For Novice Investors

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This Blog is for Educational Purposes

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. For a list of the stocks for which I have put up spreadsheets on my web site click here.

What to Read

Monday, August 27, 2012

I am doing this entry because I get asked to suggest what a novice investor should read. I think that if you want to learn about investing today I would suggest reading some blogs rather than any particular book. I know that some people find investing intimating and complex. The great thing about blogs is that most blog entries do not take long to read and over a period of time, you can gain a good understanding of investing.

I write about specific companies, about such things as ratios and secular verses cyclical markets, etc. and these are all good things. However, if you are a novice investor, you may not understand all of this. (I have had complains.) Also, a number of people have asked me about what book should they read to learn about investing.

So, I want to introduce you to a number of investment bloggers I like. I feel they have great blogs that offer great information to the novice investor. Over the next couple of weeks, I will be talking about each blogger and what they have to offer the novice investor.

My blog list:
Dividend Ninja, go to his Blog or see My Report below;
The Loonie Bin, go to his Blog or see My Report below;
My Own Advisor, go to his Blog or see My Report or My Report2 or Update 2014 below;
Dividend Monk, go to his Blog or see My Report below;
The Dividend Guy, go to his Blog or see My Report below;
The Passive Income Earner, go to his Blog or see My Report below.

The Loonie Bin Blog

Wednesday, August 29, 2012

The Loonie Bin blog is a favourite. He has great entries on different aspects of investing. A novice investor should probably head right over to his Investing 101 section. This is divided up into a number of sections.

Life Before Dividend Investing

I remember when I was 12 I asked my father about investing in the stock market. Even though he is very wise and taught me many important things he, like most middle class people, had limited investment knowledge and invested his money in mutual funds. I followed his direction and thought mutual funds were the best way to invest without all the continue....

What is a Dividend?

A dividend is a portion of a corporation's profits paid out to its shareholders. The word dividend comes from the Latin word dividendum which means, "thing to be divided". As a shareholder of a dividend paying company, you are paid dividends for as long as you own the shares. You may be paid in the form of a cheque if you hold the actual share certificates or the dividends may be directly deposited continue....

Dividend Yield

Simply put, a dividend yield is a ratio between the yearly dividend of a company relative to its current share price. It can be found by dividing continue....

Dividend Growth

The most important part of any dividend investment machine is dividend growth. Without it, your investment returns will be a stagnant pool that will slowly erode away thanks to inflation. As dividends increase over time, not only does your dividend income increase, but so does continue....

The Power of Compounding

"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it." - Albert Einstein.

Compounding or compounding interest is a process of earning interest not only on the principle of an investment, but on previously earned interest as well. This compounding effect continue....

More Good Things

There are a couple more items that I want to point out to you. The first one is a timely one on investing. It is talking about the fact that you should not just go for yield when investing in dividend paying stocks. The last two items talk about investing in Tax Free Savings Accounts (TFSA) versus Registered Retirement Savings Accounts (RRSP). Here are the last three I want to point out.

Man Can't Invest By Yield Alone

One of the biggest questions I get asked is "Should I invest in this stock, it has a great yield". While yield does play an important part when making an investment decision, there are many other important factors to consider. A stock that has a large continue....

TFSA vs RRSP: Which One Works For You?

It seems Canadians have been bombarded with the notion that the RRSP is the ideal way to save for retirement. Now that its baby brother, the TFSA has been introduced, there is a common question floating around the country asking which one is better. No matter how many "experts" continue....

TFSA vs RRSP Round Two: The RRSP

The RRSP was introduced in 1957 to help promote retirement savings. Unlike the TFSA, you may only contribute to an RRSP if you earned income in the previous year. Contributions to an RRSP continue....

The Dividend Monk Blog

Monday, September 4, 2012

As you probably have noticed by now my favourite blogs talk mostly about dividend stocks. The Dividend Monk is not any different. His blog has a lot of great information not only for the novice, but for more experienced investors. The main article is called "Dividend Stocks: The Essential Guide". The Dividend Monk talks a lot about US stocks, but there are a lot of Canadians that are interest in US stocks.

Main Article

Dividend stocks are one of the most powerful tools for building long-term wealth.

If you had enough passive income to perpetually support your expenses, and you could direct your creativity and passion to do what you want, how would you spend your time?

What kinds of active passions or active income streams would you build if your necessary expenses were already covered?...continue...

Some Highlights of his Essential Guide

First, there is the Dividend Discount Model Overview.

The Dividend Discount Model (DDM) is the key valuation technique for dividend paying stocks. The most straightforward form of it is called the Gordon Growth Model. This guide explains how it works and the streamlined way to use it. ...continue...

Next is Dividend Growth Investing 101

Dividend Growth Investing is about purchasing dividend stocks that grow their dividends over time, and then holding onto those investments for quite a while as you receive continually increasing passive income from those companies....continue...

A very interesting article is about "High Dividend Stocks: Finding Safe High Yields". We all like to have high dividend yields, but you must tread carefully.

Investors must be cautious when it comes to investing in high dividend stocks. Companies with high dividend yields can potentially offer very strong returns, but they can also lead to value traps and dividend implosions. ...continue...

If you want to get good information on checking out a company, see 20 Quick Ways to Check a Company.

Investing research can be overwhelming. This is especially true for novice investors; there are just so many metrics to consider, and they all relate to each other in a large and complex whole, so how can one make sense of a set of investments and compare them? ...continue...

His article entitled MLPs: The Essential Guide also serves as a portal to some further articles on MLPs. If you want

MLPs, or Master Limited Partnerships, are an interesting option for income investors that can offer higher yields than most dividend stocks....continue...

He also has on his site an archive of free dividend stock reports, arranged alphabetically. They are all US companies, but if you are interested in a stock report on your favourite US company, you may find it here.

This page is the collection of stock reports on the best dividend stocks for the site. Each week, I publish one or two analysis reports on companies, and the full list of recent analysis reports appears below, organized alphabetically. Each link leads to the full quantitative and qualitative report on that dividend stock....continue...

The Dividend Guy Blog

Wednesday, September 6th, 2012

Dividend Investing

I think that the first thing you might want to check out is The Dividend Guy's Dividend Investing eBook. It is free. He starts off with: the question of "Why Dividend Investing?" and gives I have 3 simple reasons:

• #1 Dividend Investing is Easy to Understand - A prestigious financial background is not required if you follow simple and time-tested investing principles
• #2 Dividend Investing is Perfect for Lazy People - Not much time is required once you learn the basic principles of how to select your stocks.
• #3 Dividend Investing, if Done Right, equals Receiving Money Monthly! - Dividend payouts are regular.

What this eBook is about? This eBook is a friendly guide to dividend investing. It is separated into 4 chapters:

• Chapter #1: Don't Lose Money Investing - Instead Learn to Make Money
• Chapter #2: Looking at the Engine of Your Never Ending Money Distributor - Build Your Core Portfolio With Dividend Stocks
• Chapter #3: Baby Steps Guide to Start Investing
• Chapter #4: Tools of the Trades - The Complete List of Dividend Resources

continue...

The above eBook was made for novice investors, but he also has written a complete beginner's guide to dividend investing with its own web site.

Dividend investing has become one of the most famous and effective way to invest for the past 20 years. In fact, it has been proven many times that Dividend investing is a huge part of the stock market yield. Unfortunately, if you are a beginner investor,... continue

Start investing with $1,000

Another section of this site that you may also want to read is his series on how to start investing with $1,000. He started this series from a question he got from someone just starting to invest. He starts out talking about options:

You have actually 3 options. However, I would disregard the first option which would be to buy 38 shares of one company trading at $26. This wouldn't make sense in terms of asset diversification and trading fees. However, you have options #2 and #3 ... continue...

Next he talks about "How To Pick The Right Brokerage Account Before Investing"

Last week, I started a short series about dividend investing for beginners. I noticed that it had generated a few comments as I waved the first option that would be to start with stock picking right away. I still believe that starting with 1 or 2 stocks in your portfolio may put you at risk if you are just starting to learn the investing... continue...

Next he talks about "How To Pick Your ETFs and/or Dividend Funds"

I remember the first time I opened my brokerage account online to start trading. I had $19,500 that I just transferred from a line of credit and I felt like a kid in a candy store with $1M in my pocket... continue...

In the last entry of this series, he goes on to talk about "What to look for in buying a stock".

Starting to get a little more precise about investing in dividend stocks with a small portfolio, we are looking today at the basics you need to consider before purchasing... continue...

This is a blog that would be well worth it for any investors to check out.

The Dividend Ninja Blog

Monday, September 10th, 2012

The Dividend Ninja Blog is another favourite of mine. He has done a number of blog entries that should help investors who are just starting out. He has also done other interesting things, like his interviews.

Dividend Payout Ratios
First up is an article on the Dividend Payout Ratios. This is an important thing to understand.

Many dividend investors go to great lengths to screen dividend stocks. If you stick with the big dividend aristocrats or other big blue chips, you will do just fine. Some of these companies have been paying dividends for over 50 to 100 years! The economic stability of a company like that, which also increases its dividends year after year, is money in the bank. This is what most dividend investors look for, and it is the basis of Dividend Growth Investing...continue...

Four Key Characteristics
Next up is an article on Four Key Characteristics To Look For In Dividend Stocks

There is a lot of talk about great dividend stocks to purchase for the long-term. But, how do you weed out the great dividend paying stocks from the hundreds of good or mediocre ones? There are a few key metrics...continue...

High Dividend Sustainable?
Dividend Ninja has a great article on whether or a high dividend is sustainable. The article is called "Is a 16.8% Dividend Sustainable?" This is an important question as lots of dividend investors chase high dividend yields.

Last week I received a couple of great questions, and I felt they were important enough to share with readers. So with permission, I've posted one of the questions today, and I will post the other next week. I also invite your discussion...continue...

DRIPs and SPPs
If you are just starting out and do not have much money, you should read this article on "Getting started with DRIPs and SPPs". This interesting thing about this article is that it is a guest post by another of my favourite bloggers, My Own Advisor.

There's do-it-yourself investing and then there's really do-it-yourself investing. I'd definitely put full dividend reinvestment plans (DRIPs) that include share purchase plans (SPPs) in the latter category. Not that full DRIPs are a difficult animal to understand...continue...

Risk Assessment
The Dividend Ninja blogger writes a great article on Asset Allocation and Risk Assessment.

The premise of this article is that "Risk Assessment" is designed by the financial industry, and does not provide any useful indicator for the individual investor. I'll argue that "Risk Assessment" has no bearing on proper Asset...continue...

Stop Loss And Limit Orders
The next article to point out is one on stop loss and limit orders.

Investing is a percentage game. The lower you can buy a stock and the higher you can sell, then the more money can be gained. But in reality finding the exact bottom or the exact top of a stock is impossible and most investors....continue...

Interviews
The Dividend Ninja has done some interesting things on his blog. One is interviewing other bloggers, including yours truly. See his interviews at on his site

Investment Book
The Dividend Ninja thinks that there are some good books for novice investors. He highly recommends Lowell Miller's The Single Best Investment: Creating Wealth with Dividend Growth Dividend Ninja says that this book is really what I think is one of the best getting-started dividend books!

This is another great blog for novice investors.

My Own Advisor Blog

Wednesday, September 12th, 2012

I think that it takes many years of reading and investing to become a competent investor. My Own Advisor thinks differently. He has recommended some good "starter" investing books that he thought I should share.

Andrew Hallam
First up is a book by Hallam which he reviews in three separate blogs. Hallam's book is called Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School

When I first heard about Millionaire Teacher, I was excited to get my hands on it. Now that I have, I couldn't imagine not owning this gem..continue...

I consider Millionaire Teacher a gem for your personal finance library because it is an excellent and an enjoyable read. Andrew goes beyond the technical...continue...

Over the last couple of weeks, in Part 1 and Part 2, I raved about Andrew Hallam's book. I have good reason to. I consider Millionaire Teacher a gem for your personal finance library...continue...

Gail Bebee
My Own Advisor also admires Gail Bebee's book called No Hype The Straight Goods on Investing Your Money

He mentions this book when asking "How many dividend stocks are enough?" See My Own Advisor's blog on this subject on buying dividend stocks. He also gives a review of this book on his books page.

Dan Bortolotti
The last book he recommends is one by Dan Bortolotti called MoneySense Guide to the Perfect Portfolio. He has a two part post on this book.

According to Dan Bortolotti from Canadian Couch Potato, there is a perfect portfolio out there for investors. Imagine a portfolio that is inexpensive to construct, has low ongoing, maintenance costs, efficient like the markets and in doing so, allows you to avoid the stock market noise. Does this sound too good ...continue...

Tired of reading technical and academic "how to" investing books? Scratching your head to figure out the financial jargon that goes with investing these days? Too many financial acronyms that sound like some foreign... continue...

If you want to buy this book, see the post on all the books My Own Advisor recommends below.

All Books Recommended
My Own Advisor has one post where he reviews all investment books he recommends. See his post on books I've really enjoyed and learned from... continue...

The Passive Income Earner Blog

Monday, September 17th, 2012

The Passive Income Earner Blog is the last one I am reviewing. He has done a number of blog entries that should help investors who are just starting out with a number of "How To" posts. This blogger says that he "has some large purchase in my TFSA/RRSP accounts but I am quite active with Computershare with small investments every month. It's slow but in 3 years, I now have over $10K invested". To learn about Computershare, read the first entry on starting with little money.

How to Start Dividend Investing with Little Money
One of the most challenging aspects of starting with dividend investing may be to not know how much money we need to get started. I started investing in mutual funds back in my 20's and I was focused on building my RRSP (Registered Retirement Savings Plan) and maximizing my contributions. That's what you were supposed to do... Well, the reality is that the benefits of RRSP when your income is low is not all that great from a tax saving perspective...continue...

How Review Your Portfolio
It's a new year and if you have not done so, it might be appropriate to review your portfolio. One powerful concept, aside from compound growth, is to balance... continue...

How to Transfer Shares to your Kids
For the longest time, I have been an income focused investor. I remember when I started working, I did not have much money to invest and I invested in mutual funds telling myself "if I can have more to invest one day, I would buy stocks" (at the time, trading was usually $30 - no $6.99 options back then). It turns out that you don't need a lot of money and you don't have to pay any fees!!! It was quite marvelous... continue...

How to Track your Dividend Investment Performance
I am a serious Quicken user and have been for years. I started using Quicken back in 1997. You read that right - even before the automatic updates from the web were possible! My Quicken file is nearly 100 megs in size. As you can probably imagine, I have a good grasp on my accounting but even after all those years, there is one view of my portfolio I can't get with all the software out there. I want to view my investment from a capital invested perspective... continue...

How To Use StockChase.com
I have written about Stock Chase in the past and how it tracks the comments from analysts and wealth managers on BNN. BNN is Canada's Business News Network with many programs where experts are invited to discuss companies either...continue...

This is another blogger worth reading by novice investors.

My Own Advisor Blog 2

Wednesday, October 3rd, 2012

My Own Advisor has been blogging for a couple of years and has a lot to share with novice investors. This is a second part for this blogger as in my original post on My Own Advisor blog I just noted the investment books he was recommending. The following are posts on this blog for novice investors.

ETFs and Indexing
My own Advisor has a couple of great posts on the benefits of Exchange Traded Funds (ETFs) and Indexing.

While definitions will vary slightly and some are more detailed than others, I like to define Exchange Traded Funds (ETFs) this way: an investment product that is like a stock, but also like a mutual fund that can be bought and sold on a stock exchange...continue...

While dividend-investing takes some considerable time and effort, investing in some ETF products in my opinion, does not. When it comes to our RRSPs and TFSAs, I'll be honest, I'm pretty lazy. That's why we hold iShares products such as XIU, XDV and XBB in...continue...

Asset Allocation and Asset Diversification
Next up are a couple of posts on Asset Allocation and Asset Diversification. The first post is called "Do You have AAAD?" The second post is called "My Asset Location, Location, Location".

It's not a bad thing if you do...if fact, it's a very good thing. No, not ADHD (Attention-Deficit Hyperactivity Disorder) or ARDS (Adult Respiratory Distress Syndrome) or AAA (American Automobile Association) - although the latter is a great membership to have. But AAAD (Asset Allocation and Asset Diversification)...continue...

Investors hear plenty about asset allocation and asset diversification but in my opinion not so much about asset location. Why is that? Is it often overlooked? I know I used to, but no longer, and here's why...continue...

On Dividend Investing
My Own Advisor has a number of interesting posts on Dividend Investing.

The first post is about buying another dull and boring stock. I've done it again. I've bought another dull and boring stock that pays dividends. To help you identify the stock, a little game of "who are they?"

• They are the largest investor-owned distribution utility in Canada.
• They have over 2 million customers.
• Their holdings include natural gas in British Columbia, electric utilities in five Canadian provinces and three Caribbean countries...continue...

Next up was a post called "My Simple Stock Selection Rule of Thumb". A few years ago, along with index investing using ETFs for my RRSPs, I feel like I saw the light and I became a DRIPper of...continue...

He continues in this vain with a post called "Canadian Dividend Stock Selection Made Easy". Yes, I think the title says it all. Contrary to what some people might have you believe, I think selecting a few quality Canadian dividend-paying stocks can be easy. Again, a few. In fact, the answer to selecting a couple of great Canadian dividend-paying stocks to start your direct ownership portfolio might be staring you right in the face, especially...continue...

The last post of this type is called "Some other reasons why I invest in dividend-paying stocks". According to Jonathon Chevreau's recent article in the Financial Post, the "magic age for the ideal retirement in Canada is 63, according to a CIBC poll out Thursday, although baby boomers are less optimistic...continue...

My Own Advisor Blog Update 2014

Tuesday, April 22, 2014

The blogger, My Own Advisor has just written a blog entry on a very interesting subject. It was on what he would tell his younger self. You will also get a chance to say what you would tell your younger self if you want to.

My Own Advisor's blog starts off "Dear Mark:

• There is no point saving for your financial future if you don't take care of your health. Your health will be your most important asset.
• Investing is for the long-term. Trading is for the short-term. You're going to have minimal success at timing the market so forget trading. Make sure you buy and hold indexed products and established companies that pay dividends instead.
• Avoid tinkering with your portfolio...."

To see the rest, click here.