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Weekend Reading: Finally Switched To Indexing Edition

For a while now I’ve dithered over when to sell my portfolio of dividend stocks and implement my two-fund ETF solution.  The tanking stock market didn’t help – particularly with oil and gas stocks plummeting and a few of my holdings underwater.  Behaviourally, I wanted badly to wait until oil prices recovered so I didn’t have to sell those stocks at a loss.

But on Thursday I finally took the plunge and sold 24 dividend stocks, worth roughly $100,000, and immediately replaced them with two ETFs from Vanguard.  I’m not going to lie, it was hard to sell my babies:

To get over my behavioural biases, I had to forget about each individual piece and simply treat it as one big portfolio.  Then I confirmed what I already knew: that my $100,000 was better off invested in two broadly diversified and low cost ETFs (which includes over 3,000 stocks from around the world) than it was invested in just 24 Canadian companies.

More on this Monday when I share my investment rate of return for 2014.  Stay tuned.

This week’s recap:

Not the smoothest segue ever, but I’ve once again entered Financial Uproar’s stock picking competition after finishing in last place for 2014.  I was determined not to suffer that shame two years in a row, which is why I went with four of the safest, blue-chip value stocks I could find: Goldman Sachs, Chevron, Travelers Insurance, and AT&T.  Wish me luck!

On Monday I offered up four solutions for you to save more this year, including a 52-week money saving challenge.

On Wednesday Marie explained the ins and outs of ETFs.

On Friday we collaborated on the first Boomer & Echo financial makeover and looked at how a couple should manage proceeds from the sale of a rental property.

Finally, on Rewards Cards Canada this week I asked whether you pay off your credit card balance immediately or wait until the balance is due.

Weekend reading:

There was a lot of great reading published over the first week of January.  Let’s get to it:

The Canadian Foundation for Advancement of Investor Rights (FAIR) is hopeful that Canadian regulators will finally clampdown on the use of embedded commissions on mutual fund sales.  I agree, a ban is coming whether the industry likes it or not.

Canadian Couch Potato published the 2014 returns for its model portfolios.  You’ll see on Monday that all four of these portfolios beat my returns for the year.

Speaking of returns, Norm Rothery updated his excellent periodic table of annual returns, which shows the returns from each asset class from 2004 – 2014.

Michael James on Money posted his investment record to 2014. Note the huge spike in 1999.  He also reviewed Benjamin Graham’s classic book, Security Analysis, to see if it would tempt him to return to his stock-picking ways.

Ben Carlson from A Wealth of Common Sense blog shares his hopes for 2015, including his hope for continued innovation in the investment industry.

“The great thing about the innovations we’ve seen over the past few years — robo-advisors, new ETFs, lower costs, social networks — is that the biggest beneficiaries have been average investors, not the big Wall Street firms.”

Ben also wrote a great piece about the danger of one-year performance numbers.

Turning to real estate, this Toronto Star article looks at how much you need to earn to buy a house in every major Canadian city.

Sheryl Smolkin explains how to unlock home equity at retirement.

Big Cajun Man says financial writers use too much jargon and catch phrases in their writing.

Barry Choi lists seven things we should stop wasting our money on.

Dan Wesley shares a cautionary tale of how a one-day car rental nearly cost him $2,100.  Dan also looked at the times when rewards programs aren’t worth the trouble.

One of those reasons is the incredible amount of data being collected on consumers and their buying behaviour.

Patrick Sojka suggests that 2015 is the year that credit card rewards come crashing down to earth.

Sean Cooper shared his experience getting laser eye surgery with Lasik MD.  Despite the cost, he says it was worth it.

Glenn Cooke explained what you really need to know about permanent life insurance over on the My Own Advisor blog.

In this video, Preet Banerjee explains how the enhanced child benefit will boost your 2015 family finances.

With the Alberta economy reeling after the massive drop in oil prices, Ted Morton says it’s time to politician-proof Alberta’s Heritage Fund.

Have a great weekend, everyone!

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15 Comments

  1. Barry @ Moneywehave on January 10, 2015 at 11:16 am

    Thanks for the mention,

    I’ll be selling my TD e-Series later this week and converting to ETFs myself. Note quite the same as selling $100K of stock but still a somewhat big change for me.

    • Robert on January 10, 2015 at 11:53 am

      I’m in neither game but I was under the impression that the move you are making is more of a tweak than a big shift.

      • Barry @ Moneywehave on January 10, 2015 at 12:50 pm

        Heh,

        Yes a tweak but selling everything and rebuying psychologically is a big shift for me.

  2. Robert on January 10, 2015 at 11:56 am

    On a gloomier note, when I think of an extremely security-rich boomer generation selling off their assets for the next 20 or 30 years, I suspect that most of us in the stock markets using any instrument will not be seeing a big upside in many years. Not that I have a solid better idea!

    • Echo on January 11, 2015 at 10:22 am

      @Robert – Hopefully the sell-off won’t be so dramatic as boomers realize that longer life-spans will require a higher dose of equities in retirement.

  3. Dan @ Our Big Fat Wallet on January 10, 2015 at 2:40 pm

    Thanks for the mention Robb, always appreciated. You’re a fully confirmed indexer now! A big step but I think one in the right direction. I’ve tried to strike a balance between dividend stocks and ETFs. I’ll always believe in dividend investing for the long term but the downside is that it can be very time consuming having to constantly manage a portfolio of individual stocks

    • Echo on January 11, 2015 at 10:26 am

      @Dan – I never lost faith in dividend investing for the long term, but had to admit my skills as a stock picker weren’t as good as I’d thought they were. A lack of time for research and new ideas made the switch a lot easier to stomach.

  4. Sean Cooper, Financial Journalist on January 10, 2015 at 8:54 pm

    Hi Robb. I appreciate the mention. Congrats on the move to EFTs. I hope to do the same one day once my portfolio is large enough.

  5. Michael James on January 10, 2015 at 10:33 pm

    You’ve given us an upper bound on your 2014 return. Hopefully, you didn’t miss the couch potato portfolios by too much. Thanks for the mentions.

  6. Grant on January 11, 2015 at 7:32 am

    Rob, if you are still feeling a bit shaken up, this post may help you feel better and underline the fact that you made the right decision.

    http://www.etf.com/sections/index-investor-corner/swedroe-why-buy-individual-stocks

    • Echo on January 11, 2015 at 10:29 am

      @Grant – I may have been convinced to switch to indexing, but you’ll never convince me to read Swedroe 🙂

  7. My Own Advisor on January 11, 2015 at 8:34 am

    Wow, you did it. Great stuff. You did what I haven’t been able to do yet, drown my dividend stock puppies.

    I don’t know if I can or will ever sell many of my Canadian stocks and REITs Robb, but you have me thinking.. 🙂

    I look forward to your article this coming week, more on the news story.

    Thanks for the mention and enjoy the football this weekend.
    Mark

  8. Gary on January 11, 2015 at 9:13 am

    i’m in shock! i never thought you would go through with it. how much alimony do you have to pay? how is your mom taking this?

  9. Justin on January 11, 2015 at 11:58 am

    Wow, thats a big move Robb! Looking forward to see how everything turns out!

  10. Alan W. (BCM) on January 11, 2015 at 1:43 pm

    Thanks for the inclusion this week. Jargon is for insiders, there is a need to be clear when dealing with clients, hope advisors remember that.

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