5 investing tips to remember

Over the years, Carl has taught me what it takes to become a successful investor

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From the February/March 2015 issue of the magazine.

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MONY01_FEBMAR2015-COVERAt age 83, Carl Anderson is more than old enough to be my father, but over the years we’ve developed a warm, if unlikely, friendship. I first met him almost 10 years ago, when my former editor asked me to find five regular Canadians who had achieved incredible investing success. At the time, he’d grown his retirement portfolio from a few thousand dollars to $2.4 million, with a stunning average annual return of 20% over almost a decade.

I wrote a piece for MoneySense on how he did it, and I’m happy to say that we’ve since kept in touch, going out for lunch every now and then in north Toronto where he lives. Over the years he’s not only taught me what it takes to be a successful investor, but a lot more besides. Here are the five most important lessons that I learned:

You can beat the market over the long term. The prevailing wisdom among index investors is that regular investors can’t beat the market over long periods of time. Thanks to Carl, whose portfolio is now closing in on $4 million, I know this isn’t true. But it’s not easy: Carl did it by choosing a proven investing strategy—dividend investing, in his case—and implementing it without a hint of greed or fear. He buys stocks with long histories of increasing earnings and dividends (gleaned from the Investment Reporter newsletter) and holds them for long periods of time. He hasn’t wavered from this strategy in 30 years.

Everyone has a different path to wealth. I’m tempted to copy Carl’s investing approach, but I doubt it would work as well for me. Not because I don’t understand his strategy, but because I don’t have his temperament. He’s got all the attributes you need to be a buy-and-hold investor: He’s patient, frugal, skeptical, and he has an analytical mind. Other folks with different personalities might be better suited to passive index investing or mutual funds. Some aren’t suited to investing at all, and should hire someone to do it for them.

The journey is more important than the destination. One of the reasons Carl has been so successful is because he’s not in it for the money. He lives in a modest two-story home he bought in 1976, he drives a used Toyota RAV4, and he revels in being frugal. He loves investing for the same reason my dad loves crosswords: because it’s challenging and fun. Like my dad, he works at it every day, and now he’s really good at it.

Money can buy happiness. Carl is one of the happier people I know, even though he’s endured his share of misfortune. His first wife died of cancer at age 41, and now his second wife, Thelma, is suffering from cancer as well. The fact that they have millions of dollars has made their lives easier, but not for the reasons you might think. They don’t have a fancy remodelled kitchen or vacation at five-star resorts. They’re happier because they don’t worry about money and they use it to help other people. They are already donating substantial amounts to fund the new Humber River Hospital and Carl says every penny of his portfolio will be donated to charity when he and his wife are gone.

Find a way to do what you love. Even at age 83 Carl is sprightly, energetic and his mind is sharp as a tack. He loves investing, and not just because he’s good at it. He loves it because it keeps him engaged. He goes to annual meetings, he teaches others how to invest, he has regular lunches at Swiss Chalet with his buddies to swap investing stories. He’s never bored and his life has purpose. That’s the most important lesson he taught me: That I need to figure out how I can spend my retirement doing something I love. I think that should be everyone’s retirement goal, actually. The money is just a tool to get there.

 

4 comments on “5 investing tips to remember

  1. If you end up living into your 80’s and assuming an investing horizon of 50 years, then you should have at least several million in your portfolio. Its all about the magic of compounding. You can easily pull this off by holding low cost funds such as Mawer. It really is that simple. No need the stress of holding individual stocks and analyzing the heck out of every stock. Stay the course and control your emotions during the ups and downs and you will be just fine.

    Reply

    • I’m relatively certain that an astute investor like Carl is not invested in mutual funds. ie. If he had just 25% of his portfolio in the Mawer Canadian Equity fund with a MER of 1.31%, he would be paying $13,100 / year in fees.

      Reply

  2. hi Duncan, thanks for reminding us all of the importance of having things other than money to live for! money does not seem to hurt quality of life if it is not its sole purpose…and, as an aside, then it can become somewhat fun :) keep up the good philosophizing!

    Reply

  3. That’s a good story and good advice. We should all strive to be like Carl

    Reply

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