With stock markets in turmoil and sky-high inflation, we haven’t had much in the way of good news as of late. But how does one respond when it seems like our economy is crashing? Do you stay invested or cash out? According to this week’s guest, now isn’t the time to panic. But that doesn’t mean the trouble is over. Kanwal Sarai has been a dividend investor for more than 22 years and started with just $500. He’s the founder of Simply Investing, a dividend-investing educational company designed to help people become financially independent and the all-new, Simply Investing Dividend Podcast. Kanwal has a natural ability to teach complex subjects in an easy-to-understand manner. He joins me to discuss why dividend investing now matters more than ever.

 

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. This episode of the Maple Money Show is brought to you by Willful. Did you know that 57% of Canadian adults don’t have a will? Willful has made it more affordable, convenient, and easy for Canadians to create a legal will and power of attorney documents online, from the comfort of home. In less than 20 minutes and for a fraction of the price of visiting a lawyer, you can gain peace of mind knowing you’ve put a plan in place to protect your children, pets, and loved ones in the event of an emergency. Get started for free at maplemoney.com/willful and use promo code Maple Money, to save 15%. Now, let’s chat with Kanwal…

 

Tom: Hi, Kanwal. Welcome to the Maple Money Show.

 

Kanwal: Hey, Tom. Thanks for having me.

 

Tom: Thanks for being back. This has been an interesting year, especially a few months where the market seems to keep going down. Everyone is talking about inflation. You see it in everything, especially things like groceries. Cars are getting more expensive. How do we navigate through all of this, especially if you’ve got a decent portfolio of stocks or ETFs? What should they be doing right now? Anyone that listens to this show probably realizes it’s not the best time to sell it all and put it under the mattress. What are your thoughts on where people should be looking at this right at this moment?

 

Kanwal: Tom, you’re absolutely right. This is not a good time. Inflation is going up in the US and Canada. We’ve seen it in other places in the world as well. Everything is costing more. You mentioned groceries. It’s the same with fuel. And now interest rates are also going up. That’s also making the situation the situation worse for everyday Canadians. Things are costing more. The question you asked is, how does someone who has got a stock portfolio, ETFs or index funds deals with that? I’ve been doing this for over 22 years and have gone through a number of crashes, personally. And I’ve survived through those. Most recently was in March of 2020 when the Coronavirus hit. We saw a big drop in the market. And now, like you said, the market is dropping every week, every month and it just continues to go down and down. The number one thing is, not to panic because the worst time to sell your investments is when they’re low. You’re then going to solidify your losses, so don’t do that. As dividend investors, if you sell a dividend stock or even a dividend ETF, you’re cutting of the supply of your dividend that are coming in from that investment. So, number one, don’t panic. That’s the biggest “golden rule” I can tell people for now. I know it’s not easy especially when it comes to money. We all get emotional about money. It’s your hard-earned money. And at the end of the day, nobody cares more about your money than you do. To see it go down month after month after month is tough. I’m in the same boat.

 

Tom: I’ve always found, personally, that I just trust in history and math. You mentioned the previous drop. I just looked today and basically, the TSX right now is roughly about the same high it was in March of 2020 when everything dropped. You don’t want to lose two to three years of your growth, but if you have some sort of long-term perspective like that—people were so concerned when it was dropping “from” that amount and now we’re dropping “to” that amount so far. In the long run, things always go up. I get what you’re saying in that, if you were to sell now, you’re truly locking in those losses instead of it just kind of feeling a little uneasy.

 

Kanwal: You touched on a good point there, Tom. When it comes to investing—and we’re talking about investing in stocks, whether directly into stocks, index funds or ETFs, either way, you’re investing in stocks at the end of the day. Your money is getting put into the stock market. You have to have a long-term perspective. What I tell people is, if there is any money you’re going to need in five years or less, whether it’s to buy a house, a down payment, a new car (or any car), a vacation or children’s education—if there’s any money you’re going to need in less than five years, do not put that in stocks. We’ve seen over and over again, in the short-term, the stock market is volatile. Prices go up and down all the time. We don’t look in terms of days, weeks, or years. We look in terms of decades. So, we’re thinking 10, 15 or 20 years down the road. When you have a long-term perspective, that gives you a little bit of confidence. Personally, for myself, I can sleep better at night even having watched my stock portfolio go down in value, I can understand that. I agree 100% with what you said. If you look at the stock market, the entire history over its lifetime, you can see that over the long-term, it’s gone up and it continues to go up. So, have a long-term perspective. That’s really going to help you here.

 

Tom: Yeah, I like the idea of decades for sure because you’ve got that quick rule of ‘72 where you assume the market will do about 7% than 10 years is exactly what it would take to double. It’s a very general rule. Certainly, you can find 10 years it didn’t work out that well. But at least it gives you that cushion. If you can roughly expect your money to double in 10 years, you can be pretty sure you’re not really going to lose within 10 years as long as you’re diversified and not selling at times like this and then going back in. You can do a lot of damage to yourself over that decade.

 

Kanwal: Yes, absolutely. And diversification is key. If you’ve got all your eggs in one basket, whether it’s crypto, Tesla or any growth stocks, you want to make sure you’re diversified. Even with dividend stocks, I tell people to make sure their portfolio is diversified. Don’t go and put all of your money in something like retail where 100% of your portfolio is made up of retail stocks because we know markets go up and down over the long term. Every six to seven years (on average) market cycles come down then go back up again. It’s the same thing with industries. You’ll have the oil industry where oil prices tank and takes down all of the oil stock. The price of those stocks come down. Within industries, they’ll have their own individual cycles. Again, if all of your money is retail stocks and the retailers get hit, there goes your portfolio. So, you want to be very well diversified.

 

Tom: I know you’ve actually helped a lot of people find individual stocks. Especially when starting out, I do like the idea of ETFs because how else are you going to be diversified if you’re only spending your first $100, monthly? You need somewhere to start so I think that’s a decent idea. Or robo advisor is another version of these ETFs where you can get started. If you want diversification, that’s probably the best way to start, I assume.

 

Kanwal: Yes, that’s a good way to start. Like you said, if somebody’s young, just starting out investing with $100, $500, or even $1,000, then that’s going to be the quickest way to get the maximum diversification. We’ve known each other for a couple of years now. I was on the show a little over two years ago. I am a dividend investor and what I’m teaching folks is how to select quality dividend stocks over time. I agree with you on the ETFs to begin with. But I think when your portfolio gets to a certain size, and as you get a job and are earning more as you progress in your career and have more money to invest then you may want to consider individual stocks. The dividends are absolutely key. And you’re right. If you look at the stock market the way it is today and compare it to March of 2020 when Coronavirus hit, we’re kind of at the baseline. Anybody who was invested in non-dividend stocks is now back to where they were in March because the stock market prices are right back to where they were whereas dividend investors (myself included) have been making money continuously. You get paid for owning those shares. So, regardless of the stock prices going up and down, the dividend gets paid, not on the stock price but based on the number of shares you own. If the number of shares I own hasn’t changed from March 2020 until today, I’m receiving dividends, continuously. That sort of becomes your margin of safety. It’s sort of like an insurance policy against the volatility we see in stock prices.

 

Tom: Yes, you’re getting that chance to… We can call it taking money out but I assume most people are reinvesting it. But to some degree, you’re making that money. And at times like this, if you’re reinvesting it, you’re buying those stocks at a cheaper price without having to come up with new money at a time where inflation is high. I’m not a huge fan of trying to time the market but I do like to lean toward if there’s bad news for a company or index, maybe there is an opportunity there. That’s probably harder to do right now because everybody is unsure about things like inflation and where the whole economy is going, in general. You don’t want to sell what you have. And you don’t necessarily feel comfortable taking any of your spare money to put into the market right now either so I like the idea of dividends—whatever potentially small amount someone is getting, is something they can reinvest without any new money going in.

Kanwal: Yes, absolutely! You’re not having to put any new money into your investments. You can take the dividends you’re getting and reinvest them. You hit on a really good point there. As we’ve seen the stock market come down, with prices coming down, again, as a dividend investor I’m looking at the dividend yield. Everybody knows the yield is dividend divided by the share price. So, if the dividend is $1 and the share price is $0.20, then you’re going to make 5% on your investment while you hold onto those shares. That’s the dividend yield. Let’s go with the same example. The dividend is $1 but now the share price is $10. The yield is now 10%. All things considered equal, would you rather make 5% on your money or 10%? So, as the share prices are dropping the dividend yield starts to creep up. And common sense, when the share price is lower you’re going to be able to buy more shares. The more shares you have, the more dividends you’re going to get. There is a benefit to that. But you’re right, because this is challenging. We’re in an environment now where interest rates are going up so people are upset about that. And rightly so because your mortgage is going to go up. Your car loans are going to go up. With inflation, everything is costing more now. It’s a challenging situation. I can’t come here and say, “Yeah, you should put another $10,000 into the stock market today because everything is cheap.” That’s very hard to do. It’s very hard for people to do that. What I would suggest is, you always want to make sure that margin of safety is there. You want to make sure you have—I’m not a financial planner so I’m not going to get into that but just make sure you’ve got a rainy day fund. You always have to have cash, liquid, in case you get sick or need a new roof on your house. You have to have a rainy day fund. That’s your immediate money. Then there are short-term funds you need for the next six to 12 months. What we’re talking about here today is money you don’t need for the next 10 to 15 years. You’re investing for the future. If you’re in a position where you still have a job, your partner or spouse has a job, it comes down to the basics… you want to spend less than you earn. That’s always number one. If you’re doing the opposite, then that’s a completely different conversation. We’re talking about individuals who are spending less than they earn and have a little bit of money left over. Even in this current situation, they’ve got a little bit of money left over and it is money they don’t need in the next 10 to 15 years. They yes, you should look at opportunities because as things are coming down, the dividend yields are going up. And we’re seeing quality companies—big blue chip companies that are now priced lower than they were six months ago. So, there are some opportunities there.

 

Tom: You mentioned the emergency fund and everything. Again, this is about the money you don’t need for at least 10 or 15 years. It’s not to empty out everything because you see what’s basically a sale on stocks. For one thing, you do need to keep some money available because who knows how all of this will turn out. Will it be this big, long recession for a couple years? Who knows? So, you don’t want to not have any of that money available to weather that. You could lose your job and have all sorts of issues so it’s not something you want to push to that point. You mentioned how different industries can rise and fall during these times—or even just normally. Are you looking at these by industries when you’re picking stocks? Or is it really more about individual stocks? I’m just thinking you could probably take advantage of this idea that an auto industry might peak and fall at different times than the grocery industry. So, by not being strictly in these wide ETFs, you might get a little bit of another sale opportunity that isn’t necessarily just as tough as these times.

 

Kanwal: Absolutely. This is why I prefer individual stocks, because I can pick and choose, not only the individual companies but the industries I want to stay invested in. It’s challenging to do that with an ETF or index fund, especially a broad-based S&P 500 index fund because they’re buying everything. I like to pick and choose what to look at. I’m just going to repeat what you just said (and I agree with it) nobody can predict the future. Nobody knows where the stock market is going to go. Is it going to keep going down in the next couple of days, weeks, months, or years? Or is it going to go back up next week? Nobody knows. As investors, what we have to do and what I teach and am passionate about is making sure that you’re buying quality dividend stocks when they’re undervalued or priced low. We’re not just going to go and buy any stock. We’re not going to go out and buy any dividend stock. We’re only going to buy quality stocks. Then, once you find the quality stock, you have to make sure that its undervalued or priced low—historically priced low. Even in good times or in bad times, you want to buy it when its low. Everybody has heard the phrase, buy low and sell high. But you have to understand when the stock is low. We can touch on that. I know how to figure that out because it’s really simple. Once you know that, you’ve built in your margin of safety when you invest any money. If you’re going to put $1,000 into Walmart—I don’t know if they’re undervalued today, but let’s assume they are. If you’re going to put $1,000 into Walmart, you’ve got a little bit of margin of safety knowing that you’ve bought the stock today when its historically at its low price. There is no point in buying a stock when it’s super high.

 

Tom: How do you find out if its historically low, especially right now? Do you also work in the overall market I assume you could probably look at most stocks right now and they probably look like a great deal. But there still have to be some that stick out differently than just the entire market being down right now.

 

Kanwal: Yes, absolutely. When I start looking at stocks I’ve got a spreadsheet. Or, in this case, I use the platform, the Simply Investing platform. We have a list of all the stocks that are undervalued today. From there, we narrow it down. What is a quality stock? Which industry are they in? We talked about this earlier, about diversification. I’m just going to give an example. If all of the oil stocks are down today and they’re tanking, I look at my portfolio and see I’ve already got enough oil stocks so I don’t want to buy any more. I want to diversify into different industries so I’m going to ignore that. You asked a question about how to know when it’s a quality stock when you’re looking at something. Is it good or bad? How do you know? For that, I created what I call the 12 rules of simply investing. This was really beneficial two years ago. And, if you don’t mind and you’re okay with this, Tom, if you can let me go over the 12 rules, that will help the audience quite a bit.

 

Tom: Yeah, for sure!

 

Kanwal: The 12 rules, think of it as a checklist. This is a checklist you’re going to go through. You want to make sure before you buy any stock, it passes the 12 rules. If it fails even one rule, skip it. Move onto something else. It’s not worth the risk. It doesn’t matter if somebody’s told the stock is going to double in price tomorrow and you should buy it, go through the checklist. If it doesn’t pass the checklist, skip it. Rule number one, do you understand how the company is making money? Really simple. Can you explain it to a 12 or 14 year old, or to your grandmother how the company is making money. Everybody knows McDonald’s. Everybody’s heard of it. They know how they make money, right? They’re producing food and selling it. Rule number two, 20 years from now, will people still be using its products or services? We want to invest in companies that are going to be around for the long-term and we don’t want to put your capital, your hard-earned money at risk so we want to make sure the company’s going to be around. If you can’t answer rule number two, or you’re unsure, skip it and move on to another company. Rule number three, does the company have a low cost competitive advantage? This is Warren Buffet’s example. I’m going to copy his example of thinking of a company, a corporation, as a castle. And around this castle is a moat. The deeper the moat, the wider the moat, the better it’s going to be at protecting itself against competitors. If you look at a company like Coca-Cola, they’ve been around for 100 years. They operate in over 100 countries. They have a very, strong competitive advantage. If you were to start a soft drink company today from scratch to compete with Coca-Cola, you’d have to spend billions of dollars in marketing and advertising and you still wouldn’t get to where they are today. That’s the brand recognition they have. Rule number four, is especially important today, is the company recession-proof? Let me ask you this quick question. If there is a chance you may lose your job, are you going to go out and buy a new car?

 

Tom: No, probably not.

 

Kanwal: Are you going to go out and buy an expensive vacation overseas—a family trip? No. And for that reason, we don’t invest in car companies. We don’t invest in airlines. We saw this in March of 2020 when Coronavirus hit. What did General Motors and Boeing do with their dividend? They cut it to zero. They just eliminated it and said, we’re not paying the dividend. We’re done. So, rule number four, today, is even more important than it’s ever been. Make sure the company is recession-proof. If there’s a chance you may lose your job, you still have to eat. When you come home at night you still have to turn the lights on. And, living in Canada in the winter, you have to heat your home. So, we want to invest in companies that are producing recession-proof products and services. Okay, rule number five, is the company profitable? Earnings per share, that’s how much money the company is making. You can look on it on a graph. We look at a 20-year graph that’s going up. We don’t want to see the graph going up and down, up, and down, or trending downwards. With up, we look at 8% or more. That’s sort of our cut-off point, 8% or more average EPS growth over 20 years. That’s pretty simple. Rule number six, is the dividend growing? We’re dividend investors. We want to make sure we’re getting paid and we want to make sure we’re getting paid more every single year. Now, I’ve been doing this for over 22 years. And I can tell you, in the last 22 years my stock portfolio value has gone down when we have a crash. Then it comes back up again. Then it goes down, comes up again. But the income being generated by the portfolio has gone up every single year. And that’s including 9/11 when we had a huge crash there. And in the 2008, 2009 financial crisis, a huge crash. My dividends, my passive income kept going up every single year. That’s why rule number six is important. We want to see 8% or more average growth over the last 20 years. Rule number seven, can the company afford to pay the dividend? What we do is look at the payout ratio. The payout ratio is really simple. It’s the dividend divided by the earnings. To give you a quick example, if the company earned $2 a share and they paid $1 a share to the shareholders, we take the dividend which is $1 divided by the earnings of $2 with that being expressed as 50%. So, that’s pretty simple. Fifty percent of what the company earned was paid to the shareholders and the rest of the money was kept in the business. They reinvested it to grow the business. Fantastic! Anything less than 75% is good. It passes rule number seven. To give you a bad example, the company earned $2 a share but paid $3 a share to the shareholders. That doesn’t make any sense but there are companies that do this. They’re borrowing money from someplace else to pay the shareholders. They’re paying a dividend which is much higher than what they earned. You wouldn’t do that in real life, right? You wouldn’t spend more than you have.

 

Tom: A quick question on that before we do the rest of the list. Is this how you (hopefully) avoid getting the Boeing’s and such? Does this show up in time? Because maybe things are looking fine for a certain while on these rules but anything can happen. On the other side of that I guess there are times where this is exactly how you catch, because they may keep increasing their dividends for 20 years then something goes sideways and all of a sudden they completely eliminate it—like that example. Or just cut it. That’s when those yield percentages start to not look so great. Maybe you thought you were buying in for a certain yield percentage and then things change. Does this help catch a lot of those or are there still surprises?

 

Kanwal: This does help catch a lot of those because if you look at rule number 5 and 6, we’re looking at 20 years. We’re looking at a 20-year average which is a very long period of time. I purposely chose 20 years because I want to see the company go through at least three or more market cycles—an actual crash, then going up and up again. That gives me the confidence they’ve done well and should continue to do well. It’s a higher degree of confidence. Nobody can predict the future. Yes, somebody could come out tomorrow—a company can come out tomorrow and say, we’re not paying the dividend anymore or they’re going to cut it. But this minimizes the risk. We can’t eliminate it entirely but what we can do is minimize our risk. Every rule is designed to minimize your risk and bring it down.

 

Tom: It’s still good insight to have this instead of just looking at yields. You can pull that number up and see it’s giving a 15% yield and say, “This is great.” But is it sustainable when they’re losing money right now or something like that. I like how these rules are fitting together to catch the different possibilities.

 

Kanwal: Yes. So, we’re looking at the 20-year history. Then we’re looking currently. For example, our next one is rule number eight—

 

Tom: Yes, I’ll let you keep going.

 

Kanwal: What we’re doing today is saying, what is the debt of the company? Anything more than 70%, skip it. We’re looking at debt 70% or less. There are companies today that have 400% 500% or 600% of debt. Why would you touch that company? Why would you ever want to own that company either individually or through an index fund? I don’t want to touch it. At 600% debt, whatever we’re in today, whether it’s a recession or what, if this goes on for another year, 18 months or longer, companies that are sitting at 600% or 700% debt are going to have a very hard time surviving. So, we don’t want to take on that risk. We’re looking at making sure the debt is 70% or less, today. Rule number nine, we want to avoid any companies with a recent dividend cut. If somebody just announced they’re cutting their dividend, stay away, skip it. Move on to something else. We don’t want to take that risk so we just skip it. Rule number 11… the first 10 rules was quality, was it a quality stock? Any company that passes the first 10 rules, good, you’ve got a quality stock on your hands. Now is rule number 11, is the stock priced low? We’re going to go (very quickly) through the three things we look at, the P ratio, 25 or less. That’s always a good sign versus a company that has a P of 400. That’s crazy. The second part is we want to look at the current dividend yield for the company and compare it to its average 20-year dividend yield. So, if the current yield is higher than its average, then the stock is undervalued and priced low. If the current yield is 5% today, and the average over 20 years has been 3%, perfect! If the current yield is higher than the average, the company is undervalued. This is the one rule I’ve never violated in 22 years. Of all the other rules, this is the one you don’t want to violate. Here’s a quick tip for all your audience members, I always go to this rule first and it’s very easy. Go to Yahoo finance or Google finance—any website. Look at the current yield. They’re not going to give you the 20-year average… I can get into a whole other rant on why they don’t because they have the data, but they’ll give you the 5-year average yield which is fine. Yahoo finance gives you the 5-year. So, if the current yield is higher than the 5-year, good! Now you can look at the rest of the rules. If it doesn’t and the current yield is less than the average, the stock is priced high, don’t even bother with the rest of the rules. You don’t have to waste time looking at the debt, earnings and all that stuff I just talked about. That’s a quick tip—you can skip all the other rules if the stock is overvalued. And the last part to this is the price-to-book ratio, 3% or less. Now, each one of these topics is a 20 minute discussion and we’re not going to do that today. But that was just quickly, for your audience. We have one rule left and this rule has nothing to do with data—looking at the company’s earnings, data, and all that stuff. Nothing to do with it. But, it has everything to do with you as the investor. So, rule number 12 says, keep your emotions out of investing. And it’s probably the hardest rule to follow compared to all the other ones. All the other ones are black and white. You’re going to look at the number and the company is either going to pass or fail the rule. Rule number 12 requires you, as an investor, to have patience and discipline. Patience to ride out market downturns, because they will happen. We’re currently in one right now, But in the next 10 to 15 years we’re going to get into some more… it’s going to happen. So, you’ve got to have the patience to ride out the market downturns. Then the discipline to follow the 12 rules. I’ve violated the rules in the past and it’s been horrible. There have been horrible mistakes. I can share a quick one with your audience here. In early 2008, Washington Mutual had a dividend yield of 10% so you can imagine, I have all these stocks—Canadian stocks, US banks, paying me 3% or 3.5% and Washington Mutual was 10%. I’m not going to name any names but a very close friend of mine texted me that morning saying, “You have to take a look at Washington Mutual. A 10% yield—you can’t go wrong! Even if they cut the dividend in half, that’s a 5% yield… you can’t go wrong!” Within 20 minutes, I put the order in to buy $4,000 worth of Washington Mutual stock. And I didn’t follow any of the rules. I didn’t care if the stock was over or undervalued. Well, guess what? In nine months, we got into the 2008, 2009 financial crisis, Washington Mutual went bankrupt. The $4,000 disappeared. So, I want your audience to learn a lesson from my mistake, and not make the same mistake I did. That’s what happens when you rush into things. I was greedy. I’ll be honest with you and your audience, I got greedy! A 10% yield looked good compared to a term deposit, GIC, bond or other stocks I had. You want to be careful. Anyway, those are the 12 rules.

 

Tom: Yeah, I’ve made that same mistake where I didn’t know what all the different numbers were (or meant) but figured a big yield must be better than smaller and I bought something. I can’t remember what, exactly, but I think it was related to oil or gold—something like that. And, sure enough, it went down to nothing.

 

Kanwal: And that hurts! It hurts when that happens.

 

Tom: It’s still there as a reminder—the few pennies that I never sold (because the shares exist) but they’re worth next to nothing. Yes, I did exactly that. I saw a big yield. I don’t remember what it was at the time. I’d have to look back at the history of it to see exactly what it was that seemed so attractive to not look at anything else about this company—none of the potential news that might have been out at the time, I really don’t know because I never looked. It was all about yield for me so I did exactly that.

 

Kanwal: Yes, but we can learn from our mistakes. That’s the benefit of looking back at the past. We can say, “Okay, I’m not going to make the same mistake again going forward.”

 

Tom: Yeah, exactly. The other thing I want to touch on quick was how wild inflation is right now and how that might affect us. Are there certain things you look forward to being inflation-proof? I know we talked about something like groceries. People are always going to buy groceries. And with inflation, potentially, those companies are going to be making more money which is great if you’re invested in them. But, just on the personal side of it, is there something we can do to protect against this inflation? It seems if inflation rates are around 8% and you’re expecting that 7% return, you’re already kind of behind at that point. So, what do you do to get around this? I guess a lot of it would be preparing in advance. But even if someone was looking at this right now, what can they do?

 

Kanwal: That’s a really good question. I’m not going to lie, it’s challenging. In the current environment, today, it’s extremely challenging. You hit the nail on the head there with inflation. The most recent numbers I was looking at this morning, in Canada, it’s 7%. Sure, if you buy a dividend stock today—or a dividend ETF that’s going to pay you 3% or 3.5%, you’re already losing because you’re at 3.5% and inflation is at 7%. What you can do today is to prepare for the next time this situation happens again in the future. Unfortunately, what’s happening today, I’m going to be completely honest with you and your audience, you can’t get a term deposit or GIC. You can’t go get a GIC for 12% today, anywhere, hoping you’re going to beat inflation today. Today, all I can suggest is to remember what I said, have your emergency fund ready. Have your short-term funds ready and set aside and prepare for the next time this happens. I started preparing 22 years ago when I started investing this way, the dividend investing approach. I started back then. I said, “Okay, things look good now but we know inflation’s going to go up. Interest rates are going to go up…” Historically, interest rates have been low for the longest time. They were almost at zero percent which is crazy. You look at that and, wow! This cannot go on forever. Interest rates have to go up at some point in time. Here’s the challenge. We’re in a market downturn now, but let’s go back to 2020, right before March of 2020. That’s when the Coronavirus hit and the market tanked. But let’s go to February of 2020. Eleven years back, we have had an 11-year bull run. Which means the market had been going up consistently for 11 years. For someone who is in their 20s right now, have never experienced a market crash, ever! They haven’t lived through it. They were 10 years old when the bull market started. Then we had 11 years of the market just going up, up, up, and up. TikTok didn’t help. YouTube didn’t help. The internet didn’t help because everybody just got on. Warren Buffet said this— I forget the exact quote but, when the market continues to go up, everybody looks like a stock market genius.

 

Tom: Yeah, exactly.

Kanwal: You can say anything you want on any stock ticker symbol and the stock’s going to go up from where it was the week before. We’ve never experienced this before—for most people. I’ve gone through it at least five or six times in the last 22 years. But we’re going through it now. What can you do now, today? You should prepare for the next market downturn. You should prepare for the next time inflation goes up. I know it’s high right now. It may go a little higher. I don’t know where it’s going to go. Nobody can predict the future but we should plan for that. Now, dividend stocks help. I know we’re getting short of time here so I don’t want to take all of your time here but anybody who bought dividend stocks 10, 11 or 12 years ago, they’re current dividend yield (based on their purchase price) is already in the double digits. Those individuals are already beating inflation because they’re making eight, nine, 10 or 12 % return, annually, on their dividends alone. That’s going to help those guys because they bought it before. If you haven’t, you need to prepare today to help you in the future, to beat inflation.

 

Tom: That’s a great point. Thanks for giving people some guidance and reassurance. Can you let them know about the service you have? Plus, let them know about the new podcast?

 

Kanwal: Yes, absolutely. The new podcast I just launched is called, The Simply Investing Dividend Podcast. I love talking about dividends. If you go to the podcast, that’s all we’re going to talk about. There is a new episode out every Wednesday. It’s all about educating folks, letting them know about the benefits and how to approach this. I’m also very happy to announce, Tom, the Simply Investing platform. What we do in the platform is apply the 12 rules—all the rules of Simply Investing we just went through, to every single stock, every single day, in the US and Canada. It’s a subscription-based service, a web app. When you log into the app it will immediately show you all the stocks that passed the rules, the ones that don’t and the ones that passed two out of rules—four or five… We rank everything. So, that tells you which stocks to consider for investing and which ones to avoid because that’s also important. You don’t want to invest in everything. That was a labor of love. It took over 2 ½ years to build from scratch and it was a lot of work. If anybody wants to know what it takes to build an app, contact me and I will let you know—it’s a lot of work! But we’re very happy. We just launched in January of this year. I think that’s a tool that’s going to help a lot of people pick and choose the right investments going forward.

 

Tom: Yeah, I think it’s a great way to take all these rules and have them there for you instead of having to work you way through the list, necessarily. The podcast sound great, too. So, if anyone is interested in dividends, they should head over there as well.

 

Kanwal: Anybody who does want to crunch the numbers themselves, and I know there are a few of you out there—there’s always that one percent of do-it-yourself investors who want to crunch all the numbers themselves, the Simply Investing course takes you through the entire 12 rules.

 

Tom: Great, thanks for being on the show.

 

Kanwal: Alright. Thanks, Tom.

 

Thank you, Kanwal, for explaining the merits to dividend investing, even when the markets are down. You can find the show notes for this episode at maplemoney.com/210. If you’re interested in the dividend stock canal Simply Investing provides, head over to simplyinvesting.com and use the coupon code maplemoney15 to save 15%. Thanks, as always, for listening, providing reviews, leaving me messages. I look forward to seeing you back here next week.