Thursday, March 4, 2010

Bank of Montreal Exceeds Expectations – I Got Lucky

Bank of Montreal’s (ticker: BMO) first quarter results exceeded analyst expectations. Starting from the depths of the market crash about a year ago, its stock has roughly doubled. In one way, my investment in BMO says good things about my investing temperament, but in another way, I was just plain lucky.

I owned BMO before the market crash, and bought more a few times while the stock price was low. The ability to ignore doomsday predictions and invest in an asset whose price is low is an important skill for investors.

However, the fact that I happened to lock in on BMO for a big bet and ride its ascent is mostly just luck. Fortunately for me, the recent good news about BMO business performance means that my bet isn’t likely to go south too soon. As much as I’d like to believe that I have some great stock-picking skill, I don’t believe I do. BMO could just as easily have continued drifting down in price for all I knew at the time I invested.

For this reason, I plan to continue my slow but steady transition from owning individual stocks to owning low-cost index ETFs. In the future, I plan to show my composure by adding new money to whichever ETF has had the worst recent performance rather than choosing an individual stock that has been hammered.


  1. Worst recent performance?

    That ETF would be the High Tech Flops Index from the Turkish stock exchange if I hear correctly. It's a bargain right now too!

  2. Big Cajun Man: You got me. I meant the worst recent performance among the ETFs I choose to own, which very likely would not include the "High Tech Flops Index from the Turkish stock exchange" :-)

  3. Don't forget that you have the option of hedging all or part of your portfolio with options.

  4. Mark: The last time I investigated the possibility of selling puts or using a collar, the numbers didn't work out well. However, that was at a time when option prices were high (high volatility). Perhaps it's getting close to time for me to try this again.

  5. I only wish I had bought more BMO during $25 range in early 2009. My return is 110%, but the $ amount is relatively low

    At least I own both TD & BMO, both outperforming others!

  6. Jerry: Don't agonize. You couldn't know for certain that buying more was the right idea.

    CC: I definitely want to get to the stage you're at, but I can't seem to convince myself to do it quickly. The percentage of my assets in index ETFs keep rising, but slowly.

    1. The second reply above is to Canadian Capitalist's comment:

      I have completed my transition to mostly low-cost index funds. And these days I simply add new money to the asset class that's below target. I find that EAFE has been beaten up of late, what with the troubles in the Euro zone economies.

  7. Michael, it is often said that it is better to be lucky than good.

  8. Maybe you should just become a recreational stock picker, like a guy that goes to Vegas and does a little gambling, but mostly watches shows. Indexers are the Liza Minnelli fans of the investment world (kidding).

  9. Gene: I took a helicopter ride to the Grand Canyon from Las Vegas once. I suspect I enjoyed that more than one of Liza's shows :-)

  10. I'm pleased with the recent news surrounding BMO. Hopefully we start seeing some dividend hikes with the banks in the months to come.

    Nice thread

  11. The Rat: I'd love to get more dividends, too. I'm not holding my breath, though.