Ten Years From The Market Bottom

My introduction to investing came when I was 18 or 19, so somewhere around late 2005. I serendipitously discovered a display in the Chapters bookstore which had some Robert Kiyosaki titles and I spent the next few hours delving into the basics of a world for which I had previously only had a rudimentary understanding at best.

To that point, I had only heard that investing was risky and that it would take money to make money. What I knew about the stock market was what most people would know based on things they heard on the radio or saw in movies. It was a big casino where you needed to take outsized risks to end up wealthy, right?

From that initial introduction in Chapters, I went on to read from hundreds of additional sources across the various books and blogs out there. I was thirsty for more information and would strike up conversations as much as possible to learn from people I met. It was all so foreign and yet, I felt, if I just kept with it I knew it was something I could do well. Everything is strange until you break it down into smaller parts and piece it all together.

Timing

When I first learned of investing, I was still pursuing my postsecondary degree and didn’t have disposable income to place in the stock market. My finances were devoted to my schooling, but that didn’t stop me from continuing to learn about money before I had any to work with.

By 2008, I was well on my way to developing my own dividend growth investing strategy. It seemed to me that the best companies in the world with the longest track records of growth also happened to be the ones that paid solid and rising dividends. This could have been a coincidence, of course, but in the face of enough “coincidences”, I felt there must be something more to the story.

Interestingly, this also happened to be the period of time when the global economic system began to come unraveled. Consumers had been borrowing against the value of their homes and living outsized lifestyles for years. The investment banking community had stretched the limits of excess. The system was on the verge of collapse as housing and stock market values cratered.

The bottom of the market came on March 9, 2009. Since then, prices have continued to climb steadily with a few bumps along the road. We’re still riding that wave to this day, a decade from the trough.

I finished my postsecondary in April 2009 and that’s when things got interesting for me. The three or so years prior had taught me one thing with certainty: the time to buy anything is when the price is low. Warren Buffet phrased it thus:

Be fearful when others are greedy and greedy when others are fearful.

That was indeed the mantra I intended to follow. And so I got started. Every dollar that I earned and which I could afford to put aside became earmarked for the stock market. I felt that I was staring a generational opportunity in the face and wanted to make sure I took advantage of it.

I picked up my first shares of an individual stock with Toronto-Dominion Bank (TD) and haven’t looked back. That leaves me with a few thoughts on how it feels to have come this far.

Ten Years of Applied Learning

I have found that the best way to learn any skill is to apply a few different methodologies. One method is to learn the technical side through reading and discourse with others who have done what you’re looking to do. Another way to get your hands dirty as a practitioner. When you put these together, what you wind up with is real-world experience backed by a foundational, theoretical understanding.

There were many lessons learned along the way, and I’d like to share two key takeaways with you:

1. Time in the market is far more important than timing the market. There were periods of time where I sat on too much cash as I waited for the stock market to hit a bump in the road so that I could deploy my capital at more attractive (read: lower) prices. The outcome in most cases was simply sitting on too much cash which should have been earning me rising dividends in high quality companies. While it is prudent to have a cushion of cash for a rainy day, the expression that nobody ever got rich holding cash is prescient.
2. The key to success is to be a net accumulator of assets. In other words, you want to do far more buying than selling. I have met a fair number of people over the years who were successful investors. None of them were active traders; the path to wealth was controlling emotions in tough periods by continuing to invest while prices were low and then reinvesting the dividends.

Fortune Telling

The art of investing inherently involves forecasting into the future. The only reason to own stock in a company is because you believe its future holds promise. Each dollar invested is done with the hope that there will be greater future dollars to be harvested.

To invest effectively, it is necessary to look ahead, depending on one’s timelines, by five or ten or more years to see what sorts of things people will be driving, eating, and wearing. It is important to have an understanding as to how they will do their banking and consuming entertainment. All of this involves people. In other words, the art of investing is the art of being interested in people.

Even if we wind up someday in an age where robots are running their own factories and producing all of the goods and services, it will still be humans consuming them and paying for them. This necessitates an interest in knowing or at least endeavouring to know how people think. This is the part that always interested me most about investing; I am a philosopher by nature and like to think my way through far-reaching problems. I like to understand why people do the things they do. This is why, no matter how much I learn, the field of investing will never grow old on me.

Changes Over the Past Decade

When I think back to when the market hit the bottom in March 2009, I think of how many changes have taken place and how rapidly they have come about. Here are just a few examples that come to mind as I write this:

• The smartphone revolution was just getting underway. The iPhone was on the rise but hadn’t entirely changed the game. It certainly wasn’t viewed as a professional-grade camera yet.
• In 2009 I had never heard of cryptocurrency or the current flag bearer for the industry in Bitcoin. It seems to me this new technology is going to shape the decade to come, but time will tell to what extent.
• Recreational cannabis was nowhere near legalization in Canada. This trend of legalization is sweeping states and nations around the globe and will lead to new areas for investment opportunity beyond tobacco and alcohol in this space.

Being on the forefront of innovation can provide wild opportunities to capitalize financially. The challenge is not only in recognizing what will shape society but also having the vision to recognize which companies will be the winners as industries change. Just because a technology or shift will lead to great change does not necessarily mean there is easy money to be made.

I suspect that no matter how things change over the decade to come, people will still require financial services from banks. The way this is consumed may shift increasing to the digital/online sphere from brick-and-mortar, but these services will still be required nevertheless. Cryptocurrency which is based on the blockchain model may be disruptive technology, but there are also very entrenched players in the market who will be adamant to protect their niches. There are also regulatory bodies who will begin to get increasingly involved as time goes on.

My point with the above paragraph is not to single out crypto but simply to highlight the fact that even when a tectonic shift in the landscape has been identified, the path to profits is not always a straight, easy line to follow. Nevertheless, it is our job as investors to tread that line and what we can to see where it may lead.

Conclusion

Learning to invest on my own was one of the best, most impactful decisions of my life. Since money is so integral to everything we do in our lives, it afforded me the ability to have control over my life in ways that I otherwise would not be able to if I didn’t have control of my money.

Times change. Times will always change. It is our job as investors to have an eye to the future while also minding the present. There will be companies ten years from now which are household names and yet they haven’t even been founded yet. The good thing is that you don’t always need to see perfectly into the future. The main thing is to begin investing and to keep investing even amid an uncertain future. After all, the future is always uncertain.

For my part, I intend to stay on the path I have been treading. The lessons I learned which allowed me to make the most of the market downturn back in 2009 have laid the foundation for me to continue growing for decades to come.

Thank you for reading.

– Ryan

Full Disclosure: Long TD