February 7, 2024 • 23 mins
In this episode, I show you why you shouldn't wait to start dividend investing.
I cover the following topics in this episode:
- The common investing fears
- 5 types of investors
- How much can you earn?
- The cost of not investing sooner
Link to SI Future Value Google Sheet:
https://docs.google.com/spreadsheets/d/1kN1RgR9Tojnz78Peq2y_S-ZoV4lHKYJ2TJnXgPaRAyk/copy
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
In this episode I'll discuss why you shouldn't wait
to start dividend investing.
Hi, my name is Kanwal Sarai andwelcome to the Simply Investing
Dividend Podcast.
In this episode we're going tocover four topics.
We'll start first with lookingat some of the investing fears
(00:22):
that you may have with gettingstarted with investing on your
own.
Then we're going to take a lookat the five different types of
investors.
Then you can see if you fit inany one of those categories.
Then we'll look at how much canyou actually earn with dividend
investing.
The last topic will be the costof not starting to invest on
(00:47):
your own.
Let's get started with our firsttopic investing fears.
What are some of your fears ofinvesting on your own?
The number one fear that we getfrom most people is the fear of
losing money, of maybe takingon too much risk.
(01:08):
Then they have questions likewell, what do I invest in?
How do I invest?
What if I make a mistake and Ilose my hard-earned money?
The biggest thing comes backdown to the fear of losing your
money.
That prevents you from notinvesting, or most people, from
(01:30):
not even starting to investbecause there's that strong fear
of losing your money.
Let's see what the five typesof investors look like and see
if you fit in any of thosecategories.
Then we're going to continueand look at what is the result
of not starting to invest.
That's our next topic in thisepisode the five types of
(01:54):
investors.
For this topic, here we're goingto be using information from
the Schwab Center for FinancialResearch.
You can see their link up onthe screen right now.
What they did is they studiedthe impact of timing on the
returns of five hypotheticalinvestors who had $2,000 in cash
(02:19):
to invest in the stock marketonce a year for 20 years,
starting in 2003.
Let's take a look at what thatlooks like for 20 years for five
different investors to startinvesting in the stock market.
In this example, they used theSNMP 500 index.
(02:41):
Here are the list of fiveinvestors that we're going to go
through.
We're going to talk about PeterPerfect, ashley Akshon, matthew
Monthly, rosie Rotten and LarryLinger.
Let's start with Peter first.
These are hypotheticalinvestors, but you may find
yourself in one of these fivecategories.
Peter had invested, we'reassuming, had incredible luck
(03:06):
and invested on the bestpossible day each year.
What Schwab did is they wentback and looked at the
historical data for the last 20years and they looked at when
was the stock market at itslowest point every single year.
And then they imagined that,okay, peter Perfect took his
$2,000 and invested all of it onthe lowest stock market point
(03:32):
of the year, which means he hadperfect timing.
He invested when the market wasat its lowest point in the year
and did that for 20 years.
Okay, so every year it fellobviously on a different day,
but let's assume that PeterPerfect invested $2,000 on the
perfect investing day of everyyear.
(03:52):
Okay, so then we move on to ournext investor, ashley Action.
So what she did is she investedher $2,000 immediately at the
beginning of each year, so atthe either January 1st or
January 2nd, depending on thefirst day when the stock market
opens of each year.
She invested all of her moneyin the SNMP 500 index.
(04:16):
Now, matthew, monthly, had adifferent approach.
He took the dollar costaveraging approach.
So he took his $2,000 anddivided by 12, and so you can
see it's roughly $166.66 everymonth, and he invested at the
start of every month, $166.66and did that every single month
(04:39):
for 20 years.
Now, rosie Rosie Rotten hadincredible bad luck and invested
on the worst possible day eachyear, which is when the stock
market was at its highest pointin the year.
So again, schwab went back andlooked at the stock market data
(05:00):
for the last 20 years and theylooked at what was the highest
point of the year for the stockmarket for that year, and Rosie
Rotten invested her $2,000 onthe worst possible day of the
year.
And then finally, we have LarryLenger.
Larry left his money in cashusing treasury bills Every year.
(05:24):
He left it in cash, neverinvested in stocks.
He was convinced that lowerstock prices and better
opportunities were just aroundthe corner.
He was waiting for a goodopportunity to invest and he
just kept waiting and waiting,and waiting.
So for 20 years he just put hismoney in treasury bills,
(05:46):
leaving it in cash, and did notinvest in the stock market at
all.
So now you may find yourself inone of these five investor types
.
Maybe you're the person who isjust waiting on the sidelines,
waiting to invest, haven'tstarted investing yet, waiting
for the perfect time.
You're not sure if the marketis at its peak right now or if
(06:08):
the market is low.
You're not sure if the market'sgoing to crash in the next
month or next year, so you'rejust waiting.
Now Peter Perfect is going tobe impossible to predict when is
the perfect time to invest inthe stock market and, naturally,
rosie Rotten invested at theworst time.
And again, it's going to bevery difficult to pick the worst
(06:30):
time to invest, so you'reprobably, for the majority of
folks that are investing, areprobably going to be somewhere
in the middle, with eitherAshley or Matthew.
Now, which one of these fiveinvestors do you think had the
highest returns after 20 years?
Well, that was Peter, right,obviously, peter Perfect
(06:53):
invested at the perfect time ofthe year for 20 years, and again
, these are hypotheticalinvestors, but you can see that,
peter, his investment after 20years was worth a little over a
hundred and thirty eightthousand dollars.
Now Ashley, who invested at thestart of every year
(07:14):
automatically the entire $2,000every year at the start of the
year, came in second place andher portfolio was worth a little
over $127,000.
Now Matthew, who was doingdollar cost averaging, came in
third place, very close toAshley, and he earned.
His portfolio was worth alittle over $124,000 a year.
(07:40):
And then Rosie, who invested atthe worst time of the year,
actually came in fourth placeand her portfolio was worth a
little over $112,000 a year.
And then Larry, who stayed onthe sidelines, didn't invest in
the stock market for 20 yearsand his investments were worth
(08:04):
$43,948.
Now you can see the starkdifference between Larry and the
rest of the investors.
Now, if we want to take a lookat the difference between Rosie
who invested at the worst time,had the worst timing, the worst
(08:25):
bad luck still made $68,000 morethan Larry.
So there's some good news hereEven if your timing is not
perfect like Peter, even if yourtiming is the absolute worst,
you will still come out ahead byinvesting rather than waiting
(08:46):
on the sidelines.
Now, for most of you, if you'regoing to be somewhere in the
middle, of course, like I said,you're not going to have your
timing perfect like Peter, andyou're not going to have your
timing the absolute worst likeRosie you're going to be
somewhere in the middle.
So, for you to look at whereAshley is coming in, the
difference between her portfolioand Larry's is over $83,000,
(09:09):
and that is substantial.
That is a huge difference.
Again, the lesson here is youdon't want to wait on the
sidelines to start investing.
Now.
Some of you might be thinkingwell, 2003 to 2023, it's a
specific period of time.
We had COVID in there as well,like what happens outside of
(09:29):
this.
What if somebody startedinvesting in 2001 or 1994, or
different periods of time?
So this is on their website,schwab, the link that I just
showed you earlier.
In this episode I'm going toquote some thoughts on this and
(09:50):
quote some other periods of timethat they considered.
So, schwab, I'm going to readit out to you, and the quote is
regardless of the time periodconsidered, the rankings turned
out to be remarkably similar.
We analyzed all 78 rolling 20year periods dating back to 1926
(10:10):
.
In 68 of the 78 periods therankings were exactly the same,
that is, Peter was first, ashleysecond, matthew third, rosie
fourth and Larry last.
But what about the 10 periodswhere the results were not as
expected?
Even in these periods,investing immediately never came
(10:34):
in last.
It was in its normal secondplace four times, third place
five times and fourth place onlyonce.
From 1962 to 1981, one of thefew extended periods of
persistently weak equity markets.
What's more, during that period, fourth, third and second
(10:54):
places were virtually tied.
We also looked at all possible30, 40, and 50 year time periods
starting in 1926.
If you don't count the fewinstances when investing
immediately swap places withdollar cost averaging all time
periods followed the samepattern In every 30, 40, and 50
(11:16):
year period, perfect timing wasfirst, followed by investing
immediately or dollar cost,averaging bad timing and,
finally, never buying stocks.
So the lesson here in thisepisode is don't wait for the
right time to start investing,because that's never going to
happen and you can see there's ahuge cost to not doing anything
(11:40):
at all.
Now, before we get into theactual what is the cost of not
investing, there's one moretopic we want to cover, and that
is how much can you actuallyearn with dividend investing?
Now, to answer that question,it's going to depend on three
things.
Number one is going to be yourinvesting knowledge.
How do you invest?
(12:01):
What do you invest in?
Do you know what to buy, whatwent to sell, how long to hold?
So that's where simplyinvesting can help you with that
.
To get that investing knowledge.
And then you need money andtime.
The more money you have toinvest, the more money you can
make because you can buy moreshares, and the more shares you
own, the more money you can makein dividends.
(12:23):
And then time, as we saw in theexample, we just looked at a
20-year time period, but if weextend that to 30 years, 40 or
50 years.
The more time you have toinvest, the more time you have
to compound your dividends andyou can make more money.
So having more time having moremoney having both is even is
(12:46):
going to be even better for you.
Okay, so for this we're going touse the Simply Investing Future
Value Google Sheet.
It's a simple Google Sheet.
It's available for free.
I'll put the link down below inthe description.
Anybody can use it and it'sjust a tool to estimate.
It's not going to be perfect,but it's going to allow you to
estimate what your future valueof your portfolio could look
(13:11):
like.
Now, there's a lot of numberson the screen here, so don't be
concerned about that.
I'm going to take you throughit step by step.
So what we do here in theGoogle Sheet is we cover a
20-year period.
Okay, so the next 20 years.
What do they look like?
The only thing you need tochange here, once you download
the Google Sheet, are the valuesthat are in green right, the
(13:34):
cell that's in green.
So let's start on the left withthe starting balance.
So in this example, I'm goingto start with $250,000.
Now, for some of you, thatmight be a lot of money.
For some of you it might not bea lot of money and that's why
the Google Sheet is there, soyou can enter in your own values
.
What I'm taking intoconsideration here is $250,000
(13:55):
would be the total of all ofyour portfolios your retirement
portfolio, your non retirementportfolio If you're in the US,
the 401k, if you're in Canada,your RSP, the TFSA, all of the
accounts combined.
We put the starting balancehere.
So let's say you've got $250,000to invest.
We're going to keep thisexample simple Additional
(14:18):
investments each year, zero.
So we're going to assume you'renot investing a single penny
more for the next 20 years.
You're starting with yourinitial investment of $250,000
and that's it.
Again, that's a number that youcan change when you download
the spreadsheet.
If you invest $100 a month,then you would put in $1,200 as
(14:39):
an annual additional investmenteach year.
Okay, then we're going to moveon to the right, the dividend
yield.
We're going to keep it threeand a half percent.
That's the average yield.
Stock growth, very conservative.
We're going to leave that atfour and a half percent.
So what does that look like?
So, for over 20 years, let'ssay you start with an initial
investment of $250,000, you willearn and again, this is an
(15:03):
estimation you will earn total alittle over $237,000 in
dividends.
That's all of the dividendsreceived over the 20 years.
We just add them up and thevalue of the portfolio should be
roughly around $1.1 million.
Okay, after 20 years.
(15:25):
Now what happens if you don'tinvest and you're more like
Larry Right in the example weshowed earlier, where Larry
waited on the sidelines toinvest?
Right, he wasn't sure if thiswas the right time.
So what if you wait and let'ssay you end up waiting 10 years
Before you start investing andthen you start with the $250,000
(15:46):
investment?
Well then your total dividendsearned is going to be around
126,000 and your portfolio willbe worth around 539,000 dollars.
So by waiting 10 years, youwould have lost out on a hundred
and ten thousand dollars individends and your portfolio
(16:08):
Would be 625,000 dollars lessthan what it could have been had
you started investing sooner.
Now, for those of you that liketo see percentages, you can see
that waiting 10 years Will costyou 47% in dividends and the
portfolio will be worth 54% less.
So half, pretty much more thanhalf that's how much your
(16:32):
portfolio would be worth.
So you can see that there's alot of money that's Going to be
lost Opportunity costs, right,that are going to be lost here.
So the lesson again is don'twait to start Investing.
You're never going to get thetiming perfect, but, as we saw
in the examples earlier in thisepisode, you don't have to have
(16:53):
perfect timing.
So let's get on to our lasttopic in this episode.
So what is the cost of notinvesting sooner and you
probably already know this,because that's where we're
headed to so the loss ofpotential income and gains, even
capital gains, and theninflation is going to eat into
the value of your cash, and andso we just saw this right.
(17:15):
We're looking at the differencehere between Ashley and Larry.
That is a difference of 80 over83 thousand dollars Just by
investing every single year atthe beginning of the year,
versus waiting on the sidelines,right.
So that's a huge differencethere.
And then the slide that we justlooked at, right.
(17:36):
So your portfolio is goingprobably going to be less than
half of what it could have been,and the dividends, 47%.
That's also around the halfwaymark, half of what you could
have earned if, in this example,you waited 10 years to start
investing, and then inflation isa big one.
So in this example really quickexample we're going to use the
(17:57):
Bank of Canada calculator.
You can see the link up on thescreen so you can try it
yourself and Take a look at this.
Right in 2003, something thatwould have cost a thousand
dollars this is cost of goodswould be now worth.
Would now cost, in 2023, $1,533.
(18:17):
So you can see that inflationincreases the value of goods and
it decreases the value of thecash that you hold on to.
So in the case of Larry, who isjust sitting on cash for 20
years, while the value of hiscash over time is going to
decrease as inflation eitherremains steady or goes up, so
(18:42):
there is a cost to not doinganything.
So again, final lesson heredon't wait to start investing
and get started immediately bylearning how to invest, and
that's where Simply Investingcan help you.
Our approach to investing andI've been doing this for over 24
(19:02):
years now is investing inquality, dividend-paying stocks
when they are priced low.
So you can see the key words.
Highlighted here is qualitydividend stocks, and when
they're priced low, when they'reundervalued.
So not just any stock, but astock that's paying dividends.
Not just any dividend stock,but it has to be a quality stock
(19:25):
and not just at any price.
We want to make sure that thestock price when we invest in it
is historically priced low,that it's undervalued.
So how do you know when you'relooking at a stock any stock in
the world?
How do you know, when you'relooking at it, if it's a quality
stock and how do you know ifit's priced low?
Well, for that I've createdwhat I call the 12 rules of
(19:47):
Simply Investing.
This is your checklist.
If a company fails even onerule, skip it, move on to
something else.
Company has to pass all of the12 rules in order for you to
invest in it, and the rules areup on the screen here.
I'm going to read them out, incase you're listening to this
podcast instead of watching it.
(20:07):
So rule number one do youunderstand how the company is
making money?
If you don't, skip it, move onto something else.
Rule number two 20 years fromnow, will people still need its
product and services?
Rule number three does thecompany have a low cost
competitive advantage?
Rule number four is the companyrecession proof?
And rule number five is itprofitable?
(20:28):
So we look at the last 20 yearsto see is the company
profitable?
Rule number six does it growits dividend?
Rule number seven can it affordto pay the dividend?
Rule number eight is the debtless than 70%?
Rule number nine avoid anycompany with a recent dividend
cut.
Rule number 10, does it buyback its own shares?
Rule number 11, is the stockpriced low?
(20:50):
So there's three things.
We look at the PE ratio, wecompare the current yield to the
20 year average yield and thenwe look at the PB ratio.
If all three conditions are met, then the company passes rule
number 11.
And rule number 12, keep yourmotions out of investing.
So, for anyone that's interested, I've created the Simply
Investing course.
It's an online course,self-paced.
It's got 10 modules and wecover everything you need to get
(21:15):
started.
Rule one we cover the basics ofinvesting.
Module two we cover the 12rules with real life examples.
Module three I show you how toapply the 12 rules to discover
for yourself quality companiesthat are priced low.
Module four show you how to usethe Simply Investing platform.
Module five placing your firststock order step by step,
(21:39):
especially if you've never doneit before.
Module six building andtracking your portfolio.
Module seven when to sell astock, which is just as
important to know when to buy,and module eight to reduce your
fees and risk.
Especially if you own mutualfunds, index funds and ETFs,
those fees are going to be verylarge over time, so we cover
(22:03):
that in module eight.
Module nine I give you youraction plan to get started with
investing immediately.
In module 10, I answer yourmost frequently asked questions.
We also have the SimplyInvesting platform, which is an
online subscription-basedservice.
The platform automaticallyapplies the rules to 6,000
(22:26):
companies in the US and Canadaevery single day, so it'll tell
you immediately which companiespass which of the rules, which
companies to avoid, which onesto consider.
If you're interested, there's acoupon code you may want to
write this down Save 10, save10.
Save 10 is going to give you10% off of the course or the
(22:50):
platform.
So if you enjoyed today'sepisode, be sure to hit the
subscribe button.
We have a new video out everyWednesday.
Hit the like button as well andfor more information, take a
look at our website,simplyinvestingcom.
Thanks for watching.
In this episode I'll discuss why you shouldn't wait
to start dividend investing.
Hi, my name is Kanwal Sarai andwelcome to the Simply Investing
Dividend Podcast.
In this episode we're going tocover four topics.
We'll start first with lookingat some of the investing fears
(00:22):
that you may have with gettingstarted with investing on your
own.
Then we're going to take a lookat the five different types of
investors.
Then you can see if you fit inany one of those categories.
Then we'll look at how much canyou actually earn with dividend
investing.
The last topic will be the costof not starting to invest on
(00:47):
your own.
Let's get started with our firsttopic investing fears.
What are some of your fears ofinvesting on your own?
The number one fear that we getfrom most people is the fear of
losing money, of maybe takingon too much risk.
(01:08):
Then they have questions likewell, what do I invest in?
How do I invest?
What if I make a mistake and Ilose my hard-earned money?
The biggest thing comes backdown to the fear of losing your
money.
That prevents you from notinvesting, or most people, from
(01:30):
not even starting to investbecause there's that strong fear
of losing your money.
Let's see what the five typesof investors look like and see
if you fit in any of thosecategories.
Then we're going to continueand look at what is the result
of not starting to invest.
That's our next topic in thisepisode the five types of
(01:54):
investors.
For this topic, here we're goingto be using information from
the Schwab Center for FinancialResearch.
You can see their link up onthe screen right now.
What they did is they studiedthe impact of timing on the
returns of five hypotheticalinvestors who had $2,000 in cash
(02:19):
to invest in the stock marketonce a year for 20 years,
starting in 2003.
Let's take a look at what thatlooks like for 20 years for five
different investors to startinvesting in the stock market.
In this example, they used theSNMP 500 index.
(02:41):
Here are the list of fiveinvestors that we're going to go
through.
We're going to talk about PeterPerfect, ashley Akshon, matthew
Monthly, rosie Rotten and LarryLinger.
Let's start with Peter first.
These are hypotheticalinvestors, but you may find
yourself in one of these fivecategories.
Peter had invested, we'reassuming, had incredible luck
(03:06):
and invested on the bestpossible day each year.
What Schwab did is they wentback and looked at the
historical data for the last 20years and they looked at when
was the stock market at itslowest point every single year.
And then they imagined that,okay, peter Perfect took his
$2,000 and invested all of it onthe lowest stock market point
(03:32):
of the year, which means he hadperfect timing.
He invested when the market wasat its lowest point in the year
and did that for 20 years.
Okay, so every year it fellobviously on a different day,
but let's assume that PeterPerfect invested $2,000 on the
perfect investing day of everyyear.
(03:52):
Okay, so then we move on to ournext investor, ashley Action.
So what she did is she investedher $2,000 immediately at the
beginning of each year, so atthe either January 1st or
January 2nd, depending on thefirst day when the stock market
opens of each year.
She invested all of her moneyin the SNMP 500 index.
(04:16):
Now, matthew, monthly, had adifferent approach.
He took the dollar costaveraging approach.
So he took his $2,000 anddivided by 12, and so you can
see it's roughly $166.66 everymonth, and he invested at the
start of every month, $166.66and did that every single month
(04:39):
for 20 years.
Now, rosie Rosie Rotten hadincredible bad luck and invested
on the worst possible day eachyear, which is when the stock
market was at its highest pointin the year.
So again, schwab went back andlooked at the stock market data
(05:00):
for the last 20 years and theylooked at what was the highest
point of the year for the stockmarket for that year, and Rosie
Rotten invested her $2,000 onthe worst possible day of the
year.
And then finally, we have LarryLenger.
Larry left his money in cashusing treasury bills Every year.
(05:24):
He left it in cash, neverinvested in stocks.
He was convinced that lowerstock prices and better
opportunities were just aroundthe corner.
He was waiting for a goodopportunity to invest and he
just kept waiting and waiting,and waiting.
So for 20 years he just put hismoney in treasury bills,
(05:46):
leaving it in cash, and did notinvest in the stock market at
all.
So now you may find yourself inone of these five investor types
.
Maybe you're the person who isjust waiting on the sidelines,
waiting to invest, haven'tstarted investing yet, waiting
for the perfect time.
You're not sure if the marketis at its peak right now or if
(06:08):
the market is low.
You're not sure if the market'sgoing to crash in the next
month or next year, so you'rejust waiting.
Now Peter Perfect is going tobe impossible to predict when is
the perfect time to invest inthe stock market and, naturally,
rosie Rotten invested at theworst time.
And again, it's going to bevery difficult to pick the worst
(06:30):
time to invest, so you'reprobably, for the majority of
folks that are investing, areprobably going to be somewhere
in the middle, with eitherAshley or Matthew.
Now, which one of these fiveinvestors do you think had the
highest returns after 20 years?
Well, that was Peter, right,obviously, peter Perfect
(06:53):
invested at the perfect time ofthe year for 20 years, and again
, these are hypotheticalinvestors, but you can see that,
peter, his investment after 20years was worth a little over a
hundred and thirty eightthousand dollars.
Now Ashley, who invested at thestart of every year
(07:14):
automatically the entire $2,000every year at the start of the
year, came in second place andher portfolio was worth a little
over $127,000.
Now Matthew, who was doingdollar cost averaging, came in
third place, very close toAshley, and he earned.
His portfolio was worth alittle over $124,000 a year.
(07:40):
And then Rosie, who invested atthe worst time of the year,
actually came in fourth placeand her portfolio was worth a
little over $112,000 a year.
And then Larry, who stayed onthe sidelines, didn't invest in
the stock market for 20 yearsand his investments were worth
(08:04):
$43,948.
Now you can see the starkdifference between Larry and the
rest of the investors.
Now, if we want to take a lookat the difference between Rosie
who invested at the worst time,had the worst timing, the worst
(08:25):
bad luck still made $68,000 morethan Larry.
So there's some good news hereEven if your timing is not
perfect like Peter, even if yourtiming is the absolute worst,
you will still come out ahead byinvesting rather than waiting
(08:46):
on the sidelines.
Now, for most of you, if you'regoing to be somewhere in the
middle, of course, like I said,you're not going to have your
timing perfect like Peter, andyou're not going to have your
timing the absolute worst likeRosie you're going to be
somewhere in the middle.
So, for you to look at whereAshley is coming in, the
difference between her portfolioand Larry's is over $83,000,
(09:09):
and that is substantial.
That is a huge difference.
Again, the lesson here is youdon't want to wait on the
sidelines to start investing.
Now.
Some of you might be thinkingwell, 2003 to 2023, it's a
specific period of time.
We had COVID in there as well,like what happens outside of
(09:29):
this.
What if somebody startedinvesting in 2001 or 1994, or
different periods of time?
So this is on their website,schwab, the link that I just
showed you earlier.
In this episode I'm going toquote some thoughts on this and
(09:50):
quote some other periods of timethat they considered.
So, schwab, I'm going to readit out to you, and the quote is
regardless of the time periodconsidered, the rankings turned
out to be remarkably similar.
We analyzed all 78 rolling 20year periods dating back to 1926
(10:10):
.
In 68 of the 78 periods therankings were exactly the same,
that is, Peter was first, ashleysecond, matthew third, rosie
fourth and Larry last.
But what about the 10 periodswhere the results were not as
expected?
Even in these periods,investing immediately never came
(10:34):
in last.
It was in its normal secondplace four times, third place
five times and fourth place onlyonce.
From 1962 to 1981, one of thefew extended periods of
persistently weak equity markets.
What's more, during that period, fourth, third and second
(10:54):
places were virtually tied.
We also looked at all possible30, 40, and 50 year time periods
starting in 1926.
If you don't count the fewinstances when investing
immediately swap places withdollar cost averaging all time
periods followed the samepattern In every 30, 40, and 50
(11:16):
year period, perfect timing wasfirst, followed by investing
immediately or dollar cost,averaging bad timing and,
finally, never buying stocks.
So the lesson here in thisepisode is don't wait for the
right time to start investing,because that's never going to
happen and you can see there's ahuge cost to not doing anything
(11:40):
at all.
Now, before we get into theactual what is the cost of not
investing, there's one moretopic we want to cover, and that
is how much can you actuallyearn with dividend investing?
Now, to answer that question,it's going to depend on three
things.
Number one is going to be yourinvesting knowledge.
How do you invest?
(12:01):
What do you invest in?
Do you know what to buy, whatwent to sell, how long to hold?
So that's where simplyinvesting can help you with that
.
To get that investing knowledge.
And then you need money andtime.
The more money you have toinvest, the more money you can
make because you can buy moreshares, and the more shares you
own, the more money you can makein dividends.
(12:23):
And then time, as we saw in theexample, we just looked at a
20-year time period, but if weextend that to 30 years, 40 or
50 years.
The more time you have toinvest, the more time you have
to compound your dividends andyou can make more money.
So having more time having moremoney having both is even is
(12:46):
going to be even better for you.
Okay, so for this we're going touse the Simply Investing Future
Value Google Sheet.
It's a simple Google Sheet.
It's available for free.
I'll put the link down below inthe description.
Anybody can use it and it'sjust a tool to estimate.
It's not going to be perfect,but it's going to allow you to
estimate what your future valueof your portfolio could look
(13:11):
like.
Now, there's a lot of numberson the screen here, so don't be
concerned about that.
I'm going to take you throughit step by step.
So what we do here in theGoogle Sheet is we cover a
20-year period.
Okay, so the next 20 years.
What do they look like?
The only thing you need tochange here, once you download
the Google Sheet, are the valuesthat are in green right, the
(13:34):
cell that's in green.
So let's start on the left withthe starting balance.
So in this example, I'm goingto start with $250,000.
Now, for some of you, thatmight be a lot of money.
For some of you it might not bea lot of money and that's why
the Google Sheet is there, soyou can enter in your own values
.
What I'm taking intoconsideration here is $250,000
(13:55):
would be the total of all ofyour portfolios your retirement
portfolio, your non retirementportfolio If you're in the US,
the 401k, if you're in Canada,your RSP, the TFSA, all of the
accounts combined.
We put the starting balancehere.
So let's say you've got $250,000to invest.
We're going to keep thisexample simple Additional
(14:18):
investments each year, zero.
So we're going to assume you'renot investing a single penny
more for the next 20 years.
You're starting with yourinitial investment of $250,000
and that's it.
Again, that's a number that youcan change when you download
the spreadsheet.
If you invest $100 a month,then you would put in $1,200 as
(14:39):
an annual additional investmenteach year.
Okay, then we're going to moveon to the right, the dividend
yield.
We're going to keep it threeand a half percent.
That's the average yield.
Stock growth, very conservative.
We're going to leave that atfour and a half percent.
So what does that look like?
So, for over 20 years, let'ssay you start with an initial
investment of $250,000, you willearn and again, this is an
(15:03):
estimation you will earn total alittle over $237,000 in
dividends.
That's all of the dividendsreceived over the 20 years.
We just add them up and thevalue of the portfolio should be
roughly around $1.1 million.
Okay, after 20 years.
(15:25):
Now what happens if you don'tinvest and you're more like
Larry Right in the example weshowed earlier, where Larry
waited on the sidelines toinvest?
Right, he wasn't sure if thiswas the right time.
So what if you wait and let'ssay you end up waiting 10 years
Before you start investing andthen you start with the $250,000
(15:46):
investment?
Well then your total dividendsearned is going to be around
126,000 and your portfolio willbe worth around 539,000 dollars.
So by waiting 10 years, youwould have lost out on a hundred
and ten thousand dollars individends and your portfolio
(16:08):
Would be 625,000 dollars lessthan what it could have been had
you started investing sooner.
Now, for those of you that liketo see percentages, you can see
that waiting 10 years Will costyou 47% in dividends and the
portfolio will be worth 54% less.
So half, pretty much more thanhalf that's how much your
(16:32):
portfolio would be worth.
So you can see that there's alot of money that's Going to be
lost Opportunity costs, right,that are going to be lost here.
So the lesson again is don'twait to start Investing.
You're never going to get thetiming perfect, but, as we saw
in the examples earlier in thisepisode, you don't have to have
(16:53):
perfect timing.
So let's get on to our lasttopic in this episode.
So what is the cost of notinvesting sooner and you
probably already know this,because that's where we're
headed to so the loss ofpotential income and gains, even
capital gains, and theninflation is going to eat into
the value of your cash, and andso we just saw this right.
(17:15):
We're looking at the differencehere between Ashley and Larry.
That is a difference of 80 over83 thousand dollars Just by
investing every single year atthe beginning of the year,
versus waiting on the sidelines,right.
So that's a huge differencethere.
And then the slide that we justlooked at, right.
(17:36):
So your portfolio is goingprobably going to be less than
half of what it could have been,and the dividends, 47%.
That's also around the halfwaymark, half of what you could
have earned if, in this example,you waited 10 years to start
investing, and then inflation isa big one.
So in this example really quickexample we're going to use the
(17:57):
Bank of Canada calculator.
You can see the link up on thescreen so you can try it
yourself and Take a look at this.
Right in 2003, something thatwould have cost a thousand
dollars this is cost of goodswould be now worth.
Would now cost, in 2023, $1,533.
(18:17):
So you can see that inflationincreases the value of goods and
it decreases the value of thecash that you hold on to.
So in the case of Larry, who isjust sitting on cash for 20
years, while the value of hiscash over time is going to
decrease as inflation eitherremains steady or goes up, so
(18:42):
there is a cost to not doinganything.
So again, final lesson heredon't wait to start investing
and get started immediately bylearning how to invest, and
that's where Simply Investingcan help you.
Our approach to investing andI've been doing this for over 24
(19:02):
years now is investing inquality, dividend-paying stocks
when they are priced low.
So you can see the key words.
Highlighted here is qualitydividend stocks, and when
they're priced low, when they'reundervalued.
So not just any stock, but astock that's paying dividends.
Not just any dividend stock,but it has to be a quality stock
(19:25):
and not just at any price.
We want to make sure that thestock price when we invest in it
is historically priced low,that it's undervalued.
So how do you know when you'relooking at a stock any stock in
the world?
How do you know, when you'relooking at it, if it's a quality
stock and how do you know ifit's priced low?
Well, for that I've createdwhat I call the 12 rules of
(19:47):
Simply Investing.
This is your checklist.
If a company fails even onerule, skip it, move on to
something else.
Company has to pass all of the12 rules in order for you to
invest in it, and the rules areup on the screen here.
I'm going to read them out, incase you're listening to this
podcast instead of watching it.
(20:07):
So rule number one do youunderstand how the company is
making money?
If you don't, skip it, move onto something else.
Rule number two 20 years fromnow, will people still need its
product and services?
Rule number three does thecompany have a low cost
competitive advantage?
Rule number four is the companyrecession proof?
And rule number five is itprofitable?
(20:28):
So we look at the last 20 yearsto see is the company
profitable?
Rule number six does it growits dividend?
Rule number seven can it affordto pay the dividend?
Rule number eight is the debtless than 70%?
Rule number nine avoid anycompany with a recent dividend
cut.
Rule number 10, does it buyback its own shares?
Rule number 11, is the stockpriced low?
(20:50):
So there's three things.
We look at the PE ratio, wecompare the current yield to the
20 year average yield and thenwe look at the PB ratio.
If all three conditions are met, then the company passes rule
number 11.
And rule number 12, keep yourmotions out of investing.
So, for anyone that's interested, I've created the Simply
Investing course.
It's an online course,self-paced.
It's got 10 modules and wecover everything you need to get
(21:15):
started.
Rule one we cover the basics ofinvesting.
Module two we cover the 12rules with real life examples.
Module three I show you how toapply the 12 rules to discover
for yourself quality companiesthat are priced low.
Module four show you how to usethe Simply Investing platform.
Module five placing your firststock order step by step,
(21:39):
especially if you've never doneit before.
Module six building andtracking your portfolio.
Module seven when to sell astock, which is just as
important to know when to buy,and module eight to reduce your
fees and risk.
Especially if you own mutualfunds, index funds and ETFs,
those fees are going to be verylarge over time, so we cover
(22:03):
that in module eight.
Module nine I give you youraction plan to get started with
investing immediately.
In module 10, I answer yourmost frequently asked questions.
We also have the SimplyInvesting platform, which is an
online subscription-basedservice.
The platform automaticallyapplies the rules to 6,000
(22:26):
companies in the US and Canadaevery single day, so it'll tell
you immediately which companiespass which of the rules, which
companies to avoid, which onesto consider.
If you're interested, there's acoupon code you may want to
write this down Save 10, save10.
Save 10 is going to give you10% off of the course or the
(22:50):
platform.
So if you enjoyed today'sepisode, be sure to hit the
subscribe button.
We have a new video out everyWednesday.
Hit the like button as well andfor more information, take a
look at our website,simplyinvestingcom.
Thanks for watching.
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