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moneysense.ca, 8/12/08
Are you a De-Value Investor?
Today’s guest post is courtesy of Brad, who writes on the excellent Triaging My Way to Financial Success blog. You can subscribe to the feed here.
My father always taught me that there are three ways to do things in life: the Easy Way, the Hard Way and the Smart Way.
Investing based on this principle has provided me with more consistent success than I would expect if I had strictly stuck to the traditional two ways of doing something. Whenever I encountered failure early in my life my father would repeat these three methods and often later in reflection the best path to correcting my mistake would become evident. Often the Smart Way was a combination of the Easy Way and Hard Way found through collaboration, teamwork and looking at the bigger picture of interpreting my surroundings differently.
The Smart Way is a different interpretation of how things come together to make better sense and achieve higher efficiencies. My investment motto of “allow money and debt to work for you instead of against you” is based on this principle. When you invest you want to do things that make sense, are fundamentally sound and require very little effort or energy to maintain.
My interpretation of value investing is much more than simply looking at a stock’s quantitative value, underlying fundamentals and financial position. To me it’s about assessing all aspects of a business and asking myself if the intrinsic value of that company is more or less than the market price. Often there are times when I don’t need a massive stack of financial statements, insights into global operations or a tour of a manufacturing plant to get a sense within the first hour or two whether an investment is something that fits my style or requirements to own.
Based on the Smart Way principle I want to highlight some introductory areas that many individuals get caught up in when investing. A De-Value Investor is an individual investor who de-values their investments and opportunities for creating wealth by ignoring basic fundamentals and avoiding the bigger picture or Smart Way.
After each quote and explanation ask yourself if you are a Value Investor or De-Value Investor in each situation based on what you might do or already do. Each of the following statements I have heard in person within the last year.
“I’m going to borrow money this year to invest in my RSP.”
Any money you borrow to invest in your RSP will not be tax deductible in comparison to borrowing to invest in a non-registered account. While this may appear to be a great idea proposed by your bank or financial advisor any loan taken to borrow money to invest in your RSP will have no tax savings on the interest. Receiving a tax rebate for your RSP contribution to pay down onto the loan may make sense, but ask yourself how far ahead you might be if you are in the highest marginal tax bracket and paying full interest on your loan. Examining this situation the Smart Way could show you how you might save almost half your interest cost.
“An extra mortgage payment? I’ve got 25 years to pay off my mortgage. I need a new TV instead.”
moneysense.ca, 8/12/08









I am not a de-value investor but I still have some things to do before I become a value investor. Nice article by the way
Nice article Brad.. The thing that always amazes me is how people hold mutual funds that cost them more than 0.50% per year.
Smart would be to pay off the mortgage before any investments are purchased, and smart would be to have put all money in GIC’s in 2008 before the stock crash. A lot of smart people thought that GICs did not bring back very much money… and that they could gain 10 percent in stocks. When they lost 10-15 percent this year… I laughed when all my money was in GICs and money market altimira accounts.
RS & DGI – thanks for the kind words.
L505 – I think a number of investors look back now on their investment decisions with a much better view of what their risk tolerance should have been. The troubling fact is that when the markets recover, start making new highs and the fever once again takes hold only a few will actually remember that there’s still risk out there despite the attractive returns.
The frustrating part about the markets these days is that some stocks which continue to post higher and higher profits every business quarter are still getting their share price dragged lower and lower with the overall market. Although the temptation is to add to my position in these stocks, that would un-diversify my portfolio in a huge way as I already hold more of these stocks than a typical 5% allocation in a single stock name.
The more I learn, the more I know that I don’t know anything!
Thanks to CC and Brad for this opportunity to understand more about PF.
Nice article. I just want to announce my new entry into the blogoshere. CC, Preet and others have inspired me to give it a shot. Comments, suggestions etc for a newbie like me are not only welcomed but encouraged.
[...] Canadian Capitalist asks “are you a de-value investor?” [...]
“a tour of a manufacturing plant to get a sense within the first hour or two whether an investment is something that fits my style or requirements to own.”
I happen to work in a manufacturing plant and I’m not sure what anyone is supposed to get out of touring the facility. As an investor, I’d probably be looking around going, well that was fascinating but what is it that you wanted me to see? I see machines making things and forklift ferrying material around, though I kind of figure that’s what the capital on the balance sheet of a manufacturing firm was. I see there’s actually people employed so you can justify your expenses, which I already kind of figured since stuff is leaving the plant and getting sold. It feels like saying, “I’m not a mechanic, but show me the guts of your used car anyway so that I can be completely mystified as to whether or not its a good car.”
[...] The Canadian Capitalist: Are you a De-Value Investor? [...]
GSS – Part of my investing approach is to investigate the corporate culture of a company and to evaluate management prior to investing.
I’ve toured a number of locations for prospective investments over the years and I’m not so much concerned with how many forklifts the company has or their capacity to turn out so many widgets per hour.
Frequently you’ll find me talking to the workers on the floor of the production plant or near the loading docks in order to assess what’s happening at the bottom level of the company to see if it matches the same enthusiasm as that from the top.
From a productivity viewpoint that’s very important. If management is involving all employees into the operations of the company they have a vested interest and enthusiasm to continue working efficiently. I think most investors would be surprised what I’ve learnt from such conversations in passing.
[...] Are You A De-Value Investor? A post about value investing the easy way, the hard way and the SMART way with insights into a number of personal finance tips that can save you money! [...]
[...] Are You A De Value Investor – Via Triaging My Way To Financial [...]