In the only video interview I know of with him – aired on CBC’s The Hour with George Stroumboulopoulous yesterday – Derek Foster revealed that he took all his money off the table at the beginning of February 2008.
Video Interview Available Here: http://www.cbc.ca/thehour/videos.html?id=1063578735
Four Pillars also has a good post out breaking the development right here, “Is Dividend Investing Dead?” as does the Canadian Capitalist, “What Went Wrong with the Derek Foster Strategy?”
For many Canadians, Derek Foster has become something of a media sensation, scandal or financial (anti-)hero, depending on who’s doing the looking. He calls himself “Canada’s Youngest Retiree” (at age 34) and probably is, since no one else has come forward to challenge that fact. But that’s not the point. He’s just an average guy who made some very average (smart!) investing moves – the same ones I’m making with my DRIP plans – and was able to begin living off the dividends.
Is that so complicated or special? Nope. Check out blogs like Nirav’s: Living Off Dividends and Passive Income. Many people do it.
That said, Derek’s books were great reads. Great sources of info in a market very dry on how to do the whole dividend reinvestment plan thing.
The fact that he cashed out in this market shouldn’t be made into more than what it is – he’s operating on the basis of his best judgment like the rest of us. Just because he wrote a book in 2002 about buy and hold investing doesn’t mean he signed a social contract with all the Canadians who bought his book stating that he’d never sell those stocks. People are allowed to change their mind and update their views when new information comes along. This market has taken everyone by surprise, and if Foster sees darker times ahead I don’t blame him – it’s hardly an irrational judgment at this point.
Don’t forget to read Ellen Roseman’s Toronto Star article on Derek Foster, which just came out last week. Roseman has also written a fair bit about Derek Foster’s strategy, which is essentially the use of dividend reinvestment plans (though not exclusively – Foster also works with options and has been for some time). As much as I’m a big reader of Roseman’s columns and would recommend them, I have to say I don’t like the line in there about “Will he go back to work to support his wife and kids?” because it doesn’t also ask about his wife: does she work? or not? can’t she? Isn’t she also supporting him and the kids? We don’t know. Instead it makes Derek sound like a lazy lumpen and will definitely contribute to all this unfair Foster backlash.
I think Canadians need to get better at encouraging excellence and not hacking away at anyone who starts making it out of the proverbial crab bucket. We’re already known for being a nation of complainers. The Foster backlash seems to confirm that attitude. I say congratulate Foster for having been able to do what he did. He’s not a “guru” except to the sheltered people who had never read ANY personal finance/investment books before and in taking his off the shelf put all their knowledge into one big basket. These same people now apparently feel betrayed. That’s just crazy. I won’t continue the rant here anymore. Suffice to say that you need to be an educated reader: read a range of material, take what works for you from different places, don’t follow anyone like they’re a prophet.
I’m glad I was well on the dividend reinvestment path well before the Foster-mania – it’s enabled me to take it all with a detached, but interested, perspective. I would still recommend Foster’s first two books today (haven’t read the third and am not interested in selling puts at this point). For people who study the markets, they are still good strategies, because people who are students of the markets will also have other hedges in place.
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{ 3 comments… read them below or add one }
Passive income is certainly the approach we’re all looking for in order to enjoy early retirement. Rather than getting into dividends, I have found myself exploring various entrepreneurial ideas that may result in that income. I have always figured that business would take me to where I wanted to be.
However, having not really explored the idea of living off of dividends, I can’t say much about it. I’m interested to learn.
Trevor, all the better if you can go the entrepreneurial route because from what I know that will get you there faster. All the power to you! For me right now income investing and online work are my two main sources of alternative income. I think it’s hard to take on too much at once. I say, develop one avenue to the point where it’s working for you, then pick up another (unless you can keep developing the first even more).
Of course, putting income eggs in different baskets is a really good idea, especially in this economy. We’ve all seen how quickly dividend distributions can be cut.
I borrowed ‘Stop Working’ from the library and read and enjoyed it but didn’t change my strategy of investing in cheap index funds. I invest biweekly in TD e-series index funds but as I am reading about the dividend strategy in ‘The Lazy Investor’, I am inspired to open a brokerage account, buy my first share and then use the DRIPs and SPPs of the companies. But I have a lot more research to do and plan to read your posts on divided investing. It’s too bad about Derek Foster. I think his books are great for beginning investors like me and I appreciate them. They give new ideas and strategies for one to consider.