iain money show presentation

Your Slow Mover Advantage Over Bay Street

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Money Show 2014 – Toronto

By: Iain Butler, CFA

• Fool.ca started at the beginning of 2013

• Active run of daily company related commentary

• Stock Advisor Canada launched October 2013

• Members only advisory service

• 1 Canadian and 1 U.S. recommendation per

month

• 23 active recommendations

• Just getting started!

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Motley Fool Canada

April 7, 2014 – CNBC – Dennis Gartman of the famed “Gartman Letter” announces he’s pared equity exposure from an average (?) of 100% to close to zero

April 21, 2014 – CNBC – Dennis Gartman – announces that he’s re-entered the market and has become “pleasantly long” stocks

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“Advice”

Overnight weakness following The World Bank downgrade, China's flip-flop on CNY and failed auction, Cantor's 'compromise-shattering' loss, appeared to be stabilized by a levitating USDJPY but when the budget deficit hit (as expected) it appears the market was hoping for a bigger deficit (and thus more to monetize and moar QE). Stock are diving lower with Trannies worst along with the Russell 2000 -1%. CNBC is already discussing if this is the pullback to buy for the next leg higher in stocks as money on the sidelines floods in...

- Zero Hedge 6/11/20144

“Stocks slide into the red for the week”

“Timing the market is a fool’s game, whereas time in the market will be your greatest natural advantage.” –Nick Murray

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A More Foolish Approach

“When you first start to study a field, it seems like you have to memorize a zillion

things. You don't. What you need is to identify the core principles -- generally 3 to

12 of them -- that govern the field. The million things you thought you had to

memorize are simply various combinations of the core principles.”

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John Reed:

• Unsuccessfully

• Long term (varying degrees to success)

• Short term, successful due to luck

• Short-term, successful due to manipulation/fraud

That's the complete list. Numbers 3 and 4 eventually become number 1.

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Four Ways to Invest……

Time is the most important variable in investing, but the one we have the least respect for. Buffett: "I think slowness turns off more people than anything else.“

Of Warren Buffett’s $60 billion net worth, $59.7 billion came after his 50th birthday, $57 billion came after his 60th.

Most investors’ definition of long term is the time between now and the next bear market.

Real estate feels like the best investment only because people hold it for the longest time.

Time is your last remaining edge on Bay Street. 8

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• Thinking we can predict leads to overconfidence. Overconfidence leads to misery.

• Knowing you can’t predict automatically forces you to plan for contingencies. It forces diversification.

• Investing works best with a wide margin of error. (This is true for most things in life).

• Graham: “The purpose of the margin of safety is to render the forecast unnecessary.”

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Life without predictions

• “The big money is not in the buying or the selling, but in the sitting.” -- Jesse Livermore

• Anyone who bought an index fund 20 years ago and checked for first time this morning can call themselves one of the best investors in the world.

• Sell your house in May and buy it back in October? Insane. But people do the same with stocks.

• Doing nothing isn’t an option for pros. So advisors trade, shuffle, rotate, panic, sell in May and go away, and generally make idiots of themselves. 12

“Do nothing" are the two most powerful

words in investing.

• Investors think dollar-cost averaging is boring without realizing that the purpose of investing isn't to minimize boredom; it's to maximize returns.

• Effort in investing increases confidence more than ability.

• Barber and Odean: “Investors who trade the most realize, by far, the worst performance.”

• “All men's miseries derive from not being able to sit in a quiet room alone." - Blaise Pascal

• The best investors in the world have more of an edge in psychology than in finance. 13

Try doing less.

• Don’t overthink.

• Don’t try to tactically time the market – dollar cost average or simply wait for the fat pitches to roll-in.

• Assume the market return will be an annualized 6-8% over long periods of time. Ignore year to year.

• Use the rule of thumb that the worse the market has done over the past 10 years, the better it will do over the next ten.

• Rebalance your mix of stocks and bonds every few years.

• Prefer companies that reward shareholders with dividends and buybacks.

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The Fool’s version of a stock tip

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Questions?ibutler@fool.com