Unlike a Larry King interview, I wanted my chat with Derek Foster to be real, not staged.   Sorry Larry.

I’d like to say Derek shared many personal experiences with me over the phone a few weeks back but I’m not that naive.  Derek has shared his investment experiences (and some failures too) in many National Bestselling Books:

• Stop Working: Here’s How You Can!
• The Lazy Investor: Start with $50 and no Investment Knowledge
• Money for Nothing: And You Stocks for FREE
• Stop Working Too: You Still Can!  AND
• *The Idoit Millionaire (*Latest book, Fall 2010)

However, I think you’ll find a few nuggets from Derek that his books don’t cover by reading Part 2 below.  Even CTV missed some of the goodies I was able to get from Derek.  Now that I’ve got you curious about this TV interview, a link will follow.  Onto Part 2; more from Derek Foster, millionaire dividend investor and early retiree from the rat race…

* * * * * * * * *
My Own Advisor: Thanks again for the interview Derek.  It’s great to finally chat with you.  Ready for the long list of questions?

Derek:   Ready Mark.

My Own Advisor:  We talked before about your investment strategy, you’re still a dividend investor.  I’m curious to know what your portfolio allocation looks like?  I mean, do you have any bond component?

Derek:  Im 100% stocks, both Canadian and U.S. dividend-paying stocks. I have no bond component. Not that I think bonds are bad, simply, Im a forty year old Derek Foster and I dont see why I need bonds right now with my multiple income sources. The empirical evidence is overwhelming about how stocks beat bonds over the long-run, Im talking 20 or 30 years. Im working on growing my dividend portfolio over the next 30-some years so this is why I dont personally follow any conventional bond allocation protocol. Ask the seventy-five year old Derek Foster and hell probably give you a different answer about his bond allocation. Im just not there yet.

My Own Advisor:  Whats your take on index investing?

Derek:  I think index investing is very safe way to go. The problem I have with index investing personally (and maybe you can help me on this since I read your blog, you own some ETFs dont you?) is the cap weighting associated with some index funds or index ETFs. At one time, Nortel and JDS made up something like 30% or more of the TSX, thats major over-representation if you ask me.

My Own Advisor Yes, but you can invest in index funds or an index ETF like XIC whereby each constituent of the fund is capped at 10%, avoiding the overemphasis.

Derek – True, I know about those products but you are still overweighted in the hot sectors. But let me ask you this. Do you think your dividend-payers with your dividends reinvested, compounding over time, dividend increases plus stock price growth, stock splits, etc. will do better in the long-run than those capped index products or worse?

My Own Advisor I think my index ETFs will never hit the proverbial home run but I also know Im always going get market returns, on the equity side of between five to seven percent over time. Thats good. If my dividends get reinvested, dividends increase over time and I hold my dividend-paying stocks long enough I should get at least that. Thats provided I own the right companies though.

Derek – Thats precisely my point. Investors can. Not to discredit index investing, I think its a good strategy. I think its good for those who dont have or want to take any time to analyze stocks, but I like my strategy. Its worked out pretty well for me so far.

My Own Advisor:  Tell me your top three all-time favourite investing or personal finance books.

Derek:  Good question, wow, there are so many. Can I tell you my three favourite authors?

OK, well I love the Peter Lynch ones, his One Up on Wall Street and Beating the Street two of my all-time favourites and he pretty much covers everything in those books.

I also really liked The Future for Investors by Jeremy Siegel (who also wrote Stocks for the Long Run). I mean he says so many great things that just make sense and he backs it up with loads of empirical data. Have you read it?

My Own Advisor Uh, no.

Derek You should. I think its a must.  I guess the last one would be The Warren Buffet Way. What else can I say? Hes the greatest investor of them all.

My Own Advisor:  Have you learned more about investing from your successes or failures and why?

Derek:  Thats a good question.  For me, failures because I think I question myself so much more. As an investor you can take failure as an opportunity to reflect on what didnt work and what could be better next time. I think sometimes many investors are blinded by their success because they fail to recognize the degree that luck was involved with their result. That mindset can have painful consequences.

This interview was originally published on December 17, 2010 at thekirkreport.com

Charles Kirk: It is with tremendous pleasure that I offer my last interview of 2010 with Mark Minervini.

As with many traders I interview, Mark requires no introduction as he is one of the most highly-respected independent traders of our generation. His blog in recent years has instantly become one of the must reads out there as he often shares market commentary and analysis which shows why the respect so many have for Mark is so well-deserved.

Moreover, his experience and past history of savvy market calls is legendary. It is with little doubt that we can all learn a lot from him! We hope you enjoy and find this focus interview helpful in your own journey toward more success in the markets.

Kirk: Hi, Mark. First of all, thank you for taking the time to answer our questions. I speak for many members who have a great deal of respect for you and we sincerely welcome you to this interview series.

Mark Minervini: You do a great job, Charles, and Im honored to be a part of it.

Kirk: Please tell us a little bit about how you got interested and started in trading.

Mark Minervini: I dropped out of school in the eighth grade in pursuit of a career as a drummer. From the money I made working as musician, I bought my first stock in 1983, which was a few hundred shares of Allis Chalmer. Shortly after, I read Richard Loves book, Superperformance Stocks: An Investment Strategy for the Individual Investor Based on the 4-Year Political Cycle. Everything Ive created with regard to my trading approach since stems from Loves initial impression on me, specifically from his writings in chapter 7.

Kirk: What was one of the most important lessons you learned early on?

Mark Minervini: That no one was going to do it for me; no one was going to make me rich except me. I learned that you must take responsibility for your results in the market and in life if you want to be exceptional. Secondly, I learned that in order to do well in the market you must be consistent; consistency is what separates the pro form the amateur. In order to have consistent success, risk must be managed in relation to potential reward as standard operating procedure. Youre not going to make just one trade, rather hundreds or even thousands of trades; its all about how much you make on average versus how much you lose on average over time. Lastly, I realized that I simply had to get to the bottom of what actually worked in the marketplace and ignore all the opinions and theories.

Kirk: Was there anyone out there who helped you greatly during your initial learning curve? If so, what did you learn most from them?

Mark Minervini: My Mother and my Father. I learned it was ok to do what I love; to go after my dream. I also learned it was ok to be unconventional. I was given the room to be creative. My parents trusted me. I always knew I was supported emotionally. Financially, we were poor but my parents supported my dreams.

Kirk: Indeed, it is so important to have a strong support structure in place. In a nutshell how do you currently approach the market and what is your primary trading strategy?

Mark Minervini: I approach the market from a risk first approach. My trading strategy is called Specific Entry Point Analysis or SEPA. We look to enter trades at low risk entry points relative to potential reward. Primary focus is not to lose money. Secondary focus is not to lose money. And, the final focus is to make more on average than I lose.

Kirk: You remind me of Buffett who said he had only two rules: 1) Never lose money and 2) see rule number 1! What do you see as the primary benefits from employing a strategy that focuses on both fundamentals and technicals?

Mark Minervini: The benefits are having all the pertinent information that is consistent with big winning stocks. We know what to look for both fundamentally and technically. I have seen stocks bought on pure technicals and the guy buying the stock doesnt even know that there was a cash offer or a proposed merger right at the price he paid. Refusing to look at fundamentals or any information that gives you an edge is usually because the individual just doesnt know how to use the info, or has some bias based on personal opinion or tradition.

Kirk: Why is this kind of trading best for you and, more importantly, why do you think it works so well?

Mark Minervini: My strategy works well because its my strategy. I know the strengths and, more importantly, the weaknesses of what it is I do. It also works well because I allow it to work and stick with it even when it runs into difficult times. Nothing works well if you keep changing your approach. To be a master you must be a specialist, not a jack of all trades.

Kirk: What do you trade mostly? Equities, options, futures, ETFs, currencies, etc.?

Mark Minervini: Only equities.

Kirk: In an average week how many trades do you make? What is your average hold time and how many positions do you have open at any given time?

Mark Minervini: During an average year I may make 400-500 trades. About half of that turnover is a result of taking small losses, which Im out of pretty quickly.

Kirk: What would you say are your primary strengths and weaknesses as a trader?

Mark Minervini: Discipline is my primary strength. And the willingness to admit when Im wrong and move on. My weakness is I usually sell early and often leave money on the table. But I dont really view that as a weakness, just something that could be improved upon. When you move in size you have to get out when the getting is good.

Kirk: In my experience it is often better to sell too early than too late Mark! How have you learned to mitigate your weaknesses and focus more on your strengths?

Mark Minervini: By not focusing too much on my strengths. If youre good at buying and bad at selling I would focus on selling; if you improve your selling you will have a complete game. Focus on making your weaknesses strengths and then you will have no weaknesses. Exploit your strengths and improve your weaknesses.

Kirk: What have been some of the most challenging lessons you have learned?

Mark Minervini: That you cant be everything. You must commit to a strategy and sacrifice other strategies. The problem with the market is its like playing poker however; you always get to see the next cards even though the hand is over. You always see what would have happened. This is very difficult to deal with for many people. To be successful, you have to understand that trading is NOT about picking highs and lows, its about making money.

Kirk: Very good. What are some of the key rules that you consider before selecting any potential trading opportunity?

Mark Minervini: How much am I risking is the very first concern. Also, does the stock meet all the necessary criteria? If the risk is acceptable and all the entry criteria are met, I enter the trade.

Kirk: What would you say is your average win: loss ratio for your trades?

Mark Minervini: I average 2 to 1.

Kirk: How has your overall performance been recently, as well as over the past few years?

Mark Minervini: Its been about the same as always. Im a consistent 2:1 trader.

Kirk: What would you say are your favorite kinds of technical and fundamental set-ups?

Mark Minervini: The ideal set-up is a stock emerging from a constructive consolidation with strong accelerating earnings and sales.

Kirk: Can you give us a recent example of a set-up you found to be very attractive and worked well in this market?

Mark Minervini: CML. Bought it on 11/24. Sold it on 12/7 for a quick profit.

Kirk: Have you noticed any trading set-ups more prone to failure than they have been in the past?

Mark Minervini: No. Not much has changed. Contrary to what many believe, its not different this time. LOL

Kirk: To help us understand your trading approach, can you talk about a recent successful trade from start to finish?

Mark Minervini: LULU. Supported by excellent fundamentals, the stock emerged from a double bottom pattern that formed from 4/15 11/04. I bought the stock on 11/05 the day the market topped just before a pullback of about 5% in the major averages. The stock was held through that market pullback because it acted normal and held above our stop. This gave me the conviction to add to the position as it emerged through its next buy point in November. I sold the stock (most likely too early) on 12/09 when they reported earnings up about +50% from the initial purchase from about a month earlier.

Kirk: Now please tell us about a recent unsuccessful trade.

Mark Minervini: Shorted GMCR; shorted the rally in October and November after the big break on SEC news. Stock rallied and stopped us out

Kirk: One of the things I most appreciate about you is how much you stress proper risk management. If we can, lets talk a little bit about position sizing. Can you provide an example of a recent trade and explain your method for determining the size relative to your own trading portfolio?

Mark Minervini: I want to own as much as I can but generally no more than 25% of my portfolio (as liquidity permits). You are not going to make huge returns being too diversified. However, I only risk what I can get out of safely based on liquidity.

Kirk: Thats interesting. I think many would be surprised at the idea of having any position anywhere near 25% of an entire portfolio. Besides over diversification and liquidity concerns, what common mistakes do you think many traders make concerning position sizing?

Mark Minervini: They dont know what an optimal position size should be based on their own risk/reward and risk tolerance. For instance, if youre a 2:1 trader, your optimal position size is 25%.

Kirk: Ok. I think I understand what you mean, but please explain this position sizing formula more in detail so others can perhaps apply it in their own trading. Can you offer another example?

Mark Minervini: Ok. First, its important to understand that you are not going to achieve huge returns consistently being overly diversified or by relying on diversification for protection. You will only get a smoothing effect. When you own a bunch of stocks you end up with two problems: the first being that you just cant watch and know all you need to know about each of them. The second problem is that you will have a difficult time getting fully invested quickly when opportunity presents itself and more importantly, getting liquid if you need to raise cash in a hurry. In addition, the math just doesnt support it. Depending on the size and risk tolerance of your portfolio you should typically have between 4 or 8 stocks and for large portfolios maybe up to as many as 10 or 12 stocks. This would provide sufficient diversification but not too much. The Optimal-f formula can act as a starting place for you to understand optimal position sizing based on expectation. If Ken Heebner of CGM Funds can move around billions of dollars in just twenty names and still manage to beat the market, then a personal portfolio can surely manage sufficiently with 4-5 or 10-12 stocks. If you lose 5-6% on average and even if your position size is at 25% exposure, youre still only be risking about 1.25% of your capital per trade. Of course, if you dont have an edge, then you will lose no matter what your position sizing is.

Kirk: Good, thats helpful. So, do you use and set stops, Mark? If so, whats your stop loss method?

Mark Minervini: I always know where Im going to get out of a trade before I get in. I aim to lose no more than 5-6% on average over time on my losers.

Kirk: Do you ever average down into a losing trade?

Mark Minervini: Theres a reason Paul Tudor Jones had a sign posted on his wall that read Losers average losers, and that reason is because its true. I almost always only add to a position if it proves itself and then I may add to my position at a higher price, not lower.

Kirk: Do you scale up and into winning positions? If so, how do you know when to increase a position size relative to your overall portfolio?

Mark Minervini: Yes. I generally move money into the better performing names at subsequent pivot points or set-ups.

Kirk: All good traders dedicate a lot of time and effort to improvement and reducing mistakes. How has your trading method evolved and improved over the years?

Mark Minervini: It just becomes more and more crystallized because I continue to focus on the same timeless principles, which allows me to become more and more of a specialist. The power of a narrow focus is amazing. The key is to be a real pro at something. Know all you can about a style or a tactic. Then you can build on that foundation. Traders give up too easily and jump around too much when things get difficult. How good do you think Kobe Bryant would be if while he was developing his skills growing up every time he had a really tough game he changed to a different sport or played a different position?

Kirk: I couldnt agree with you more Mark. I see this problem among many. Can you provide an example of something you thought was true when trading early in your career and now believe is just completely wrong?

Mark Minervini: Yeah, everything. But I learned very quickly sound principles. It just took me many years to master the application.

Kirk: Why do you think most traders fail?

Mark Minervini: Here are 6 reasons:

1. Poor selection criteria; usually based on personal opinion, theory or tips and bad advice
2. They dont stick to and commit to an approach; style drift
3. Dont cut losses (#1 mistake made by virtually all investors)
4. Dont know the truth about their trading they fail to conduct in-depth post analysis
5. Treat trading as a hobby not a business
6. Want too much too fast; learning a skill takes time

Kirk: Please describe a typical trading day for you. How do you organize and dedicate your time?

Mark Minervini: Most of my work is done the night before. I already know what Im going to trade before the open. I watch the market all day long, never leaving my desk for more than a few minutes during trading hours.

Kirk: How much time and attention do you pay to others opinions about the market and/or stocks you are trading?

Mark Minervini: Zero. I avoid outside opinions like the plague!

Kirk: Are there any tricks of the trade that you use to help maintain a consistent successful approach over a long period of time?

Mark Minervini: Yeah, long hours, hard work, a sound approach and discipline. There are no tricks or big secrets. Again, is there a secret to having a good basketball shot? It starts with a good coach, proper practice, plenty of hard work, discipline and sacrifice.

Kirk: Amen. However, most traders I know have a set of rules that they have learned from past mistakes. What are a few of yours that you think most traders would benefit from?

Mark Minervini: Hard work alone wont cut if you dont have a sound approach and if youre not doing the right things. You must be facing west if youre looking for a sun set. Approach each trade from risk first; ask how much can I lose. Dont risk more than you can expect to gain on average. Know the truth about your trading; study your results carefully. Never average down. Always cut your losses; keep your losses small. These are fundamental rules that should never be compromised.

Kirk: I suspect like all good traders you are working on improving your performance in some manner. Can you share what youre specifically working on right now?

Mark Minervini: Sticking to the rules. Always making sure we stick to the rules. We have a great approach, I dont like to get to tricky and over complicate something that requires a straight forward approach.

Kirk: Youve been trading for some time now. What would you say are the biggest changes in the markets and trading in general youve seen during your career, both good and bad?

Mark Minervini: The order handling rule change in 1997 has changed the way stocks move short-term because Market Makers dont really keep inventory anymore. Its a topic that would require a lengthy discussion; maybe we could talk about it another time. Other than that, not much has changed except more information moves faster than before.

Kirk: What advice would you give a person just now beginning to trade the markets?

Mark Minervini: Find a good mentor. Commit to a strategy. Cut your losses. Tune out the media. Take full responsibility for your results.
Kirk: What do you think are the greatest misconceptions beginning traders have about trading the markets and about trading systems?

Mark Minervini: Way too many to mention. Just about everything a beginner thinks is a misconception.

Kirk: A number of people who read my website desire to trade for a living and I receive a lot of questions concerning capital requirements needed to start and how to make the transition to trade full-time. Do you have any words of wisdom or rules of thumb to share along these lines?

Mark Minervini: I started with a very small sum of money and turned it into a fortune. Capital is not the challenge. Mastering yourself is the challenge. Discipline is the challenge. Persistence is the challenge.

Kirk: Do you think trading for a living is getting more difficult or easier for the average individual investor? Why?

Mark Minervini: Much easier. Tools for pros and amateurs are virtually identical. The pro has no edge. The individual has the advantage. No real liquidity concerns for the small trader versus the big fund manager. Its a fantastic time to be a stock trader!

Kirk: When all is said and done, in your experience, what is the best way to learn how to trade?

Mark Minervini: Trade. As Ralph Waldo Emerson said: Do the thing and you shall have the power. And then conduct post analysis. Learn to be objective. You could try and find a mentor. However, the chances of getting great advice are slim at best. Trading is just like any other profession, there are only a handful of really outstanding practitioners.

Kirk: Do you have any books, websites, etc. that you highly recommend beyond your own website?

Mark Minervini: The Kirk Report. Why is there anything else? LOL!!!

Kirk: You are too kind Mark. Although I know both of us share a love for the markets and trading, what are your long-term career plans and future for your website?

Mark Minervini: I honestly dont know for sure. My long-term plans are too stay healthy and be a good father to my daughter. This past year I started a pilot training program. Also, we now offer my research to the individual investor not just exclusively to the institution anymore. It feels good to help others achieve their goals. I think I may continue to develop that. Why hog all the good trades for myself? LOL!

Kirk: What are some of your personal passions beyond the market?

Mark Minervini: Ive been a drummer since I was 6 years old and I continue to play. I play tennis, train boxing and lift weights to stay in shape, and I play an occasional round of golf.

Kirk: Finally, if you had only one piece of advice to share with all traders, what would it be?

Mark Minervini: Believe in yourself and never give up. Persistence is more important than knowledge. Make an unconditional commitment to trading and you will not fail.

Kirk: Thank you so much Mark. I really enjoyed this interview and Im sure others will find it helpful.

If you’ve been following my blog, you might recall a few months ago I called out to Derek Foster, wondering what Canadas Youngest Retiree has been up to.

Back in September, Derek was a busy guy.  I found out he completed an interview with MoneyTalk host Patricia Lovett-Reid, he was preparing for a speaking engagement in Toronto at Canadian MoneySaver’s Investment Conference, he was putting the finishing touches on his new book and as always, he was helping raise his five kids.  I don’t know about you but that seems more like a year’s worth of work, let alone one month.

For those of you who don’t know who Derek Foster is, here’s a quick bio (photo courtesy of his website):

• Derek was born in Ottawa in 1970.
• Derek was able to become a millionaire and leave the proverbial rat race at the age of 34 by using various investing strategies, many he believes any investor can emulate.
• Derek, ”Canada’s youngest retiree” is a well-known Canadian author and has shared his personal investment experiences and strategies in his National Bestselling Books:
• Stop Working:  Here’s How You Can!
• The Lazy Investor: Start with $50 and no Investment Knowledge
• Money for Nothing: And You Stocks for FREE
• Stop Working Too:  You Still Can!
• *The Idoit Millionaire (*Latest book, Fall 2010)
• When not writing books or giving speaking engagements, Derek spends time with his wife and five children in Ottawa (in my old neighbourhood no less).

For a couple of years now, maybe like some of you, I’ve been both entrigued and somewhat skeptical of Derek’s investment journey.  I’ve read a few of his books (Stop Working:  Here’s How You Can! and The Lazy Investor) and to be honest I’ve been more inspired than skeptical of his success.  Sure, he may have had some great timing on his side and some risker investments paid off, but sometimes you make your own luck as well.  I know others don’t feel the same and have written so.  That’s fine because everyone is entitled to their own opinion. 

Overall, I’m happy for Derek because he had a dream, saw it fulfilled and then some.  Investment timing, luck, skill or otherwise, he’s a fortunate guy. 

I’m glad I got the chance to chat with Derek for almost a couple of hours a few weeks back.  Here’s what he had to say in Part 1 of My Own Advisor interview.  I hope you enjoy the read.

*     *     *     *     *     *     *     *     *

My Own Advisor:  Thanks again for the interview Derek. It’s a busy time of year for everyone and I’m glad you got back in touch with me. It’s great to finally chat with you – enough email already!

Well, onto my questions.  Ready?

Derek:  Fire away Mark.

My Own Advisor:  Youve just released the latest book in your Stop Working series entitled The Idiot Millionaire: You Can Become Wealthy! What inspired you to write this book?


Derek:  To be honest, it was largely because of the 2008-2009 economic downturn. Because my personal situation had changed since I originally left the rat race at 34, (I was earning an income from other sources such as book sales, etc), I wanted to switch my portfolio to higher growing dividend-payers as this would save me tax and generate better returns over the long-term. BUT I wasnt as smart as I thought I was; hoping to sell my stocks at one price and trying to get back in at a lower price. In some cases, it worked. I bought businesses like JNJ, Shoppers Drug Mart and Phillip Morris at reasonable prices. For other businesses, it didnt work. For example, I waited too long for Canadian bank stocks. I missed the bottom and their subsequent run ups in price. Admittedly I missed that boat. I would buy some if prices to crept lower. I guess the title of my book really applies to me, kind of tongue-in-cheek.


My Own Advisor:  What makes this book unique in your Stop Working series?

Derek:  More so than any of my previous books, this one discusses a companys competitive advantage. I describe what I mean by this and how investors would do well to invest in those companies that have it and it also offers a list of those companies.


There are many companies out there that are worth owning, companies that pay dividends but they do not have any economic moat around them. This is important because ideally you want to buy companies that not only pay dividends, but that increase their dividends over time and also have great growth opportunities because of their advantaged products and services. My new book includes a pretty good list of these companies in Canada and the U.S. In the U.S. for example, Coca-Cola quickly comes to mind. In Canada, Enbridge.

My Own Advisor:  Switching gears a bit, tell me about your investment strategy. Still a dividend investor?


Derek:  Absolutely, but my approach or maybe should I say my focus has changed. Before I was more focused on higher yields for income generation, maybe slower-growing stuff but now my needs have changed. I mean the books generate income which was an unexpected surprise (because being an author or a writer is not usually the path to riches). Really though, Im fortunate to have some other income streams with no debt and so things are different for me at 40 than 34 when I wrote Stop Working (Heres How You Can Too!). Geez, that was six years ago. Im now more focused on companies that have their moats and good long-term growth prospects. I try to explain that in plain language in the new book.


Also, the reality is many folks dont retire from the workforce at 34, or even 40 or 50. They are working their way towards retirement bit by bit and hopefully this book will provide them with a more complete list of companies to help them out.

My Own Advisor:  A short time ago, when the market was falling (in 2008-2009) you sold all your dividend payers. I read a few articles about that. You took some heat. Can you walk us through that decision?

Derek:  I was an idiot but at that time, I sold my shares in early February 2009, I thought I could get back in later and at cheaper prices. Turns out I did and I didnt as I told you before. I managed to buy a lot of stocks much more cheaply but a large part of this was luck. I benefitted from put-option premiums and the incredible strength of the Canadian dollar. After I sold my stocks, I remember humming and hawing for a couple of weeks – should I say anything to the media? The books encouraged folks to do the opposite; buy and hold dividend-payers for income. I didnt want to be hypocritical but I can see why some people were a little put off, you know what I mean? In the end, my approach did save me money and I came out ahead but not on everything; I missed the boat on those Canadian bank stocks and some other companies I would like to own.


The book (The Idiot Millionaire) actually includes some of this stuff and Ive got some details in there about my prices when I got back in.


My Own Advisor:  Made any recent purchases?


Derek – Yeah, I bought Strayer Inc (a for-profit university) at a pretty reasonable price. It just made sense with our Canadian dollar being so high and the recent stock price weakness due to pending potential changes to loans for students. Im very comfortable with this holding but I realize there are potential risks. The stock price had dropped from over $250 earlier this year to under $140 where I bought it. This is even cheaper than at the March 2009 low of $159 and the Canadian dollar is much stronger now, so the stock price is actually 30% below the March 2009 bear market low (in Canadian dollar terms).


My Own Advisor:  Something more fun now. Whats on your Christmas list for 2010?


Derek:  Well with five kids in house, Christmas is really for them, not me. Ive never been one to covet stuff, Im not materialistic. I finally got a GPS this summer for our trip out West and Ive got a laptop computer. During our trip, once the kids were in bed and all the chatter had stopped for the day, I pulled out my laptop and wrote a couple of pages (for the new book). Honestly, Im a cheap guy. If a burglar came to my house, he would quickly leave in disgust as my material possessions are not really worth stealing (except perhaps for my Sienna minivan). When I look at stuff, I always ask myself, is this really going to add any value to my life? If the answer is no, I dont buy it. I guess nothing Mark. I dont even own a cell phone. I guess I dont consider myself important enough to need one.


I had to laugh at this last response. I mean, with five kids, how can Christmas NOT be all about them?
 
It was great to chat with Derek.  He’s a bright and funny guy.  Foster’s fast track to early retirement through  savings and diligent investing in Canadian and U.S. dividend paying stocks may not appeal to everyone but I think it’s inspirational.  In the end, we’re all trying to achieve financial freedom and regardless if you’re a fan or a critic, learning something from Derek Foster can and should be done.  That doesn’t mean you need to follow his path or emulate what he did.  Knowledge is always different than the application, but learning what works and what doesn’t for you is important.  I’m trying to build my investment knowledge and application all the time because in my opinion, continuous improvement is critical to success. 
 
In Part 2 of my interview, you’ll hear more from Derek about his portfolio allocation and his stock market predictions for 2011.  Stay tuned for that blogpost after Christmas. 
 
I hope you enjoyed Part 1 and as always, I look forward to any comments!
 
Cheers,
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Wrong: Why experts* keep failing us–and how to know when not to trust them *Scientists, finance wizards, doctors, relationship gurus, celebrity CEOs, … consultants, health officials and more

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

Dividend Stocks For Dummies

How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy

Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs (Wiley Trading)

What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions

The Forever Portfolio: How to Pick Stocks That You Can Hold for the Long Run

Jim Cramer’s Getting Back to Even

It is refreshing to read, after seeing so many doom and gloom books blaming the failure of capitalism, a new book about how capitalism is the solution and not the problem.

I was very happy to read Steve Forbes’ recently released book, How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy, which very clearly shows us that capitalism is here to stay and will get us out of this mess.

Capitalism works well when governments stay out of the way. Steve Forbes explains very clearly that the solution to our economic problems is to let the free enterprise system run.

A great read that also makes a great gift, How Capitalism Will Save Us by Steve Forbes and Elizabeth Ames is the book worth getting.

Ok, lets jump into to comparing gold and silver as trading instruments. I get the same questions from new traders all the time and I think these two questions will help clear them up.

The questions are:

1. Why dont you give silver (SLV) trading analysis/signals?
2. Why dont you trade silver?

My answer to the questions are simple and the chart below displays my view.

The gold (GLD) signals I provide work with silver so you can just trade silver when I have gold long or short trade. This is the reason I dont provide much silver analysis because its duplicate info.

The chart below shows how gold and silver trade together when it comes to rallies and sell offs. But notice how volatile silver is while gold had a nice slow and steady trend upwards Golds low volatility trending characteristics is what I love about it. Silver on the other hand is all over the place making it easy to have protective stops triggered before the majority of the trend is over. The silver charts almost always look terrible (tough to read for a direction). I really dont like getting shaken out of a winning trade

To see chart and the rest of the article, click here.

by Chris Vermeulen

The show was held at the San Francisco Marriott Marquis Hotel on August 19th through August 21. The keynote speaker was Steve Forbes, Editor-in-Chief of Forbes Magazine, who spoke very candidly about his opinion of the current administration and its policies adversely affecting the economy and the stock market. However, he was positive about the future and expects many favorable changes to take place over the next couple of years. He went into detail about how capitalism and the free market can save the economy, even with health care, Social Security, and Medicare. His latest book has recently been published, How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy.

The Opening Ceremonies panel discussion was on Nanotech, with four panelists discussing the various aspects of this fast growing industry, and how nanotechnology is used in heathcare, technology, batteries, transportation (boats with nanotech hulls), and many other areas.

Some of the stocks that were mentioned in this industry include Harris and Harris Group (TINY), the stock with the great stock ticker symbol, a venture capital company which specializes in early stage nanotechnology companies. Other companies mentioned were Nanosphere (NSPH), Starpharma (SPHRY.PK), A123 Systems (AONE), Cree (CREE), First Solar (FSLR), and SunPower (SPWRA).

There were 55 seminars to choose from on Thursday, 99 on Friday, and 24 on Saturday, covering everything from options, to ADR’s, to ETF’s, to dividends, to low priced stocks, to China stocks, to numerous other topics.

One interesting one was called The Top Ten ETFs and Stocks You Should Buy Now, with Mark Skousen and Doug Fabian. Skousen mentioned Enterprise Products Partners (EPD) due to its rising dividend, currently yielding 6%, and insider buying. He also recommended Ford (F), due to the fact that sales are rising substantially, the early paydown of debt, and a forward PE of 10.

Fabian recommended iShares S&P Global Telecom ETF (IXP) due to its 4.8% yield, paid quarterly. He also likes PowerShares CEF Income Composite (PCEF), which invests in master limited partnerships but doesn’t issue K-1s. It pays an 8.5% yield.

Another informative speaker was Michael Murphy who’s presentation was called ‘Best Tech and Biotech Stocks for the Next Ten Years.’ In the Content on Demand sector, he likes TowerStream Corporation (TWER), a company that puts wireless towers on buildings and offers broadband services to businesses. The company has already signed up eleven cities. Insiders own 30% of the company.

In the biotech arena, one of the stock he recommends is Rochester Medical Corp. (ROCM), which makes catheters made of silicone instead of latex, to avoid the latex allergies for some patients. This also allows the use of anti-fungals in the catheters.

One stock he favors in the energy sector is Connacher Oil (CLL.TO), a Canadian company that is in the oil sands industry. Murphy also likes the geothermal industry due to the very favorable government tax credits and loans available to developing projects.

If you missed the MoneyShow in San Francisco, you can check out other upcoming MoneyShows at MoneyShow.com. And if you want to find more information on buying dividends, check out our recent article on stocks going ex dividend.

Author owns F.

By Stockerblog.com

Here is the abstract:

“An interaction competition provides an entertaining enjoyable environment for a player to compete against a celebrity in a head-to-head trivia game. The questions may be associated with the celebrity rather than random general information or general trivia. The celebrity can participate via prerecorded audio media, prerecorded audio-visual media, or in a live real-time format. A goal of the competition is for a player to gain more points than the celebrity. Another goal of the competition is for the player to answer more questions correctly than the celebrity. At least one or more game episodes can be provided on computer-readable media. A game episode may be implemented with a product featuring a celebrity. The competition can be provided in many different gaming environments. The competition can be provided online via a web-based format; a television game show format; telephone call-in radio talk show format; or a cellular phone game format.”

Author owns MSFT.

I could be writing about Italys former national currency before the euro took over and what remains the national currency for Turkey, but thats another post better served by currency analysts. What Im writing about today is my Locked-In Retirement Account (LIRA), part of my investment portfolio:

-what is it?
-what I did with it recently, and
-what Im doing with it going forward as part of my retirement strategy.

What is a LIRA and where does it come from?

A LIRA is better known as a Locked-In RRSP. They originate from money held within a company pension plan. As long as youre employed with that company your money may be invested (and vested) in a defined benefit or a defined contribution plan. When you leave the company you may have the choice to move the money accumulated into a personal plan. This is what happened in my case. I left my former employer almost 10 years ago and was able to…take the money and run. Problem was, I couldnt contribute to that pool of money. Too bad too, but its the nature of the locked-in account.

This is one of the main differences between a LIRA and a RRSP:
LIRAs hold pension money and because of this you cannot contribute money to it.
The second main difference is:
With RRSPs, you can take money out when you want (taxes will apply) and there are no limits how much you can take out if you do. With LIRAs, you are restricted on withdrawals.

Only some provinces allow the unlocking of LIRA monies. Certain circumstances must apply. Some of those conditions include: small balances in the account, becoming a non-resident of Canada, shortened life expectancy or financial hardship. Taxtips.ca has a great page about LIRAs if you want to know how, or if, you can unlock your LIRA.

My LIRA: Then and Now.

Then
Soon after leaving my former employer in early 2001, I invested the money in a dividend growth mutual fund and never looked back. That is until about a year ago. The dividend growth mutual fund performed OK, even after the most recent bear market. I guess I got lucky. After learning more about ETFs, index and dividend-investing in recent years, I decided my dividend growth mutual fund had to go. This year, amongst other portfolio changes, became the year to get my LIRA finances in order.

Now
Early in 2010, I transferred my LIRA account from a mutual fund account into a brokerage account. I was able to make this transfer in-kind, no fees involved. Next, I sold my dividend growth fund. I kept the money for a few months in cash until I saw an opportunity to buy XBB with some of the cash. I now hold enough units to provide me about $30/month in dividends. Compare that to the $30/quarter I was getting with my mutual fund, and I know I made the right decision. Additionally, I wanted more U.S.-exposure so I decided to pick up Coca-Cola (US:KO). Until this transaction, I didnt own any Coco-Cola stock but I knew it would be a good holding; theyve paid dividends to investors on its common stock since 1893. I know historical performance is not indicative of future performance but heck, hard to argue with that track record.

My LIRA: Going-forward.

In holding XBB and some Coca-Cola in my LIRA, I figure Ill have a steady stream of dividends coming in allowing me to buy more shares as I see fit, as the cash accumulates. XBB will provide long-term fixed income stability, something I was looking for as a compliment to my growing number of unregistered Canadian dividend-paying stocks. Coca-Cola will give me desired U.S.-exposure. Since I want to keep my dividends as a source of pleasure and not pain, I bought Coca-Cola for my LIRA instead of keeping it unregistered, since there is no withholding tax on U.S. dividends inside an RRSP or RRIF. You can read more about that here. Since the same tax rules apply to LIRAs and RRSPs, I believe I shouldnt get hit with U.S. withholding taxes. My financial hypothesis has yet to be validated though. Ive written and talked to at least seven departments at Revenue Canada about thiswith no direct answer yet but the experiment is on and hopefully I am correct. It’s not the end of the world if there are withholding taxes, simply, I’d like to avoid them. Im optimistic the entire US:KO dividend of $0.44/share will land in my account when the next payment date arrives. I will keep you posted.

Closer to retirement, Im considering converting my LIRA into another tax-deferred vehicle such as a Life Income Fund (LIF) or a Locked-In Retirement Income Fund (LRIF). An annuity is probably another choice, but I havent done tons of research on any of these products yet. I cant retire tomorrow or next year (sigh…) so I figure I have a few more years of work (and to work) on those retirement options. Im just glad to have learned what I have in recent years so I can take better control of my finances. I know I might make mistakes, but that’s OK. The more I learn, the more I know and the more I know, the more I can improve.

Do you have a LIRA? If so, how do you manage it?

The bricks were invented by an American professor of architecture in Abu Dhabi.

This could give new meaning to ‘a brick ….house’.