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When I attended the Toronto Money Show in 2014, this session caught my eye: “Beating The TSX – It Works!”. I was skeptical but decided to check it out anyway. The auditorium was packed with investors. And at the front stood David Stanley – the originator of the ‘Beat the TSX’ system. Mr. Stanley, a retired University Professor, gave his audience the necessary backround before revealing how ‘Beat the TSX’ (BTSX) worked and its strong performance (12.47% compound annual return):
“After I took early retirement I looked at the stock price and total return data for the TSE35 bluechip index (predecessor to the TSX60). I was struck by how much the total return index with its reinvested dividends had outperformed share price appreciation. [Then I read] Michael O’Higgins book called “Beating The Dow” (BTD). His ‘Dogs Of The Dow’ uses an emotion-free method to select high-dividend stocks. From 1974 till 2012 (38 years) BTD has averaged 11.7% vs. 9.1% for the S&P 500 index, a difference of 29%. O’Higgins’ book became an instant investment classic and served to get me interested in dividend investing. I adapted the structured decision-making process of BTD to the TSE and wrote my first ‘Beating The TSE’ (BTSX) column in 1996.”
How BTSX Works:
David Stanley explained that “the list of S&P/TSX 60 stocks is ordered from high to low by dividend yield. The top 10 [highest yielding] stocks are purchased in equal dollar amounts and held for 1 year. Investors build up a portfolio of high quality stocks purchased at a reasonable cost. No secret sauce, hocus pocus, animal spirits, etc.” But he added that “former income trusts are not included in the list from which I select the portfolio. Why not? For BTSX, BTD, or any similar method to work, the index must be composed of only ‘blue-chip’ stocks”.
Over a 27 year period (1987-2013), BTSX deliverd a 12.47% compound annual return vs. the TSX Index’s 9.89% return. That means $1,000 invested in 1987, using the BTSX system, turned into $16,915. The TSX would have only turned that initial $1,000 sum into $9,607. But please note: history does not guarantee the same future performance.
If you’re interested you can take a look at David Stanley’s Toronto Show Money Show ‘Beating the TSX’ presentation here.
Read More About BTSX:
I was obviously impressed by ‘Beat the TSX’. So I interviewed Ross Grant, David Stanley’s successor, for my book, Market Masters. While it’s the last chapter of my book I probably get the most email comments about the system. For years, Ross Grant invested in TSX60 stocks based on ‘Beat the TSX’ and was able to retire at age 43. He beat the daily grind! (but that’s no guarantee you can realize the same exact outcome). If you’re interested in learning even more about the BTSX system, and Ross Grant’s path to financial freedom, you can read his book, Destination: Early Financial Independence.
Robin Speziale is the national bestselling author of Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca. He lives in Toronto, Ontario. Learn more about Market Masters.