When you look at a stock exchange chart index over the years, there is a significant upwards trend. Indicating if you owned the index over the years covered, there would be some bumps along the line, but if you owned stocks over the time period you would have made more money than leaving your money in a GIC or a bank account.

One of the questions to ask is why? The first clue is to look at the stocks which make up the index 50 years ago, 25 years ago, or even 10 years ago. Are they the same? The companies your grandfather grew up with are not the same as you grew up with, fortunately some are, but not all. The names in the stock exchange change – for lots of reasons.

In order to keep things simple, how do you ensure that when changes occur, as they will, you continue to benefit? If you own an index fund, when the stock exchange changes the indexes, the losers are removed. The winners are kept and more winners are placed in the index till the next time. If you own a dividend fund, if a company does not pay a dividend or is threatening not to pay, the manager sells it. They companies get replaced by those that do pay dividends.

Thus a key to successful investing is limiting losses. Losses happen, you can not avoid them. Sometimes losses are good for the tax code allows you to deduct your losses against any capital gains so losses may not be such a bad thing, if you had capital gains. Dividend shares provide an automatic discipline to exit a holding, even one that you have an emotional attachment to.

There are always more questions than answers, till the next time – to raising questions.