Stop Working: learn how you can with finance guru Derek Foster

Derek Foster had officially retired at the young of 34 and is Canada’s youngest retiree. He describes his journey in 3 books: Stop Working, Here’s How You Can (2005), The Lazy Investor, Start with $50… and no Investment Knowledge (2007) and Money for Nothing: And Your Stocks for Free (2008).

It took me several reading of Derek Foster books to understand the whole pattern. I learn about Derek Foster in the Canadian Business forum. It’s actually the only place where Mr. Foster interacts with readers, answering questions, starting discussions and so on. But even with this so little publicity, Derek Foster book Stop Working had become a bestseller in Canada.

About Derek Foster strategy

Derek Foster begins his investment life at the young age of 21. He made himself the commitment to save 200$ per month. He begins by investing in mutual funds and later move on to stocks and income trusts. Without saying more (you will have to read his books to learn about his strategy), Derek Foster had developed an interesting way to see investments. Personally, the reading of Derek Foster books helps me to understand that it’s possible to reach financial freedom. I had been investing in stocks since last year, while we were in the middle of a major recession, and I never regret my move.

The only thing I regret actually for different reasons is the choice of Derek Foster broker, TD Waterhouse. And you can imagine, whatever was in Derek Foster I try it, so I unfortunately open a broker account at TD Waterhouse. Just like Derek Foster...

Copying Derek Foster portfolio… and how are the results?

If I got it right, at the time he retired, Derek Foster portfolio was constituted of 17 companies. After his retirement, his portfolio had been reduced to 13 companies. After opening a broker account, I pick some stock ideas of my own. Those 3 picks come from Derek Foster portfolio:

-Pengrowth Energy Trust Income Fund (PGF.UN);
-Livingston International Income Fund (LIV.UN);
-Pembina Pipeline Income Fund (PIF.UN).

Having a mix of my own stock picks and Derek Foster picks in my portfolio allow me to have a relatively decent portfolio. I unfortunately had lost around 24% of the overall value of my portfolio. Even if I face major loses, I continue to invest in a regular basis in the stock market. My goal is to increase my dividend income.

I am currently at 1 791.32$ in yearly dividend income. It’s truly possible to make a living from dividend payments. At first (I was a total newbie in stocks at that time), I didn’t believe that there were companies out there willing to pay dividend to their unit or stockholders. After I went through this learning process, I finally purchased stocks and fund units. I am now receiving dividend earnings income on a regular basis and I love it.

On what happen on February 2009

I didn’t learn it right away, but on February 2009, Derek Foster did what some many people did in those last couple of months: he had cashed out his portfolio. In February 2009, Derek Foster sold all the investment he owned in his online brokerage account, a value of 472 000$. In an interview giving to Ellen Roseman of The Star he explained: "I held on all last year, but I've been doing lots of research and I don't think we're close to the bottom yet."

Derek Foster had been able to live on 36 000$ income provided by his dividend income. Some companies, like Livingston International Income Fund (LIV.UN) for example had suspended their dividend. Other had reduced their dividend. It’s currently the case with Pengrowth Energy Trust Income Fund (PGF.UN). So I can easily understand Derek Foster for selling his portfolio. He might be in need of money.

For my part, I didn’t sell any of my investments. I was shocked at first to learn that Derek Foster had cashed out his portfolio. It might have been a difficult decision to take. Today, the TSX had close at more than 10 500 points. I decide not to give up hope. My current goal is to reach a 2 000$ value in dividend income by the end of this summer 2009.

Conclusion

What Derek Foster had achieved in his 3 books is just extraordinary. It’s allowing people with small or no financial knowledge to discover the world of opportunities that represent the stock market. And this had probably changed my life for the best.

Eventually, I would like to retire early. If not, I will just continue working and write articles about investing on HubPages…