The Canadian Investor - Mailbag episode - Bitcoin, TFSA, Starting a stock portfolio and more!

Episode Date: January 25, 2021

In this week’s episode we answer listener questions that were sent to us on anchor. We answer questions on diversification, bitcoin, RRSP, TFSA, investment books and getting started with investing in the stock market. Want to send us a question? Check out our Anchor.fm link in the description below and leave us a voice message! Getstockmarket.com Candian Investor Pod Twitter: @cdn_investing Simon twitter: @Fiat_Iceberg Braden twitter: @BradoCapital Get rich with dividends book --- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee 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. 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 Brayden Dennis and Simon Belanger. The Canadian Investor Pod. What's up?

It's Jan 21, 21. Simon, how's it going? Are you on my email list, by the way? Just like the general newsletter? No, I don't. Did you get something this morning i did not know if i am it goes straight to my junk inbox but you just you just flagged my email they're like i don't want to hear anything from this guy okay well this morning i sent it out

and it's it's just like a monthly newsletter and i've been bad about putting it out it's just kind of like a roundup of news and like my random thoughts and uh it's called the stratosphere altitude and i made a banner for it i thought it looked all cool and i sent it out today but i spelt altitude wrong on it and didn't notice and it's alta dude like i replaced the t and the d so everyone got this morning, like a lot of people listening, would have got this morning an AltaDude email, and I think it has to stay because it's amazing. Like the AltaDude.

I'm keeping it. I love it. It's a funky mistake, but hey, run with it. So today we're going to do a mailbag episode we got a bunch of questions come in people can always leave them on the anchor link you go on there you do a little voice recording you can leave us a question and the chances it gets played on the show are are quite high and we're going to do them maybe quarterly or whenever we feel like it so let's get into the first question here from Michael. I'll let you roll that there, Simon.

Hi. My question is about adding to a position. If I put aside a few hundred dollars a month, what is the best strategy to invest those monthly savings? How do I pick which stocks to add to? And finally, when do you decide to trim profits from your stocks? All right, I'll let you take it away on this one first. Okay, so yeah, so it's a good question from Michael. I get asked that from time to time. So how do you decide to

invest money in specific stocks if you're adding a little bit of money every month and when do you decide to trim and take profits well it's definitely a two-part question the first part i would say you need to have a strategy you'll have to decide you know some companies that you're interested you can slowly build your positions and then build your position over time dollar cost average every month you could do it in several different ways you could have five stocks for example that you're and then bill your position over time, dollar cost average every month. You could do it in several different ways. You could have five stocks, for example, that you're interested in. One month you put it in one stock, the next month you put it in the other,

then the other, and then you kind of rotate that way. It all comes down to dollar cost averaging. There's different ways of doing that. So you have to figure out what works best for you. You could also just decide to select an ETF, a broad market index fund. There is you might have just one ETF that kind of covers is broad enough. And then you just do every month. You put a little bit of money in there. That's an approach you could do as well. There's really different ways to look at it to add money. The second part of your question, I think, I would like to clarify that, you know, for us, investing is really staying invested for the long term. If you're really looking at trimming position within a year or even two years, that's almost in my book, it's a bit more considered trading. So yes, at some point,

you may have to take profits or trim positions if they really come really big in your portfolio. But that shouldn't be your concern, especially if you're just starting. Your main concern should be adding money every month, have a strategy, whether you want to spread it out over several stocks, or like I just said, you can just pick if your index fund, your ETF is broad enough, you could just have one ETF and that's it. And you just had regular installments every month. So that's kind of my view on it. There is no necessarily perfect approach. But I think the one thing you should take, at least from my perspective, is you shouldn't worry too much about selling.

You should really look at it from the long term. How about you, Brayden? Yeah, I mean, there's a million ways to go about doing this, right? So like the classic disclaimer, we can't give investing advice, right? But this is what I do. I pay myself monthly. It goes right from my online banking, right to my brokerage, every single month, a set amount. And I decide what I want to do with that because it like

transfers on the 24th. I think it clears and it's in my account by like the 28th. And then on the first Tuesday of every single month, no matter what, like very committed first Tuesday of every month, I just like that. I invest and I just put it in one position and I add to positions or I have a new position. But I run a pretty concentrated portfolio, like over 60% of my holdings are in MasterCard and Visa, like literally 60%. So I'm clearly not scared of high concentration. And I think that leads into the next part, which is when do you trim? And I mean, if I was running a portfolio for clients, obviously I would never run a portfolio like super concentrated like mine, because if there's

drawdowns on MasterCard and Visa, like you're just massively underperforming the benchmark and that's just not ideal. But I don't trim because if something gets super massive, I just don't trim winners. However, if I have a position that I think that has lost their competitive advantage slightly, but I don't want to just completely exit it, I've lost my confidence in

it or my conviction is the correct word then i'll trim some of it i'll just feel better about it i don't want to be exposed to it as much but this is yeah it's there's a million ways to go about this but at the end of the day simon hit itiv is like dollar cost average, right? Consistently, whether it's monthly, quarterly, annually, pay yourself, and you invest it consistently, no matter what the market's doing. And that is really beneficial, because things happen, like in March, things happen, the stock market loses 25% of its value in a few days. And that contribution, you made lots of money on versus, you know, the contribution the month before you lost money on. But this is how dollar cost averaging works is over the long term, you're buying shares and you're acting more rational than

the irrational market. And that's the way to do it long term. Yeah, yeah, exactly. And the one thing I forgot to add for that is the we've talked about this before. The if it you're getting worried to the point because a position starts being so big in your portfolio, and you're stressing out and you're losing sleep over it, then you should probably trim it. That's a really good indicator right there. So it shouldn't be stressful to invest. If it is, then you probably, that's a good indicator that you should be trimming. And like Brayden said, that will be different for everyone. You may hear certain rules and things like that, but it all depends, you know, what makes sense for you and what your tolerance is. tolerance is. And obviously, the more concentrated you are in a specific holding, however good the company is, you have to understand that if something happens bad, like something bad

happens to that company, you know, you might be in trouble. So keep that in mind as well. Yeah, well said. All right, let's move on. This question. Great question. And we got it before we're a bit late. We got this one for Christmas, but Hey, investing books are good all 12 months of the year. So we'll let this one roll. Hey guys, Travis here, long time listener with Christmas around the corner. Just curious, each of you top three investing books that you would, uh, you would gift to somebody else who's interested in investing. Thanks a lot, guys. Love the show. Take care. Timon, three books? Yeah, three books. So I'll start off and I'm sure I have three and you'll, do you have a few, Brayden, as well, that are different from mine? I got one. I'm keeping it short and sweet because I

think there's one that's just so fun to read if you're a beginner. Perfect. So one of them that I really enjoyed, it's not super well known. It's called Get Rich With Dividends by Mark Lichtenfeld. I will add a link to the description because I'm probably butchering the last name. But basically that book, he goes over really the principle of making an income with dividends and over time basically having your full income coming from dividends. It's really good for those who may be looking in the future. You might be in your 40s and you're looking at retiring in 10, 15, 20 years and you really want to build a steady income just with dividends. He goes over some great principles.

The one thing I will mention, he does mention that he tries to get at least a 4% dividend to achieve what he's doing. That may not be realistic in the current market. Or smart. Or smart, exactly. But, I mean, it's still realistic for certain types of companies. I'm thinking about REITs, for example, some utilities, banks. But just keep that in mind. But overall, the concepts are really good. And I think especially right now in the context of low interest rates, bonds yielding basically nothing unless you go into junk bonds.

And that's a discussion for another day, especially for retirees. This is really or people retiring not too far down the future. This is a really good book how you can build a portfolio that pays you on a regular basis and you actually have some sort of income compared to a portfolio that would be bond based when you do retire. So that's really a book I enjoyed. I've re-listened to it a few times, and there's some really good principles. One of the thing he harps on is the payout ratio based on free cash flow. So that's one of the books I got that concept from when I started investing. So that's a great way right there. The second one is The Wealthy Barber by David Chilton or The Millionaire Teacher by Andrew Hallam. They're similar kind of books. So you can't

go wrong with either of them. And both written by Canadians. Exactly. And David Chilton, well, we had Andrew Hallam before on the podcast, but David Chilton, you may know him for Dragon's Den. So he was a couple of seasons he was on there, and I think his book is really good. It looks after not only investing, but also getting your financial well-being or your budget in a place where you can actually start saving as well so

it really starts with the basics and then goes into the investing part so those are are the three books for me more for beginners obviously there are some other books but we were really trying to think beginner when with that question yeah totally if it's if you're gifting a book to someone who doesn't invest uh the millionaire teacher by Andrew Hallam, like we had him on the podcast, that book was gifted to me when I was 16 or 17. And it is the reason that I opened my portfolio the day I turned 18. I was so pumped. And it's because of that book. It walked you through not only getting your finances in order, which is going to be super important during the accumulation phase. You're going to be able to invest way more if you're... He talked about biking 40 miles to work because he wanted to save money on driving a car. Stuff like that. He has really good stories and a great storyteller, so that's a great book.

My one recommendation for people who like investing and want to learn is One Up on Wall Street by Peter Lynch. It was written in the 90s. Peter Lynch is a legend. He ran the Fidelity Magellan Fund for a long time. Crazy returns, absolutely nuts returns. Unconventional strategies, no doubt. But he is so funny.

He's like the most clever writer. And that's the most important thing, right? Because if someone has an investing book for the first time, they're going to expect boring. And most of them are very boring boring especially if you don't love this stuff so i really like that book and pd lynch is just hilarious man that guy cracks me up have you read one up on wall street yeah i have uh totally agree with that it's a really good book easy to read um he makes it easy to understand understand I think you know all the books we've mentioned I think they're great books for anyone getting started some of you may wonder why we

didn't say the intelligent investor it's not an easy read and it's not a book I would recommend to anyone starting I would recommend that book for someone who's read a few books has an interest in it has some base as well some basic understanding then it's a good book but these three or the four books we mentioned i think they're really good starting point for anyone starting looking to get started okay i'm so glad you brought that up because the intelligent investor for some reason, for some reason has surfaced as like, because Buffett famously called it the most important investing book of all time. And people call it like the value investing Bible, right? So it's like, oh, well, this has to be the one that I read first, of course. It's probably the worst book for someone to pick up because it was written so long ago.

for someone to pick up because it was written so long ago. It like is fairly complicated for someone who knows nothing about investing. And yes, it's gold. Yes, you should read it. Yes, Ben Graham is a fantastic writer. And there's so many important concepts like the classic Mr. Market concept, which is amazing and brilliant, but it is not a good first book. It's a horrible first book. And I wonder if you could find out some number of the amount of people that have read that book for their first book and been like, nope, and went and got a mutual fund. It would be hilarious, probably the amount of people in that camp. 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. Okay. We got another question from our buddy Thomas. Great guy. Let's roll this one.

Hi, Braden. Hi, Simone. It's Thomas here's Thomas here leaving you a couple questions I have two questions the first ones regarding a Bitcoin and how much of the your portfolio you think should be held in us I guess and the way also you hold it personally I have recently purchased some and used a the led the, the ledger nano, um, and that we actually hold the Bitcoin as opposed to say, holding a Bitcoin ETF, which kind of, from what I've been reading goes against the whole idea of Bitcoin and that it's a hedge against the financial markets. Um, my second question is in terms of knowing what you own and as a portfolio of 10, 15

stocks say, how often should you be checking in? And, and do you And do you have a calendar that reminds you when annual reports coming out, those kinds of things. So in terms of keeping yourself accountable to monitoring your holdings. Okay, thanks boys. Okay, so do you want me to start with the Bitcoin portion of the question? Or do you want to go ahead and start with the second part on stocks, Brayden? start uh with the second uh second part on stocks braden no let's let's uh let's get our local resident bitcoin bug simone yeah yeah so to uh well sammy got twitter and he's uh if you like bitcoin go follow simon on twitter because he's you're more of a bitcoin bug than i thought you were it's a mix of everything though my like

it'll be some bitcoin crypto random use sports investing so it's not gonna be i guess what i'm saying is i underestimated i know you i know you love bitcoin i know it yeah but i i think i underestimated it and i'm enjoying the content. So yeah, you can take this. OK, perfect. So I think those are really good questions by Thomas. So let's start with the first one. So what percentage of your portfolio should you hold in Bitcoin? And I don't have a specific answer for you because that will be really a personal question.

I would say you should try to determine the percentage you want in Bitcoin or cryptocurrency if you're interested in investing in that. See it as something that you're okay if it goes to zero. So what percentage of money are you okay investing in Bitcoin or cryptocurrency? And if it got wiped out tomorrow, you know, you would not lose your shirt over it. So that will give you your answer right there. You hear a lot of podcasts that's focused on Bitcoin. They'll say one to two percent. You hear that a lot. I mean, one to two percent may be not enough for you. You might want more exposure. It might be too much. You may want just a tiny, tiny portion. Just see how it goes so you don't panic. It's really important to be honest

with yourself because I've said it before, Bitcoin and cryptocurrencies as a whole are extremely volatile. So keep that in mind. It's not unusual to see like 25% drops in a matter of a couple of days. So those happen pretty quickly. So make sure you're comfortable with that. And that should help you determine what percentage of your portfolio to invest in that. And the second part is interesting. How should you hold Bitcoin? So you did mention Ledger. So Ledger is actually a cold storage hardware that you allows you to store Bitcoin off the grid. Like that's basically the essence of it. So typically you'll have two way to store Bitcoin. You'll have, you can keep your Bitcoin on an exchange like Coinbase, for example, Kraken's another one.

The risk of being on an exchange, first of all, is there are some regulatory risks for the bigger ones. There's been some talk in the US specifically having more regulations on exchanges, I mean not specifically Coinbase, that could be good and bad. More regulations, I mean it kind of defeats the purpose a little bit of cryptocurrency where it's supposed to be decentralized. Another risk of having it on an exchange is your account could get hacked and someone could go into your account and transfer your cryptocurrency to their home address.

So that has been known to happen. And there have been frauds in the past of exchanges. I mean, I don't think that's a big issue with an exchange like Coinbase. BitConnect. Yeah. Do you remember that one yeah but there's other ones when i first invested in cryptocurrency in 2012 i invested a little bit the exchange i was on eventually was a fraud and i lost my 500 dollars that i invested which would be worth about 40 grand today but that's beside the point yeah no i mean you know that's fine yikes but it's just important to understand that

there are some risks of keeping your money on exchanges. For the most part, if you have multiple factor authentication, you should be okay. But again, there is a risk of having there. So that would be online storage on an exchange. The other option is what Thomas talked about ledger is a basically cold storage key if you'd like that you're keeping so basically you need physical access to be able to access your cryptocurrency so the ledger and familiar with that one you basically have a device you plug it into your computer and you cannot make any transaction without putting your device in along with a I think it's like a long digit passcode if you lose your device or that long

passcode then you have a I think 20 or something like a secret word phrase that you can retrieve it but if you lose both say there is a fire and your house burns down and you lose both, your Bitcoins or cryptocurrency are gone forever. So there is also a risk to that as well. So it's really, for the most part, most people will recommend cold storage as being the best way to go. But those are typically the two main ways there are some i think places that offer kind of the mix of both so there's a part of cold storage mixed with an online storage i'm not super familiar with those but there's also there's different kinds that you can get so another a competitor to ledger is trezor is one there's a few other out there just make sure you do your research and

whatever you do if you opt in for cold storage that's the option you choose and you buy the device make sure you buy it directly from the manufacturer do not buy it on amazon there has been known instances where sellers put in a virus or like kind of hacked into the key and then when you transfer your money or your cryptocurrency they're able to find a way to get access to it so get it always directly from the manufacturer um the last you heard about this buddy you heard about buddy who lost 220 million right about this this is this big story going around of this guy who who had one more password attempt and he couldn't get it and he got he lost 220 million dollars with the bitcoin well no i didn't didn't hear about that it's going everywhere surprised you haven't heard this story it's

but god it's it sounds horrible yeah and ultimately cryptocurrency is the whole goal behind it is to kind of be outside of the financial system like Thomas talked about and can almost give you an edge against the financial system if you know it collapses or something doesn't go as well like who knows what will happen I'm not saying that will happen whatsoever that's not what I'm trying to say but it does give you a little bit of an edge towards that so one last option is they're starting to be some cryptocurrency ETFs more specifically Bitcoin and the Ethereum ETFs there is one it's called the QBTC so it's a

Bitcoin ETF it's listed on the TSX still falls under a gray area in my opinion whether it's TFSA or RSP eligible or not. They say on their prospectus that it is. But from what I've read on the CRA, it's kind of still in a grayish area just because of the type of holdings it has. So that's always an option for people. But be aware that if the CRA comes a year or two from now and says, you what in our view that's not eligible you'll pay a penalty so just be aware of that there's always this whenever it's the CRA there's always that gray area that you have to be careful with so that is another option whether it defeats the

purpose or not of having cryptocurrency I mean I get what he's saying. You're basically still in invested in the financial system through that ETF. But again, it does make it a lot easier to get exposure to Bitcoin than having to buy Bitcoin on an exchange and then transferring it to a cold storage if that's what you opt for. But yeah, in a nutshell, that's kind of, that's my answer to those questions. Any comments? All of this reminded, all of this reminded me of why I don't own any Bitcoin. Oh God, Simon, this is, you're scaring me. People losing money. If you don't, if you haven't heard of BitConnect, Google BitConnect, and you will howl. It is hilarious.

It's great stuff. No, there's a lot of merit to it. I'm just kidding. Let's move on, though. So his second part of his question was talking about keeping up with holdings. You know, how often should you look at it? It is a pretty simple answer, really. My recommendation, this is what I do, and this is what I recommend people do,

is try to track just a few metrics to verify your thesis is still holding up. Just a few. All right. So here's an example. Spotify. You might be listening to the podcast on Spotify. Their quarterly one pager just right at the top. The number one number says how many monthly active users there are and how much

it's grown compared to the previous quarter. That is the only number I think I would track if I am holding Spotify, because that is the number that I want to go up. Honestly, everything else I'm hoping that they execute on, but I want to make sure that it is taking more and more market share and that monthly active user numbers going up. So that's all I would do was track that number because, you know, a CFA might say, oh yeah, you should read the, you know, the report front to back every single quarter. And like, sure, if that's your job, sure. Yeah, you probably should. But a lot of us have other things going on

and we have a life and we don't want to read a quarterly report that's 45 pages long for all 15 of our holdings. I get that. Another thing is the earnings calls are really nice. So you can think of them like podcasts. You throw them on, you hear the CEO talk, you learn about the business, you see if you trust the management team. Those are good as well. On Stratosphere's company search, every

company that I track, it says the news there and it'll show like news on their quarterly report. And it'll say right at the top, revenue grew by this much and the earnings grew by X and monthly active users grew by X. So these kinds of things are important. Uh, but really like don't stress about it at the end of the day, if you know the business and you know it well, you don't have to read every quarterly report front to back.

If you want to awesome, you're going to learn some stuff. That's great. But don't feel stressed about that. That's just my opinion. I'm curious if you have a take on that. No, I agree with that. I mean, for me, it's usually I'll try to focus on more the annual report.

So there are certain things I'll look at in the annual report, but I will also listen to the conference call for the annual report. It's easy to get kind of worked up for quarterly results sometimes because it's only a quarter. Some businesses will be more seasonal and things like that. So that's at the minimum for me. I look at the annual report and I'll listen to the conference call, like you just said.

And the conference call is great because if you listen to a few years in a row, well, you can see if management is full of uh i won't uh full of it versus and if they keep their promises too right so you kind of see that okay yeah like four years ago they mentioned this but now you know they're not talking about this anymore what happened um so i guess that didn't work out and things like that so you can pick up on things really easily and you do something else, go for a walk and listen to it on your earphones. But yeah, that's my two cents on that.

Yeah, it's a good idea. 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. All right, we got one from Christian. I love this question, by the way. Let's see this one. Hello, Christian here. I'm a new investor who's just doing research before I actually started investing anything. I've listened to your whole podcast back catalog. And I just have one question for the two of you. Everybody says you can't beat the

stock market in the long term. But then everybody turns around and tells you how to pick stocks. So my question, whether it's the two of you, or it's Warren Buffett, or it's any other investor picking their own stocks, how much are you planning or forecasting to or have in the past beaten the stock market? And if you're not planning on it, why not just invest in ETFs? Thank you. I can take this one first. So I love this question for a lot of reasons because it asks a very fundamental question about what we're doing here. fundamental question about what we're doing here. If I didn't want to spend any time on my investment portfolio, well, I don't know what I would start doing with all that extra free time

because I love it, but I would just hold index funds and call it a day, add to them every month and pay no commission fees and sleep great at night and be well diversified and probably get around 10% a year. That's really great. So if you do that, keep doing that. That's awesome. Good for you. So lately, everyone thinks that they're absolute legends because they've outperformed Warren Buffett in the last two years. But you got to bring that outlook a little bit longer, right? Warren Buffett himself even said that it's really hard to beat the stock market. And he had the famous bet with hedge fund managers. So if you are comparing it to a mutual fund, like walking into the bank and being like,

hey, invest my money. Absolutely. Just investing in S&P index fund or like an all world ETF way better because that two and a half percent mutual fund fee, there's no chance they consistently beat the market after paying those fees. There's just, there's no way there's just not going to be enough alpha in the fund to beat that two and a half percent. Okay. So Okay, so let's look up past that. So I believe that outperformance is driven by not holding the crap co's, not holding the losers that the S&P will have, and there's going to be lots of them in the S&P, and many of them will leave the S&P and die,

and that's just the circle of life. So I believe those businesses can be avoided with a few simple rules that I live by, which are I avoid commodity businesses with no pricing power because I do not believe they have any moat. And I avoid companies that I have an impossible idea on justifying the valuation,

which can become huge parts of the S&P, by the way, Tesla, right? So because I want nothing to do with those types of things, I just avoid them. And the S&P might have huge weightings on them that I just don't want. And I believe that the outperformance will be from not holding those. You know, some of those could double from here, and I look like an idiot, which is fine. But I believe durable moats, high margins, these things matter. And if you can buy companies at reasonable valuations, their median return on invested capital, that ROIC number, you should be able to get similar returns as their ROIC number if you're paying a reasonable price. And these ROIC numbers will far exceed 10%. Some of these capital allocators are, you know, 30% ROICs, like you see this stuff.

These are the kind of businesses that I want to own. So if you want to keep it simple, own an index, look at it once a year, feel great about it, all the power to it. That's absolutely amazing. It's way better than being in some garbage mutual fund or gambling on a stock that you heard about this morning. These are not real strategies. So if you want to do that that's great um if you're a complete nerd like me and like numbers and like this stuff then there's a good chance you'll uh

you'll do pretty well so uh that's my take i i'm i'm hot and cold on this one because if you choose to go full etfs like i love that i you. Yeah. Yeah. And there's nothing wrong with doing that. One of the things, Brayden, I think you touched on it a little bit, but keep in mind, too, the problem with an index fund like the S&P 500 or S&P TSX or Total Market Index, it will have sectors that you may not want to invest just from an ethical standpoint. So if you're not wanting to invest in oil and gas stocks, I mean, pretty much any index fund that you look at that's a broad base index fund will have exposure to that. So that is one of the downsides is if your philosophy, you do not support those type of businesses and you just choose an index

fund, you're going to have some exposures to those type of businesses. So just keep that in mind. At the end of the day, I would say, do you enjoy picking stocks? And if so, just make sure that you keep track of the index and you compare your returns to that. Because even if you enjoy it, what's the point if you're five percent under the the index you're tracking so that's just kind of my two cents on top of what braden said yeah yeah that's a good point if you're just if you've done it for five years and it's just like yeah i should have just owned the index then maybe that's the right play but uh it is someone asked me yesterday someone asked me yesterday, do you think you can

beat the index? And I said, or no, they said, they said, Is it possible to beat the index? And I said, possible, of course, of course, it's possible. Is it very difficult? Yes, it's very difficult. And if you do all the right things, you invest in high-quality companies, you keep your fees low, you're going to have a pretty good shot. You're going to give yourself a good chance. But if you can't do those two things, then the chances are probably, honestly, quite low over a long time horizon. Or you could just be like Simon and do 77% last year.

What ridiculous return did you have last year? Yeah, I think it was 76 or 77 oh my that's disgusting that was not a bad year beat the index by a little bit you absolutely crushed it well you held tell doc which which helped and brookfield that renewable that definitely helped you um okay let's move on we got a question from jeff okay let's let's move on. We got a question from Jeff. Okay, let's just roll this one. Hey, guys. Jeff from Edmonton here. Love the show. Just had a couple questions for you. Just wondering about the number of holdings you guys recommend having in a portfolio, I guess a typical portfolio where you'd have TFSA, RRSP, different types of accounts.

And then does it change if you have, say, a portfolio worth $10,000 versus, say, $2 million? And then kind of expanding on that, what about sector diversification? You know, especially within higher value portfolios. For example, should you own CP and CN? Should you own Coke and Pepsi? Things like that. Just curious to know your guys' thoughts on that. Again, love the show. Thanks. So I guess I'll start with this one. Take it away. Yeah, take it away. So I mean, it's a good question. I've struggled with that a little bit at first. How should I look at my holdings?

Should I look at them specifically in the type of account it is or as a whole? I have more of the idea now for me. I look at it as a whole. So whatever I have in my TFSA, RRSP, locked-in RRSP, and then my pension, which is a defined contribution pension. So that and obviously my cryptocurrency holding as well. So I look at that as a whole. That's just the way I see it, because pretty much all my investments, my intent is to have them for retirement.

So I'm not looking to withdraw money until then. I mean, nothing's impossible, but that's my view for my investments. So that's why I look at it from a whole. Maybe you're a bit different. Maybe your TFSA is targeted a bit more for something that you might need in six, seven years, and then your RSPs is for your retirement in 20, 25, 30 years, then you may want to look at diversification maybe a little differently per account. diversification maybe a little differently per account. So it really depends what your goal is with your investments and not everyone will have the same goal. I know a lot of people it will be for retirement but that's not necessarily the case for everyone. In terms of total number of holdings I would say for me the sweet spot personally is between 15 and 20 excluding my ETFs. The reason for that is pretty

simple is because I want to be able to stay on top of them. I did have a bit more than that at some point and I found it difficult to really stay on top of it. You have to keep in mind too if you have too many holdings if you're getting like 50 plus holdings for example well at that point if you're over if you're starting to have that many holdings, for example, well, at that point, if you're over, if you're starting to have that many holdings, you'll see that your returns will actually start mimicking more and more the index funds. So you have to keep that in mind as well. I had, I listened recently,

I think it was a couple of months ago, Kevin O'Leary, so the guy that you might know from Shark Tank or here in Canada, Dragon's Den, and his view. Mr. Wonderful. Mr. Wonderful, exactly. His view was interesting. I mean, he's more conservative and I totally understand that. I'm not sure I agree 100% with him, but I do understand where he's coming from. So he would say his philosophy is he never has more than 5% in one specific stock and 20% in one specific sector. His view is that by doing that, you basically automatically trim as the stock gets more and more expensive. And then you collect a little bit on the profits. a little bit on the profits.

And it makes sure that you don't go broke or lose a lot of money if one specific holding or sector really goes sideways. So there's a lot of merit to what he's saying, though. Keep in mind, his job is, you know, managing people's money in terms of capital preservation, too, right?

Yeah. So you got to think about what game he's playing, which might be very different than yours. And I think it's actually, it's not a bad recommendation especially for the more conservative investors that may be listening um you know some people may be comfortable with having having a bit more concentration to a specific sector or having like a specific holding representing 10 15 20 personally i would say if you have one holding that's more than 20% of your whole portfolio, so everything that you have invested, all accounts, across all accounts, if one holding,

I'm not talking about an ETF, just one stock represents more than 20%, just be careful. Because however good the company is, you there's always risk there might be something that you think can never happen i know in the states i think it was a couple years ago the one of the big utilities in california which a utility is supposed to be super stable they were held responsible for one of the big fires over there and they went bankrupt so someone who would have had a lot of exposure to them thinking that it was a safe investment in air quotes, while they suffered a big loss in their holdings because they went bankrupt. So keep that in mind. I mean, I think at the end of the day, you want to be diversified, but you also want to be honest with yourself and what you can

tolerate. Yeah, it's a good point you brought up a great a lot of great points because if you own more than you know 20 odd stocks yes you're mathematically massively reducing drawdowns from one position it'll become much less painful uh but then again you're bringing us back to the last question we answered, which is you might start mimicking the index if you have a bunch of holdings. Like the TSX-60 is only 60 companies. So if you have a Canadian equity portfolio with like 20 holdings, it's like, why don't you just own the TSX-60? But again, these are relating. But here's the thing.

And these are relating, but here's the thing. It really comes down to what you're going to feel comfortable with. And I know that's been a lot of this show, and it's because it's really what the case is. So, yeah, 20% in one stock, I mean, yeah, that might be a little too much. Because concentration can create wealth, but it also can destroy wealth. So concentration, just being like super concentrated in a few positions. My portfolio is definitely way too concentrated, but I am super comfortable with it. I don't like owning tons and tons of stocks. If I had a portfolio of 50 stocks, I would have anxiety.

That sounds like the worst thing ever, and I see it all the time. There's nothing wrong with that. We're just talking about legendary Peter Lynch. The guy literally ran Fidelity Magellan Fund with over 1,000 positions. It's like, how on earth did he outperform the market um but it's because they were like really small uncorrelated bets and then like there were like the flagship positions that were much more of the the holding so that number a thousand isn't really reflective of you know it was actually more concentrated than you might think, but there's a million ways

to do this. And if you're like me and super, super bullish on digital payments, and you might have a very large exposure to it. And that's, that's personally what I do. But again, there's a million ways to do this. If you own more than 25 stocks, do you know what's happening with them every quarter? And if you're a CF, like I said before, if you're a CFA and you do this full time, then definitely, you know, you do this full time. But most of us don't. Most of us don't. That's just the reality of it. So, right. So you got to think about that. We got one more question from Camille. How am I doing? She sounded French.

Yeah, Camille. I think just the way she pronounced it, you guys will see. I'm 99.2% sure that she's French-Canadian, even though she's from Vancouver. Yeah, it's a very good observation. Here it is. Hey, guys, salut. My name's Kemi and I live in McKenzie, British Columbia. I love your show.

I'm definitely still a beginner when it comes to investing. So my question is, where can a person participate in investing inside of a TFSA? Like, can you open a TFSA to house your investment money directly in Questrade? Or do you have to go through your bank and do your investing from there? Thank you. I hope that makes sense. All right, hit it, Simon. You got some fun facts about Questrade here. Yeah, exactly. So that question, thank you for that question, Camille. So that question, thank you for, merci pour ta question, Camille. So that question was really good because it made me do a little bit more research just for fun. So yeah, when you have, if you open a Questrate account, but it could be, you know, it doesn't have to be Questrate, it could be another online brokerage, then yes, when you open that account and you want to start investing,

you would take money from your bank. So let's say you're with TD or let's just say TD as a hypothetical. So you transfer the money from TD over to your Questrade account, and then you can start investing once you have the money. With Questrade, you'll have to decide what type of accounts that you want. You mentioned the TFSA, so you would open your TFSA with them. So the way it works, and this is probably a bit more too much in detail, so you can feel free to fast forward on this explanation. No, they got to listen to every second. It's good for the numbers. No, for sure. See, Juan? It's good for the numbers. We got to get more listeners. No, that's true. I was just obviously joking around.

So the way it works with Questrade is they actually don't hold your funds. So the custodian for Questrade is CIBC Mellon. So CIBC Mellon is actually a joint venture between CIBC, so the Canadian bank, and the Bank of New York Mellon. So I know them pretty well because the pension plan that I'm with with my employer, well CIBC Mellon is also the custodian. So what is a custodian? So they actually hold the funds, so they safe keep the funds that you would have with Questrade. So yes, you do everything with Questrade, that's what you need to know, Kemi. You put your stock orders, your ETF orders through Questrade. You'll just have to make sure that you transfer the funds from your bank to Questrade.

And there's different ways to do that. But that's the way it works. So the funds will be with Questrade, but safe kept with CIBC Mellon. And that's really just the gist of that. And just as a side note, I noticed that the funds in the account, if you have a Questrate account, are insured up to $10 million.

Just for some of you that are listening that may be really wealthy, well, you're good until $10 million. Damn, I got 100 mil. Oh man. This is problematic. This is problematic this is problematic did you have anything to add to that uh other than kameet you have a a very nice mic that you're using or a very good podcast voice so come on the show in a few years when you're investing whiz

so you can absolutely invest within your tfsa of course like that's the the this this question uh rbc did a study last year and they showed that 44 somewhere in that ballpark is in the 40 of canadians are using their t TFSA just for cash, just for holding cash. And not only is this horrible, like I wanted to puke when I heard that, but because TFSAs are incredibly good investment vehicles. We need to band together here at the TCI podcast to convince the cra to change the tfsa to the tfia which is tax-free investment account uh and the reason for that is because i think the s the savings people think of savings a savings account what do you think of cash right like if you if you think oh i have a savings account what are you thinking simon like oh i have some auto desk stock in there no like you're thinking cash probably right maybe maybe

a high interest savings account so this is a problem right this is a real disservice to canadians that it's called the tfsa and i've been vocal about this but i'm all talk right now in terms of actually doing anything about it so uh you know hit me up if you want to band together we'll uh we'll get in the cri's face because i'm sure they uh they're probably pretty busy right now but hey we can change this we can do this yeah and go tfia and go back to our um inflation discussion discussion a couple episodes ago. That's why you don't want to be holding cash in a TFSA because even if you end up getting one or two percent interest, you're essentially losing money because you're not keeping up with inflation. So what Bayer said is completely true. A lot of people still use it as a savings account when they could hold

investments in it. I see that at work all the time um you really want to maximize it it's just such a great vehicle there's no penalty for withdrawing it's i mean yeah i don't know why everyone doesn't have a tfsc and at least an index fund in there yeah absolutely i try to max that thing out right away all right so yes to answer your question absolutely you can go to quest trade you can go to the other brokerages and open in tfsa and rsp open those up directly with that brokerage platform it doesn't have to be through a bank all the banks have their platforms as well if you decide to use Questrade and you open a TFSA, you can use the code SI50, S-I-5-0.

So SI stands for Stratosphere Investing, S-I-5-0. And you will get $50 in trade commission because it's five bucks a trade. So your first, what is that, 20? No, first 10. Oh my God, I'm an engineer uh that'll be all free so you're you're good there so that's si 50 in terms of uh 50 in trade credit that does it for this this episode guys some mailbag episode a lot of the stuff you might think oh i know this

but guess what some people don't and they want to know the answers. They want to know. And we appreciate all the questions too. You were a beginner at one point, right, Simon? Oh, yeah, definitely. And I probably had some of those questions early on. And I'm sure, Brayden, you did a lot of research on your end too. And we love having those questions. So keep them coming.

Doesn't matter if they're more beginner questions. We'll be more than happy and answer them. And we'll put the audio on the podcast. All right, guys, take it easy. We will see you next week. Of course, GetStockMarket.com brings you to Stratosphere. Free trial. You can do all the company searching you want,

all the stock screening you need. There's a forum. You can ask questions. I answer them all within like an hour because I have clearly nothing better else to do right now with lockdown. We'll see you guys next week. Take care.

Bye-bye. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.