I was honored when Avrom asked me to contribute to The Dividend Ninja. As a long time investor, in individual stocks, bonds, funds, ETFs, and real estate, I figured I had a lot to say. Acknowledging the Canadian origin of the site, I began reminiscing about the 5 years our family vacationed at a lovely Canadian resort just north of Toronto.
We selected that resort because we were just starting out as a family and were in the early stages of wealth accumulation. (Translation, we didn’t have a lot of money.) The hubby, daughter and I have always been an active bunch and we were drawn to the all-inclusive nature of the resort including delectable cuisine, sports competitions in tennis, golf, volleyball, bocce ball, and countless activities for the kids.
One of our most memorable “adult” events was the scotch tasting soirée. And who can say no to a lakeside buffet every day for lunch with the tough choice of pool or lake swimming in the afternoon?
If you’re wondering how this is a bargain vacation, let me explain. Back in the 1990s the U.S.A. dollar to the Canadian dollar exchange rate was terrific for those Yanks visiting Canada. One U.S. dollar fetched about one and a half Canadian dollars (or loonies as we learned to say). So those of us from the U.S.A. visiting the resort were paying quite a bit less than our Canadian counterparts. Today, that same U.S.A. dollar gets about $1.03 Canadian. Not much of a premium.
What Does My Canadian Vacation have to do With Investing?
I’ve been around long enough to see gold remain stagnant for decades. I remember when inflation was in double digits and you could get 12% on U.S. Treasury bonds. And late last century, dividends were shunned. After all, who cared about a dividend when the average technology stock was growing at 20+% per year?
Now, dividends are all the rage. One can certainly understand why; recent stock market appreciation is dismal, interest rates stink, and it’s tough to get a decent return in the financial markets.
Do not despair.
This afternoon I was inputting into Quicken the quarterly statement for a retirement account from my first real job. I was shocked to see that over the 9 years I worked at that position, I contributed $29,000 to the account. The account has quadrupled in the interim.
I bet you’re wondering in what this account is invested. The account is held at an old conservative firm and I elected 25% of my contribution to go into a fixed “annuity” (this portion was kind of like a savings account, only with higher interest rates) and 75% in a broad-based, low fee stock fund.
There was nothing fancy or glamorous about these investments. Over the ensuing decades, these funds mirrored the ups and downs of their respective benchmarks. When the stock market was in the sewer, so was the fund. Fortunately, the fixed part of this investment kept the lows from being so terrible or the highs from going through the roof.
Don’t panic when your investments go up and down. Look at your portfolio overall and don’t obsess about each individual movement up or down in one stock or fund. Over time, invest regularly, diversify your holdings, maintain an asset allocation suited to your risk tolerance and you will grow your personal wealth. And when the exchange rate is in your favor, go visit a great vacation destination!
What have you learned about investing from the market cycles?
Barbara Friedberg, MBA, MS is editor-in-chief of Barbara Friedberg Personal Finance.com where she writes to educate, inspire, and motivate for wealth in money and life. Learn about personal finance from a real-life Portfolio Manager & MBA professor!