Investing strategies for the commercial pilot?

[Heavy Rayn]

Hey everyone. Here’s a bit of a preamble, I’m a young instructor in Ontario. Luckily I’m still employed but the opportunity for career growth right now is obviously essentially nil, which isn’t a huge issue, I’m happy where I’m at. The fact of the matter is thought, that my future potential earnings have suffered due to the lack of potential career growth. I make less than the typical FO, and I won’t be getting into a right seat anytime soon and I’ll be even further from a left seat anywhere. This whole pandemic has got me thinking about aviation and economic downturns and how the two are often interchangeable based on past events. This has led me to the desire to diversify my earnings as I progress in my career. I’d like to hear from people that have been through other economic downturns as pilots and if/how they managed to diversify their earnings, either through an investment portfolio, real estate, side business etc to protect against wage losses.

My current efforts are directed towards building a high dividend yield investment portfolio as a means to generating passive income over years to come. My current plan is to reinvest dividends, but in an economic downturn dividends could be supplementary income, so long as your holdings are in “recession proof” or as close to recession proof companies as can be. Currently I own Enbridge, Telus, and RioCan, along with a few other non dividend companies. The real estate market also intrigues me, but it is too inflated for me to enter right now. Admittedly, I have never been one to budget and failed to manage money effectively, up until recently, as I’m sure most others also did when they were younger.

I rambled on a bit there and if that’s too long of a read for you, essentially what I’m asking is for advice in staying financially stable during economic downturns that may cause job loss. Have you found an effective strategy in diversifying your income? Thank you to everyone who is able to share advice.

[rookiepilot]

Wise thinking.
I commend you for your desire to be a "student".
Pretty good stocks, too

[Mostly Harmless]

A & W

RBC

[Eric Janson]

Disclaimer:- Not investment advice

Looks like we are in for a period of uncertainty in the Markets. The recent events with r/Wallstreetbets and GME stock has revealed what a rigged system this is.

You may want to look at Gold/Silver as an alternative means to protect what you have. By that I mean physical metal not the ETFs or other 'paper' products.

[digits_]

Disclaimer:- Not investment advice

Looks like we are in for a period of uncertainty in the Markets. The recent events with r/Wallstreetbets and GME stock has revealed what a rigged system this is.

You may want to look at Gold/Silver as an alternative means to protect what you have. By that I mean physical metal not the ETFs or other 'paper' products.

r/Wallstreetbets has been eyeing silver as well, might be too late to be a stable investment.

[ayseven]

You are on the right track. Spend less than you make and you will be fine. Best of luck to you!!

[stef]

An aviation forum is not an appropriate place to seek financial advice, although you can always count on a pilot to tell you their expert opinion on something they know little about. If you don’t want to take the time to educate yourself, seek professional advice from a !fee based! financial advisor. Not the bank. Not a commission compensated advisor. Fee for service is what you want.

I am not a professional advisor, but if you’re worried you might count on that money to eat or pay rent some day, I strongly suggest keeping your money in cash at least until you’ve learned what you’re doing. Stock picking is a risky endeavour best left to professional analysts.

[TalkingPie]

As someone who's had beers with plenty of high-earning airline pilots, I second the advice of not counting on pilots' financial advice. (I had one wide body FO, earning probably close to $200k, who simply couldn't get his mind around the fact that I, then in my early thirties with no house, had zero debt with my sub-6-figure income.)

Spending less than you earn is more than halfway there. Beyond that, I suggest considering ignoring the noise, not picking just a small handful of stocks, but instead investing in an index ETF or two. As far as I'm concerned, real estate shouldn't be an investment, it should be a place to live, especially in times when cashflow is in question. And I say that despite owning a 2,300 sq ft house on a 25,000 sq ft plot of land (in an area that is most decidedly not the GTA).

And it never hurts to have a Plan B; what else can you do if aviation stagnates?

You can trust me; I've never flown anything larger than a C172.

[DHC-1 Jockey]

I'm not here to give advice, but I could pretty much have written what the OP said. I'm doing the exact same thing as the OP, and I only started last year while being laid off. My father has been very successful with his investments and so I'm essentially just mirroring what he does. It's simple and it works.

1. Pick Canadian blue-chip stocks that have been around for a long time and pay dividends.
2. Choose dividend-paying stocks that are dividend "aristocrats" - that is they have been paying dividends for a long time and have a steady history of increasing their dividends.
3. Reinvest those dividends into more stocks. Your money is now making you more money.
4. Diversify your holdings: natural resources, telecommunications, banking, insurance, healthcare, etc.
5. Practice dollar-cost averaging. I contribute the same set amount each month rather than a one-time lump sum. That way, over time, you'll buy more units of a stock when the price is low, and fewer when it's high. Over the long run, that will prevent you from potentially doing a lump-sum buy when the markets are up and only be able to afford a few stocks.
5. Profit.

I use a TFSA because as I'm laid-off, I won't get the tax gains that an RRSP provides for higher-income earners. As well, any capital gains or dividend growth within the TFSA is tax free.

I'm only working with a portfolio of 9 diversified stocks to keep my life simple, and I've balanced it to mirror what the best-performing ETF's that mirror the TSX have. That way, I don't pay the Management Expense Ratios that ETF's have (even though they're low.. it's still an expense), and I get to use the dividends I earn as I see fit. The only thing I have to do is rebalance my portfolio every so often to keep it mirroring the ETF that is my benchmark. For me (largest % of portfolio to smallest): Banking, Railway, Energy/Gas, Real Estate, Utilities, Telecommunications and Retail. With any change left over from those purchases, I put into my "dark-horse" penny stock which is up over 200% since I bought last year. The ironic thing is that my dark-horse is in the aviation sector and is my best performer of my whole portfolio.

If the markets perform as they have over the past half-century and I keep contributing the same amount each month until I retire, I won't be able to completely live off the dividends these stocks will be producing, but it'll make retirement that much more comfortable. If I can contribute more once I'm back to work and moving up the pay scale again, that'll be even better.

Moral of the story: start early, be consistent, and keep it simple.

[200Above]

EIF, BNS, TELUS, TRP, FORTIS, SUNCOR, CIBC and a REIT (which is being taken private right away).

Already average $300+ a month in monthly DRIP dividends for doing nothing. I contribute automatic every month. Set it and forget it.

Unsexy, completely boring, dollar cost averaging, couch potato, easy, and prevents me from investing in more ACB and Blockchain.

I learned long time ago I'm not a swing trader and such. Buy and hold. 5% yield with good dividend growth over 30 years....... you're set.

Remember taxes too. The dividend tax credit is nice.. much more tax efficient than capital gains and interest, as I hold it outside my tfsa and rrsp.

I do this regardless of my AC pension.

Just my opinion.

[stef]

https://www.pwlcapital.com/the-irreleva ... n-starter/

[DHC-1 Jockey]

https://www.pwlcapital.com/the-irreleva ... n-starter/

I'm not saying to look at dividends first and then determine which stocks to pick. I'm saying I pick blue-chip stocks that also just happen to pay dividends. The long-term history of the stock is my first criteria, then I go with the ones that also have a long-term history of increasing dividends.

Those stocks will not only appreciate in value on their own, but their increasing dividend will also net you more money depending on which investment vehicle you have put them in.

[Heavy Rayn]

An aviation forum is not an appropriate place to seek financial advice, although you can always count on a pilot to tell you their expert opinion on something they know little about. If you don’t want to take the time to educate yourself, seek professional advice from a !fee based! financial advisor. Not the bank. Not a commission compensated advisor. Fee for service is what you want.

I am not a professional advisor, but if you’re worried you might count on that money to eat or pay rent some day, I strongly suggest keeping your money in cash at least until you’ve learned what you’re doing. Stock picking is a risky endeavour best left to professional analysts.

My gf is an analyst at one of the major banks, working in the financial district in Toronto, and I lived with four finance majors in university, whom I’ve also consulted with. I have done a ton of reading and have studied and researched endlessly into what I should buy initially. I’ve got that area covered as best I could at the moment. I’m just looking for more experienced aviators opinions and experiences they have over the years of investing, like are they saving a percentage of their per diems and dollar cost averaging with it. Basically I’m just trying to learn more about investing from those who will have had life experiences which I’m striving to attain.

[Heavy Rayn]

I'm not here to give advice, but I could pretty much have written what the OP said. I'm doing the exact same thing as the OP, and I only started last year while being laid off. My father has been very successful with his investments and so I'm essentially just mirroring what he does. It's simple and it works.

1. Pick Canadian blue-chip stocks that have been around for a long time and pay dividends.
2. Choose dividend-paying stocks that are dividend "aristocrats" - that is they have been paying dividends for a long time and have a steady history of increasing their dividends.
3. Reinvest those dividends into more stocks. Your money is now making you more money.
4. Diversify your holdings: natural resources, telecommunications, banking, insurance, healthcare, etc.
5. Practice dollar-cost averaging. I contribute the same set amount each month rather than a one-time lump sum. That way, over time, you'll buy more units of a stock when the price is low, and fewer when it's high. Over the long run, that will prevent you from potentially doing a lump-sum buy when the markets are up and only be able to afford a few stocks.
5. Profit.

I use a TFSA because as I'm laid-off, I won't get the tax gains that an RRSP provides for higher-income earners. As well, any capital gains or dividend growth within the TFSA is tax free.

I'm only working with a portfolio of 9 diversified stocks to keep my life simple, and I've balanced it to mirror what the best-performing ETF's that mirror the TSX have. That way, I don't pay the Management Expense Ratios that ETF's have (even though they're low.. it's still an expense), and I get to use the dividends I earn as I see fit. The only thing I have to do is rebalance my portfolio every so often to keep it mirroring the ETF that is my benchmark. For me (largest % of portfolio to smallest): Banking, Railway, Energy/Gas, Real Estate, Utilities, Telecommunications and Retail. With any change left over from those purchases, I put into my "dark-horse" penny stock which is up over 200% since I bought last year. The ironic thing is that my dark-horse is in the aviation sector and is my best performer of my whole portfolio.

If the markets perform as they have over the past half-century and I keep contributing the same amount each month until I retire, I won't be able to completely live off the dividends these stocks will be producing, but it'll make retirement that much more comfortable. If I can contribute more once I'm back to work and moving up the pay scale again, that'll be even better.

Moral of the story: start early, be consistent, and keep it simple.

I really appreciate the insight. Out of curiosity is your dark horse Drone Delivery Canada $FLT? I bought into it a bit as my spec play for my portfolio and have seen really impressive returns already. Mirroring an established ETF is an interesting idea. Thank you for sharing!

[Heavy Rayn]

I'm not here to give advice, but I could pretty much have written what the OP said. I'm doing the exact same thing as the OP, and I only started last year while being laid off. My father has been very successful with his investments and so I'm essentially just mirroring what he does. It's simple and it works.

1. Pick Canadian blue-chip stocks that have been around for a long time and pay dividends.
2. Choose dividend-paying stocks that are dividend "aristocrats" - that is they have been paying dividends for a long time and have a steady history of increasing their dividends.
3. Reinvest those dividends into more stocks. Your money is now making you more money.
4. Diversify your holdings: natural resources, telecommunications, banking, insurance, healthcare, etc.
5. Practice dollar-cost averaging. I contribute the same set amount each month rather than a one-time lump sum. That way, over time, you'll buy more units of a stock when the price is low, and fewer when it's high. Over the long run, that will prevent you from potentially doing a lump-sum buy when the markets are up and only be able to afford a few stocks.
5. Profit.

I use a TFSA because as I'm laid-off, I won't get the tax gains that an RRSP provides for higher-income earners. As well, any capital gains or dividend growth within the TFSA is tax free.

I'm only working with a portfolio of 9 diversified stocks to keep my life simple, and I've balanced it to mirror what the best-performing ETF's that mirror the TSX have. That way, I don't pay the Management Expense Ratios that ETF's have (even though they're low.. it's still an expense), and I get to use the dividends I earn as I see fit. The only thing I have to do is rebalance my portfolio every so often to keep it mirroring the ETF that is my benchmark. For me (largest % of portfolio to smallest): Banking, Railway, Energy/Gas, Real Estate, Utilities, Telecommunications and Retail. With any change left over from those purchases, I put into my "dark-horse" penny stock which is up over 200% since I bought last year. The ironic thing is that my dark-horse is in the aviation sector and is my best performer of my whole portfolio.

If the markets perform as they have over the past half-century and I keep contributing the same amount each month until I retire, I won't be able to completely live off the dividends these stocks will be producing, but it'll make retirement that much more comfortable. If I can contribute more once I'm back to work and moving up the pay scale again, that'll be even better.

Moral of the story: start early, be consistent, and keep it simple.

I really appreciate the insight. Out of curiosity is your dark horse Drone Delivery Canada $FLT? I bought into it a bit as my spec play for my portfolio and have seen really impressive returns already. Mirroring an established ETF is an interesting idea. Thank you for sharing!

[DHC-1 Jockey]

I really appreciate the insight. Out of curiosity is your dark horse Drone Delivery Canada $FLT? I bought into it a bit as my spec play for my portfolio and have seen really impressive returns already.

Yep exactly. I bought back when it was $0.60 and now it’s $2.10. It’s weird how two people can come with almost the exact same portfolio.

And on mirroring the ETF’s: why pay a MER to have someone actively manage the fund? I just copy the holdings they have and essentially get the same portfolio and return of the ETF without paying the management expense.

[Bede]

Stock picking is a risky endeavour best left to professional analysts.

Because the pros have a better track record than lay people?

[stef]

‘Because even highly skilled pros with access to far more information than is publicly available still get it wrong’ is not a viable argument that I should be picking stocks.

Op, Your roommates were finance majors and your girlfriend works for a bank? Guess you’re all good then. Best wishes.

[stef]

For those interested in learning to maximize your chances of success in investing by following a plan based on academic research, Ben Felix is a good source of information. He has a YouTube channel and podcast you will come across with a quick search.

[turbo-prop]

If you want EIF for the dividend you are out of luck.

https://ca.finance.yahoo.com/news/why-m ... 40097.html

[turbo-prop]

Hoping Thermabright THRM.V and Medmira MIR.V can gain some traction, might be a help to the airline industry once their product can hit full swing. Both are rapid covid tests. Therm being based on a saliva test, with 15minutes for results, and medmira using antibodies.

[rookiepilot]

An aviation forum is not an appropriate place to seek financial advice, although you can always count on a pilot to tell you their expert opinion on something they know little about. If you don’t want to take the time to educate yourself, seek professional advice from a !fee based! financial advisor. Not the bank. Not a commission compensated advisor. Fee for service is what you want.

I am not a professional advisor, but if you’re worried you might count on that money to eat or pay rent some day, I strongly suggest keeping your money in cash at least until you’ve learned what you’re doing. Stock picking is a risky endeavour best left to professional analysts.

My gf is an analyst at one of the major banks, working in the financial district in Toronto, and I lived with four finance majors in university, whom I’ve also consulted with. I have done a ton of reading and have studied and researched endlessly into what I should buy initially. I’ve got that area covered as best I could at the moment. I’m just looking for more experienced aviators opinions and experiences they have over the years of investing, like are they saving a percentage of their per diems and dollar cost averaging with it. Basically I’m just trying to learn more about investing from those who will have had life experiences which I’m striving to attain.

I'm not an aviator, I've been a full time trader / investor for 20 odd years, who happens to be a pilot. (And I still get it wrong. Everyone does)
A few thoughts -- for anyone in your position:

The reading is great. I read a ton, every day still. The focus on being a student is what leads to success, in anything.

There are many levels, from PPL to ATPL. No one but you can decide how far to take your own knowledge and risk curve. Knowledge is acquired and built upon.

Success is never from tips, and never from someone doing your thinking for you. A strong independent streak is required.

There are multiple styles. Bottom up, sales and earnings, and top down, which is a macro view of the world. More than one way to skin a cat.

It takes time. Years.

Come over to the TwitFin community, follow me if you wish, then develop and follow a feed of other pro's there who tweet on the market. Some great contributors.

@cessnadriver50

[airway]

Here is what has been working well for me:

I am a senior pilot at a major airline. I am not in personal finance.

1. Live below your means. Don't spend more than you make. When you do have to buy something, search around for the best deal always. Use coupons. Maybe no-name is fine.

2. Pay yourself first. If possible, have at least 10% taken off your pay check and deposited into a TFSA if you are making less than $50,000 a year, or a RRSP if you are making more than that. Then you won't even miss it. If your company has some kind of investing program like a share purchase program or RRSP matching, that matches your deposits by any percentage, take full advantage of it. If you are worried about losing money, sell all the stocks after the match happens. It's basically free money.

3. Pay off your credit cards fully each month. Don't invest anything until your high interest credit cards or payday loans (really bad) are paid off.

4. Buy a house and pay it off as soon as possible. Don't buy until you know you are staying for at least 5 years. Every time you move you will lose approximately $15,000 in fees and moving expenses. Generally, it is best to reduce other investments until it is paid off. Try to get a high enough down payment to avoid having to buy mortgage loan insurance. Do not buy the mortgage life insurance the bank will offer, or anything but term life insurance if you company life insurance is not enough. If nobody will be financially hurt if you die, you don't need life insurance. Some people say rent and invest the difference, but I still think the pros of owning are better than the cons.

5. If you are investing for more than 5 years, or have a Defined Benefit pension plan, buy 100% stock index ETF's (Exchange Traded Funds), that are diversified worldwide, but with a significant Canadian component. Don't sell if there is a market crash. My go to is Vanguard's VEQT:

https://www.vanguardcanada.ca/individua ... /?overview.

If you need the money in less than 5 years, move it into a Canadian Bond ETF, hopefully not right after a stock market crash.







.

[Boreas]

4. Buy a house and pay it off as soon as possible. Don't buy until you know you are staying for at least 5 years. Every time you move you will lose approximately $15,000 in fees and moving expenses. Generally, it is best to reduce other investments until it is paid off. Try to get a high enough down payment to avoid having to buy mortgage loan insurance. Do not buy the mortgage life insurance the bank will offer, or anything but term life insurance if you company life insurance is not enough. If nobody will be financially hurt if you die, you don't need life insurance. Some people say rent and invest the difference, but I still think the pros of owning are better than the cons.

I'll second what airways said except for this.

Mortgage rates are dirt cheap nowadays. I'm seeing rates in the mid 1% range. They are unlikely to go up anytime soon.

You should invest any extra money you have allocated for additional mortgage payments. Even a conservative 60/40 portfolio will give you better returns.

[ChrisB]

I really appreciate the insight. Out of curiosity is your dark horse Drone Delivery Canada $FLT? I bought into it a bit as my spec play for my portfolio and have seen really impressive returns already.

Yep exactly. I bought back when it was $0.60 and now it’s $2.10. It’s weird how two people can come with almost the exact same portfolio.

And on mirroring the ETF’s: why pay a MER to have someone actively manage the fund? I just copy the holdings they have and essentially get the same portfolio and return of the ETF without paying the management expense.

A word of caution: don't underestimate how risky these micro caps can be. I did a bit of research (back when it was $0.80) and passed because ceo compensation is above 2 million (insane for a company this size), and engineer and industry sentiment is that they're just a stock company, based on the limited information I could find. It has 3x'd since I looked at it which could be attributed to market hype and the dissociation of stocks with their underlaying companies (it has a cool name and cool ticker). I have a hard time seeing it as a long term investment with competition in China and the US with much deeper pockets.

Bottom line; I wouldn't put any more into it than you're willing to lose. Not to say it couldn't 10x over the next few years. Also as you've already heard, be wary of any stock advice on an aviation forum

Chris