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About Scott

I turned my infrequent forays into the stock market into a full-time adventure during the COVID-19 pandemic lockdown.

While I don’t have any stories of getting rich overnight on cryptocurrencies or the latest investing fad, I invite you to join me on my investing journey as I manage three portfolios – mine and both my parents’.

Throughout this journey, I’ll share the valuable lessons I wish I could tell my younger self, my evolving process for selecting companies, and answers to fundamental questions about investing and how you can start your own investing journey.

Each week, I provide an update on each portfolio, comparing their performance against the four major North American stock markets. Your participation in this adventure is more than welcome as I write about my experiences and the knowledge I’ve gained so far.

Living in the Greater Vancouver area, I’ve been investing on and off since the mid-1990s. With the onset of the COVID-19 pandemic, my IT consulting business essentially shut down. As a result, I immersed myself in learning about investments and, more importantly, the art of investing. I quickly realized the necessity for a system that would help me identify the right companies to invest in while minimizing the risk of losing money.

My background in Information Technology (IT) has led me to focus most of my investments in the technology sector, as I’ve found the most success investing in areas I’m familiar with. I try to follow the sage advice of legendary investor Peter Lynch, who suggested ‘invest in what you know,’ in order to leverage your personal expertise and insights. However, to have a diversified and less risky portfolio, I also invest in companies outside my ‘circle of competence.’ In those cases, I take to heart the wisdom of Warren Buffett, considered the greatest investor of all time, who advises caution when venturing beyond one’s areas of expertise. Consequently, I try to thoroughly research a company before committing a dollar to the investment. Drawing upon my IT background, I developed my own 4-part checklist process, which allows me to become very familiar with a company before deciding to invest. This continuous refinement of the attributes I seek in companies and the types of companies I want to include in my portfolio has been instrumental in navigating the dynamic world of investments.

Overall, my aim is to help individuals gain the confidence to invest confidently in the stock market and get their money working for them. To accomplish this, I share lessons from both my successes and failures to make investing more approachable for others who wish to embark on their own financial journey.

Read on to learn about my investing philosophy, investing strategy and what I invest in.

Investing Philosophy

When I first started investing, I had no investing philosophy. My initial goal was simply to beat the S&P 500 Index (S&P). After all, how hard could it be? However, as I learned more about the market, I came to realize that consistently outperforming the S&P is very difficult. There are millions of investors out there, including professionals and institutions led by highly intelligent investment managers, supported by an army of smart analysts and other investment professionals. These professionals make up approximately 90% of the investor pool. To beat the S&P average, I would need to outperform at least 50% of these seasoned pros and their support staff. The odds are not in my favor. While I may beat the S&P average in one year, thus outperforming 50% of the other investors, it’s not realistic for me to expect to consistently outshine the pros’ average.

Rather than play their game where I’m at a disadvantage, I now focus on my own my own plan to achieve my goals. I use time to my advantage and no longer worry about beating the Indexes. Nevertheless, it is gratifying when I do manage to outperform them. 😊

For me, investing is something I enjoy but it is also a means to an end. It provides a source of revenue that allows me to attain my goals and live my life as I choose. My investing philosophy has definitely changed since I made my initial investments and I expect it will continue to evolve as I grow and my needs change. For now, this is what guides me when it comes to investing.

  • Generate wealth: First and foremost, investing is about generating wealth for me. It is not about keeping up with the Joneses or simply investing with companies I happen to like for one reason or another. My investments must contribute to growing my wealth.
  • Stick with what I know: This one I borrowed from investing guru Warren Buffett who believes one should stay within one’s “circle of competence”. As I understand technology companies better than other sectors, I have a natural inclination towards investing in technology. I do venture into other areas for diversification purposes but generally I don’t spend time on areas I know little to nothing about.
  • Be patient: I recognize that sometimes, the best course of action is to do nothing rather than making hasty investment decisions. I avoid the temptation to chase quick profits and understand that building wealth requires steady, well-considered strategies.

I enjoy investing because it allows me to learn about different companies and industries. It also gives me a sense of control over my financial future. By embracing these guiding principles, I aim to make wise investment choices, minimize preventable mistakes, and maintain a disciplined approach to achieving my financial goals.

My philosophy has evolved to prioritize long-term growth and sensible decision-making over trying to beat the professionals consistently. As I continue to learn and evolve, I look forward to sharing my experiences and insights with others on their own investment journeys.

Investing Strategy

I am 100% invested in stocks—no bonds, real estate, Non-Fungible Tokens (NFTs), meme stocks, or any current investment fads. My strategy revolves around investing in a wide variety of companies that I believe will thrive over the next 5+ years, occasionally including Exchange-Traded Funds (ETFs) for diversification (ETFs are designed to track the performance of an underlying index, sector, or asset class).

To replace bonds, I opt for mature, blue-chip, dividend-paying stocks, such as utilities, real estate investment trusts, Canadian banks, and telecommunications companies. These stocks offer relative stability, regular dividends, and the potential for value growth, which bonds do not provide. To further grow the portfolios, I invest in more volatile growth stocks, primarily in the technology sector. Before committing to any company, I diligently conduct research to minimize risk and remain calm during inevitable market downturns like we saw throughout 2022. For additional diversification, I explore other sectors like finance, utilities, communications, and consumer discretionary, with a focus on market leaders.

Although each portfolio has a technology sector bias, I maintain diversification by investing in different themes (e.g., cybersecurity, electric vehicles, etc.), across various sectors, industries, company sizes, and geographical regions. My goal is to create resilience so that when one area experiences a downturn, the other areas can continue growing the portfolios or at least minimize losses. After facing a more than 60% decline in one of the portfolios in 2022, I now appreciate the value of being well-diversified and holding dividend-paying companies that continue generating income even during the downturns.

This is the strategy I follow:

  • Minimize risk through diversification: Avoid putting all your eggs in one basket. Stay well-diversified across companies of different sizes and from various sectors.
  • Buy and hold: Focus on investing in top-quality companies that are industry leaders or promising up-and-comers, with long-term potential for revenue and earnings growth. Holding onto these companies for the long term minimizes transaction fees and taxes. However, that does not mean I won’t sell an investment if conditions drastically change.
  • Buy the business, not the share price: Gain a deep understanding of the business and its potential to generate earnings. The share price will follow the company’s performance.
  • Avoid unforced errors: Realize that not every investment will be successful, but you can minimize preventable mistakes through thorough research.
  • Trust, but verify: Be an independent thinker and avoid FOMO (Fear Of Missing Out) or following the herd mentality. Conduct your own due diligence before investing in any company. Knowing the company reduces the risk of making hasty decisions and provides confidence during market downturns.
  • Have pride in ownership: Ask yourself if you would be proud to own the companies you invest in.
  • Play your game: Don’t feel pressured to keep pace with the market or outperform others. Every investor is unique and has their own financial goals. Define your own investment strategy, play to your strengths, Invest accordingly, and stay true to your goals.

What I Invest in

Following my investing philosophy and strategy, I adhere to a disciplined approach to reduce risk. I aim to own high-quality businesses with sustainable competitive advantages that operate in growing markets, preferably multiple growing markets. These companies should possess a strong balance sheet (with lots of cash and minimal debt) and be led by proven management teams capable of sustaining growth over an extended period.

Categories of Companies I Invest In:

  • Core: These are large, stable, top-quality companies that may not have the explosive growth trajectory of Growth category companies. However, like a train going uphill, they relentlessly climb and produce profits and predictable earnings year after year. These companies typically pay dividends, providing income even when the market is down. Examples include Canadian banks, the big three Canadian telecommunications companies, and CN and CP Rail. Companies like Apple and Microsoft have transitioned from Growth to Core companies due to their size, continued earnings growth, and dividend payments.
  • Growth: I expect these companies to grow revenues and earnings faster than the market average and ‘Core’ companies. They possess some form of competitive advantage that allows them to gain share in new or existing markets. The share price of these companies can be highly volatile, but the overall trend is upward. Often, these companies do not pay dividends as they reinvest earnings back into the business to fuel their growth. Profits are realized only when I sell shares. Examples include MongoDB, Celsius Holdings, The Trade Desk, Shopify, Amazon, and Nvidia.
  • Income: Also known as dividend stocks, this class of stock provides regular and steady income in the form of dividends. Instead of diversifying with bonds, I invest in more mature companies with stable earnings and a solid financial outlook. These companies pay a portion of their profits to shareholders as dividends rather than reinvesting all earnings back into the business. I seek companies that continually increase their cash payout, leading to a higher share price. I aim for the best of both worlds – a growing dividend and a rising share price. Examples include Fortis, Telus, and Real Estate Investment Trusts (REITs).
  • SFTF (acorns): These are newer, smaller companies (usually with a market value of less than $2 billion) that have a new product with great potential to disrupt an industry. The share price of these companies is very volatile, making them higher risk than other categories of stocks. Examples include FuboTV, AcuityAds, and Digital Voyager (Fubo is well down, Acuity doubled, and Voyager went out of business).

There is no right mix of these four groups or investments, but this is what works for me.

When deciding what to invest in, remember that it’s your money and your goals. Develop a mix of investments that allows you to sleep at night while helping you achieve your objectives and live life on your terms. It may be as simple as a few Index ETFs, a mix of companies like I’ve done, or something entirely different. The main thing is that it must work for you.