As I have mentioned several times already, I have had many opportunities to connect with many like-minded people through this blog. All of these meetings have been extremely pleasant. I certainly have learned a few things meeting up with these people, whether they are fellow bloggers or readers of this blog.
A while ago, Matt a fellow Canadian and DIY dividend investor reached out to me via email. He has been new in the FI blogosphere and recently started writing “Beating the TSX” series for The Canadian Moneysaver. He has also started a dividend focused blog called Dividend Strategy. He reached out initially because he wanted to reference a post that I have published.
After a bit of back and forth, turns out Matt had been travelling around the world for almost a year with his wife and their four young boys aged 7, 9, 11, and 12. They recorded their travelling experience on their travel blog Big Family Small World. Since Mrs. T and I plan to travel around the world for an extensive period of time in the near future with our two kids, I was immediately drawn to Matt’s story and wanted to learn more.
It may sound silly, but we immediately connected due to our love for dividend investing and travelling. As it turned out, Matt and his family were stopping in Vancouver while making their way back to Ontario. Wanting to pick on his brain a bit, we arranged to have lunch. Like many meetups I have had, we ended up talking about various topics for over 2 hours. We had to end the lively discussion because I had to go back to work (darn you work, you are so over-rated!).
Anyway, after talking to Matt, I thought it would be super neat to invite him to appear on this blog and answer a few questions. I believe readers will find his story fascinating.
Q1. I love that you guys travelled around the world with four kids for a year. What triggered this decision?
It was really a combination of things. As an emergency physician for thirteen years I was getting a little burned out. Most people wait until their “golden years” to travel extensively; but medicine also exposed me to the very real possibility that if we wait too long to do the things that are important to us, we might lose our chance. We’d been saving and investing for a great retirement down the road, but suddenly realized that we would much rather accept a more modest lifestyle and do something epic as a family now; fortunately, we had enough money to do that.
One night all six of us were watching a documentary called “Given”, about a family who travelled around the world for a year. When it was over my wife and I looked at each other: we were both thinking the same thing. Within 24 hours we had decided to backpack around the world for a year. I wrote about this shift in our financial mindset here.
Q2. How many countries did you visit? Was it a mix of fast travel and slow travel? What were your top three destinations?
In total, we visited twenty-two countries on five continents. It was very much a mix of fast and slow travel: from a whirlwind three-day road trip in Iceland to six weeks of settling into an amazing neighbourhood in Istanbul. Most of the time we’d stay in one place for a week or less. Longer and we felt restless; shorter and the logistics of planning, booking, transportation, etc. became onerous.
Everyone asks us what our “favourite country” was. Unfortunately, I find this an impossible question to answer, akin to asking me who my favourite child is! A top three list is a little better, but still hard. Here are the countries I would be most excited about going back to and why.
Iceland: such a unique and stunning geological island; I’d love to do a 2 – 3 week summer road trip with a good camera and a great pair of hiking boots. Then I’d like to do it again in the winter for the northern lights.
Turkey: We spent six weeks in Istanbul, which was incredible. The cradle of civilization with volumes of fascinating history, vibrant art, and delicious food. It was one of the most welcoming places we visited, and affordable too! We can’t wait to explore more of the country.
Peru: We spent almost four weeks in Peru, but could have spent four years. It has everything from ancient ruins (Macchu Picchu is only one example) to amazing cuisine to jaw-dropping art and textiles. There is so much to explore from the beaches of the South Pacific coast to the mountains of the Andes to the rainforest of the Amazon Basin. And it didn’t hurt that we often fed our family at a market stall for less than $15 CDN!
Q3. How did school work for the kids? You mentioned that you and your wife home-schooled the kids. Tell me about your philosophy.
Every parent is concerned about their children’s education, and we are no exception. The really interesting thing is how many preconceptions we held about what a “good” education looks like. Many things I thought were true have been turned upside down, like the idea that learning comes from teaching (it comes from exploring and doing), and that grades are a necessary feedback mechanism (grades serve standardization, not learning).
We allocated precious backpack space to curriculum books for each of the boys, but they were rarely used. There was much greater value in just giving them the time and space to investigate and research whatever caught their interest, whether it was history, geography, coding, language, or planning the Lego city they would build when they got home (Jake and Ben planned “Newbuildia” for about two months straight!).
Kids don’t learn well by being passive recipients of a force-fed curriculum; they learn when they are curious and interested. Our kids are also much happier humans when they are not forced to comply with the rigid structure of conventional schooling. It is validating that every teacher we know has been genuinely encouraging of this approach. In fact, even though we are living in Canada again, we are continuing to homeschool the kids.
Q4. Did you and your family plan out the entire trip before departing? How did you plan where to go and the travel itinerary?
Not at all! We had planned out the first month or so before we left, but the rest of the year was a blank slate. We did this for a few reasons:
- maybe we would hate travelling and want to go home
- maybe we would want to travel slower/faster
- maybe opportunities would arise that we would want the flexibility to pursue
- maybe cheaper flights/accommodation would present themselves
- it is both challenging and cathartic psychologically to have your future be a blank slate rather than predetermined
In general, we would plan 3 – 6 weeks in advance, looking for the cheapest flights that would gradually take us east around the globe. I’m amazed at the number of places and a variety of surprising experiences this approach afforded us from sailing in Mallorca to horseback riding in Peru.
Q5. How did health insurance work? Did you encounter any health scares while travelling abroad?
We made a conscious decision not to buy health insurance. First of all, I’m a doctor and can handle a lot on my own (especially with access to open pharmacies in much of the world). Second, in most of the places we visited, health care is far cheaper than in North America. And, third, we had the funds to be able to pay for health care if we needed it. We didn’t have any health scares during our year away, but perhaps we were lucky. If I wasn’t a physician, I think the few thousand for insurance, and the peace of mind it would provide, would be worth it.
Oh man, there are many! I got swindled out of more than $100 in Poland, which was deeply embarrassing, but I decided to write about it on our blog anyway. The response was amazing. Rather than laugh at my stupidity, our readers sympathized and respected my decision to share the experience. I learned that exposing my own vulnerabilities is 90% of turning them into strengths.
A few months later we were in Cambodia, about to fly to Vietnam. I had applied online for our visas in plenty of time, but only my wife’s had arrived. We showed up at the airport thinking we could sort it out there, but were turned away. No refund, no rebooking – nothing. It was 10pm and dark outside as all six of us piled into an Uber to go back to the Airbnb we’d just left, hoping they’d still have room for us. As we pulled out of the airport, our Uber driver, in broken English, welcomed us to Cambodia. When I explained that we’d already been there for a few weeks and were just turned away at the airport, he didn’t say anything. I thought he didn’t understand me, but then he got on his phone, said a few words in Cambodian and handed the phone to me. “This is my friend. I think you can sleep at his home.” A lot of people think the world is a scary place. Kindness is far more common than hostility.
Q7. How did you manage finances while travelling abroad? Did you continue banking and investing with a Canadian institution and using Canadian credit cards? How did you fund one year’s worth of travel?
First of all, long term travel doesn’t have to be expensive. We posted details of our travel spending here, but in the end, we spent about as much during our year away as we would have to live in Canada (about $100k). This is mainly a reflection of how expensive it is to live in Canada relative to many other parts of the world.
We opened accounts at a second financial institution, BMO, just in case something happened with our primary accounts at National Bank. Bank of Montreal also offered a no fee USD account, USD credit card, and no fee (on their end) cash withdrawals at international ATMs. The best credit card I could find was the Rogers World Elite Mastercard which gave us 4% cash back on all purchases. In the end, I wish we’d known to also have a Visa as some countries did not take Mastercard – weird.
How did we fund our year of travel? Our main source of liquidity came from the sale of our house before we left. We’d been pretty aggressive at paying off the mortgage and it’s value had just about doubled in the five years we’d owned it. So, we invested much of the proceeds and set aside a good chunk for our big year of adventure.
The truth is that we would have done this trip even if we had half as much money as we do. In a very real sense, it was an investment in us. The returns on that investment are, perhaps, less concrete than the numbers we like to see on our investment spreadsheets, but they are far more important to me. We all learned so much about the world, ourselves, and our relationships with each other. We bought the time and space to do that. I don’t believe money has a greater purpose.
Q8. Now that you are back in Ontario, are you planning on going back to work?
Yes. The biggest reason we decided to return to Canada was so that I could practice medicine again. Not so much because I missed it, but because I wasn’t ready to close the door on it forever. So, I am working part-time in a few ERs to see if it is rewarding again, doing less. I certainly have no desire to work full time – there are too many interesting things to pursue all the other days of the week!
It’s interesting to be working these shifts by choice rather than for the money. I’m still not sure how it’s going to pan out. A year from now I might be a doctor . . . or a painter, author, woodworker . . .
Q9. Tell me why dividend growth investing is so attractive. Should most people stick with index ETF investing?
What originally attracted me to dividend investing was David Stanley’s “Beating the TSX” series of articles in The Candian Moneysaver magazine. David, who had nothing to gain personally, prospectively tracked and published the results of a very simple dividend-based portfolio for two decades and the results were excellent: BTSX beat the index by 2-3% per year (on average). Because the method is so easy and transparent, it gave me the confidence to do it myself. Ten years later I find myself writing those articles and running a little blog (dividendstrategy.ca) to make that information available to everyone whenever they want it.
What attracts me to dividend investing is simply that it works. The evidence is clear that dividend paying (and especially dividend-growing) stocks have out-performed the broad Canadian index. Having said that, I can think of three good reasons to go with index ETF investing: 1. having less than $50k to invest, 2. valuing simplicity over superior returns, or 3. lacking the knowledge and confidence in dividend investing necessary to ride out market turbulence.
Q10. Give me the elevator pitch of the Beating the TSX portfolio. Why does BTSX work? And what’s your stock selection method?
Beating the TSX is very simple. We start with the TSX60 index and buy equal amounts of the top ten yielding stocks every year. Rinse and repeat. It is the Canadian version of “Dogs of the DOW”.
For the purposes of data tracking – and we have thirty years of performance data – we assume that stocks that drop off the list are sold at the end of the year and that the new list is, again, bought in equal parts. This clarifies the performance record, but most who use the system will hold on to good dividend-paying stocks even if they drop off this list because it is usually due to price appreciation forcing the yield down – a good ‘problem’ to have!
Over the last thirty years, BTSX’s average annual total return has been 12.48% vs. 9.73% for the benchmark TSX60. What this means in real terms is that $10 000 invested using the BTSX strategy 30 years ago would be worth $266,956 today. That same $10 000 invested in the benchmark index would be worth $132,643 – a 101% difference. This information is also on our blog here. I’m not aware of a single fund or strategy that is available to the average investor with a similar track record.
BTSX works based on five main factors:
- The portfolio consists of large, profitable companies
- We select for high dividend yields
- Dividend yields may be high because stock prices are depressed; i.e. there is a value factor involved in the process
- These stocks often have a long history of increasing dividends
- The process is easy to understand, and easy to put into practice for the DIY investor, thereby minimizing behavioural errors
Q11. When we met up, we talked a lot about the psychology of money and investing. Why do you think people can get so biased about money and investing?
People are biased about money and investing because we’re biased about everything. Our brains evolved over thousands of years to function in a tribal setting, reacting to immediate threats and opportunities, processing three or four salient inputs at a time when making decisions. So, we feel losses more acutely than gains (loss aversion), we anchor on arbitrary values (what we bought a stock at), and we seek information that confirms our views (confirmation bias).
We can’t change this wiring; the best we can do is put systems in place that minimize the need for judgment. This starts with having a written investment plan; make savings automatic; have specific criteria for buying (and selling, if you’re into that kind of thing). Ignore all the poisonous noise from the financial media. Most people should probably only look at their investments annually.
Q12. What is your number one advice for people looking to start investing their money?
Make a plan. It doesn’t have to be the best plan. You just have to know what you’re going to do before you do it. Most DIY investors fly by the seat of their pants and find themselves speculating on hot tips, timing the market, and generally exposing themselves to a thousand situations in which to make bad decisions. It’s nerve-racking and ineffective.
Get the evidence and use it to formulate a simple plan that suits your risk tolerance, i.e. one that you will be able to stick to through the next crash. Make these decisions and put them in action with a cool head, not one that is reacting to what Trump tweeted or Trudeau might say next week. Investing is not always easy, but it’s not complicated.
Thank you for much Matt for sharing your travel stories and your investment insights. It is very inspirational to hear that you and your wife travelled all over the world with four kids. Extended world travelling with kids is definitely a possibility, you just have to plan and put your mind to it.