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IFB193: Consistent Investing, ESG, and ETFs

Welcome to the Investing for Beginners podcast. In today’s show we discuss:

  • The advantages of investing consistently and using dollar-cost averaging to your benefit
  • The pluses and minuses of ESG investing and the ESG score
  • ETF investing, pluses and minuses

For more insight like this into investing and stock selection for beginners, visit stockmarketpdf.com

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Transcript

Announcer (00:02):

I love this podcast because it crushes your dreams of getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew Sather and Dave Ahern with a step-by-step premium investing guide for beginners; your path to financial freedom starts now.

Dave (00:33):

All right, folks, welcome to Investing for Beginners podcast tonight. Andrew and I are going to read a great list of questions we’ve gotten recently. So I’m going to go ahead and turn it over to my friend, Andrew. And he’s going to read the first question to us.

Andrew (00:46):

Yeah. Thanks, Dave. So this first question comes from John King. He says, hi, Dave, I love the podcast. And I’ve been binge-listening to all of them this past month. I have a question about dollar-cost averaging over a very long timeframe. About a year ago, I researched and bought about ten dividend-paying stocks. I have been dripping into each position I own is small and only has about five shares of each. I run a vegetable farm, and with that family and other expenses, I never have large sums of money to put into stocks. I’ve heard you guys talk about dollar-cost averaging over one year. Would it be okay to add monthly to stock over 30 years as long as the company is in good shape? Keep up the great work. Thanks.

Dave (01:31):

Well, in a word. Yes. So I guess that is the easy answer. So let’s dive into this just a little bit. First of all, Don, thank you for reaching out and kudos to you to stay taking this step and diving in and embracing this with both arms. So I applaud you for taking that step. So that’s, that’s a great first step, and people struggle with that. So kudos to you for doing that. And the fact that you’ve bought all these great companies and are starting to put money aside is, is a great thing for you and your family in the long run and dollar-cost averaging, especially if we don’t have tons of money to put it into the market is a great way. And the studies show that well there’s, there are various studies. I’ve read about dollar-cost averaging talk a lot about more about time in the market than timing the market.

Dave (02:28):

So if you find a great company that you think is got a lot of great prospects over a long time, continually adding money to that company is a great way to go. And it doesn’t have to be over a year. It doesn’t even just have to be over six months. It could be over ten years or 20 years because as you continue to add money to that, that company, then if it’s paying a dividend, that’s more dividends you’re going to get, which will compound upon that. And it becomes this huge snowball. That’s going to roll down the mountain for wealth. And the more that you can continue to put into that company that during the good spells and the bad spells, that’s really kind of how you average out the returns. And when you think about 401ks that people invest in for their companies that they work for, that’s really what that com those 401ks are doing is they have an allocation that you’re allowed to choose from depending on which company you work for and every month or every paycheck.

Dave (03:27):

For example, when I worked at Wells Fargo, every paycheck, they would take a portion of my paycheck to allocate for them to do this with. And it would take basically dollar cost average into the different funds that were in my 401k. And that’s really how it works. The idea is that when things are down, you get to buy more shares of the company. Let’s say, for example, the company is selling for $50 a share, and then there’s a downturn in the market, and it drops to $40 a share. Well, now you get to buy a little extra with that. And then if it drops to maybe $35, you get even more percentage of shares. Then, as it continues to rise, those shares are worth more when things turn around, and you get a greater compounding effect. And when the prices are up a little bit, then you’re still adding as the company goes up, and you’re still buying it for less than it’s worth a month from now.

Dave (04:22):

Let’s say that it goes back to $55 and then the next month that jumps up to 60 and then the next month at 65. Now, these are just examples. But my point being is if you buy at $5 less than a month, it is next; then you’re still buying it less than you’re still getting those advantages of, of the share appreciation as well as more dividends because all those things all add up and that’s really where some great returns can come from. And dollar-cost averaging is a fantastic way to invest in. It also helps alleviate some of that stress of having to find your next great idea every single month. And it’s a hard thing to do. I know, eight or night do this, and it’s a very hard thing to do. Sometimes it’s just; it’s nice and easy to go; hey, this company is still doing great.

Dave (05:15):

Hey, I’ll buy more of it. You know, there’s nothing wrong with that. I guess, think of it as your, like your favorite food pizza, for example. So there’s nothing wrong with buying more pizza. Well, except maybe for your waistline, but buying more pizza is a great thing to do. The same idea applies to investing because it is continually trying to put money into the company. If you found companies that you think are great businesses, then continuing to add to those positions will help you in the long run. So I encourage you to keep doing that. And, and again, kudos for taking this step and doing as John. I think that’s awesome.

Andrew (05:53):

That’s a good answer. And it’s very inspiring too, I think now, so that kind of out of the follow-up to that. You know, he mentioned having only about five shares each when he would buy these companies. Does the same logic apply to somebody who’s allocating a little bit more money. Maybe they’re buying 20 shares; maybe they’re buying 50 shares. Is the logic change as, as the dollar amounts get higher?

Dave (06:20):

No. the same idea applies to think about a perfect example of this is Warren Buffett. When Warren Buffett invests in a company, he doesn’t always buy one particular company’s traunch. In many cases, he’s adding as the company improves perfect case in point is his recent investments in Apple. So they dip their toes at one point, and then they bought in more water, and they bought in more again; recently, they did sell trim some of the positions, so they sold some of the positions, but then the idea is still the same is that you’re, you’re, you’re acquiring more positions of the company. And, especially if it’s undervalued, then that’s even more of a benefit. As the company improves, your share appreciation will go through the roof because you have a bigger portion of that, and exponentially it’s going to improve. So yeah, whether you have, you know, a little bit of money or a little bit more money, dollar cost averaging at any stages, I think fantastic. As there

Andrew (07:28):

The certain point you would recommend to an investor like John, where if a stock price goes too high, maybe not wanting to add to that versus if it stayed a little flatter,

Dave (07:42):

You know, that’s a really good question. One of the things that I would think about with that is like your, as your dollar-cost averaging into a particular company, let’s say the company has been on a great run. And then, after a while, you start to see that it’s maybe is tapering off. One of the things you could do is look at other positions in your portfolio and see if there are advantages to switching your focus from that company to another. I guess I have mixed feelings about trimming positions or changing ideas because I haven’t; I guess I haven’t concluded what’s the best thing. I still struggle with that, honestly, weigh on the things that I read. Yeah. One of the things I read recently was Charlie Munger said that one of the aspects of compounding is never getting in front of it.

Dave (08:41):

And in other words, don’t interrupt it unnecessarily. That’s one of them, I guess, big unforced errors that he talks a lot about. So unless there are fundamentals that have changed about the company that would make you want not to own the company, I guess I would maybe not necessarily continue adding to the company but certainly looking at other positions. So he mentioned that he has ten other companies that are part of our portfolio. So there’s nothing wrong with, you know, seesawing back and forth. In other words, adding to company a and then adding to company B the next month and it adding to company a, to the third month and then company B the fourth month, it kind of alternating back and forth. There’s nothing wrong with that. There’s also nothing wrong with focusing more on one company for a while. And then if you feel like it’s reached a plateau or it’s become a bigger portion of your portfolio, you could look at other portions of the portfolio and start adding to those to kind of even out to the diversification if you will. So those are, those are some, I guess, ideas I have on that. What are your thoughts on that?

Andrew (09:47):

I guess coming from somebody whose personality, especially when I first started investing, was I want structure, and I want the system that I’m going to follow strictly. That takes me, kind of directs my decisions. And I just kind of think and go back to this idea of don’t fight tomorrow’s battles today. And so whatever that answer is for how your dollar-cost averaging today doesn’t mean that needs to be the answer a year from now. For me while, you know, I’m, I’m looking at this stuff all day long, so I have that luxury, but I’m constantly re-evaluating between what is this stock and how does that compare with what I have in my portfolio? And so that’s like an ongoing process for me. And in any given month, I could be looking at any of my stocks and seeing which ones I want to add more to which ones I have higher conviction towards?

Andrew (10:44):

And how does that play out in the whole portfolio? So, you know, Buffett’s a great example. Not only did he dollar cost average into Apple, but he also did it with Coca-Cola, which was another one of his huge bets. He, he, he got in at like, you couldn’t time it anymore, perfectly. He got in after the 1987 crash added a bunch, and then three or six months went by, and then he backed up the truck even more, even though the price had gone up. But, you know, I don’t know if we’re all Warren Buffett’s per se. I mean, the longer I become an investor, the more I kind of move away from the whole betting big. I like to look at my portfolio as having a good balance between all of the positions. And so you might have a company that you have super strong conviction in.

Andrew (11:35):

That doesn’t mean you’re going to be right on it. You know, the market doesn’t care how you feel about it. So, you know, maybe having some humility and keeping that diversification by changing which positions your dollar-cost averaging into to have just a healthy, balanced portfolio. And I think that the answer, which stock am I going to add to each month that might, that decision process might change for you depending on how often you’re looking at it. You know, maybe for somebody like me, I’m looking once a month, every month, maybe somebody else is looking once a quarter or once a year. And then, just like Dave said, changing the focus and switching between which ones your dollar-cost averaging to. There’s no perfect solution, but I think those are all good ideas to kind of think about and just being somebody who’s first starting. I think it’s; it’s, it’s something that as long as your dollar-cost averaging into something you’re going to do, really, well.

Dave (12:32):

Yeah. I would agree with that. Those are, those are great points. And one of the things that I think about when I think about building a portfolio and working with investing is you have to think about your risk tolerance and what you can handle. One of the things that I admire about Warren Buffett and Charlie Munger is they talk a lot about being able to sleep like babies at night because they don’t worry about what they’re doing with their money, that they’re comfortable with what they’re doing. And I guess that to me, is, in essence, a margin of safety for them. And when Andrew was talking about having a structure and having a formula or a, you know, an idea of how to do things that in essence is a margin of safety, because a lot of investing is in our heads, honestly, it’s, it’s emotional.

Dave (13:24):

And when we’re dealing with money, especially money, we’ve worked hard to earn. It becomes emotional. The biggest struggle that most people have with investing in the emotional part of it and dealing with the ups and downs and the risk and the not risk, and everybody’s wired differently. So what I may view as risky, Andrew might not, and vice versa. And so to have a, a one size fits all kind of idea, I think some generalities are good to think about. So dollar-cost averaging is a, is a great generality to use for people that are investing. But for me to tell John, for example, that you should buy just this company for the next 30 years, I don’t know how John feels about that particular company, and as the facts change, he may change his mind. That’s a, a kind of a famous quote for investing in.

Dave (14:18):

I think that’s something to think about when we think about any investment and how we want to start kind of building our portfolio. The most important thing is time in the market, not timing the market, and just being consistent and continually adding, because, as my grandma used to say. I’ve said this before water dripping on a stone eventually makes an impression. And if you keep at it, you will get where you want to go. I think it’s a great idea to use something like dollar cost averaging, and remember you have your own mind and have your ideas and follow them. Remember that the stock market is a fickle mistress just because you are right on the numbers, and everything you’re thinking about is right. It doesn’t mean the markets are going to agree with you. So don’t try to get too emotionally attached to an investment. So I guess that’s kind of my last thought on that.

Andrew (15:15):

That’s a perfect way to tie it up. Great job.

Dave (15:18):

Thank you. All right. Let’s move on to the next question. So I have Andrew, Dave; I love the podcast. I have been learning a lot. I have heard recently about the environmental, social, and governance ESG ratings for companies. What can you tell us about this rating system? And is it a good thing? Does this rating score show up on annual reports? Thanks, Mike. Andrew, what are your thoughts on ESG?

Andrew (15:42):

So let’s, let’s, let’s back up before and provide some context. So, you know, let’s talk about what do companies have to, what do they have to disclose, and what don’t they have to, because when it comes to ESG, this is an idea that’s still relatively young. And so the bottom line is it’s not required yet. And so you’ll have some companies who will talk about ESG in their annual reports while others won’t, because they don’t have to. And so, you know, a regular annual report will have numbers that every company is required to file. So think about like, every company has to say how much they’ve earned in profits each year. They have to talk about their assets, stuff like that. So when it comes to ESG companies, they aren’t doing that yet, but there does seem to be a big movement. And I would say just a big movement in the psyche of investors in general; there seems to be particularly among my generation, a lot more investors who are thinking about the social implications behind where they put their money, instead of just thinking strictly of, alright, I’m going to operate as a corporation and S and just, you know, a hundred percent focused on the profit motive.

Andrew (16:58):

They’re starting to bring, you know, our values and moralities into and through the type of decisions they’re making. And so I think it’s something to watch. And I think, I think there’s a lot of leeways right now with how a company presents itself from an ESG standpoint. Even as you have these investments, like ETFs that track companies with good ESG scores, a lot of that’s very, none of it’s set in stone because, again, you don’t have the regulations behind it. And so I think it’s, it’s a lot of opinions right now, and it’s, it’s, it’s going to be, you know, you have to think from a pragmatic standpoint, there’s, there’s a good reason to pay attention to the, to these scores as they pertain to certain companies. And, you know, when you talk about environmental as an example, and the company talks about what’s their carbon footprint, whether they’re doing to reduce the carbon footprint, that might be a lot more relevant for a company that’s been going through litigation because of the dumping they’ve done to the environment versus a company where they’re not making a carbon imprint anyways.

Andrew (18:15):

And, you know, it’s not going to, from a, from a financial standpoint, from a return from the stock market standpoint, there might not be many benefits. And so you can, you can say similar, you know, as it comes to like social and governments, you have social things like diversity governance refers to things like ownership, you know, does management have a stake in the business? Are they treating the business? Like they own it themselves? You know, do they have that skin in the game, or are they just using the business as a way to extract cash and pad their balance sheets? I think things are becoming more prevalent as time goes on, and, you know, is it a good thing or is it not? I think it, I think it has a lot of good potentials, but I think we’re still very early in this, in the, in this situation.

Andrew (19:17):

And so I would, I would be cautious on making investments solely on someone’s opinion on their ESG rating, but I do think it’s important. I do think there are, you know, there are companies that are, that are like doing good for in regards to ESG and also making it a very profitable endeavor. I think of a company as a target as a perfect example; they’ve installed many solar panels to the top of their stores and, you know, I’m sure most of us have been in a target store. They’re massive. So it’s a lot of surface area on the top of the store where they can put solar panels; not only is that good for the environment, but it also gives them a huge potential revenue stream down the line as more and more companies become power-hungry and, you know, electric costs go up and if the target can reduce the amount of money that they need to spend on electricity, that’s a huge saving. And that directly affects profits to, to investors. So it’s a factor, but I wouldn’t call it this overwhelming kind of metric to use for every single investment particularly.

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Andrew (20:42):

That’s a great point, and I love the example of Target because when you think about

Dave (20:48):

The ESG scores and you think about the impact that in the social world, it’s, it’s getting a lot of, a lot of buzzes. And you think about companies that spring to mind, as far as the environmental and social aspect of it, you think of maybe like the oil majors, like Exxon and Chevron as being kind of the antithesis to some of this. And then you also think about a company like Target, which has a good social presence. And they also are working to, I guess, reduce their carbon footprint. And honestly, when we’re, when we first started hearing about some of this stuff, I remember thinking to myself, I don’t think of a company like Target as really having much of an impact on the environment. But then, as I thought further about it, and Andrew was telling me about targets, looking at adding solar panels to the rooftops, I thought, Hey, that’s brilliant.

Dave (21:48):

And B I guess, you know, they do have a bigger impact than I started noticing when I was reading through financial reports, more companies talking about those kinds of things. For example, Amazon talking about some of the solar farms that they’re producing or creating to help reduce their need for electricity and being more self-sufficient as a company and doing some of the same similar things that target is doing. And I think when we think about the ESG and the impact, some of those things are going to be good in the long run for not only the planet but also for the economy, as well as for all the people that work for those companies and want to invest in those companies. And the governance part is probably something that probably doesn’t get as much attention as it really should. As Andrew was mentioning, it really goes back to the people who run the company.

Dave (22:42):

Are they treating it as they’re an owner-operator, or are they treating it as a hired gun that is there to make as much money as they possibly can for themselves, as opposed to everybody else that’s involved in the company? And I guess, ideally we’d all want to work for investment in companies that people that want the best for everybody, not just them. And that’s something that doesn’t get a lot of focus. The environmental and social is, is much bigger buzzwords right now. Like Andrew said, investing in a company just solely on the ESG rating or system is it’s a little bit like buying something because you read something online that said, this is a great company. I think it comes down to your values and what you think about certain things instead of relying on what others think.

Dave (23:35):

And I’ll give you an example. So I am not a smoker, and I’ve never been a smoker, and I don’t, I’m not too fond of it. And so I will never personally buy a company that sells cigarettes for their main product. And it’s, I’m not bashing anybody who does, and I do not see any, anything negative about those companies. Personally, it’s not something that I want to promote, so it’s not something I’m going to invest in. And for me, that is, I guess, a form of ESG. It’s my personal opinion. And it’s my belief. And I’m putting my money behind that belief by not buying something like that. Now the flip side of that is I love diet. Dr. Pepper is it’s one of the greatest things on earth. And so for me to buy a company like that is something that would fall in line with my values. Now there are other people out there that won’t agree with me on that. And that’s, I guess the beauty of markets is that we get to decide what we want to put our money towards. Like ESG ratings, I think it is a great thing to use as maybe a guideline. Still, as far as solely investing in something like that, just based on that, I think it needs to look at what your values are, what you think about any particular company, and then kind of go from there.

Andrew (24:53):

That’s a really good point. And you know, there are a couple of things about when you look at these investments being personal for you. So, you know, on the one hand, if you want to make really good profits, you got to do your research. You’ve got to figure out what kind of stocks do well over the very long term. So that’s why Dave and I talk about margin of safety emphasis on the safety, the fact that conservative investments with good balance sheets and trading at a good price do well over the long term. Okay. That’s one part. The second part is the investor behavior. And so going to what Dave is saying about, you need to believe in the company that’s super key too because one of them, if not the biggest killer to your returns over the long-term, is a lack of conviction because the market, even though a lot of times, it seems like it goes straight up.

Andrew (25:49):

The reality of it is every 10 to 15 years; it’ll have a huge crash. And the people who lose are the ones who panic and sell during the crash. So if you don’t believe in the company, like going back to the smoking example, if, if, if a company in that industry is struggling, you know, and maybe it is facing an existential crisis, if you don’t believe in the company, if you don’t believe in the products. You don’t think that they will recover, then you’re, you know, it doesn’t matter all of the logic behind it. If you don’t personally believe in that company, you’re probably going to sell, and that’s going to be bad for you because a lot of companies do recover. So you do need that conviction, but that conviction needs to come from a place of education and understanding why a company makes people tick.

Andrew (26:42):

Right? So diet Dr. Pepper is another great example; Dave, being the consumer of that, knows why people buy it. And he knows that if it has that kind of a place in his heart where he’s going to go, the diet Dr. Pepper and nowhere else, then he can, he can kind of use that as a proxy to be like, okay, there’s probably a lot of other consumers out there like me. And so, yeah. You know, they might be struggling in the short term. Yeah. There might be some issues with, you know, this, this store over here or getting a supplier over there, but over the long-term, I think they’re going to do well. And if you know that you pay the good price for a company, you know, that the business is good, the numbers tell you it’s good. You also know what makes the company great, which can help you with your behavior side and keep you in the long-term, where the compounding comes in.

Andrew (27:39):

That’s where the benefits from staying in the market over the long term come from just letting the company do the work for you rather than micromanaging the company and micromanaging the stock market and becoming some expert market timer. I don’t think there are many of us out there who can do that. I think there’s a lot more of us who can stay invested for the long-term trust in the companies that we invest in, know why we invested in them, and stay the course. I mean, from my perspective, I think of a company where I’m really glad I had conviction on it. It was American Eagle. Dave, he’s probably sick of hearing about American Eagle

Dave (28:18):

Behind the scenes. Not quite yet. Okay.

Andrew (28:22):

No guarantees of what I’m going to do in the future. And, and, you know, that’s a whole different conversation, but as it stood between what I had to go through, holding that company, it went from to give you some context. I went from, I think, somewhere around 24 when I bought it, and then it dropped to 17, and I was like, Ooh, it’s on sale. So I bought some more, and then it continued to drop, and then COVID happened. And so we’re, we’re talking about a stock that dropped below $8 and, you know, even down to like six 75 ish from 24. So that’s huge; I was looking at my account. I was like, really, I’m down like 60, 70%. This is insane. But you know, when I researched the company, I knew I paid a good price for it. So I knew that as low as it’s going, it’s ridiculous.

Andrew (29:08):

Cause this is a profitable company over the long term. I knew that I knew they had no debt at the time. Sure. They might have to add some debt to get through this storm. But this is a very, very strong company. I wasn’t worried about them going bankrupt in the next six to 12 months because I had done my research, and sure enough when the market came back, it came roaring back. Everybody knows that story of 20, 20 American Eagle bounce back incredibly compared to everything else. And it went from eight to; I think it’s close to $30 now. So, you know, completely outpacing the stock market just blowing, blowing me away. And it was because I had the conviction to hold. And you know, the fact that I had dividends along the way, too, those have contributed even more. So as another example, I had like $50 in dividends that I receive from owning this company over several years.

Andrew (30:04):

And that turned to $80 because, as Dave said with the whole dollar-cost averaging idea, as the stock goes down and you reinvest these dividends, you’re able to pick up more shares. After all, the stock is cheaper. So when it does recover, you get a higher percentage and that exponential growth. And that’s what I was able to see, but it only happened because I didn’t freak out when I saw it at $7. I mean, I had to, I had to vent to Dave about how frustrating it was, but I didn’t; it didn’t cross my mind to sell because I knew I would stay in the long term. And, and that worked well for me.

Dave (30:42):

Yeah. That’s a great example. And, and these are some of the advantages of, of investing and all the different options that we have. And, and it’s good to embrace the different ideas that that ESG is, is promoting. And I think it will be helpful in the long run, but again, try to follow your path instead of relying on what somebody else is telling you. Because as Andrew said, it’s not a codified system yet. And a lot of it is just opinion, and there’s no real factual stuff behind it yet, but there are certainly some great aspects to it. And it’s something certainly to keep an eye on and to, I guess the bottom line is, is invest where you believe, and you put your money where you,

Andrew (31:26):

You want to put it. Yeah, very good point. So let’s move on to the next one here. This one says I’m a new advance. I am a new investor. And I recently started listening to your podcast. I listened to a couple of episodes, and I haven’t heard you talked about ETFs yet. When I started investing, I thought I should be on the safe side after a couple of episodes on the podcast. I was thinking, do these guys even invest in ETFs, and are they ETFs? No good. Maybe one day, I will never make money out of VTS. Although I know Buffet suggested that someone could invest in S and P 500 and do well. So Dave, whether your thoughts on this question

Dave (32:05):

ETFs are good. So this is a great question. So absolutely, ETFs are good. They are a perfect vehicle for people that want to be more of a, I will call, a defensive investor. And by that, I mean, they are, let’s say that you want to invest, but you don’t want to spend the time and effort to investigate and research and make all the reading and learning and all the effort that it takes to, to learn as much as you can about Microsoft. For example, it takes a lot of time and effort to do that, and that’s not for everybody. And that’s okay. There’s nothing wrong with that. There are perfect, great people that invest in ETFs, and there’s, it’s a successful industry in and of itself. There are trillions of dollars that are put into ETFs every year. I don’t know what Vanguard’s total market cap is, but it has to be monstrously huge with all the ETFs they manage, not to mention BlackRock on and on and on.

Dave (33:10):

So there is a place for ETFs if that’s what you want. And there’s nothing wrong with having a combination of different kinds of, of ETFs. It’s also nothing wrong with having an ETF is like a core position. And then having some other single investments, if that’s what you want to do, you know, maybe there’s a situation where you want to put the majority of your money in an ETF. You want to have some other little play ideas that you want to invest in other companies that are coming up or that you think are going to be great. And you want to put a little bit of money in there. There’s nothing wrong with that. And if that’s something that keeps you invested and keeps you interested in investing, I would encourage that ETFs are a part of 401ks and a major part of 401k’s.

Dave (33:58):

And there’s a lot of money in 401ks. And I think 401ks are a great investment vehicle. And if you are not investing one and you have the one available at your work, do it now, a run-out today and get one, get it signed up for it, because if your company matches, that’s free money that you were throwing away. So absolutely do it right now. So ETFs are great, and you could make a lot of money in them, and there are a million different flavors of ETFs out there. So if you want to invest in cannabis stocks, there’s an ETF for that. If you want to invest in ice cream shops, I don’t know if there is one actually, but that could be, but there are ones for airlines. There’s one for, I think, there’s one in Canada now for Bitcoin. There, they’re just any flavor you want.

Dave (34:43):

There are ETFs out there, and they’re ones that just simply match the stock market. And if that’s all you want to do, there is absolutely nothing wrong with that. You can make a lot of money. Let’s think about this, for example, last year in 2020, which was probably in our lifetimes easily, the worst year ever, the S and P returned 18, 19% for the year. That’s a pretty outstanding return for the year. If you’re just buying any, if you’re buying an ETF, matching the S and P return for the year, and you are 19% on your money for the year. That’s pretty awesome. Warren Buffett’s record over 50 years is around 20%. So yeah, that’s pretty darn good. So there are good ETFs. So I’m curious to hear what Andrew has to say about this. Well, you know, I’m not much of an ETF guy, and then it goes to my personality. I, I love looking at companies and knowing I have ownership in those companies and

Andrew (35:38):

There’s something there’s something there. And, and also, you know, I, I spend a lot of time on this. And I think if you’re somebody who is looking at individual stocks over ETFs, I would just really emphasize that you should have somebody who’s kind of helping you lead that path for you. So when I first started, that was like Warren buffet, where I had somebody to follow and model, as I learned more and more and more, and you know, like we’ve talked about before, there’s a language to money. There’s a lot to learn about it. And it like a language you won’t learn about; you won’t become fluent overnight. And so with the stock market and stocks and businesses, it’s, it’s very much the same way too. And so, you know, I tried to provide that through the e-letter. I give a lot of research with every stock pick that I am sharing.

Andrew (36:29):

And so whether you are following along with that, whether you are following along, trying to model other successful investors you’ve seen and kind of doing it yourself that way, or if you, you realize that that doesn’t sound like something that interests you and you just solely want to look at ETFs. What’s, I guess, interesting about the whole ETF versus stocks discussion is that the generalities and the big picture timeless principles that apply to each, you know, it’s, you can’t, you can’t learn about those things. So well, whether we talk about diversification, whether we talk about dollar-cost averaging, whether we talk about having conviction with the stocks, you have held them for the long-term, letting them compound reinvesting your dividends, that applies whether you’re talking about ETFs or individual stocks. Even if you want to take a hands-off approach and a passive approach, you can’t get around the fact that it’s your money.

Andrew (37:33):

Nobody’s going to care about it more than you do. And B, you still need to learn about really key principles that will keep your returns acceptable. If you lose those two things, you’re going to; you’re not going to do well. And I don’t care. You know, I don’t care what you say unless somebody is blindly doing it for you. You’re not going to do well unless you internalize those two things. And so that’s why I like stocks over ETFs because you get more of a sense of ownership. It’s a lot easier in my book to stay interested, follow along, and internalize those key concepts you need to succeed. But again, that’s me, and I have my personality, my own opinions. Somebody else has their own too. And there’s no right way to this. I mean, that’s a beautiful thing about the market.

Andrew (38:25):

It’s huge. There are many different companies, you know, I don’t have to buy all of the best companies to do well. Nobody does. We can, all, we can all make our path through different avenues. We have to be thoughtful, be mindful, be wise, and do things that I’ve worked for a very long time, and we just don’t necessarily need to reinvent the wheel on that. Just do. What’s worked well, and you’ll do well too. And I think it takes education to get there.

Dave (38:54):

That’s a great answer. Good advice. That’s good stuff for people to listen to.

Dave (39:00):

All right, folks. Well, that is going to wrap up our conversation for this evening. I wanted to thank everybody for taking the time to write us those great questions. Please keep them coming, guys. This is awesome. So without any further ado, I’m going to go ahead and sign this off. You guys, go out there and invest with a margin of safety emphasis on safety. Have a great week. We’ll talk to you all next week.

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