Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 527

Defence beats offence in investing

Offense sells tickets, but defense wins championships.
- Paul 'Bear' Bryant

The momentum of Nvidia's stock price seems unstoppable. Many are comparing Nvidia’s historic run to a certain stock from the late 90’s, Cisco Systems (I drew the same comparison back in May). And so I thought this would be a good time to revisit a section from my book, Low Risk Rules that compares an early-90s investment in Cisco to a more conservative alternative.

The results might surprise you. With the benefit of this hindsight, how might you build your portfolio today?

In the late 1990s, while the whole world was on offense, seemingly getting rich on the promise of this amazing new thing called the ‘internet’, I debated a friend who refused to play the growth stock game. Steady and stoic, he invested defensively in Canadian bank stocks. “Bank stocks never go down for long” he told me. I mocked his conservatism in what I perceived as stocks more well suited for a retiree’s account. “You go ahead and wait for your measly little dividends,” I told him, “while I get rich".

History, of course, has been very kind to the Canadian banks—a government-protected oligopoly who have just become more entrenched into the economic fabric over time. And not so kind to the internet stocks of the 1990s.

Does boring pay off?

So I became curious. What if, instead of chasing internet stocks back in the 1990s, one had just stuck to this boring approach that the younger me looked down upon?

I ran some numbers—keeping it simple with two very high profile and successful companies.

In the low-risk corner… Toronto Dominion Bank (now known as TD Bank)—a Canadian banking powerhouse that also built a strong US presence with retail branches and discount brokerage.

In the growth corner… Cisco Systems. One of the hottest stocks of the 1990s, and the most valuable company in the world for a brief period of time. It would have been too easy to pit TD Bank against Pets.com, so let’s go with Cisco. An undeniably great company, Cisco is still around (and thriving) today.

I started keeping track in mid-1996, just as the internet bubble really began to pick up steam. This allows us to take fully into account Cisco’s meteoric rise. As you can see in the chart below, in early 2000 the investment in Cisco would have been about 8x as valuable as your investment in the boring, old, plodding TD Bank.


Source: Morningstar.com

However, the subsequent crash wasn’t kind to Cisco at all. It was dead money for a decade, only starting to recover well into the middle of the 2010s. Meanwhile, like the Tortoise to Cisco’s hare, TD Bank plodded along and, except for a scary episode in the 2008-09 global banking crisis, has generally outperformed the faster grower.

There's more to it though

But here’s the thing with the chart above—it’s not quite accurate. It completely ignores the dividends you would have earned on the TD shares. When we take those dividends into account, and reinvest them in TD shares, the picture looks very different.


Source: Morningstar.com

This isn’t even close. Your investment in the ‘boring’ bank shares has outperformed the exciting, high-growth company by more than 2x, and it’s done it with a lot less drama.

My friend who refused to take part in the internet stock craze, who I openly mocked, had the last laugh. He has experienced decades of steady growth in his portfolio of safe, dividend-paying stocks. And meanwhile, I spent far too much time in search of the next great growth company, completely ignoring these massive wealth creation machines because I perceived them as ‘too boring’.

Lest you think I’m cherry-picking, the reality is that I actually gave the growth stocks the benefit of the doubt here. I could have chosen any number of optical equipment makers who languished post-crash, but instead I chose Cisco, a company that since the turn of the century has grown revenue at 4.9% per year and earnings at 8.5% annually for 20 years. That’s a solid track record through several economic cycles, including a crash that laid waste to the industry that Cisco sat at the core of. The problem, and the reason for the underperformance of Cisco, is that expectations were so high, that the odds were stacked against anyone betting that growth would continue.

It took me a few market cycles to finally learn that the simple investment strategy I had mocked is actually far superior to more elaborate, exciting, and seemingly intelligent strategies.

Most amazing of all is that it’s surprisingly easy to follow, as long as you don’t let your biases and weakness get in the way of doing what’s best. Always remember, as the old sports saying goes, defence wins championships.

 

Geoff Saab is the author of Low Risk Rules: A Wealth Preservation Manifesto, and writes a free newsletter at lowriskrules.substack.com.

 

RELATED ARTICLES

Why buying speculative stocks often proves irresistible

Irrational exuberance in growth versus value

The two best ways to maximise dividend income

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 628

Australian investors have been pouring money into US stocks this year, just as they start to underperform the rest of the world. Is this a sign of things to come? This looks at 50 years of data to see what happens next.

  • 11 September 2025
Exchange traded products

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement

We need a better scheme to help superannuation victims

The Compensation Scheme of Last Resort fails families hit by First Guardian and Shield losses, as well as advisers who are being wrongly blamed for the saga. It’s time for a fair, faster, universal super levy solution.

Investment strategies

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Economy

How bread vs rice moulded history

Does a country's staple crop decide elements of its destiny? The second order effects of being a wheat or rice growing country could explain big differences in culture, societal norms and economic development.

Investment strategies

Small caps are catching fire - for good reason

Small caps just crashed the party like John McClane did in the movie, Die Hard - August delivered explosive gains. With valuations at historic lows, long-term investors could be set for a sequel worth watching.

Defensive growth for an age of deglobalisation, debt and disorder

Today’s new world order appears likely to lead to a lower return, higher risk investment environment. But this asset class looks especially well placed to survive, thrive, and deliver attractive returns to investors.

Economy

Will we choose a four-day working week?

The allure of a four-day week reflects a yearning for more balance in our lives. Yet the reliability of studies touting a lift in productivity is questionable and society may not be ready for such a shift anyway.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.