The Canadian Investor - Is Index Investing or Stock Picking Better?

Episode Date: August 22, 2022

The age old debate of using an Index ETF strategy or stock picking. We go over the pros and cons of each approach and what to consider when deciding which strategy to use. We also go over 25 Canadian stocks with sales and earnings growth, the recent investment by Andreseen Horrowitz in Adam Newman’s new business venture and Simon goes over why he recently sold two of his stock holdings. Tickers of stock discussed: QQQ, VTI, BBU-UN.TO, TCN.TO, FIH-U.TO, SMU-UN.TO, TSU.TO, PRMW.TO, BAM-A.TO, MTY.TO, AQN.TO, GOOS.TO, INE.TO, WIR-UN.TO, RBA.TO, WCN.TO, TFII.TO, CSU.TO, CJT.O, FSV.TO, ATA.TO, CIGI.TO, EQB.TO, IFC.TO, DSG.TO, GSY.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast 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 forward slash GIC. Again, eqbank.ca forward slash GIC. 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 Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. How we doing? It is August 18th. My name is Brayden Dennis, as always joined by the great Simon Belanger. Simon, I have a question for you. I told you I wasn't going to tell you what it is because I want to know. I'm sure you have thought about this before.

How much money does someone have to give you so that you never work another second in your life? Not that you don't like work. I know you do. You're a hungry guy. But what is the number that you're like, all right, I'm just doing fun. I'm doing epic fun stuff every day for the rest of my life. I mean, yeah, that's a good question. I've kind of looked at some of the numbers, especially when we did that episode on the 4% rule. So I looked at the numbers on top of my head. I think it would probably be minimum 5 million.

That's just, yeah, it's kind of the number that comes to me because 1 million is just not enough. And then I would want something where I have a decent amount of buffer. So 5 million, not based on any calculation, but that's just a number that comes to mind. Yeah. I think that that's a good one. It's one that people probably think of right away because they're like, yeah, like three, I need need a little i need a couple more buffer for me it's 10 somewhere between 10 and 20 someone hands me that i'm like okay i'm just doing fun stuff i'd still be working because you know just how i'm wired but i would be doing strictly fun stuff okay yeah i think that that is a good number. All right, Simone. Today,

we are talking about Canadian stocks that actually grow fast, but have profits or at least earnings growth. You're going to talk about the timeless discussion, the never-ending age-old debate between index investing and picking individual stocks. And then we'll talk about what you've been doing in your portfolio recently, which by the way, I looked at your notes here. I like what you've done objectively for the most part. I think that it was quite smart. Simon, do you have this Google doc up here on the sheet here? Yeah. Yeah. I have it open. I don't even have it open. Hold on. Let me fire it open. View only because he doesn't trust me with the data but uh for people listening this is

actually our third time i think trying this episode or a second time actually no must be like fourth yeah when is the last time we have we're coming up on the 200 episodes of the show and we we just like anything goes whatever like who cares know, voice cracked like a 16 year old boy, let it fly, don't care. But this one, they just either the tech or, you know, someone deciding to drill for gold next door to my house, can't record a podcast. So I'm at my buddy's house. Maybe it's a little echo in here, but who cares? The show goes on, Simon. We are committed to the content here. Yeah. And it's probably the last recording we do show goes on, Simone. We are committed to the content here. Yeah. And it's probably the last recording we do for a couple of weeks. We have some episodes

banked, but of course, everyone knows my wife is pregnant and now she's three days late. And I think, you know, I have a suspicion that she'll give birth before our next planned recording, which would be next Monday. Yeah. Yeah. Three days late. Yeah, you're good. I became an uncle recently and it was a full week late. Sometimes they just need a little bit more time in the oven there. You got this spreadsheet open here, right? Okay. Yeah. So what this topic is here is inspiration came from discussing the trade desk a few days ago on the podcast. For those who don't know the trade desk,

it is ticker TTD. It is a US listed ad tech company. And it got me thinking about the environment that we're in today, which is, let's preface this. So last year in 2021, it didn't matter what you did. As long as you showed top line revenue growth, the market liked it. That was in favor. It doesn't matter how much we dilute, doesn't matter how much operating cash we burn. The Brinks truck explosion at the head office, their annual shareholders meetings, they just light money on fire. Their annual shareholders meetings, they just light money on fire. So revenue growth at all costs was the hot thing in 2021. In 2022, investors smartened up naturally, I think with the ebbs and flows of bull and

bear markets. And so the trade desk is kind of like an anomaly in this where it's like they actually grow fast, but they've been run profitably since 2013. And their entire time as a public company, they've produced real cash flow. And so many stock charts these days, 2021 was like straight up into the right. And then 2022 is like a fall from grace. Many of them look like they would fit right in at the Rocky Mountains as the shape of their stock chart. And Lightspeed comes to mind as a Canadian name. It's still fantastic top line,

80% growth rates. But profitability-wise, expenses are growing faster than that. So where does operating leverage come in? And operating leverage comes in from revenue growing faster than expenses. And in software, since it's perfectly scalable and doesn't have high variable costs, ideally revenues grow faster than expenses. And so I was like, okay, I'm going to run a screen on Canadian companies that are actually growing sales more than 15% on average for the past five years and had greater than zero earnings growth. So it doesn't mean that they're profitable today, but at least that they're working on closing that gap.

I tossed out companies with weird one-time growth. I tossed out materials and I tossed out anything less than $1 billion in market cap. We arrived at a nice list of exactly 25 stocks. It's actually 24 here. There's a repeat, but 25 sounds way better for the podcast title, so catch it there. Do you notice anything interesting about this list just looking at it? Yeah. well, for me, I think it was just the sectors, a lot of industrials, financials, some consumer discretionary as well, and real estate. Those are kind of the ones that come, seems to be reoccurring. I think there's just two tech plays in here, two that people will be familiar with if they listen to this podcast. And the other thing is just in terms of market cap, that may be more of a result of these being Canadian listed companies than anything.

But the market caps, I would say are kind of smallish cap to maybe the lower end of a medium cap, depending on what your own definition is of a small cap and a mid cap. I agree. Yeah, I look at this list and I'm like, okay, a lot of roll-ups. Yeah. Quite a bit of real estate. Lots of roll-ups. Yeah. Like lots of acquirers. All right, here it is. So I'm going to start with fastest sales growth on the past five years and work our way down. Brookfield Business Partners at number one, Tricon Capital Group, Fairfax, India, Summit Industrial Income, REIT, Tricera. So yeah, lots of real estate there. Primo Water, Brookfield Asset Management, MTY Food Group, which has been like a sneaky compounder, but

I've talked about them quite a bit in the past. Some of their assets that they acquire, I'm like, I don't know about this. I'm like, I'm not sold on Manchu Wok roll-up. It's like all these food court names. Algonquin Power, another side note, they just keep diluting the shareholders at an aggressive pace. I saw that they're going to issue another like 500 million in shares. Canada Goose, Intergex, WPT Industrial, Richie Bros, Auctioneers, Waste Connections, great name. TFI International, great name. Constellation Software. Oh, this is the juicy part. Constellation Software, Cargojet, First Service. Wow, this is a great list right here. ATS Automation Tooling, that's a cool company. Colliers International, First Service and Colliers have the same origins there. Equitable Group, which is the owner of EQ Bank. Intact Financial,

Descartes Systems, the logistics software company, and GoEasy Financial, which is the high APR lending company. So there's the list. I thought it was interesting to look at these lists because some of these names have had fantastic performance even through the past year and a bit. And they all generalization, they all grow, trade at pretty reasonable multiples and the reason for that is who's looking at a 1 billion one and a half billion in market cap toronto stock exchange name even though they're billion dollar companies it's a pretty undiscovered list generally to the you know global equity community at least yeah yeah i think so obviously, when I was talking about market caps, if people are listening to this, there's a few exceptions. There are about, I think,

four names, if I'm looking quickly, that over $30 billion in market caps. But the rest are relatively small. The one name, I mean, I've been kind of hammering the drum on is Canada Goose. I think, honestly, they've been very impressive on how they've operated and the results they keep having. I haven't had the chance to look at their most recent earnings, but I'm planning to do that and just really impressed. I wouldn't be surprised actually, just a side note on Canada Goose, wouldn't be surprised for like a LVMH to just buy them eventually. I totally see them as an acquisition target for a luxury goods roll up. They just need to do it before they get too big. Well, exactly. And there's still I think they're

just around 3 billion market cap right now. So it's still like that's Canadian, I think, is a Canadian because they are listed. But regardless, I mean, I think they've, they've been very impressive of all the companies like the results when we were getting really bad earnings earlier this year, guidance was changing. Canada Goose kind of stayed the course for the most part. So I just wanted to mention that one. Yeah, I wouldn't be that surprised, actually. It's like, okay, so they throw a little premium on it. They buy it for like $2.8 billion USD LVMH.

It would fit in with those luxury brands that they already own. That's a good call. Maybe that's a bold take for you end of year. You heard it here first. Stop. Put that one in the back pocket for our bold predictions for next year. All right. That is the segment there. I like doing these screens. It's good to get the brain flowing, the juices flowing and look at new ideas because sometimes it's one of my biases. I haven't, I would say in the last two years, been like really actively turning over as many stones as I used to be. Mostly because I'm just kind of sitting on my hands with what I own. But I do think that I need to be better at doing

that in the future. Yeah, I think me as well. I mean, it's just, you know, we're both really, really busy people as well. So there's just sometimes there's something's got to give. But I think I got 10 hours a day to just screen stocks all day. Come on. Of course. Yeah. But obviously, I think the podcast is great for that because then you you know, you come across something or someone mentions a stock, piques your interest, and then you start digging into it. 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 at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Now we'll move on to our next segment, one that I think a lot of people will enjoy. We had someone just recently on Twitter a couple days ago asking us about it, and I just joked around with him, just saying, well, it sounds like your mind reader because I worked on this segment last

weekend because I wanted to have something in case the baby was coming that we could do in a couple of weeks from now, if need be. My question here is, should you pick individual stocks or broad-based index ETF? So like I said, something we've had a lot of questions over the years. And I've recently been listening to the audiobook Trillions that goes into depth on the history of index investing. I'm not quite done yet, but really interesting to see how that came about. And it actually started, you know, the infancy way before John Vogel, but he really popularized it with Vanguard, as we all know. Now, looking at the potential returns that you can expect, well, with a broad-based index ETF, you know you'll match the market

returns minus a minuscule fee. And the fee here, typically, it'll be like something like 0.03, 0.05. It'll typically be less than 10 basis points so it is quite small this could be though an advantage or disadvantage depending on which way you look at it because you won't underperform the index which is great but it also could be seen as a disadvantage because you will also not outperform it now if you're picking individual stocks to make your portfolio, then you could outperform the index or underperform. Of course, very rarely will you match the index unless you have like 100 individual companies, which at that point, you know, the question is like, why do you own that many? Why don't you do index investing anyways? But at the end of the day, you'll do as well as your stock picking, which could lead to underperformance or overperformance.

Any comments here? No, I think that that's a good overview. And what you're hinting at here is there are a collection of pros and cons in this discussion. And ultimately, you just do what makes sense for you. And many, many people, just to generalize, you grab someone off the street, they ask you, it's like, what should I do with my portfolio? Well, one, neither of us give stock picks to people in person anymore because they check back three months and the market's

down and they're like, what the hell's wrong with you? Is to just dollar cost average into a broad-based index is just such an amazing return on time. The simplicity is amazing. But of course, many people listening to this podcast have a fascination and interest in individual securities, investing in above average businesses, and hoping that they can get above average returns with their ability to be patient and own good companies. And so you put those two things down on a piece of paper and they both have wonderful pros and cons in this discussion. It's a win-win because people have choice. That's what I think is the best part about this discussion is people can decide for themselves.

Yeah, exactly. Now, the next thing here to consider is volatility. Again, if you choose an index CTF strategy, the volatility of your portfolio will match that of the market. Obviously, it'll depend on which index you're following, but it would match the S&P 500 if you have an S&P 500 index. Now, this might surprise people, but picking your own stocks could either have more or less volatility than an index ETF. Because I think a lot of people think as soon as you start picking your own stocks, you'll have more volatility. Not necessarily, because it really depends on first the amount of stocks that you have in your portfolio. And second, the type of stocks that you actually own in your portfolio. For example, let me just give a couple of examples here. First, let's say your portfolio is just tech growth stocks.

I can guarantee you, you will have more volatility than the S&P 500. On the other hand, if you have a portfolio of only utilities, then I can also guarantee you that you'll be less volatile than the S&P 500. I personally would not recommend any of these strategies, obviously, because there's going to be limitations to both here. But volatility, again, there could be more, there could be less. It really depends how you build your portfolio compared to the index. But if you have an index ETF, one thing that you know is the volatility will be the same to the index. But if you have an index ETF, one thing that you know is the volatility will be the same as the market. And usually it should be more

palatable, I would say, just because you have so many stocks within that index ETF, especially if you have kind of a total market, right? Index ETF, then you have thousands and thousands of stocks. index CTF, then you have thousands and thousands of stocks. I love this discussion because you often hear this metric called beta. It is a flashy financial term for stock investors that is just a simple measure against how volatile a stock is. volatile a stock is. Now, the problem with beta is that it is not a good measure of risk, even though many fund managers will put in their prospectus that the volatility has a direct correlation with risk, and they'll define that by beta. Now, that may be true if you have a very short time horizon, but it should not be confused with actual fundamental business risk. Whereas some high, fast-growing stock, in terms of their financials,

are growing very fast, they're going to face a lot more volatility because there's so much expectations priced in every quarter by analysts. They they beat earnings massively, they missed guidance, the stock's going to move a lot in some trading days. And so you're going to have a lot of volatility. One more thing that I'd add here is it also depends on how concentrated you are. Say you have a basket of 10 stocks, nine of them are utilities, but they make up 10% of the holdings. And then you have this 90% position in this ridiculous mining. Yeah. Or like some junior mining TSX venture stock, you're going to have absurd volatility. And so you have to really be thinking about how many holdings and concentration. But this is true. I mean, generally, summarize, if you're holding a basket of 1000s of stocks, you're going to have generally a lot less volatility than holding a basket of 10 stocks. And that is a pro towards just owning the index and holding on for a long time.

just owning the index and holding on for a long time. Yeah, yeah, exactly. Well put. And obviously, yeah, the way I was talking to was more like with all other things being equal, but that was a nice clarification. Now, the time commitment, clearly index investing can be done with very little time. You really have to put the initial time of if you have no idea of how to invest, just learning the basics so look you know creating that account with an online broker and then just learning how to purchase stocks and sell so i

mean you probably shouldn't be doing any selling is if you're doing index ctf especially dollar cost averaging but just knowing how to put an order in i would say opening an account and all that's probably you know let's say less than five hours commitment overall. You know, sometimes it's a bit more cumbersome to open accounts with some online brokers and others, the paperwork and stuff like that. But after you're done, it's very, very little time commitment. And I think that's a big advantage. And time commitment here is probably, in my opinion, one of the biggest deciding factor, whether you should do an index investing strategy or picking individual stocks. Because even if you use a service like stratosphere.io to help you pick stocks, you still have to

take the time to read the deep dives that they'll do into the business. It won't take you hours and hours, but you know, it's still going to take more time than an index ETF. And of course, if you want to do the research yourself, then you're going to have multiple hours of commitment before starting a position. You may also be doing research just to find out that you're deciding not to invest in this business because after doing the research is just not a good investment for you. And when you do invest in a specific stock, you also have to keep track of it on a regular basis. I'm not saying on a weekly basis or anything like that. But usually, you know, just be aware of the earnings on a quarterly basis,

and maybe once a year, do a more thorough review of your investment thesis in that position. This is the most important section of your section here on the podcast is this time commitment piece. Because if you, like I said, return on time, just owning the basket of the index and calling it a day, rebalancing it once a year, take 15 minutes to an hour per year is such a wonderful thing that everyone with an internet connection can do, in my opinion. And you're right. Like you mentioned, my company, stratosphere.io has all this analytics tools and research for you to make decisions. And we used to like have model portfolios and like all these kinds of ways for the people that are like, tell me what to buy. And I thought I actually pivoted completely away from that because the reason for that is you have to have your own conviction.

And I felt like it's a disservice to people to tell them what to do. And then they own a stock that's down like 15, 20%, which is in line with the market. But they don't know why, because they have no idea what the company does. This is a giant fundamental problem. You have to understand the business if you're going to own individual securities and owning the individual business requires time. It requires a little bit of time. You don't have to know every single C-suite's middle name, but you have to at least know what the business does and how they make money and what their competitive advantages are at the minimum. And so I think that you've nailed this on the head. This is, in my opinion, the most important talking point.

Yeah, and I think we went through that pretty well with our 25-point stock checklist. So I bet people are kind of interested to looking what the reasoning we go through for investing in businesses. And if you listen to that, I mean, it's not going to take you 15 minutes to research a stock. And like I mentioned, I mean, sometimes you'll research a company and, you know, you'll put several hours just to decide to not invest in it. So that's something to consider as well. Now, the next thing, flexibility and allocation. Well, index ETF investing doesn't provide you with as much flexibility. That's obvious. The index is what it is. And the changes in holdings will happen automatically based on who manages the index, whether it's S&P or FTSE. There's other companies, of course, that will do

that. But you do have some flexibility. So, for example, you could decide to invest in a basket of, say, 3-4 index ETF providing you with different exposure. Or, for example, you could use a total stock market index like Vanguard VTI for, say, 80% of your portfolio. But you also want more exposure on to the tech space. So you also decide to put 20% of your portfolio into the QQQ power shares that track the NASDAQ. So you do have some flexibility here in allocation with using an index ETF strategy. I mean, a lot of people I think would just be better served just having a total stock market index but again if someone wants a bit more exposure it's not an all or nothing but with

stocks of course you can actually get the type of companies you want to invest and allocate whatever percentage you want for that position so i know we're pretty similar in that way. So we'll tend to have bigger position for blue chip companies. And then we will have smaller positions for like higher volatile companies that, you know, we know there's more risk involved and we know it could go down significantly and there's more potential for the company to go to zero. So we do put a smaller percentage. So that's an example of the flexibility you can have there. You're right. It's matching your conviction with your concentration in the company. And in this case, you can do the same with owning baskets of stocks

via index ETFs or specialized ETFs. And so I'm completely aligned there. ETFs or specialized ETFs. And so I'm completely aligned there. Yeah, there you go. So now the question is, after all that, should you do index investing or stock picking? Well, for me, the first question... I hear what you're saying. Now tell me what to do. Yeah, exactly. Well, I won't tell you exactly what to do, but I think I'll go over the reason. Now, the first question I think everyone should ask themselves is the one that we talked about, the time commitment question. So if you're busy and you don't have time to stay on top of the companies that you own,

then to me, that's a no brainer that you should do an index ETF strategy. Obviously, do that analysis yourself and be honest. I think I think that's the most important thing, right? A lot of people will say, well, you know, I can still have time. And when they actually are honest with themselves, it's like, well, yeah, I don't know when I'll actually have the time to review these companies. And in my opinion, that's probably the approach that most people should take. the approach that most people should take. The vast majority of Canadians, Americans, whoever wants to invest, I think that's probably the best approach for the vast majority of people.

Very good. Now, the second one is one that I think we'll disagree a little bit on it. But if you constantly find yourself underperforming the market by stock picking, then you probably should be using an index ETF strategy. But at the very least, if you find that your returns are not matching the market, at the very least, I would say consider a hybrid strategy where you can maybe have three quarters of your portfolio into an index ETF, and then the remaining 25%, you can allocate to five, 10 different stocks. I mean, maybe that's I'm biased a little bit. But for me, I want to have the best returns possible. So if I can't do that with a stock picking strategy, well, at the very least, I'm just going to use one that will match the market. I know, I don't disagree at all. I think I completely agree as long with the caveat that you're giving yourself enough time horizon to test your actual hypothesis, because if you underperform the market on a quarter, it doesn't matter. It's not a long enough time horizon to measure against the benchmark. If we're up three, five years, you know, you look back and you're like 10 years, you've kind of got smoked by the index. It's like...

That should be a red flag. Yeah. And if it happens to me, I have the willingness to be like, oh, shoot. It isn't happening to me. So thank God. Thank goodness. I don't think I'd be confident enough to even run this podcast. But you have to be honest with yourself and remove your biases from this conversation, I think, is the most important part.

And ego, I think. Exactly. I think a lot of people will have the ego like, oh, no, I can beat the market. And even if the numbers are saying otherwise. But I think you had a great point. Don't freak out if you underperform the market for one year or two. I mean, I think having a bigger sample, I think what you mentioned three to five years, you're starting to get a bigger sample. But then yeah, if you get to 10 years and you're underperforming, that's probably a good sign that maybe you should reconsider your

strategy. Now, the last thing I'll mention, which I kind of touched on, is I think there's a lot of people who think it's just one way or the other. So either you do index, ETF investing, and that's it, or either you pick your own stocks and consider a hybrid strategy. Maybe you only have time to stay on top of five businesses and no more than that. stay on top of five businesses and no more than that. Well, there's nothing wrong with, say, using a 75% of your portfolio to put money into an ETF like VTI and then pick, say, five individual stock at 5% allocation each and then you have your portfolio. It doesn't have to be an all or nothing proposition. And take me, for example, although I have stock holdings and you can have a look on join TCI dot com or you can go to past episodes. I think last year we went a deep dive into our portfolio towards the end of our December or November, I think. But

I still have substantial amounts of money in index ETFs through my DC pension at work. So I do get that broad base market exposure through that. And I will also talk about some recent moves when we're done the podcast. Well, after your next segment, and one of the approach I'm using is dollar cost averaging in an index ETF. I love it. Now, if you look at what marks for a lot of people is this third point here, this hybrid approach. And I'm with you, man. I think a lot of people do do this. I think that people are like, okay, I'm smart enough to know that I have a good chance of not beating the market. So I'm going to put my time and energy into this, but I'm also going to have like half my portfolio in the index just to hedge against the fact that I might not be as smart as I think I am. And that's probably something I should do because I have the IQ of like 48. So maybe I should do that. 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. 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 airbnb.ca forward slash host. That is airbnb.ca forward slash host.

Simone, let's move topics here. Have you seen, have you seen this shit dude? Oh, I've seen it. Yeah. Okay. Oh man. What's the quote? It's like, it takes years to build your reputation and like five minutes to destroy it. Whatever, whatever that quote is. And Andreessen Horowitz has managed to do that. So some context here, Adam Newman, you, the most honest guy in business, didn't lose his investors $11 billion or anything, real standup guy, Adam Neumann. He is infamous for the shenanigans of WeWork and he is back. This time in his latest stunt, he has convinced Andreessen Horowitz, one of the most well-known and well-capitalized venture capital firms in the world to give him

a $350 million check to start his company that doesn't even exist yet. This puts the value of the company at $1 billion off a slide deck. Nothing has even happened. And so they made some, as they invest in every company, they go, we are investing in blank. And they go, we are investing in flow. And the thumbnail photo is just a picture of Adam Neumann. Every time I see Adam Neumann, I think, uh-oh, what fraud is happening now? Because fool me once, shame on me, but fool me twice. How did this happen? Okay. So they have this weird blog post about investing in Adam Newman's company and they lay out that there's like a housing crisis in America. They lay out these like weird philosophical problems with housing. And then they go, that's why we're partnering with

Adam Newman to fix it. It's like, okay, zero solution is proposed. The website for Flow is just a landing page that says coming soon. And so I was starting to think here that the garbage was washed out, obscene evaluations on PowerPoint decks were the days of 2021. Nope. It looks like this mania is still out there and even more mania considering it's Adam Neumann and he lost his investors $11 billion last time. He had some quote, life-changing idea. So I am shocked by this. I almost couldn't believe it. And the rest of the venture scene and startup scene has the same reaction. Him and Elizabeth, is it Elizabeth Holmes, the Theranos girl? Elizabeth Holmes?

Yeah, yeah, that's her. The two of them, you know, she's going to come out of jail or whatever and raise a billion dollar company from Andreessen Horowitz as soon as she is able to as well. Yeah, I was looking at, as you were talking, like, oh, I guess WeWork is still a thing. I didn't even realize. Yeah, there are still most of them have closed down, like the company went into bankruptcy. Yeah. And I mean, look, WeWork was essentially a real estate business that they were trying to sell as a tech company. That's basically what they were trying to do. And yeah, the only thing I'll mention here is, I guess if we need investors in the podcast or stratosphere, you know who to go see who will give you money without any questions asked.

The problem is, is that, you know, we actually have revenue. They want to invest in a company that's just some big idea, right? And so I'll make a new PowerPoint deck slide how I'm going to change podcasting forever. Yeah. And it's funny because didn't he make like a way with a lot of cash too oh yeah out of we work he had like a huge breakup fee and why didn't he even need that money i guess he doesn't really believe in the idea himself if he's gonna do that but yeah i guess we'll see huh yeah yeah we will we will see if he proves me wrong, I'm willing to be proved wrong.

But until I just don't have, dude, I just despise sociopathic fraudsters. You know, I love watching those fraud documentaries. Yeah. It makes no sense in my brain that people have that kind of psychology. So I just don't trust this at all. So if he proves me wrong, I'm willing to be proved wrong. But my first stance is, this is going to end horribly. Like Andreessen Horowitz is just flushing money down the door.

Yeah, there is a documentary on that too. On WeWork? Yeah, WeWork or the making and breaking of a 47 billion unicorn. Because I think that's the evaluation. that's a netflix one i think right is it i'm not sure i think i watched it they said hulu i'm looking at but i think apple also has a series or something on it it's not a documentary and it's not an actual like kind of recreation right oh yeah there's like a dramatization yeah yeah i think so i love it i was browsing apple tv

i feel like i saw that i could be wrong but there's definitely a movie there is documentary on it yeah yeah i've seen the documentary and i'll have to watch it i mean it's convincing enough i kind of know this story but it's still fun to to watch these i agree i get pretty fascinated by those yeah now the moment everyone's been waiting for, the recent moves in my portfolio. So I think we've talked about a little bit. I was reviewing my portfolio. After reviewing it, I came to the conclusion I had too many individual stockholding. Just to go back to our first point here, because I'm quite busy and expecting a child. And with the podcast, obviously my regular job.

So I just was honest with myself. I told myself, look, I have a total of 19 holdings and I'd like to get that down closer to 15. I also want to jump in real quick here because you know, we started join tci.com where we disclose our monthly portfolio updates. But I like this section because we promised to the podcast listeners, the wonderful listeners of the show, that we're not going to gatekeep any information there.

It is strictly a great way to support the show and get it in writing, see our thoughts, and just get our actual portfolios in a spreadsheet. But we're not gatekeeping any information here. And this is why the podcast will still be talking about what we're doing because it makes for entertaining content and it provides some authenticity. But I just wanted to specify that we're not gatekeeping anything, but it is a great way to support the show and get our portfolio updates every month at join TCI.com. Yeah, exactly. You'll get just more detail if you go on there as well.

You'll get the specific allocation, what it represents. But yeah, if we do moves, I think it's a fun discussion. I think people like it because they kind of realize their reasoning behind it. So the two holdings I decided to sell, of course, I sold recently Pinterest, talked about it. The other two I just sold, I think it was last week now, are Digital Realty Trust and Block, or also known as Square. Now, Digital Realty Trust, for those who are not familiar with it, essentially it's just a just a data reap so it's very similar to equinix but i think equinix is the better play here and has better potential for returns in the future

it is growing faster on both revenues and dividends and i don't think digital realty trust actually ticker dlr is a bad company If I were strictly looking for dividend income right now, then I would most likely pick DLR over Equinix, especially say if I'm a retiree, I would probably pick DLR because the dividend yield is more than double that of Equinix. So that would make a lot of sense, but I'm not. And I think over the long term, I have a feeling that my actual dividend, my yield on costs will be higher with Equinix and the growth obviously will be better. But I can't blame anyone who would like to also do more of a basket approach here. Nothing wrong

with having a mixed equal weighting of DLR, Equinix and American Tower REIT. Three great companies just as a basket if you just want to spread out your allocation too. I think that's good. You and I like picking the best in breed horse in the race. I believe that that horse is Equinix. Now, American Tower also could be 1A and 1B, but American Tower is mostly focusing on towers with their little small foray into data centers like PurePlay Equinix. Sorry, PurePlay data centers. I agree with you. Equinix is the best in class and their capital allocation is different as well. DLR moves more capital back to shareholders. Equinix is reinvesting more. So I think it just aligns with your goals a little

better as well. Yeah, exactly. And DLR is still growing. And like I said, I think, you know, you're still looking at three great businesses here, but I think personally, and I think you agree with that, Equinix is just the better of the three in our opinion. Now, the next one is block or square. So I had block on my list of potential selling for a while. There are two main reasons here why I decided to sell. And actually, just a quick note here, even with DLR, it's not a move I made overnight. So I've been thinking about this for quite some time.

These are two names I had on my radar for potentially selling. Now, the two main reasons for Square or Block, I'm still having trouble with the name, I'll be honest. Call it Square. It's like Facebook and Meta. It's like Meta and Facebook, right? I still get back to Facebook. Now, their decision to buy Afterpay for $29 billion worth of Square stock at the time. I think the actual cost was much lower because the stock of Square had gone down. It was not a great purchase. We talked about it on the podcast. It was a little bit of a head-scratcher.

I guess they decided to buy it because they preferred that over building it in-house. But obviously, I think it was questionable to say the least. And the other reason reason and this might surprise people but their increased focus on expanding their Bitcoin business the reason for that is I'm still very bullish on Bitcoin this hasn't changed but I already have tons of this coin exposure of course directly with owning Bitcoin but also through some Bitcoin ETFs. And MasterCard has also invested in some crypto in their business as well. So I do have tons of exposure for that. And Block was previously more of a play on traditional digital payments.

Now it's shifted. Clearly, it's still a big part of their business, the digital payments, but more and more on Bitcoin. a big part of their business, the digital payments, but more and more on Bitcoin. And it just made me realize I didn't need it in my portfolio when I already have Visa, MasterCard, and PayPal. I think I have the digital payment space covered here. And I wanted to have something to hedge a little bit in the event that Bitcoin doesn't pan out the way I think it will pan out in the future. Well, I have those traditional digital payment in Visa, MasterCard and PayPal and Square. I mean, yeah, it just kind of fell out of favor for me for that reason. And now I'm down to 16 individual holdings, which I think is a lot more manageable.

I've already started investing some of that money. a lot more manageable. I've already started investing some of that money. And the way I'm actually investing it, like I referenced earlier, is through an index ETF. So the one I chose was ITOT. So it's the US total market, the iShares US total market ETF. And that's in USD, right? It is in USD. Yeah. I wanted something that in usd because i do like having some of my and you had usd from the proceeds of selling it yeah yeah and i think it's just a good hedge against the canadian dollar as well it's just i like i do have canadian holdings of course but our revenues my salary is in canadian dollars like a lot of the things that i own are in canadian dollars so i do like having that balance in my portfolio. It's three basis points. So the fees are extremely

low here. And for the most part, you should be able to find a broad base index ETF, definitely below 10 basis points. And it is a total market, but it's very similar, though, to the S&P 500 in terms of their top weighting. Apple still represents about 5% here of the holdings and obviously its market cap weighted. So this is the one I landed on. Made a whole lot of sense for me. Gives me some broad base exposure to the U.S. stock market. And of course, you'll be happy. It's an S&P index ETF.

Hey, let's go. Got to support the holdings over here. I don't have much to add other than I, if you and I were looking at your portfolio together, I'd probably arrive at very similar conclusions here because the block story is just a little confusing. That $29 billion for afterpay was clearly overpaying. Jack obviously is an incredible visionary entrepreneur. He started multi-billion dollar

companies from scratch. He's a very interesting thinker, 40 million times smarter than I'll ever be. But as in the leadership role of public companies has puzzled me quite a bit. Never drove shareholder returns for Twitter ever, like ever, ever. And what they're doing at Block is just hard for me to grasp what they are trying to accomplish and they could spin up this like what they're doing with big like what is it's like a weird tbd what is it yeah yeah it's tbd there's different there's different projects that they have for bitcoin definitely and also i think they have a lot of their revenues that come from bitcoin trading with a cash app but the issue is it's like super slim margin yeah the margins are garbage on that.

You know, it could very well take off with the investments that they're doing, right? But the way I'm thinking is if it does take off, my portfolio will take off as well. Exactly. Yes. And the index ETF, just to get back to that, the reason why I've kind of started

putting some money in there too is it makes it much easier to dollar cost average because you can just I don't have any fees when I buy ETFs with Questrade and the other thing too is when you own individual holdings sometimes it'll be tricky to dollar cost average especially if you're trying to have a certain allocation right for an olding so it'll be sometimes just even if you want to be as consistent as possible it can be a little bit tricky in terms of where the allocation is at and i'm still gonna reinvest money in individual holdings most likely not add anything new just the ones i currently own. But I will keep dollar cost averaging part of the money I

put towards stocks in that ITOD ETF because I can do it on just a weekly basis. If I want, I can just do one share every week and I have that dollar cost average. And the idea I have is about 50% towards that and the other 50% I keep and invest in individual companies, most likely, like I said, the ones I already have. Thank you for listening to another episode of the Canadian Investor Podcast. Hope you like it. If you're new here, we really hope you like it.

This is a pretty typical type of discussion we'll have. If you're not new here, okay, and you are trying to get your friends listening to the best podcast in the whole world, that's this one. We don't ask for a whole lot. Three people, if you can share it with three people and this episode in particular, the reason for that is because we talked about one of the most important questions that investors need to think about when they're starting out is, should I be picking stocks or should I be going right into the index? The discussions around how easy it is to just go

into the index. So if you are a longtime listener of the show, You tune in every week. You love hearing our goofy voices up here. Share it with three friends. That means the world to us. It helps us grow a little bit. We can get into the ears of these people as well, because I think that this is an important conversation. So share this exact episode from your podcast player with three friends. Maybe call it 10. So maybe you share it with 20 friends. That's twice as many friends I have, but maybe you have that many friends. So share it around. If you have not checked out stratosphere.io, it is the goat for researching securities, researching stocks. If you are owning individual stocks, it is a great place to find my team's research.

So you can read stuff, use analytics. It's like a Bloomberg terminal in a web application, and it is electric. So go ahead and check that out. That is stratosphere.io. We will see you in a few days. 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.