and whether it's best to put in something like just an index ETF where there are management fees,

but oftentimes, you know, it's less than 10 basis points. They're so small. Yeah. Yeah, that's a good point. There are definitely time commitments to managing your own portfolio. However, not monetary. and many people just straight up enjoy doing it, including you and I. Yeah, yeah, exactly. And there's very, I know like when you're mentioning this, you're thinking more about traditional management fees, which are typically really high. So yeah, like mutual funds and stuff like that. Yeah, we've talked about it time and time again. If you don't want to put a lot of time into it, you can still be a self-directed investor and just using a broad

base, low cost index ETF, you can achieve some very good returns without too much time commitment and very low fees. Perfect. So now we'll go on to another subject. I feel like people can be pretty passionate about it. Are share buybacks better than dividends or vice versa? So I actually can't believe we never talked about this before. We've talked about dividends. We've also talked about share buybacks. But we haven't really compared both of them because at the end of the day, these are two ways where companies are returning capital to shareholders. My impression, I don't know if you're like that, Braden.

My impression is that Canadians tend to prefer dividends over share buybacks. Is that the same impression? I know I'm generalizing here, but that's the impression I get. Self-directed Canadian investors are dividend drunk. And I don't know why. I have theories about it. One, it's just satisfying to get dividends. I get that. It's very satisfying. There's like the whole fire movement about generating passive income, which has made dividends sexy. Getting your $15 from some company on a quarterly basis really sacks you for some reason. It has to do, I think, with our index constituents.

with our index constituents. The banks pay very safe and growing, like up to 5% yields, 4.5% dividend yields. And so I believe that is why, but they tend to forget about the entire portfolio allocation decision tree, which you're going to talk about now. Yeah, yeah, exactly. I think maybe another thing too, you said banks, but there's also energy to pay very nice dividends. There's also the fact that Canadians have been heavily invested in real estate traditionally, and you can get steady income from real estate. And if you compare real estate to investing in the stock market, well, if you're looking to get income, you'd have to look at dividend stocks as the alternative. If you look at what has worked, a lot of them

have been income producing assets in this country, historically. I always say the only person who's beat Warren Buffett over the last 30 years is Joe from Thunder Bay who invested in Royal Bank stock and never sold a single share. You know what I mean? That's worked really well. Real estate has worked really well, both from capital appreciation, but also income. And so it's been a rocky road for oil as commodities always are. But I think that that may have something to do with it as well. But I think that that may have something to do with it as well. Yeah. So what are the advantages and disadvantages of share buyback?

So a share buyback for those are new to investing. It's essentially just a way that the company removes existing shares. It reduces the outstanding share count. An easy way to understand it is just comparing a company to a pizza. So let's just say the company is a pizza and the slices are the shares. Now say the pizza has 10 slices and you own one of those slices. Now take the same exact pizza and slice it into eight pieces instead of 10. You still have one slice. That means that your one slice is actually worth more than it was originally worth when you had 10 slices. So share buybacks is exactly the same

thing as that. The company is removing shares. So in theory, it should increase the value of the remaining share because it decreases the amount amount of shares so increases the scarcity of those shares i'm laughing because in your analogy wouldn't it make sense as if instead of cutting the slices into eight instead you just say one of them was eaten like one of them's removed like i think in your analogy that doesn't really make sense. I'm sure our listeners understood what I was trying to get at. But it's not all of a sudden like it cut up into eight slices, like someone just ate a slice. Well, if you ate a slice, though, technically the whole pizza is smaller, though.

Yeah, that's true. Oh, you may have got me there. But you know what I mean? See, I thought, yeah, I don't know. I mean, I thought my analogy was good. I think we're both right. Anyways, yeah. So I digress. Anyways, so one of the advantages here of share buybacks is that you don't pay any taxes on it if it's a taxable account. I mean, you'll eventually pay taxes potentially on capital gains related to your stake in the company when you do sell the shares, but you don't pay taxes

when the company buybacks shares. Share buybacks can also be tricky because you have to trust management that they are buying shares at good value. We've talked about Warren Buffett. He's been famous to say that he doesn't really believe in dividends for Berkshire, although he believes in receiving dividends, but not paying them out through Berkshire and their huge cash piles. So they've opted for a

strategy of buying back shares. And he's had a pretty good track record of doing so when they usually buy back shares. I mean, back in the day, he had like a book value that he wanted to buy back at a certain threshold. Now, I think he has a bit more flexibility on it. But, you know, there are countless examples of companies buying back shares only to see their share price go down massively in the following years. And that's something to keep in mind because not all management teams will buy back shares effectively. So, I mean, you really want, in my opinion, that they have a good track record of doing so.

Another advantage here for share buybacks is that it does offer flexibility. So it's pretty common for a company to buy back shares in a given year than not do it in the following year. Whereas when I talk about dividends, I'll mention that companies tend to feel obligated to pay a dividend if they've done it for a certain period of time. Share buybacks is one of those interesting things like investing for the business in a long term. For the management team, investing in the infrastructure that's going to help them over the next 10 years and share buybacks are one of those capital allocation decisions that you don't know if they're great for a while. that you don't know if they're great for a while. That's kind of one of the tricky things in investing overall is getting feedback loops that are shorter.

Investing, you have very long feedback loops. That's what makes it such a hard game. And so there are many pros and cons to this, and it can be hard to evaluate in many cases, like I think you have mentioned here. Yeah, exactly. Now, switching over to dividends, the biggest advantage of dividend is that it provides really an immediate return. So you get paid a dividend, you get it, essentially, it's cash in your account, where, like I mentioned,

share buybacks, you know know it's great if they're done well but they don't guarantee a return necessarily and that means that a good company that pays a consistent and hopefully growing dividend can provide you with a consistent income stream without having to sell any shares of course on the opposite here one of this disadvantages is that if you have it in a taxable account, they are taxed when they are paid out. And you have to keep in mind as well, we're Canadians, so the TFSA, right? If you have a company that's a U.S. dividend payer, for example, in your TFSA, there's going to be that withholding tax that you'll be charged. You'll never see it. It will just be applied automatically from the U.S. government.

Another disadvantage here is that, like I mentioned, one big issue is companies will oftentimes feel obligated to continue paying or even increasing the dividends when it's clear that they shouldn't. That happens times and times again. You'll see a company that was once a really good company that could afford paying a nice dividend and keep growing the dividends but has run into some recent headwinds and in those cases you'll often see management teams being extremely reluctant to cut the dividends because they fear that the dividend investors that are probably a good portion of the investors in that company will abandon the stock.

So that can definitely happen. And when it's clear that the right move for the business is to cut the dividend and use that money to reinvest in the business or pay off debt or even a combination of both, then that can be really tricky. I know there's businesses over the years that face some big headwinds. And you've seen, I can take a few on top of my head. I think one was AltaGas. I think we've talked about them before as they were like, waiting to not cut it, not cut it. And then eventually they did cut it after new management came in. So it was a really big cut. And the business suffered for a while.

Because they didn't cut it soon enough. Yeah it's one of those things. Where the investor base. Comes to. Assume that dividend. Will continue in the future. And their position. Thesis may rely.

On that dividend. Now. That's a style of investing. The one thing that I really pressure self-directed investors to ask themselves is, are you investing in the stock strictly for the dividend? And if so, be very careful. This is the number one mistake we see, Simo. It's got to be. Is I see all the time dividend drunk investors because I don't know what else to call it. It's like, look at this thing I'm investing in. It's this, it pays me an 8% yield, but I have no idea what they do.

And it's basically a melting ice cube the stock has like this value of the stock is depreciated over the last 10 years consistently and you would have made money got a dividend by just owning the index so there are great companies that pay dividends i'm not anti-dividend don't hear what i'm not saying there are great companies that pay dividends. I'm not anti-dividend. Don't hear what I'm not saying. There are wonderful companies that pay dividends. And I think what you're going to talk about now is you can have the best of all worlds. You don't have to be an income-seeking investor and buy shit companies. You can buy great companies that pay good and growing dividends over time.

That's the way you got to do it if you're gonna be a dividend investor yeah and there's in my notes here i have you know it's pretty simple why not both so lots of great companies will actually do boats a little pay a dividend and they'll do share buybacks and one of the easiest examples here is Apple. They're a great example. They consistently increase their dividend year over year. They also buy back shares on a pretty crazy basis. To say the least, yeah. Yeah, and tens of billions of dollars every single year and share buybacks. And what the two together can actually do is you can, in theory, i know there i've seen businesses where it's

happened before is when you combine the two you can actually increase the dividend paid out per share without increasing the total amount of dividend paid to all of your shareholders so for example if a company pays out a hundred million dollars in dividend in a given year and then the next year they reduce the share count by, let's say, 10% and keep that dividend payout to $100 million total. That means that the actual dividend per share will increase, even though that the total amount of dividend paid to all shareholders remains the same. So that's something just to keep in mind as well.

I don't think it has to be one or the other. It can oftentimes be both, especially really good companies will be able to do both. But it's just something to keep in mind. Challenge your thinking, whether you love buybacks or dividends, and make sure you just invest in very good companies that are growing because one of the pitfalls, like Braden said, especially looking at dividends here, if you're going after yield, there's usually a reason why a company is paying 8%, 9%, 10%, 12%, 13% dividend. It's because the market doesn't think it's sustainable. There's a problem with the business. Therefore, the share price have gone down so much that the yield is high basically yeah and that's signaling that the company has no other way to invest it better in the in the business if they're if they're paying out almost all free cash flow to the dividend that means

there's basically no reinvestment into the company right Yeah. And oftentimes, the reason why it's so high is the market is actually pricing in a dividend cut, even though management might not actually be willing to do it right away. Oftentimes, the market is just saying, you know what? We know you're going to have to do it, even though you're saying you're not. We know you'll have to do it sometime soon. That's why we're punishing your share price. There's a few companies that should absolutely just slash the dividend. And they won't, but they should. I'll give an example.

My beloved Constellation Software. Mark keeps toying with the idea on the calls. They pay this goofy, tiny dividend that does not increase at all. The odd special dividend that they've done over the years that they said they're going to stop doing because they can get such higher RICs investing in small companies. Just do it, Mark. Just do it. The investor base is so lethargic that they're not going to punish you. It's probably one of the only ones that the stock would actually go up on a dividend hike.

that they're not going to punish you. It's probably one of the only ones that the stock would actually go up on a dividend hike. But like another Canadian company, WSP, a roll-up in engineering firms, they've paid the same dividend since like 2012 or something. And it's just like, why use that excess cash to pay some dividend that the shareholder basis doesn't give a crap about? Like the yield is so tiny, right? So there's a few examples where it's like you should absolutely slash it. I wonder if sometimes it's like a major shareholder that pushes it for it because for them it actually creates a decent amount of income. Maybe.

You got to wonder. I'm not sure. But I like the example you brought up of Apple and a company that buys back an egregious amount of stock. Most of the gains in Apple, not only because they're a great company and have become extremely profitable, but if you look at earnings per share, it has skyrocketed because they have reduced the share count. So when you hear about earnings per share, people care about that per share number so much because this company is removing shares from the public market, an aggressive right in Apple's case.

And it's the same reason why dividend growth investors should also like share buybacks. Because that dividend per share, that's the number that's actually going to come into your brokerage account anyways. That number is increasing over time while the company still pays the same payout ratio. So, well, not necessarily payout ratio, but the same total payout on their cashflow statement. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose

the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. That is questtrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away.

Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at I have a section here called the sexy case for boring compounding. Now, unfortunately for investors, there's some basic math kind of working against you when you invest in something and see the value get actually washed out. Now, I see this a lot in 2018 when every retail investor and their dog was piling into weed stocks.

Piling into Canopy, piling into Aurora and Tilray because it was quote unquote, you can't see me right now, but I'm doing it. The next big thing. This is why value investors stress what is called a margin of safety. Now, if we look at the math, because I like looking at the math, at the math. These are the types of gains that you have to get to make up for a capital loss. So if you lose 10%, you have to make 11% loss, which means the value got cut in half, exactly in half, you need to make an 100% gain to make up for it. This is basic math because if you have $100, you lose 50%, you now have 50 bucks. You have to double your money to get back to 100. This sucks. This math sucks. And experienced investors know this very well. They know this extremely well. They're hearing this segment and they're going, oh, he's talking about drawdowns.

I know. But the reason that I'm bringing it up is because we have seen over the last two years, investors and retail investors in particular, go further and further out of the risk spectrum. And I don't see that as a way to predictably make money long term. And this math is a reason why, and I'm going to get into more reasons why in a second, but I am here to make the sexy case for boring compounding and really drill that message home that the first rule of this is don't lose money. That's the one you got to really make sure you solidify, even if it's a small portfolio gambling into some TSX venture shit go. You really got to understand the math and how it can work against you there. Yeah, no, exactly. And I think, you know, it's almost a way to put it to understand for people that need to wrap their head around it.

It's almost like think of it about base effects. Right. So it's almost a base effect because if you have a 50 percent drawdown, you know, you're going from a thousand. That was your original base. You've got a 50 percent drawdown. You had 500. Well, now your new base is 500. So how much is the multiplier required to get it back to 1000? Well, it's 2x. So it's 100%. So it's almost like a base. Well, it is a base effect case when you think about it. Yeah, it is. And so when I'm talking about going further out the risk spectrum, this is what happens in long bull markets as well right is next thing you know your friend at a party is telling you about some next generation technology stock trades on the tsx venture

and by the way they've been public since 2012 and haven't made a dollar on their top line statement i had a buddy send me one of these last week. Sean, if you're listening, I'm sorry. This happened, man. It's been public since 2012. Trades on the venture, not a single dollar in revenue. I'm not going to even list the ticker because you don't need to waste your time. Now, these are hyper risky type bets. And when the bet doesn't pay off, even if you're barbelling with a bunch of like established companies you know you got your blue chippers they have to work a hell of a lot harder than they should to bring your portfolio to the promised land so moving out the risk spectrum to potential

zeros is a tough way to go a recurring theme you theme for my segments that I go like this is, this unsexy compounding is not for me to sound all stoic and be like some Karen who's like, be careful out there. I'm not trying to ruin the party. I'm just saying because this unsexy compounding should be thought of as more attractive given that it actually creates generational wealth. Almost all of the best investors in the world have made life-changing type of money, like stupid money, over time by not doing silly things and not going against the math that really can hurt them. And that basic drawdown math really doesn't help you if you are potentially losing your shirt on a position.

Yeah, no, exactly. And I think there's a lot of advantages to of investing in great companies that are compounding over time, it might not be as sexy as, you know, super high risk venture stocks, you know, startup companies that just got listed on the public market, but it will also be much lower volatility. You'll probably sleep better at night. There's tons of other advantages that you, you know,

you can definitely make a case for those kind of companies. So I think, yeah, go ahead, Brayden. I just wanted to mention before your last segment here that if you have a 90% drawdown on a stock, the math works out to you requiring a 900% gain. Can we take that in? Like a 900% gain from that where you lost your shirt. Like you're expecting this nine bagger. And I hear all the time. How many times do you hear this?

I'm just waiting. You know, I'm down. It's down 90%. I'm just waiting for it to come back. I'm like, do you think it's going to 9X from here? Because that's what requires for you to get your money back. I'm like, do you think it's going to 9x from here? Because that's what requires for you to get your money back. It's not like it just needs to go up 90%. And so this is a really tough psychological and mental barrier to get over. But once you recognize it and just understand

the reality of it, put the emotions aside, probably make better decisions. Yeah, I was gonna say it's oftentimes because it's emotions get involved. That's right. And you've put so much of your like, you know, you've put some of your emotional energy into it. So you don't want to admit that it can't go back to what you paid for it. And then you add that with some arbitrary price points. You may say, you know what, if I recoup half of it, I'll sell,

even though there's no fundamental logic behind it. So you have to really be careful of that. And a lot of it, a big component of investing, and I'm sure we'll talk about in other episodes, is just the psychological aspect. Perfect. So now we'll move on to our next segment. I think this is an interesting one. I did an interview last week with Elizabeth Robinson. We did talk about some financial

literacy concepts. And I was thinking, you know what? We talk a lot about investing, but you need money to invest. So ways for people to actually get a bit more money so you can invest more. And clearly right now we're in an inflationary environment. So clearly, you know, most people are paying more for some of the things that they buy on a regular basis. They might be paying more for the rents and so on. And it's not always possible for people to earn more money. So there are ways that you can save money and potentially have more money to invest. So now, obviously, you know, whatever amount you can invest on a regular basis is great. Even if you're just investing, you know, $50 a month, not everyone has the same amount to invest. Just $50 over time can actually

compound quite well for you. And of course, the more money you have, the more you have in terms of a base to compound over time. So the first thing I think everyone should do, I do it on a pretty regular basis. I do it every two to three months usually so I'll track my expenses and I'll just update my total expenses if you don't track your expenses you won't know what you're spending money on so you can do this manually or you can use apps that will connect your bank account and credit cards and they'll track your your spending for you there's tons of app out there but two of the most widely used from what I can see are Pocketsmith and Mint from Intuit. Have you tried any of those, Brayden, before?

I've been meaning to try Mint just because I use some of other Intuit's products, which are very solid, by the way. But I haven't. No, I'm so spreadsheet guy. I'm literally the definition of spreadsheet guy. Yeah, I do. I do spreadsheets a lot. But if I were to try one, Mint would probably be one just because same for you. I've used Intuit products before and I think they're very good. And from the reviews I've seen, it seems to be one of the top ones, if not the top one. Hey, Mint, sponsor the podcast.

Look at this. This would be a perfect fit. Now, once you've tracked your expenses, I think the next logical thing to do is to review your expenses because there are some easy ways you can actually reduce your expenses. The first thing I think everyone should look at is those subscriptions. And so this is one that I do regularly, personally for our streaming services for each month. So we actually have a maximum budget, my wife and her and I, that will allocate to streaming services. So we don't want to pay more than $50 a month. So that means we actually have two to three ongoing services depending which one it is because some are cheaper than others. And if we have a certain service we want to try or subscribe to, we have to drop another one. So if there's a certain show we want to watch for a given month

and we need a service, we'll add it on, but it'll cost us another one to make room for that service. And if there's a show we want to watch and we already reached that $50 cap you know what it'll still be available one two three months from now um so that's the way we approach it but another thing I've done when I subscribe to something especially I don't know if you've done that Brayden when you subscribe through like Apple pay on your phone. So Apple is really cool for that. It's actually you can manage your subscription through your iPhone.

And when I want to try something, and oftentimes there's a free period, or it's like you pay for one month, but then if you don't cancel it, it'll auto-renew. So what I'll do is I'll actually subscribe to it, and then I'll cancel it right away. The subscription will continue still for that one month but then I know I don't have to worry about it auto renewing and if I do want to continue after it I just have to go and do it manually so I find it's much easier to do that right away if not you tend to forget about it I haven't used that on my phone I didn't even know that existed. Yeah, it gives you the list of your subscriptions, when it ends and everything.

It's actually quite useful. Yeah, I can see why those, like Mint, for example, those services pop up because it helps you really see the – helps you visualize stuff like this, like your subscription. I've even seen services come out that are like, subscribe to our service and we'll cancel services for you. I'm like, wow, that's quite ironic. I've heard it advertised on podcasts. I have too, yeah. You've heard this as well, which is very ironic.

I don't really understand the product market fit. But hey, I mean, check out your... Some people don't even know what they're subscribed to at this point, which is probably a good time to review them. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by Money Cents. And with them, you can buy all North American ETFs, not just a few select ones,

all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit Questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra

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The next one I think is very easy. It's something that I think most people can relate to is, you know, eating out or ordering food, whether it's Uber Eats, skip the dishes or any other, you know, food delivery service that you might use. So an easy way to reduce your expenses is just cooking more often and eating out less often. The same applies for delivery or takeout. If you like delivery, for example, an easy alternative to save money, essentially just go pick it up in person for takeout and you'll save probably $10, $15 on delivery and tip that you wouldn't normally pay. If you're too busy to cook on a regular basis what I do personally and my wife is we'll try

to prep some food on Sundays that way we have some food ready for the week. We're very busy, she works, she has a demanding job. I work a regular job and do the podcast so obviously time can be quite tight during the week. So there is a way that you can actually plan. And the last thing here that I would mention is that, you know, you might want to go do groceries just a little more often instead of doing a massive grocery for like seven to 10 days. Because what I've noticed on a personal basis is that when we do that, we tend to throw away some stuff because we don't end up using it or we forget that we have it in our refrigerator. So you actually reduce your waste by going a bit

more often to grocery store and you end up saving money. And of course, I think any Costco member can relate to this. If you go to certain stores and here I'm saying Costco, go with a list. Because if you don't go with a list, I've seen it for myself, I'll be completely honest. I end up going out there and it's costing me $200 more than I thought it was going to cost. The list is a key thing on both sides of this equation. It like keeps you from buying junk and spending money unnecessarily. But what it also does is make sure you have everything so that when you go to cook, like you actually have it. What I'll do if I don't make a list, if I get lazy, I'm in like a lazy period and I don't have a list and I go to the grocery store and I just, I'm just waddling

around. Don't know what I'm doing. I ended up not getting enough food. And then it's like Wednesday night and I don't have enough. I'm like, I literally need groceries again, but I'm busy. So what do I do? I order, I order sushi and I crush like 40 rolls of sushi cause I'm fat. Um, and spend a bunch of money. So this goes back two ways, right? Yeah, yeah, exactly. And then there's a couple easy ways I think you can save money here. I'll kind of rapid fire a bit more so you can reduce your energy costs.

You know, obviously, it might not be easy for a lot of people to do so, but it could be some small little things like just make sure you Reduce the heat if you're not home You can get a smart thermostat that could help you do that Make sure you close the lights when you're not home these little things kind of add up over time But if you have a bit more of a budget it could help you over time is getting more efficient appliances windows Furnaces things like that. you can also lower your housing expenses uh you might tell me you know how the hell do i do that with rents going up and prices of home going up well

there's some ways to do it if you own a home and think about renting a room or your basement if you have a two-bedroom apartment that you're renting with a second room that's collecting dust, why don't you look at getting a roommate? Only if you own this in a central neighborhood and you have an extra parking space available, maybe look at renting out that extra parking space for like a nearby apartment building. So there are ways to get a bit more income without, you know, without requiring too much work. Of course, it does require some sacrifices and the examples I said, you know, some some privacy sacrifices. But, you know, it's something that you can get to have something you can do to have more money to invest. And then the last two things I would say here is use public transportation if you can do it. I did it myself some years ago

where I just figured I could get rid of my car. I was a bit more in a difficult financial situation. Actually, it was like 10 years ago, if not more. So I got rid of my car, started using public transportation, and I was using a bus. I'd always driven to work. And you know what? After a while, I was reluctant at first, but after a while, I actually liked just chilling in the bus, reading a book or listening to podcasts or music. So it was a good thing to do. And I saved tons of money on insurance and gas for the car. And then the last thing I'm going to say is reduce your debt or consolidate loans,

especially if you have high interest loans or debt. So if you can pay off credit card debt, if you actually have credit card debt, you should try and pay that as fast as possible because you're looking at what, like 20% interest rate? 20% plus. That would be on the low end. Yeah, exactly. And if you're not able to pay it, or if you're having trouble even making the minimum payments, then go and try to see if you can qualify for a consolidation loan. They'll get all your loans together. They'll lower your rate. It'll be more manageable for you. And then at the end of all of this, I would just say, whatever you do, just make sure you set yourself a realistic

monthly budget. Don't, you know, don't set yourself something that's not realistic. I joked last episode or an episode before that, you know, Brayden could get more money by just to invest by just eating just crab dinner. But, you know, I said that as a joke. Dirt and ramen, baby. Dirt and ramen. Exactly. I said that as a joke. But of course, like you have to be realistic as well so if you you don't set a realistic budget i think you'll go down on yourself and it'll probably just end up having a counter effect no uh you know the null of seriousness though the dirt and ramen thing that ain't no joke i'm in startup land this is this is a sign up for stratosphere so i can stop eating dirt and

ramen um but no i i like the like this last part set a realistic budget like look at your last few month statements on your credit card and see you know what what is really gonna be possible right like some of this stuff is not uh not feasible to of. Now, I just want to give a quick shout out to a listener of the show, my buddy Kyle. I chatted with him this week. And he was telling me, and he's been listening to the podcast for a long time and a great guy. And he was telling me that he got a job because he gets so into investing. He's like, if I can just invest a couple hundred bucks extra a month, it would make a huge difference. He's like, I'm listening to the podcast, just a couple hundred bucks a month. And I'm seeing how much that can come out to in

my TFSA. I'm like, I know, isn't that crazy? And so what he did was every Sunday, he works just one shift a week at a local business across the street. And he says it's fun. He gets to meet local people and chat and just kind of contribute in that way. And like after tax makes like, you know, less than 100 bucks a shift. But it's not a chore for him. Like it's fun. Like He works from home the rest of the week, and he enjoys it, and he takes that money and throws it immediately in the market, every paycheck, and just to throw a little bit of fuel on the fire that he makes from his regular job. But he said that that has made a huge difference for him. And I was like, man, that is an awesome story to hear because you don't need to do a lot. When you have a long horizon like he does, you don't need to invest that much money to really succeed long term. And I don't know,

I thought that was a cool story. Yeah, no, that's exactly right. Obviously, you can get extra income like he did and these are just ideas here to get more money to invest there's other things right that you can look at your budget but you can also get another job like you mentioned here and i think if you do something that you enjoy and then you get that extra income you invest it even if it's just 50 or 100 bucks more a month, it can make a really big difference if you're looking at 20, 30, 40, 50 years compounding. That will make a huge difference. It might not seem like a lot right now, but, you know, do yourself a favor. Use a compound income calculator and just crunch in the numbers.

You'll see the difference it can make. Do you have any stories or examples of borderline insane money-saving things that you've done? Like back when you're like in your early 20s or like as a student, do you have any things that you would do? I have two. I'm curious if you have anything. I have one that anything that you have. It was like borderline questionable. Yeah. So I had one of I was I must have been like twenty twenty one. And I like I was really tight on cash. I just like I didn't have a job at that point. I just quit my other one because i really hated it so i was looking for new jobs i was really living on my reserves but i i needed gas right so you gotta you know you need a car you gotta do what you gotta do so i would never rev my car more it was standard

more than 2500 rpm so i would never rev it more than that because i was always in gas saving mode that's one the first one that comes to mind and i mean at the end of the day it probably didn't make much of a difference and i ended up it's like bad for your car too i probably you know and not too long after i got a job i was never without a job for very long even at that young age but that's the one that comes to mind yeah like i feel like everyone or people like think that like we do we don't talk much about i think the first time we've talked about personal finance on this show in like 100 episodes um feels like it anyways but i feel like everyone who's like kind of borderline obsessive, like I think you and I fit the bill. Everyone has that like borderline embarrassing questionable thing they did when they were trying to make – save more money.

And hey, that's cool, man. I like that. working at regular commute before I quit my job and started Stratus for full-time, started eating dirt and ramen. Before that, I was making well over six figures with the side hustle income I was doing and my engineering job. But instead of paying for the TTC subway to get to work downtown every day, I'm talking about even in the winter, even in the winter, I would bike both ways to work. I got the idea from Andrew Howell has been on the show before. And so I started doing it and I was like, months, I can save $840 a year if I go through the winter as well. So I started using a crappy bike, not to ruin my main bike, for the winter months. And I would bundle up.

I would get to the office. I would unbundle in the gym when gym when i got there it saved me 840 bucks and i stayed fit all year round i thought it was an absolute win-win but looking back at it it's a bit ridiculous you almost got it by about 15 different cars but yeah you know what the the bike lanes aren't so bad um i was pretty safe for the most part. The odd close call. But in minus 20 and windy, minus 20, like we got some listeners who are like out west going or like they're in winter peg and they're like minus 20. Come on, buddy.

No, but windy as hell through the city wind tunnels will absolutely wreck you. So I'm going through there and it's freezing. And I'm looking back. I'm like, why did I do that? Just take the subway, dude. And especially Toronto, it's usually really humid with Lake Ontario, right? Just around the corner. Is it Lake Ontario?

Yes, it's Lake Ontario. Oh, you're in Ottawa. It's not that bad yeah no I know but it's it's probably quite humid all the time so that makes a difference but in the winter it's humid in the winter yeah is that a thing isn't it just dry in the winter no I think you can get dry cold people from Edmonton can probably yeah yeah I can probably vouch to that where it's more of like a dry cold there. And then out east, we tend to have like more humid days in the winter. I just always thought humid meant like associated with hot. But I legit have no clue. Well, if we have a meteorologist listening to this, hit us up on Twitter and let us know.

We'll do an episode. Thanks so much for listening. We really appreciate it. You guys rock. I've been talking to a lot of listeners over the past little while. And I strongly believe that we have probably the best fan base of any podcast called the Canadian Investor Podcast, just saying. Thanks so much for listening. We really appreciate it. Today was Wednesday, March 2nd. We'll keep you updated with the ongoing turmoil around the world, to say the least. But don't worry, we'll keep you updated with earnings results as well because business, you know, it's still happening for a lot of great companies and it's going to continue to happen for the best companies. Thanks so much for listening. If you have not listened to, not listened to, if you have not checked out stratosphereinvesting.com, that is where you find financial statements on a 10-year basis.

So you want no more three-year statements, man. Cancel three-year statements. We got 10-year statements. Stratosphereinvesting.com will help you out over there. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.