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Welcome to Safe Dividend Investing’s Podcast # 152 on January 25th of 2024.
Today, I will be answering two interesting investment question.
QUESTION (1)
Why would investment advisors like to see the elderly banned from managing their own investment portfolios?
QUESTION (1)
What is your investment horizon and strategy?
(A transcript of this podcast is available.)
SIX INVESTMENT BOOKS BY IAN DUNCAN MACDONALD, ARE AVAILABLE FROM AMAZON.COM KINDLE BOOKS)
(1) CANADIAN HIGH DIVIDEND INVESTING -
In this 325-page book, learn how to select, purchase and build a portfolio of 20 Canadian strong dividend stocks. Summary records of 215 stocks are sorted in multiple ways, and each stock's unique page provides detailed scoring data and 24 years of price and dividend trend data.
(2) NEW YORK STOCK EXCHANGE'S 106 BEST HIGH DIVIDEND STOCKS -
In this 334-page book, there is a 2-page report for each company scoring 11 data elements. It also lists 23 years of historical share price and dividend payouts so that investors can judge the stock's reliability. Released December 2022.
(3) AMERICA HIGH DIVIDEND HAND BOOK
&
(4) CANADIAN HIGH DIVIDEND HANDBOOK
in these two books, pages of charts are sorted four ways by stock score, share price, dividend yield percent and alphabetically. A page for each stock provides eleven facts which created each stock's total score. Both books list all common stocks that were paying dividend yield percentages of 3.5% or more on the New York Exchanges and the Toronto Stock Exchange.
(5) SAFER BETTER DIVIDEND INVESTING:
All 628 stocks paying dividends of 6% or more on the NYSE and the NASDAQ are scored and sorted by score, price, dividend % and alpha. Plus 199 high dividend Canadian stocks. The answers to 128 questions asked by investors are provided. This instructional reference book will make building a better investment portfolio faster and easier.
(6) INCOME AND WEALTH FROM SELF-DIRECTED INVESTING
In this, his first investment book, in easy to understand language, Ian MacDonald reveals the serious concerns you should have about entrusting your money to investment advisors. Step-by-step, he shows you how you can realize an annual 6% income while your portfolio continues to grow year-after-year. 654 stocks paying dividend yields over 3.5% or more on the Toronto Stock Exchange are scored and listed.
FOR MORE INFORMATION ON THESE 6 BOOKS, HIS 3 NOVELS, PAINTINGS, PHOTOGRAPHS AND DIGITAL ART VISIT www.informus.ca and also www.artgalarian.com
Ian Duncan MacDonald
Author, Artist, Commercial Risk Consultant,
President of Informus Inc
2 Vista Humber Drive
Toronto, Ontario
Canada, M9P 3R7
Toronto Telephone - 416-245-4994
New York Telephone - 929-800-2397
imacd@informus.ca
Ian Duncan MacDonald
Author, Artist, Commercial Risk Consultant,
President of Informus Inc
2 Vista Humber Drive
Toronto, Ontario
Canada, M9P 3R7
Toronto Telephone - 416-245-4994
New York Telephone - 929-800-2397
imacd@informus.ca
Safe Dividend Investing
Podcast # 152
25 January 2024
Greetings to listeners all around the world. Welcome to Safe Dividend Investing’s Podcast # 152 on January 25th of 2024.
My name is Ian Duncan MacDonald. In today’s podcast I will be answering two questions.
Every day I hear from readers of my books and listeners to my podcasts. They, keep me current with what is now of concern to investors. So please keep sending your questions to my personal email address, ianduncanmacdonald@hotmail.com.
QUESTION 1
Why would Investment advisors like to see the elderly banned from managing their own investment portfolios?
No matter how old you are, giving control of your portfolio to an investment advisor who is paid to separate you from your money seems to verge on illogical. Every day I receive releases from the body that polices the investment industry. They report horrendous incidents, such as the lawyer who had been barred from practicing law because of his dementia. Hundreds of thousands of dollars of his money were stolen from his portfolio by a trusted investment advisor. These investment criminals seem to get off with just a fine and being barred from the industry. Is their punishment so light because they are a self-regulating industry?
In a January 19th article, a well-known financial writer suggested, and I quote, that retirees should stick to "golf, bridge and iron-man events" and stay away from managing their own investments”. He advised that elderly amateurs should "set up a small investing account on the side with an online broker to scratch that itch to manage their own investments" and "leave your retirement account with the adviser”. I found his comments demeaning, ignorant and dismissive.
He went on to infer that all 80-year-olds were on the edge of senility and would be unable to manage their investments. He had reached this insight after receiving an email from an 80-year-old doctor who was worried about his ability to continue to manage his portfolio.
Th financial writer went on to further advise that you should start early to find "an adviser because at any age it can be an exhausting process of seeking recommendations from friends and family". My question would be, why are these friends and family any more capable of determining the integrity and value of an investment advisor than any 80-year-old with decades of experience in judging character?
In my first book, Income and Wealth from Self-Directed Investing", written 5 years ago, I wrote about an 80-year-old friend, a widow, who asked me if it was normal for her investment advisor to be losing $100,000 every year.
This woman, let us call her Ms. Innocence, sought my help because she was frightened that her portfolio would be entirely depleted within a few years. For the previous 20 years an investment adviser, employed by a major national bank, had been managing her portfolio. In her retirement her portfolio was her sole source of income. That portfolio had lost $300,000 in the last three years. The dream of passing an inheritance on to her children and grandchildren now seemed remote. I told her that I would look at her portfolio but there was no reason the value of a carefully managed portfolio had to shrink. It is all a matter of controlling income and expenses.
Upon retiring she had told her advisor that she wished to only withdraw a modest income of $3,500 per month from her portfolio. The investment adviser had assured her that withdrawing such an amount from the portfolio could be easily provided for the rest of her life. Considering the amount, she had invested, in my opinion, she should have been able to withdraw double the $3,500 without impacting the total value of the portfolio.
After reviewing her portfolio, I told her what I did not understand why the investment adviser had put most of her money into low interest bonds, preferred shares, and questionable mutual funds? These were investments with little potential for increasing the value of the portfolio.
She replied that she had never paid attention to what the advisor was doing with her money. All she had ever looked at was the total amount in her portfolio. Her only concern had been receiving that $3,500 every month. She said that she would now look more closely at her portfolio.
A few days later, she reported that the investment adviser’s annual fee of 1% of her portfolio’s value was, on closer inspection, 2%. She had not realized that she was paying additional transaction fees every month over and above the agreed to 1%.
Her investment portfolio was experiencing more chargeable transactions in one month than I would see in my portfolio in ten years. These transactions were generating thousands of dollars in fees annually for the bank.
I then reviewed the bank’s full-service contract appears. It detailed the dozens of fees that a client agrees to pay upon signing up for the investment account. The legalese was written in the smallest font and displayed in such a compressed format that it was almost impossible to read. Could it be they do not want their clients to read the terms of this investment contract.
This reluctance to make their written material transparent and easy to comprehend is also present in the basic investment information that thousands of unsophisticated investors receive from the bank.
Ms. Innocence told me of the many widows in her senior’s apartment building who, from a lifetime of saving and the sale of their homes, had a net worth of hundreds of thousands of dollars. Most of these women had only an elementary education. Many had never written a cheque until forced to do so after their husbands died. Their husbands had done them no favor in taking care of all the family’s money matters. Unable to comprehend the bank’s basic investment advice, their pride prevented them from revealing their financial ignorance to the bank.
Being suspicious of anyone prying into their financial affairs, these women felt forced to park their wealth in minimal interest savings accounts. Here, it was being depleted by their living expenses and inflation. Such widows really do face the possibility of outliving their savings. They need help and they are not getting it from the investment industry.
Investment advisers seem to prefer that investors be ignorant and timid. They discourage questions regarding how they will handle your money. Given the freedom to do as they please with a customer’s money many seem unable to resist manipulating a client's account to their own financial advantage. Too many behave like sharks. You are the prey. Buyer beware.
The investment industry works hard at making millions believe that only qualified investment advisers could possibly make intelligent investment choices. That anyone, after reading any of my books, could generate better capital gains and realize more income without their assistance, raises the question as to what are investment advisors doing to earn the thousands of dollars, they charge their clients?
Investment advisers certainly do not see themselves in the business of educating clients about investing. If clients are unable to distinguish between a good safe investment and a bad risky investment, the investment industry sees this as the client’s problem, not their problem? Based on what they seem to prefer adding to client’s portfolio makes you wonder if investment advisors can or are willing to recognize the difference between the two.
The 1 to 5 percent of their portfolio’s value that clients pay their advisors each year may seem like a small amount. However, over twenty years, a client could pay hundreds of thousands of dollars for investment adviser services. They pay it whether the value of the portfolio increases or decreases. These advisory fees represent the loss of hundreds of thousands of dollars that could have been safely invested and providing additional dividend income to the client.
Clients seem to have difficulty in recognizing that the first loyalty financial advisers have is to the bank that employs them. Like all employees it is an adviser’s responsibility to contribute to their employer’s profits. The investment charges and fees you pay are not going to the adviser, they are going to the bank.
While advisers have varied compensation plans, the bank, not the adviser, gets the greatest percentage of any fees charged. The bank believes it deserves the bigger share because it gives the financial adviser credibility and access to millions of potential bank customers to prospect.
Despite their claims of making investment decisions in the best interest of their clients. If one mutual fund was paying a 5% commission to the bank while another almost identical fund was paying a 4% commission which one, do you think gets presented to the clients. Investors are oblivious of the benefits a bank is receiving from the investments they recommend. Rarely do investors question their advisors so called professional advice. Even if a question were to be raised by a client, the advisor are trained to respond with jargon and convoluted explanations that confuse and intimidate those who dare to question their investment choices.
All salesmen, including investment advisors, are measured by their ability to convince people to sign binding contracts. If, a salesman’s income can double by convincing you to buy an investment, be assured, that he will say, whatever it takes to get your signature or approval.
Sales commissions do not bring out the best in people. They fan the flames of greed and ruthlessness. To keep their jobs, investment advisers must meet quotas. To be deserving of a promotion, they must generate more sales than their peers.
Successful investment advisers often receive the title of Vice President as an incentive. The title gives the adviser greater credibility with their clients and prospective clients. The title costs the bank nothing and helps increase bank revenue. Recognize that investment advisers with the title of Vice President on their business card are the real sharks. A large bank might have hundreds of vice presidents selling investment products.
Standing out from your peers is never easy. The typical investment adviser handles about 150 clients. If they, on average, work a typical 2,000 hours in a year, this could allow an investment adviser to spend 13 hours with each of their 150 clients. However, clients die; they get lured away by competitors, and some are discarded when they lose all their investment money.
Replacing one lost client may require developing relationships with ten prospective clients. This takes time. That combined with clerical work, training and meetings leaves no time to research how to increase the value of one client’s portfolio. An investment adviser may have as little as an hour a year to maintain their relationship with a client. Small accounts may not even get a phone call. Securities Commission surveys confirm small investors would rarely be in contact with their advisers more than once a year and many would have no contact. Yet, they are supposedly paying for the professional services of an investment advisor. Wouldn’t small and large clients be better off managing their own investments?
If you ever realize that you are not getting what you are paying for and complain. You will be quickly reminded that you signed a full-service fee schedule. If you sued, the bank’s lawyers would immediately present this piece of paper as proof of your compliance with the investment guidance you gave them. A legal action would be a lost cause. The banks employ platoons of salaried lawyers to protect their interests.
Ms. Innocence was not aware of what went on behind the scenes at the bank other than to realize that it was not working for her. She followed the steps laid out in my books. Within ninety days, using all the free investment tools that she had not known existed, she was carefully buying hundreds of thousands of dollars of shares in financially strong stocks paying high dividends.
Ms. Innocence’s gravest error had been in giving an investment adviser control of her portfolio. It seemed to be a wonderful idea because it was one less task that she would have to be bothered with. For the bank it was like being handed a signed blank check. They did not miss their opportunity to milk her portfolio for all that their conscience and loose laws allowed.
When her portfolio was declining each year, she had naively accepted the investment advisor’s explanation that it was just the nature of investing conservatively. She accepted that this meant she should not be expecting any growth.
My first investment book was written five years ago. I wrote that book as references that my wife and my children could use to safely manage my portfolio if I were not able to do it. Since 2019, I have written 5 more investment books. Each book was an evolution in making it easier and easier for someone with little experience to become a successful self-directed investor.
Miss Innocence is now about 85, still managing her growing portfolio and thanking me for showing her how to do it. She has come a long way from not realizing that her income was being derived from the investment advisor liquidating a piece of her portfolio every month. It was not the income from dividends that she assumed it was. She now knows that 100% of her income is from dividends. She understands now why she sees steady growth in the value of her total portfolio.
When Ms. Innocence finally understood that she was in control of her income. She sent me an email in which she stated, “ I realized that the stress I lived with, is slowly dissipating and my face is relaxing. It is almost impossible to believe that I can feel safe. That I can trust my own judgment, though in all fairness you did help even with that. The decisions were mine, of course, but I had to be discerning, learning all the time why I took a specific stock and invested in it.
I am one of possibly millions of people who are discovering the benefits of Self Directing
QUESTION #2
What is your investment horizon and strategy?
By using the word “horizon” are you asking what is the objective of my investing? My first objective is to never lose money. The second objective is to provide myself with a reliable, generous ever growing dividend income that I can live on. The third objective is to grow the size of my portfolio.
I have achieved these three objectives by only investing equally in 20 financially strong companies who have a long history of paying ever higher dividend payouts.
With a portfolio of 20 strong companies, I have sufficient diversification that if one of the twenty should encounter an unusual problem, the other carefully chosen stocks in the portfolio will pay dividends and show capital gain to offset any set back from a deviant stock that would only represent 5% of the portfolio’s total value.
I keep the number of stocks as close to 20 as I can because the idea is to make the management of the portfolio as easy as possible. More stocks require more monitoring and more attention.
I seek to realize a dividend return of 6% from my portfolio. This means carefully balancing the financially strongest stocks that pay lower dividend yields with stocks who are not the strongest but pay higher dividend yields.
It is very easy before purchasing a stock to look back at decades of historical records showing share prices and dividend payouts. These records establish the character of the company in whose shares you are investing. The management of a company does not control share prices, but they do control dividend payouts. Many companies, to maintain constant dividend yield percents will increase their dividend payouts even during market crashes. Such companies strengthen your portfolio and your dividend return.
Investing this way is not only effective but is not complicated or difficult. It is what I teach in my books.
END