Transcription
Building a million-dollar investment portfolio. It's something many Canadians won't achieve in their entire working lives. But DIY investor Belal Doich, he wants to do it within a decade, and he thinks he has the investing strategy that can get him there. So, let's hear all about it.
You're watching Inside Investing.
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Hello everyone, welcome to another edition of Inside Investing, the show that helps you level up your financial knowledge and sharpen your investing skills. Presented to you by TD Direct Investing, named Canada's best online brokerage by The Globe and Mail three straight years and counting. I'm your host, Rob Moir. We've got a fantastic conversation lined up for you here, so I just want to get right into it. Here, joining us is Belal Doich, founder of BD Investing. Belal, it's great to have you with us.
Thanks for having me. Excited for this.
Yeah, you're looking real dapper in the suit. I'm liking it. I'm liking it.
You as well. There you go. Yeah, look, us dressed up like adults here. Look, playing pretend here.
Awesome.
Well, we're adults, right?
There you go. A little bromance off the top here. Great stuff, man. Listen, I want to get right to it because you've got this ambitious investing plan, and I want to hear all about it. So, how did you conceive this incredible investing plan where you think you're going to be able to be a millionaire in just 10 years?
Well, Robert, who doesn't want to be a millionaire, right?
Sure. I mean, you know, once you, once I got into the working field and became an adult, you have money. And then I always like to save money. And then once I saw my money being saved up, I'm like, how can I grow this even more? Obviously, it won't be, it won't grow to a million by doing 9 to 5. So I started getting into investing. You know, read up some, read some books, looked into Warren Buffett, watched some YouTube videos. And then I, I got addicted to investing. You know, I bought my first stock, I received my first dividend. You know, maybe it was, it was $1 of dividends, but it still made me very happy to see that notification. But ever since then, I got addicted. And hey, I, I had this amazing goal of, hey, I want to achieve a million dollars because I want to attain financial freedom.
Awesome, man. And like, how much are you putting away a month, just out of curiosity here, and working towards that goal?
So, in a, in a regular market, it would be about $1,000 a month. $1,000 to $2,000. And then when it's really, when we come to more volatile markets, bare markets, sometimes it can go all the way to $3,000 to $5,000 a month, just because, you know, I want to buy the dip and try to invest as much as I can.
Right on. You're socking away a lot of money, man. Congrats. That's good. Now, I guess the million-dollar question, pun fully intended, of course, is, how close are you to your goal today?
So, currently, my portfolio, two weeks ago, was around, sitting at $330,000. We are back under $300,000 for obvious reasons of the market right now. But hey, we're, we're still there. $300,000. I'm very proud that I've, I've got that much in my portfolio.
Yeah, I think that's an incredible accomplishment for someone as young as you are. And you know, we're going to get into your investing strategy in just a moment here. But independent of, like, you know, what you're specifically investing in, were there any sort of, like, habits or decisions or behaviors or what have you that really helped you, you know, put that money away, get invested, and grow the portfolio the way that it has?
Of course. Um, you know, I live a very frugal and minimal lifestyle. You know, I try to save as much money as I can. I, I really believe that, you know, you need to sacrifice early on, especially when you're younger. And I made the sacrifice. You know, at the age of 16, when I first got my first job, I try to save every dollar. You know, and when I first, when I started learning about investing, it made me want to even save even more and invest more into the market. Right? So, I guess having a great, you know, savings habit. I also live at home, so that helps a lot. And because I made this decision, sure, people can laugh at me. Hey, you know, he's 28 years old, he's still living at home. But guess what? I have a $300,000 portfolio, and I'm pretty sure I'll reach that million dollars just because I'm, I'm sticking to my discipline. I don't care what people say, and I have an excellent plan when it comes to investing in the stock market.
Hey, listen, man, there's a lot of 28-year-olds who don't have a $300,000 portfolio that are living at home too. So, no shame. Toronto's an expensive place to live, too.
So, tell me about it.
Yeah, yeah, yeah. For real. Well, anyway, look, I'm excited to get into the investing strategy that you're pursuing here. But just a quick note to our audience here, if you want to get in on the conversation, you can do that. One of the best things about this show is that we have a live Q&A for that. You can ask your questions to Belal later in the show. So, if you want to get in on the conversation, you can join us. If you're joining us on WebBroker, you can use the chat box that's right there in-platform. You can fire the question away to us. If you're joining us on our broadcast platform powered by ON24, you can use the questions and comments box. It should be on the right side of your screen. And if you're joining us on our YouTube live stream, you can click the link in the description, and it's going to take you over to the broadcast platform, and then you can join the conversation that way.
I also just want to have a quick disclaimer, too, for folks out there. We're going to be discussing Belal's investing strategy and his portfolio, and that's based on his particular financial goals, circumstances, what have you. Take this as food for thought for your own investing journey rather than sort of explicit financial advice. But with that said, Belal, let's get into it here. Tell me, give me the overview, the bird's-eye view of this investing strategy that you're pursuing.
Well, well, the bird's-eye view is, like, I have a specific portfolio allocation goal. So, I like to have 60% of my, of my portfolio allocation into growth stocks, like 20% into index ETFs. And I do plan on investing more into ETFs in the long term and increasing the allocation. And then, and then I also have 10% allocated to dividend stocks. You know, just a great foundation to have. Dividend stocks are usually solid companies, blue-chip companies. And then a 10% allocation into crypto or speculation stocks. Now, mind you, I did have my growth, I did have my speculation very high early on, especially when Bitcoin was, um, very low. But I have taken a lot of profits along the way because, remember, these are speculation bets. You don't want to, you don't want to, you need to rebalance your portfolio. You don't want to make sure your speculation becomes 50% of your portfolio as the prices rise. And I'm, I'm pretty grateful that I did take profits along the way because we are seeing, you know, a lot of speculation stocks and crypto, they have fallen from the top. So, I'm pretty glad I made that decision. And I plan to just keep my speculative stocks at 10%. And with the 60% in growth stocks, I am getting kind of hit right now. However, I have to emphasize that I'm confident in what I own. And I always say, only buy stocks and companies that you know like the back of your hand.
Mhm. Yeah, words to live by, for sure, here. So, give me the breakdown, because what I find interesting about your strategy is that you're a stock picker, but you're also an index investor to some extent. So, what's, like, the breakdown where you're allocating the money in one basket, another basket?
Well, uh, see, the thing is, because my portfolio started off small. So, when I first, when I first started investing, I think I had maybe a $10,000 portfolio. Obviously, I realized along the way that, hey, I need some more growth. So, when I first started investing, it was mostly dividend stocks. And that was because, you know, I followed the steps of Warren Buffett. So, like, like I mentioned earlier, I got addicted to getting dividends. Now, you're not going to get rich off of collecting a dollar dividends every month or quarterly, right? So, that's when I started backtracking. I'm like, okay, sure, I got into investing, but how do I grow this portfolio? So, I started getting into getting more into growth stocks, like, you know, you have the Magnificent Seven and technology sector. So, I started buying, especially during the 2020, uh, pandemic crash. That's when I started investing a lot of money and capitalizing on buying the dip strategy, meaning whenever stocks go down, I invest more and try to buy stocks at a cheaper price or valuation. So, when I, when I decided to buy the dip, this allowed me to grow my portfolio immensely. So, from, I started off at $10,000, then, then two years later, I actually, no, I recently just hit $100,000 last year. And because we're following the uptrend in the bull market, my portfolio was 60% growth stocks, as I said, which was mostly tech stocks. It was very easy for me to, with the power of compounding, it was very easy for me to go from $100,000 to $300,000. $300,000 thanks to the bull market and the compounding effect. Now, words to live by is something Charlie Munger said, which is the first $100,000 is a right, but I don't want to swear, but the first $100,000 is hard. But once you get that first $100,000, the compounding effect is beautiful, and I've seen that in my portfolio. And anyone I followed me on social media on Instagram saw my portfolio grow from $100,000 to $300,000. It's, it's not magic, it's just the compounding effect.
Yeah, I mean, it, it really takes on a life of its own once you really start rolling down the hill and you get over that initial hump of really slow growth on small amounts. But yeah, when it gets rolling, it's, they call it the eighth wonder of the world, right?
It is.
Yeah, yeah, yeah. For real. So, okay, so that's interesting. And then one of the other things that I want to pick, pick on to is you said that as your portfolio gets larger, you want to kind of drift a little bit more towards index funds and diversified investments. Why is that?
Well, you know what? Once your portfolio starts growing, it's kind of harder to manage all that money, too. I mean, currently, I have 28 stocks, 28 positions, actually, say. So, I have about 24 stocks and four ETFs in my portfolio. And it's getting kind of hard to track all the earnings reports. Um, it's, sometimes the stock falls down 10% and I don't even realize it because I'm not even paying attention to it. And then only when I check my portfolio, I realize that, hey, this stock is underperforming my other assets. Now, because my portfolio has grown so much, I kind of want to have a good night's sleep. You know, so ETFs make that a perfect place to just kind of park your money and not really lose your sleep. Because, sure, a stock can go down 10%, but I'm not worried that the world's ending if the S&P falls down 1% because it's, it's, it's better than a stock going down 10% and seeing like $10,000, $20,000 gone in a single day, especially in the current market we're in.
Yeah, it can, it can hurt. Like, everybody likes to talk about, like, on paper, you know, I'm a long-term investor, I look through the noise. But when it's getting really noisy in your face, it can be hard to, you know, put that stuff aside. For sure. I mean, a couple years ago, when, when I saw stocks going down, I used to worry about losing $100. And now, you know, I'm losing like $10,000 in a couple days. And that's because I'm taking so much risk in the portfolio. But I am confident because of the stocks I own. But like I said, it, it is hard. It's not, some people can say, hey, it's easy, I'm not worried about losing $10,000 in a week. I can tell you, it's not easy to see. Right. So, stock picking obviously still a really big part of what you're doing here. You said that, you know, you have a very high-risk tolerance here. This is a high-risk, high-reward portfolio, right? Um, what gives you the confidence to pick one stock over another? Are there certain criteria that you look for that give you the confidence that this is one that I want to invest in long term?
I mean, moat is always important. The story of the company is always great. It's very easy to kind of pick, like, you know, popular stocks like Apple and Google. And one of the main reasons why it's easy for me to pick these stocks is because it's every day, like, we use them every day. I use my iPhone every day. I use Google every day. I'm starting to use ChatGPT every day, right? So, when it comes to picking stocks, these aren't that hard. But now, when you're picking, like, other individual stocks, there are certain metrics I look for. And just to keep it simple, I like to, the most important part, the most important thing about a company is it needs to make money. People forget, like, we're investing in businesses, and we're investing in companies. And the most important, a great business makes money. If you're buying a stock that's not making any money, and you're seeing that quarter after quarter where it's just, uh, you're just losing money, that is not a great company or a great business. So, I have to emphasize that if people are investing and looking for companies, make sure the revenue is going up, and make sure there's, it's profitable at every quarter. And yes, looking at earnings is important if you are a stock picker. So, you like to see that consistent march upward of earnings, revenue. I know you've talked about net margin, uh, which is basically the money left over.
Yeah, profit margin.
Profit margin. That's important. One of the things in our, when we were chatting off-screen, you mentioned low debt. Why is that so important, and maybe really important at a time like today?
Well, there is a, a certain metric everyone likes to look at, which is the, the debt to the debt versus liability. I mean, sorry, the cash to liabilities, and that is like the debt ratio. So, a healthy debt ratio is around one. And the reason why, in this market, you want to find companies that have, uh, more cash versus liabilities, because we, the interest rates are so high, and because the companies need to pay back their interest, because the only way a company can grow is they need to borrow money and then reinvest it back into the company. Now, if you are paying back loans and you're paying back loans at a high interest rate of five to 7% every quarter, you're, you're losing money. And guess what? It's going to affect your, your, your net profit margins when it's earnings time. So, in this market, I chose to find companies that had very low, very low debt and a high cash pile. So, in case if there were any downturns, they could always dig into their cash pile and pay off any debt first before they try to dilute shareholders or, you know, try to print more shares. That was the case. It's just easier to kind of get along when the going gets tough if you have low debt, right?
Well, it's also, if you're in a high, high interest environment, you're not worried about a company going bankrupt, right? One of the first things, uh, a company's going to go bankrupt is they're going to have to pay back its debt first, right? So, if a company doesn't have a lot of debt, it's very hard for it to go bankrupt, right? Some people get trapped. It's very hard for a company to go bankrupt if they have low debt. Now, as a growth investor, I want to ask you about this price-to-earnings ratios and stuff like that. This is, you know, one of the common metrics that we see used. But with growth stocks, sometimes you see these seemingly absurd numbers, or it's so high. Like, how do you think about price-to-earnings or, you know, forward price-to-earnings and stuff like that? How does that factor into your decision-making?
You know, um, a lot of beginner investors, when we first start, you know, gain to the, the stock picking game, the first thing we look at is valuation. And everyone always falls for this whole PE thing. And it is, it is good when you're trying to evaluate, um, blue-chip companies, you know, like you have your Costco and your TD Bank stock and whatnot. So, PE does help in that sense. But when you're looking at growth stocks, it's very hard to, to evaluate using PE because sometimes, like you said, you do have PE ratios of 100, but yet the stock keeps going up. So, what the way I've managed to maneuver in this market is I try to look at the sector, the average PE in the sector. So, I'll give you an example. If there's a company like an Nvidia, and its PE is sitting around 46 right now, and let's say I wanted another semiconductor stock, and maybe I'll give you an example, maybe something like AMD, if its PE is around the same, like 30, 40, and I know it's a healthy, balanced, or healthy sector PE, right? So, whenever I'm looking for a growth stock, I look for the same PE with other common stocks.
Mhm. Okay. So, you want to avoid like outliers for the wrong reason, type of thing?
As long as it's around the same median average, then I, I feel comfortable investing in that stock.
Okay. What about, you know, going back to some of those criteria that you care about? Do you ever make exceptions to your rules? What would, what would lead you to do that, if that's something that you'll ever do?
If the story is really great, and if the management team is excellent, especially if you have like a superstar CEO, then sometimes I will make that, I will kind of forget my metrics in a sense. But I wouldn't fully invest in a stock just because the CEO is amazing and the valuations are complete garbage or it's losing money. But a, a great, excellent management team and a great story does have a huge role to play, especially, especially when it comes to like speculative positions or speculative stocks. Then the story is very important because majority of the time, a speculative company or, or, like, you know, like a small-cap company won't really have, won't really be making too much money. Instead, it'll be losing money because the first couple years, they'll be borrowing a lot of money to reinvest into the, the story or the company itself, right?
Yeah. One of the things too that's interesting about your strategy that we, we were talking about off camera, is that you kind of distinguish between investing opportunities in some of these growth stocks and trading opportunities. You like to trade some of them as well. How do you differentiate between the two? What tells you that one is going to be a good investing opportunity versus a trading opportunity, potentially?
Well, if I don't really believe in the company long term, you know, and like, I'll give you an example, like sometimes when we do have these market crashes, or a company decides to, you know, dump 20% after earnings, and it is a, a great company, maybe in the short term, at least to my knowledge. And a, a certain trade I did was with PayPal and Alibaba stock. So, Alibaba was a Chinese company. Chinese stocks were getting obliterated. However, the valuations were great. Alibaba is huge in China, right? And I know on stock was very cheap at that time. So, I decided to, obviously, invest in that stock. But I knew I didn't know enough for enough of the company to hold long term. I obviously don't live in China, obviously don't use many Alibaba companies, right? But I do know that there's a lot of great stories, people in China trying to talk, you know, talk a big game about Alibaba. So, I saw an opportunity. I bought that stock. It went up. I think I held it for maybe a year and a half. And then when I was comfortable, and I like to kind of take profits around 40%, I think that's a great, like, 20 to 40%. You can't go wrong with it, you know? So, that's kind of where I choose to take profits. So, I decided to sell it afterwards. And that's only because I didn't see a long-term vision with that company. And sometimes it's okay to admit that you don't know enough about the company. And hey, if you make money, then that's fine, right?
So, you're looking to, like, ride momentum sometimes, if, if you see it in the market there, or just, just riding an opportunity, right? Even PayPal, like, I use PayPal often. But do I think there's going to be, there's so much other competition? You have Stripe, right? You have Square, you have all these other companies that are very competitive with PayPal. But did I believe that PayPal could survive the next two, three years? So, yeah, I definitely think they will. So, that's why I decided to buy PayPal when it was cheap as well.
Okay. So, considering that, like, okay, um, you know, you're talking a lot about all these things that you do. I know you're a really passionate researcher of stocks and stuff like that. Just give us a sense of, like, how much time and effort are you putting into not only, like, looking for new investments, but also just staying on top of the ones that have?
Man, you know, this investing game, you really had to keep on top of it. And I never thought I'd be looking through financial reports and looking at news 24/7, especially when it comes to looking for stocks. What I like to tend to do is keep a watch list. Right? If I hear about a great company, or if I know there's, there's a company that I like, but the price is too high, I'll just keep it on my watch list. And I'll, I'll tend to do research on that company over the, like, you know, over a period of days, weeks, months. There's some stocks that I haven't, I've been researching for a year, but I haven't pulled the trigger because maybe it's too expensive, or I'm waiting for a specific price target. And then sometimes I could immediately go into a stock, um, within a matter of, of weeks or days, and then do the research afterwards because I see it's a great opportunity. Now, sometimes that might not be the best thing to do, and I have learned my lesson from that. So, that's why I choose to just keep stocks on my watch list, do my research over time, and when the opportunity does come, I don't need to scramble to see why this company is good. I already know the company is good, and then I can, you know, pull that trigger and buy that stock in company.
Yeah, speaking of pulling the trigger, uh, one of the things I find really interesting about your strategy that we were talking about before was this idea of strategic dollar-cost averaging. Now, I think some people might be familiar with dollar-cost averaging, but what is strategic dollar-cost averaging? How are you using that?
So, yeah, so strategic dollar-cost averaging, um, I kind of developed this kind of DCA principle. So, I love the whole DCA principle, which is, you know, you, you blindly buy weekly, no matter what. And that works excellently with index ETFs. But when it comes to individual stocks, right, you can't blindly buy a stock, you know, every month or every week because, think, you know, news and factors and earnings change the price of the company. So, often. So, I'll give you an example. If I like a certain stock, and what I will do is I'll make that, I'll make that first initial, um, plan that I'm going to put $5,000 into this stock. Now, I don't want to invest a full $5,000 because I might be uncertain, maybe the stock price is too high, um, maybe the macroeconomics in the future don't look too good. But I do really love that company. So, how do I kind of, you know, relieve that itch I get to buy that stock? So, I'll make that first initial investment of $1,000. Okay? And then I'll wait either a month or a week. And if the price goes down, maybe 10% from there, I'll make that other initial investment of $1,000. And maybe if the price goes up another 5%, I'll put maybe another $500. So, so this is a strategic, you know, a more strategic way of dollar-cost averaging because we also have sometimes there's a bad earnings report, and the stock could fall down 20%, and boom, I just found a great opportunity to put another $1,000. And then we also have like technical analysis. Maybe if I see a bearish pattern, a head and shoulders pattern, or if I see a double top pattern. But sometimes technical patterns don't always work out, right? But let's say I do see it on the chart, then I could kind of save some money just in case I need to make that strategic purchase in the future when it does play out.
Mhm. So, you're kind of trying to combine a little bit of like buying the dip with also dollar-cost averaging there, okay?
Well, the thing is, I don't want to put $5,000 for at, like, let's say, what if I bought the top, right? Sure. What if I buy an all-time high? All of a sudden, I buy it at $5,000, and then boom, something bad happens, and then the stock falls down 20%. We're kind of seeing that in the market right now, right? So, yeah, it's, you're kind of almost protecting yourself.
Okay. Now, we do have a lot to get to, so I do want to move on. But one thing I want to ask about before we do is this, uh, obviously, volatility that we're seeing in the market right now, particularly the US markets. There's a lot of uncertainty out there. There's a lot of, quite frankly, like fear, panic, and stuff like that. Does any of this, particularly as a growth investor who, you know, like you were saying, like, some of the stocks have gone, uh, down like a fair bit recently, does this give you pause at all? Or is there anything that you do to adjust your strategy in in conditions like this?
You know, from learning from past crashes, I did invest. I did, I started investing during 2017, but I didn't start picking stocks till 2020. And I survived that 2020 bare market, and then the 2022 bare market. And one of the, something I can advise is, don't rush in to buy the dip immediately. Sometimes you need to kind of see where the market's going. Obviously, when you have days where, you know, the index falls 3%, 4%, or your favorite stock falls, you know, 10%, 15%, those are necessarily great buy the dip opportunities. But yeah, majority of time, I am taking a pause just to see how the market reacts. Because right now, the market is not falling based on overvaluation. It's falling because we have, you know, a, a new president with new, you know, we have the terrorists and we have all these other, uh, new policies going into effect. So, the market's kind of in a wait-and-see situation. They want to see what the president is going to do. They want to see what the world is going to do. We have, we still have ongoing wars going across the world. So, when you have all these, you know, walls of worries, it's sometimes the, sometimes the best, the best strategy is to just wait and see what happens. You don't need to immediately rush and and buy the dip. But when you do see, you know, amazing quality stocks that are down 20%, I do see them as buying opportunities, especially for the long term. So, yeah, it really depends.
Yeah, I mean, like, if you can, you know, time it nicely like that, or or benefit from, you know, those, those market drops and then you see it really rebound, that's where you can get really powerful returns, right? And carry your portfolio to those, those highs that you've seen already. I mean, like, I, I know so many traders and so many investors, and no one's ever timed the bottom. And it's very hard to do. It's very hard to predict a market crash. It's very hard to predict, like, the top of the market. So, sometimes it's best to just, just do what you're doing and follow your plan and ignore the noise.
All right. Ignore the noise. Uh, just a quick note to our audience here. If you're enjoying the show right now, make sure you check out TD Direct Investing on YouTube, on Facebook, and we're also, uh, on Instagram as well. You can see there's QR codes on the screen here that you can check out. We've got a lot of educational content that's designed to level up your investing game here. So, check that out. And you might get some sneak peeks at upcoming episodes of Inside Investing as well. So, make sure to check that out.
All right, Belal, I want to move on to another segment we have here. We like to call it Hits and Misses. Okay? And this is where we're going to ask you some of the lessons that you've learned from some of the biggest flops and successes that you've had in your investing journey. And we've all had a bunch here, I'm sure. So, why don't we start on a low note? All right. Tell me about one of the worst investing decisions you've ever made and what you learned from it.
One of the worst decisions I've probably made was following, um, random stock picks. Like, you know, we had Reddit, we have Twitter, and then we also have YouTube. And one of the biggest mistakes I made was trying putting too much trust into influencers. And I myself am an influencer now, so that's why I try to be as transparent as possible. So, I would say, do not try to blindly follow anyone and always do your own research. And it, it comes back. Not that I'm an influencer, like I, like I do, you know, share my portfolio, um, on, on, on an app called Blossom, which is an amazing app, by the way. You get to see my stock picks, portfolio, for, for free. And it kind of protects, you know, just the, just regular people when it comes to blindly following, you know, influencers. Because there came a time where I bought a stock based on what an influencer said, and then when the stock fell down, we were, me and other people were questioning the influencer, hey, did you, what's happening with the stock? Are you still buying? And he's like, oh, I already sold it for 40% profit. We're like, what? You didn't tell us that? So, because of that, I didn't want, you know, my audience to kind of fall for that. And I always tell people, you, you know, you ask a thousand questions before you buy an iPhone or a car, but you don't ask a single question before you buy a stock, or you don't do any research. So, always do your own, you know, always do research. At least do research 10 times if you have to. Ask a thousand questions. You have ChatGPT now, you have Google, there's so many, so many, um, tools you can use to research a stock, you know what I mean?
Yeah, it's, it's maybe this is anecdotal, but always the, uh, stock tips from friends and fam tends not to work out for whatever reason. Anyway, uh, best decision that you've made in your investing journey, and what you learned from it?
Best decision I ever made was staying at home and saving my money. 'Cause it helped me, you know, really, really put my money to work. Really helped me save my money. I obviously don't, I'm not a complete, you know, uh, like, I'm not, I'm not a complete leech. Like, I'm not living off my parents. I'm obviously helping at home, you know, I take care of my parents, you know, always try to help your parents and try to help with the groceries. It's tough times. But I am saving so much more money versus if I, you know, moved out, paying rent, condo living on my own. So, that was probably the best decision I made. And I continue to, I'm going to stay out, stay at home until I reach a certain amount of money, or until I get married, right?
What I'm hearing is, thank you, Mom and Dad, right there.
There you go. Thanks, Mom and Dad.
Yeah, they do everything for us. Um, okay, awesome. That's great. Uh, another segment that I want to, uh, throw you away here. We like to call it Hot Takes. Okay? We've heard a lot of interesting perspectives on past episodes here, and I want to bounce an idea off of you here. This one is from Nick Muli, and he was from a blog, Dollars and Data. It's a great blog, and he talked about how the way that we think about how we think about market valuations might need to change. So, let's have a listen to what he has to say.
I know people talk about valuations, PEs are so high, higher than average. But like, this, the composition of the US stock market, at least in the US, it's changed so much. Like, now we have tech companies now, which are far more profitable, and it's very fair to say that maybe these companies deserve higher multiples. So, on average, the overall multiple of the market should be higher, and we should be paying more for these earnings, right? For the same percentage of earnings, right? So, I think that's a counter, which I think is very fair. So, like, you know, valuation is not valuation, so to speak.
So, what do you think about that idea that the market is structurally, you know, higher with the different types of makeup of companies that we have now, and the valuations are structurally higher? Is that something that you buy, or you're not sold?
I mean, I do agree. The market has been overvalued for, for, for a for a while now. And especially when we look at, like, the, the Warren Buffett index, and the CAPE index, and the Shiller index, there's so many signs that are saying that the market is overvalued. But guess what? The market has been overvalued since 2020, yet the market has still gone up. So, I do kind of agree to the sense that, um, yeah, the market is overvalued. However, times are changing. You know, we have inflation at the real inflation at all-time highs. There's millions of trillions of dollars that have been printed. So, I feel like it does kind of need to be, it does kind of need to be re-evaluated, like, based on how we evaluate the whole market. And but I don't think investors should be scared and stop investing. So, yeah, I'm still going to continue to invest. However, I do think the markets are going to be a lot more volatile. So, we're, we're not going to see, I don't think we're going to see like long bull markets. We're going to see, we're going to see more volatility in the market going, going forward.
Yeah, I, I think we've already started to experience that for sure. And I mean, like, you know, when it comes to, you know, the market always going up, I mean, certainly has recovered in the past. We don't know what's going to happen in the future. But, you know, with that long-term time frame, I always like to think of this guy, Bob, the world's worst market timer, where it shows like, even if you invested these lump sums right before a market crash, if you hung on for a long time, you would have done all right. You would have become like a multi-millionaire over like 40, 50 years or something like that. So, it kind of goes to show that, you know, the long-term perspective is important. I mean, if anyone's worried, there's always great words to live by, which is, "in doubt, zoom out." Right?
Sure. I, I like that one too. Um, okay, Belal, we've, uh, you know, heard a lot of what you've had to say here about, like, investing criteria and stuff like that. I want to throw it over to my colleague, Caitlyn Cormier, because she's going to show us how in WebBroker, you can get started researching growth stocks. So, let's go ahead and click on research and stocks.
Once we arrive at this page, we're going to click on fundamentals. And here, we start out by seeing information with industry comparison. So, what we're seeing is the company that we've researched, their per share data, as well as the industry average, and then a little bit of a, a range of where this company falls within the industry. You'll notice that there's all different information here, all different figures that you can go ahead and look through to get a little bit more detail on a particular company versus the industry. Next, you can click on peer comparison. And this is going to be similar to industry comparison, but it is actually going to show you both the industry and the direct competitors of the company, the different companies we would consider kind of their peers, and be able to compare numbers kind of side by side of this particular company, as well as its peers. Finally, we have financial statements. So, this is where you're going to see a version of the company's income statement, balance sheet, and cash flow statement. There's both the annualized and interim versions. And if you scroll down, you will see that we can do a year-over-year comparison of different metrics of the company, whether it's revenue or operating income or net income. You can actually filter through these different statements to understand maybe some different trends that you're seeing within the company. So, you can go into cash flow statement, as well as balance sheet, and same sort of idea. You're just going to see that year-over-year comparison and maybe look for some specific trends. Another great tool we have is under research and tools, we're going to click on screeners. And this tool is actually going to take all of the stocks available on the market and filter them down based on criteria you're looking for. So, I'm going to start by clicking screening. Once I get here, I can go ahead and keep whatever the predetermined options are here, or I can clear them. But then, what I'm going to do is I'm going to add what it is I'm specifically looking for in a company. So, you'll notice on the right, I've got lots of fundamental choices here, so debt, dividends, growth and earnings, financials, valuation. So, I can go ahead and choose any of these criteria and put a range in for what it is I'm looking for from any. So, let's just say we're looking for earnings per share growth. So, we can go ahead and put, maybe we're looking for at least kind of a minimum amount of positive growth. And next, let's go ahead and put in, uh, maybe revenue growth. Same sort of idea. Let's get into again, we can kind of, let's say we're looking for a positive number there. And finally, let's add one more. Let's do the five-year historical earnings per share growth as well. And again, I'm going to look for at least a bit of a positive number there. So, the number of matches has gone down to 346. Still a lot, but at least a little bit more manageable than what we first started out with. So, what we're going to see here is the number of companies that match that specific criteria. We're going to see our criteria that we've added towards the left-hand side here, and then the criteria that was already there towards the right. We can rearrange the results based on any of this criteria that we'd like. And if we click on the individual companies, we can see a bit more information about the company and as well why they were ranked the way they were out of these results. For example, for this company, it is ranked number one out of all of the results, and the reason why is because of these particular results.
All right, thanks so much for that, Caitlyn. Much appreciated. Belal, we're going to have to leave the interview portion of our conversation there, but we're not done yet, okay? We're going to open the floor and see what our viewers want to know more about. So, you ready to take some viewer questions? Let's hear them.
All right, let's see what we got. All right, first one up here. This one is coming from Aram, and Aram wants to know, how would I invest my first $1,000? And I guess maybe a way to think about that is, how would you invest your $1,000 as well?
So, if I had to start all over again and had to invest my $1,000, I would probably put 60% of that money into an index ETF like the S&P 500. Um, some, some great ones are, you know, VFV. There's also, if you want to invest in the NASDAQ, which is XQQ. So, just your first, maybe 60%, your first $600, put that into ETFs. And then maybe with the other 40%, you could, you know, choose individual stocks. You know, pick great blue-chip companies, great Canadian large-cap companies. And that's probably how I'd first invest my $1,000.
Right. So, you mentioned a couple tickers there. There's a lot of tickers, obviously, that do like similar types of things. But, uh, it sounds like you're looking for like an index type of approach, just to kind of get your feet under you, kind of thing, is what I'm hearing.
Well, that's, S&P 500 is the top 500 US companies, right? So, you can't really go wrong with picking, you know, betting your money on on America. As well as you can also pick, like, if you, if you like to buy Canadian stocks, you can also buy tickers like XIC, which is the top 60 TSX large-cap companies.
Okay. Uh, and just a programming note for our audience here quickly. Uh, talking about the S&P 500, Belal, in a couple weeks, we're going to have an episode talking about, is this idea of VFV and chill? In other words, just, index investing into the S&P 500 and just, you know, just regularly investing in it. Is that a good idea or not? It's a popular Reddit, uh, favorite of their strategy, but we're going to pick into that a little bit more and see if that's a good strategy. Um, okay, let's move this train along, though, right now. We have a question coming in from Harmon, and Harmon wants to know, how can we invest in the US stock market and US stocks as a Canadian? So, what are the options there?
I mean, you can buy individual US companies, right? For there's also, uh, CAD-hedged. We're seeing a lot of CAD-hedged stocks as well. So, you can buy, you know, you can buy your Amazon, you can buy your Apple, your Google's in Canadian dollars. And we are seeing these instruments being available to us as Canadians. So, if you don't want to pay USD and you don't want to go through the whole FX fees, you can look into Canadian-hedged American stocks.
Okay. What are, just curious, like, what are your thoughts on hedged versus unhedged? Uh, I think some people kind of stress about this decision. What do you think?
I'm kind of happy I, I, I, I held some US USD stocks just because the US dollar is so strong right now, and we're seeing our Canadian dollar a little bit weak. But I do like to have a good balance between them. I like to hold at least 50% in just US dollars, and then the other ones in CAD-hedged. I'm, I'm, I'm not, I'm not against it. It, it does help you, it does help save with fees. And we are seeing a lot of the major brokerages starting to lower their FX fees. So, it's, it's great to see.
Right on. Uh, okay, let's keep it moving here. We got one from Shashant, and apologies if I mispronounced that, uh, but they want to know, can we just put, you know, X amount of money every month in an index fund and not worry about it? Is that a good strategy for retirement, they're wondering?
If I was to start all over again, and with all the knowledge, I think like I like I explained before, I would just, and you said ETF and chill, you know, one of the, one of the my favorite strategies, which I do, and I have it on automatic, which I automated my investments, is I, you know, buy index ETFs like VFV, buy weekly.
And I've been doing it for the last two years, $100, $300 bi-weekly into index ETFs, and I haven't looked at it. I haven't touched, touched it, and it's up 30%. So I'm not complaining at all. Okay, but I'm curious to hear you say that though, because, you know, you're, you're somebody who admitted, you know, it was growth stocks that powered your portfolio to these like new highs, right, and got you to that $300,000 mark. And yet, here you are saying, no, you know, if I could go back in time, I'd probably just like, you know, index it. Why? Why? Like, that's such an interesting thing to me.
Well, if I had, now, if I had the amount of money I had, which is $300,000, then sure, I would definitely put that all into index ETFs. But if I was starting off with just $110,000 and I didn't want to look into the stock market, I didn't want to pay attention to news, and I wanted to have eight hours of sleep every night, then I would definitely just, you know, ETF and chill. Obviously, it might take much longer, but, but for someone that doesn't care too much to look at news, doesn't care too much to stock pick, I think that's a perfect, perfect strategy to have.
Right, right. You're, you're benefiting from the diversification of these investments, so you don't have to be so nitty-gritty in the research. Not to say that you do no research, obviously, you want to, you know, maintain your portfolio allocation and, and watch it and stuff like that, but it, it's not quite as intensive as, uh, juggling like, you know, a 30-stock portfolio or something like that. I mean, obviously, if you want the growth, there, there's a lot of homework you need to do, there's a lot of background work you need to do in the background, right? Obviously, there's been times where maybe in a year, I've spent over like 2,000 hours just spending time on researching stocks and making sure I picked the right amount of stocks. Or if you don't want to spend 2,000 hours researching, you can just ETF and chill, right?
On, okay, so there's options out there for investors, is what, is what I'm hearing here. Uh, okay, so, uh, Puja has a question, and she wants to know, what's the best way to keep up with the financial results, conference calls, all the other company data, and stock research when you have a lot of stocks in your portfolio?
Try to decrease the amount of stocks you have in your portfolio, you know. Um, when you're, when you have, I know I've seen some people that have like 50 to 100 stocks. There's no need for that. You're, you're too overly diversified sometimes. It's like, if I personally, if I had to, if I had to go back, and I'm currently working on this, I'm trying to decrease my portfolio to 15 to 20 stocks. I currently have about 28. So the less amount of stocks you have, the easier it is to follow with earnings and financials.
So, but where do you like to go to get this information? Where do you find is, is useful to stay on top of everything that you would need to?
Nowadays, like social media, you have X, you have Blossom, you know, you have all these other outlets. Sometimes, um, even Yahoo Finance and all these other news outlets report earnings and financials. It's very easy to accessible nowadays. You can even, you can even just ask ChatGPT, can you summarize, you know, Amazon's earnings call for me? And it'll do the job for you.
Yeah, shameless plug, TD Direct Investing, by the way, does have a lot of these research tools available too, if you want to dig into the numbers there, as Caitlyn was showing us in that demo. Uh, okay, Holly's got a question here. What's the best way to analyze a stock before investing, and how long should I spend analyzing a stock?
So this is actually, you know, kind of building on what we're just talking about here. How long would you say you generally spend researching a stock before you're comfortable to say, yeah, I'm going to, I'm going to make an investment decision right now? And, uh, you know, what approach do you like to take to analyze it?
You know, sometimes it could take a matter of days, weeks. I like to, I like to research a stock for at least like a month before I, I pull that, pull that trigger. Unless, of course, if I know that company already, then there's no need to do research. But if it's a completely brand new stock, I wouldn't jump, jump on, jump on right away just because you heard like a whisper or a rumor. So I like to spend at least a month researching it. And like I said, I like to look at profit margins, revenue growth, you know, debt to, debt to, uh, equity ratio and whatnot. Sorry, debt to cash, cash ratio. Make sure it doesn't have too much debt. So there is a lot of factors that go into this. I do have a checklist, like there's at least 20 metrics I, I like to look at. And I do make videos on this on Instagram and YouTube. So definitely check it out.
Yeah, if you're joining us in our, uh, broadcast platform, by the way, there are links to all of BLW's socials in the resources section there, so you can check those out if you want to learn more about, uh, the videos that he produces and the content he does there. Um, okay, let's, uh, move along to our next question here. Um, I see one coming from Madus. How could I make a living off of dividends? I read a couple that invested 80% of their money into dividends for 10 years, you know, which is a high percentage. What's your take on that dividend investing? You used to be a dividend investor.
Actually, I, yes, I was. Dividends are great. You know, I see, I see a huge, um, um, community of dividend investors, especially in the high, high dividend yields. Like you have, have the covered call stocks, and they're, they're getting very popular nowadays, especially the covered call ETFs. And some of these ETFs pay about, you know, 10 to 20% dividends. And we are seeing a lot of people, you know, earning income from this. However, people should realize, you do need a large portfolio to earn these dividends. You're not going to get rich off like investing $1,000 into a dividend stock and like I said, collecting $10 of dividends every quarter. You are going to need a large portfolio. So I would first focus on increasing your portfolio size before you dwell into dividend stocks. And also, make sure you don't fall into these covered call ETF traps. Some, like they are good tools, but you need to do your research. You need to understand why they are made. Most people that invest in these, you know, high income dividend stocks, they are retirees.
Right. Yeah. I mean, those are investors that prioritize income today versus growth tomorrow. I think some people do get attracted by the, the covered call high yields, but it depends on what your investing goal is, right? Like, it's not a fit for everybody.
Uh, I totally hear what you're saying there. Uh, I think we may be at time for one or two more questions. Ahmed has a question here and wants to know, what would cause you to sell a stock? Because, you know, your, your investment plan here, you want to get this million dollars within 10 years. That's, that's a lot of time, but it's not that much time, right? So what would cause you to sell a stock?
You know, that's, that's probably one of the hardest things to do, which is sell a stock. Because we all know it's very easy to buy, it's hard to sell. And most people tend to sell when a stock goes down, which is a very bad thing to do, right? You don't want to sell a stock based on emotions. So majority of time when I sell a stock, it's either because I've reached, you know, a certain profit margin. And like I said, I like to take profit, profits between 20 to 40%. Some stocks, if I'm confident in the story, if the story hasn't changed, if the revenue growth hasn't changed, if the net margin hasn't changed, if the comp, if the company's continuously beating earnings, there's no need for me to sell. However, if I do see that, you know, it's starting to, it's starting to, you know, the revenue growth is slowing, it's starting to miss a couple earnings, and hey, maybe I'm going to start, start evaluating the stock more, do some research, and then maybe I'll, I'll sell, sell that stock. So two things: either it's, it's reached my price target, I'll sell the stock. You know, it's always good to take, it's always good to take profits. You know, you're never going to go broke, you're never going to go broke taking profits. Or number two, the story has changed, or it's slowing, it's starting to see some, you know, faults in the, in the, in the balance sheet.
Yeah, something's changing about the investment thesis, right? Uh, okay, I think that's all the time we're going to have for questions, but thank you for fielding those from the audience. That was fantastic stuff. Wrap fire there, I loved it. Good stuff. But before we go, though, any sort of final thoughts you want to leave with our viewers?
Well, one thing I should say is, given the market we're in right now, I see there's a lot of fear. And I just want to make, I just want to tell investors, the best time to invest is when no one wants to invest. When you see extreme fear in the market, that's probably the best time to invest. You know, just on, on Monday, when we saw that, you know, when we saw the markets fall, it was very hard for me to even buy the dip, I won't lie to you. But because I, I knew it was hard to buy the dip, I decided to, you know, invest in the stock because I knew it was a great opportunity. And I'm not saying that this is the bottom, maybe the markets keep falling, but it shouldn't stop investors from, you know, being scared of the market. You got to kind of ask yourself a question, when stocks were at all-time highs, you didn't, you didn't think twice before you bought stocks. And I see this first time because I get so many questions, especially during all-time highs, which kind of scares me because it kind of gives me signs of the top. But now that, now that stocks are falling, I don't get any of these questions. Should I buy the stock? I buy that stock. So it should tell you, why are, why do you only want to buy stocks when it's at all-time highs? Why are you not buying when stocks are down? Like, you know, you have boxing day sales and everyone's lining up. Why isn't it the same when it comes to stocks? So that's one thing I, that's that's something I'll leave with with the audience.
That's it. It's a good message there. It's like, tune out the noise, think about the big picture, and keep that investment plan in mind. And hey, if you can get something on sale, why not? Uh, really appreciate you joining, below. Great conversation with you there. And thank you to everybody in the audience who joined as well. Great questions that you tuned in there. Uh, we have, uh, this show airing every single week, obviously Thursdays at 2 p.m. Eastern. Make sure you check out next week's episode. We have Rennie the Resource coming on, and she's going to share how she built up a six-figure portfolio. So make sure you tune in to that one, and she'll share some of the lessons there. For now, though, thank you so much for tuning in. Really appreciate you tuning in, and we'll see you all next time. Have a good one.
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