This article was posted on May 1, 2005.
Canada's Youngest Retiree, 34-year-old Derek Foster, tells you how he did it in his autobiographical how-to manual Stop Working. His retirement plan combined disciplined saving and a modest lifestyle with an investment approach that focused on buying stock in large, well-run, dividend-paying companies.
Foster graduated in 1993 with a degree in accounting, but came to realize that the field was painfully boring and decided not to make it a career. He spent a couple of years travelling in Europe, Australia and New Zealand while supporting himself with part time jobs. After returning to Canada, he progressed through a couple of telemarketing jobs and a temporary position with Revenue Canada processing tax returns before heading off to Korea to teach English. He retired at age 34 with his wife Hyeeun and two children even though he never earned more than $25,000 per year while he was working -- a notable achievement.
A Disciplined Saver, Savvy Investor
Mr. Foster began saving a minimum of $200 per month starting in 1992 when he was still in college. His investment philosophy was shaped by reading books like David Chilton's The Wealthy Barber, Peter Lynch's One Up On Wall Street and Ben Graham's The Intelligent Investor. He's also read all of Warren Buffett's Berkshire Hathaway Chairman's Letters.
Foster limits his stock portfolio to the shares of companies with a long-term record of increasing dividends. He uses the Mergent Handbook of High Dividend Achievers as a screening tool to find candidates for further review. He usually holds less than 20 stocks in his portfolio. His largest single holding is Canadian Oil Sands Trust, which now makes up about 13% of his portfolio after the recent run up in oil prices
He also took some big risks along the way when he detected an unusual opportunity in the market. For example, he bought cigarette maker Altria Group on margin in early 2000 when legal worries had beaten the stock down to the point where it had a 10% dividend yield. He put his entire portfolio into the stock and sold after it rebounded 33%. That's the kind of risk a 30-year-old is better able to weather than someone older.
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Copyright © 2005 John P. Greaney, All rights reserved.