Sunday, April 8, 2018

The Lazy Simple Idiot's Guide to Investing



I stole this phrase from the original Idiot Investor Derek Foster. Maybe he prefers the Lazy Investor, Simple Investor or Worried Boomer.

These are just some of the monikers he uses to describe himself and his investing style.

He is neither an idiot or lazy or even worried about anything, he just wants you to think that to prove what he's doing, is the way to stop work, retire early and maybe become a millionaire.

It's his sales pitch you see. The way he grabs your attention and sucks you into his belief system. Shameless really but it absolutely works for him and the gullible herd who believes his spin on investing.

His book 'Stop Working' written in 2005 was a how to guide on how he retired at age 34. Your decisive guide on I did it and 'here's how you can too'.

Reality check time. You can't unless you get lucky. What's that you say? Luck.

Yes, Derek got lucky making a leveraged bet (borrowed money) and then buying the stock of a global multi-national company and then turning around and selling his position at a massive profit.

Anyone can do this right? Oh sure but would you then be lazy or an idiot and would you be called a worried mills investor or loser gen x-er?

What about RISK? Isn't this a risky thing to do when it comes to investing?
It sure is. Just as sure as buying real estate in Toronto is over priced.


The Foster Pitch

  • buy stocks in companies you know and use
  • collect dividends
  • keep investing those dividends to buy more stocks
  • if I can do this so can you
  • live off your dividends
  • retire early maybe at 34 like me
Of course I'm giving you the condensed and sanitized version of what he's done. Those top four bullets are absolutely what most dividend growth investors do. I agree with them too. I only buy companies I know and use. I only buy those that pay a dividend and I then use the income to eventually buy more stocks.

I invest this way because it's fun. I'm not an idiot or lazy and neither is Derek.

Maybe I should call myself 'The Fun Dividend Investor Guy". You can use that if you want.

What's Missing

  • any mention of risk or any disclaimer, ever
  • the recommendation to use margin as he did
  • this strategy can't be duplicated for the majority of investors
  • what he's bought, how much he's bought and income produced
  • any portfolio updates at anytime
  • the income produced by having 7 kids, think Child Tax Credit at $1000 a pop to reduce taxable income. 
Now ask yourself, can anyone do this? No they can't. This is just what Derek does. 


Very little in the way of transparency but lots of investing generalizations. Derek can't teach you anything about strategy. It's what he does with his life and NOT what anybody can do. Are you going to have 8 kids to claim on next year's taxes?


Watch and Learn

What is Derek's number #1 investing tip? Keep it simple.
It's all about the common things that people use every day where there is repetitive business. Nothing new or exciting here and a true statement, also not original.

Warren Buffett says this all the time, he calls it a 'wide moat'. Long before there was a Derek Foster.

So why all this Foster love for a dividend growth strategy that has been used throughout history to create wealth?

Because Derek stopped working at 34 is why. He borrowed money and bought a lottery ticket on a stock and it cashed in.

He never does this anymore. It was a one time thing so he could go forth and breed, collect the tax benefits and give the middle finger to working life.

The Reality

Picking individual stocks is hard work and NOT simple. Derek is NOT lazy, he is an active speculator believing that he is smarter than everyone else and can make more income stock picking. Nothing wrong with that strategy and he has been very successful at it. This is what a speculator is and does.

He is also NOT worried because he can fall back on book sales, writing articles and collecting child benefits for extra income.

Derek has NOT stopped working and is NOT retired.

This is a myth continually perpetuated by newspaper articles tossing softball questions so Derek can come across that way. 

Other Options

Subscribe to Tom Connolly @ dividendgrowth.ca
(he is winding down his service soon)

Subscribe to stingyinvestor.ca Norm Rothery makes outstanding stock recommendations
Become a regular reader of Yield Hog by John Heinzl @ The Globe and Mail (subscribers only)

Read everything you can to edify your investing personal financial health by Rob Carrick @ The Globe and Mail

Subscribe to Moneysense Magazine and Canadian Money Saver


Recommended Reading:

1 comment:

  1. Many people get fixated on Retire Early and they don't look or think beyond that point. Retire at 34, 45, 55? How many more years will you & your spouse live and what will it cost to live the way you wish over that period. If one retires at 45 they will likely live another 45 years, possibly more.
    I didn't mind Dereks book but you raised good points. But what he proposed was not all bad, just exaggerated.
    I don't believe picking a selection of good DG stocks is that difficult. A bit of research and thought should do the trick. Secondly, by investing for Income growth once established is easy and simple to maintain. One does not need to spend a lot of time monitoring and especially worrying about price changes or selling of profits. Just buy, add, reinvest, hold and monitor your income growth.

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