Doug Porter, chief economist at Bank of Montreal
First stock: Laura Secord
When I was 10 years old, long before the creation of registered education savings plans, my dad wanted to teach me about investing and decided to buy me a few shares of a company of my choice. My three brothers chose stocks behind sensible, venerable consumer brands like Labatt’s (which happened to have a big operation in my hometown of London, Ont.). I decided instead to go with my favourite company at the time: Laura Secord. Suffice to say, there wasn’t a lot of in-depth research on my behalf on the company’s financials, but I did feel like I knew the product side relatively well.
How it felt having that first investment:
I was mildly intrigued at the thought of being a partial owner (albeit a microscopically small share) of a chocolatier. I anxiously awaited the annual reports (mostly for the pictures) and even planned on eventually attending the annual meetings in person, operating under the assumption that free samples would be provided.
What happened to the stock?
The company eventually got taken over (by Labatt’s, ironically) and I vividly recall that I got less than what was initially paid for the stock. I believe it was a loss of about 40 per cent within a few short years. Instead of plowing the money into another consumer products stock, I opted to re-channel the proceeds into another company I was familiar with as a preteen: Bell Canada (now BCE). I held that stock for years and it restored my faith in equity investing.
Lessons learned from the initial investing experience:
The key lesson was that stocks could go down, even for what seemed to be a well-known and seemingly successful brand. The other lesson was how gratifying a nice steady dividend inflow can be, even when the price of a stock is drifting or falling.
It also taught me about stocks from an early age and may have played a small part in how I eventually ended up in a financial market role in my career.
How the experience shaped your investing style:
It’s hard to say whether that experience of losing money on my first stock made me a less aggressive investor, but I’m not a big risk-taker and I do heavily favour solid, dividend-paying companies to this day.
Naturally, in my position, I follow the markets closely, but I tend to be mostly a “buy-and-hold for as long as possible” investor. I try to buy solid companies with good long-run prospects and then ride through the waves.
While not exactly timing the market, I do tend to set target prices for a list of companies I may be interested in adding to my holdings and wait for opportunities. Occasionally, I will dabble in some short-term moves if I sense a sector/company that has been oversold, or spot a clear opportunity – but generally, I am not a trader. I am overweight Canadian equities, but that’s partly reflective of their favourable tax treatment (on the dividends), not a tactical decision.
Advice for others buying their first stock:
For someone starting out, I would recommend buying a company they know relatively well, that still has some room to grow, and preferably isn’t just today’s hot item. And after buying that high-quality company, by all means, track its progress – but be patient. Both the second and third stocks I bought had a long period (i.e., years) of lacklustre returns at one stage, but both eventually had excellent, robust returns over time. Patience is truly a virtue when it comes to equity investing.
This interview has been edited and condensed.
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