Through Stock Investing By Shawn Allen, CFA, CMA, MBA, P.Eng. - - PowerPoint PPT Presentation

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Through Stock Investing By Shawn Allen, CFA, CMA, MBA, P.Eng. - - PowerPoint PPT Presentation

Oct 19, 2022 157 likes •512 views

Evidence That You Can Get Rich Through Stock Investing By Shawn Allen, CFA, CMA, MBA, P.Eng. President, InvestorsFriend Inc. 12/21/2013 12/21/2013 Growth of $1000 Return 10 years 20 years 30 years 40 years 50 years -2.0% 817

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Evidence That You Can Get Rich Through Stock Investing

By Shawn Allen, CFA, CMA, MBA, P.Eng.

President, InvestorsFriend Inc.

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Growth of $1000

Return 10 years 20 years 30 years 40 years 50 years

  • 2.0%

817 668 545 446 364 0.0% 1,000 1,000 1,000 1,000 1,000 2.0% 1,219 1,486 1,811 2,208 2,692 4.0% 1,480 2,191 3,243 4,801 7,107 6.0% 1,791 3,207 5,743 10,286 18,420 8.0% 2,159 4,661 10,063 21,725 46,902 10.0% 2,594 6,727 17,449 45,259 117,391 12.0% 3,106 9,646 29,960 93,051 289,002 14.0% 3,707 13,743 50,950 188,884 700,233

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Growth of $6000 per year

Return 10 years 20 years 30 years 40 years 50 years

  • 2.0%

54,878 99,718 136,355 166,290 190,749 0.0% 60,000 120,000 180,000 240,000 300,000 2.0% 65,698 145,784 243,408 362,412 507,476 4.0% 72,037 178,668 336,510 570,153 916,003 6.0% 79,085 220,714 474,349 928,572 1,742,015 8.0% 86,919 274,572 679,699 1,554,339 3,442,621 10.0% 95,625 343,650 986,964 2,655,555 6,983,451 12.0% 105,292 432,315 1,447,996 4,602,549 14,400,109 14.0% 116,024 546,150 2,140,721 8,052,151 29,967,128

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Stocks, Bonds, Bills, Gold and Inflation

Historic Real (After Inflation) Returns

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12/21/2013 12/21/2013 $0 $50 $100 $150 $200 $250 $300 $350 1925 1928 1931 1934 1937 1940 1943 1946 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

Total Real Returns, Large Stocks, Long Treasuries, T-Bills, The Dollar and Gold 1926 - 2011

Large Stocks Long Treasury Bonds T-Bills The Dollar

Gold

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12/21/2013 12/21/2013 0.0 0.1 1.0 10.0 100.0 1,000.0 1925 1928 1931 1934 1937 1940 1943 1946 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

Total Real Returns, Large Stocks, Long Treasuries, T-Bills, The Dollar and Gold 1926 - 2011

Large Stocks Long Treasury Bonds T-Bills The Dollar

Gold

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12/21/2013 12/21/2013 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945

Total Real Returns, Large Stocks, Long Treasuries, T-Bills, Gold and the Dollar Large Stocks Long Treasurys T-Bills Gold The Dollar

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12/21/2013 12/21/2013 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965

Total Real Returns, Large Stocks, Long Treasuries, T-Bills, Gold and the Dollar Large Stocks Long Treasurys T-Bills Gold The Dollar

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12/21/2013 12/21/2013 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Total Real Returns, Large Stocks, Long Treasuries, T-Bills, Gold and the Dollar Large Stocks Long Treasurys T-Bills Gold The Dollar

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12/21/2013 12/21/2013 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Total Real Returns, Large Stocks, Long Treasuries, T-Bills, Gold and the Dollar Large Stocks Long Treasurys T-Bills Gold The Dollar

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12/21/2013 12/21/2013 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Real Returns, Large Stocks, Long Treasuries, T-Bills, Gold and the Dollar Large Stocks Long Treasurys T-Bills Gold The Dollar

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  • 4%
  • 2%

0% 2% 4% 6% 8% 10% 12% 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

30 Year Compounded Annual Real Returns - For 30 Year Periods Ending 1955 Through 2011 Large Stock Return Long Treasury Total Return T-Bills

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Stocks Returns Over 30 Years

  • Real Returns, after 30 years, over and above

inflation, were always over 4% and sometimes

  • ver 8%.
  • At 4% real, purchasing power doubles every

18 years (quadruples in 36 years). At 8% it doubles every 9 years (16 times in 36 years).

  • But what about volatility along the way?
  • The returns were NOT steady year after year.
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100% equities $6000 per year invested

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Balanced 60% equities, 35% Corporate Bonds, 5% Cash $6000 per year invested

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Year After Start of Savings

Real Dollar Growth of $6000 per year savings (inflation adjusted) 57 30-year scenarios starting in 1926 through1982

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30 Year Ending Portfolio Values

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82

Year Savings Started

Ending Portfolio Value for All 30-year savings scenarios beginning in 1926, '27 etc. to '82

6k per year all equity 6k per year 100% Bonds 6k per year 60/35/5

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40 Year Ending Portfolio Values

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72

Year Savings Started

Ending Portfolio Value for All 40-year savings scenarios beginning in 1926, '27 etc. to '72

6k per year all equity 6k per year 60/35/5 6k per year 100% Bonds

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50 Year Ending Portfolio Values

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62

Year Savings Started

Ending Portfolio Value for All 50-year savings scenarios beginning in 1926, '27 etc. to '62

6k per year all equity 6k per year 60/35/5 6k per year 100% Bonds

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4% Withdrawal from $1 million portfolio over 30 years

The Safe Withdrawal Rate

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100% equities, $40,000 per year withdrawn from $1 million to start

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60% equities, 35% Corporate Bonds, 5% Cash $40,000 per year withdrawn

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Retirement Ending Portfolio Values

$0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82

Year Savings Started

Ending Portfolio Value for All 30-year $ 1 million retirement scenarios beginning in 1926, '27 etc. to '82

All equity, $40k withdrawal Balanced 60/35/5, $40k withdrawal

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0% 2% 4% 6% 8% 10% 12% 14% 16%

1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

Rolling 30 Year Returns - Nominal - For 30 Year Periods Ending 1955 Through 2011

Stock Returns Long Government Bond Total Returns

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0% 2% 4% 6% 8% 10% 12% 14% 16%

1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

Rolling 30 Year Nominal Returns - For 30 Year Periods Ending 1955 Through 2011

Stock Returns Long Gov. Bond Total Returns Starting Bond Yield

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0% 2% 4% 6% 8% 10% 12% 14% 16%

1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 2039

Rolling 30 Year Nominal Returns - For 30 Year Periods Ending 1955 Through 2041

Stock Returns Long Government Bond Total Returns Starting Bond Yield

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0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

1945 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029

Rolling 20 Year Returns - For 20 Year Periods Ending 1945 Through 2031

Stock Returns Bond Total Returns Starting Bond Yield

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Estimating Long Term Stock and Bond Returns

  • Long Term Stock Returns approximate:

– Real GDP growth, plus inflation, plus Dividend yield – What is the current estimate of this?

  • Long Term Long Bond Returns approximate:

– The yield on long term bonds at the start of the period – What is the current estimate of this?

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$0 $1 $10 $100 $1,000 $10 $100 $1,000 $10,000 $100,000

2011 2008 2005 2002 1999 1996 1993 1990 1987 1984 1981 1978 1975 1972 1969 1966 1963 1960 1957 1954 1951 1948 1945 1942 1939 1936 1933 1930

S&P Earnings $ versus U.S. GDP billions 1929- 2011

US GDP billions $ S&P Annual Earnings $

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Will The Stock Market Rise in 2013?

  • I don’t know…
  • Neither does anyone else
  • It’s not a useful question
  • Ask instead, is the stock market fairly valued at

this time so that it can rationally be expected to be a good long-term investment?

  • Ask instead also if you can find any individual

stocks that seem likely to provide a good return

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Will Stocks Beat bonds over the next 20 years?

  • Almost certainly, yes
  • A 20-year Canadian government bond purchased

today will earn about 2.2%.

  • A high grade corporate bond will earn an

additional 1.4% or so, for a total 3.6%.

  • This is before taxation and inflation
  • Stock indexes will likely earn an amount equal to

their dividend yield plus real GDP plus inflation. Reasonable estimates for this are in the 6 to 7% range as an average, but certainly not every year.

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Yield Adj. ROE P/B Adj. P/E Company $ CAN Price at this update Portfolio Percent 2.6% 12.7% 1.3 10.6 Wells Fargo 33.74 12.4% 1.7% 12.0% 1.3 11.2 Canadian Tire 71.79 12.3% 2.8% 8.7% 0.8 10.0 Melcor 15.65 12.1% 0.0% 7.1% 1.2 18.2 Berkshire Hathaway 86.56 8.8% 0.4% 4.3% 0.5 11.1 Bank of America 9.81 7.9% 2.2% 14.0% 1.9 13.8 Canadian Western Bank 29.36 5.0% 4.5% 22.4% 2.7 13.3 Shaw Communications 21.43 5.4% 1.6% 17.8% 2.6 15.1 Stantec 37.11 4.7% 0.0% 2.6% 2.0 79.0 Toll Brothers 32.06 3.4% 6.1% 10.5% 1.9 17.1 Boston Pizza Royalties 19.30 3.1% 3.4% 70.4% 9.6 17.5 Constellation Software 115.49 2.9% 2.7% 117% 18.4 8.6 Bombardier 3.70 0.9% 2.7% 41.7% 3.9 10.7 MicroSoft 29.37 1.7% Other Equities 1.2% 0.0% 0.0% 1.0 - Cash 1.00 18.1%

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Can You and Your Family Get Rich By Investing in Stocks?

Absolutely, yes, but it takes a long time and it requires a reasonable savings level

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When Should You Start a Long- Term Savings Plan?

Best time, about 50 years ago… Best available time… Right Now!