Issue #14 - Why Saving is more important than Investing

1. Personal Finance

Question: what is more important, how much you can save or how great your rate of return on investments is? 

Let's see:

Save 5% of your income | 10% Return on Investment

• Your income is $100,000
• You save 5% or $5,000/yr
• You invest at a ~10% return

→ In 10 years, you have $93,000

Let's swap these:

Save 10% of your income | 5% Return on Investment 

• Your income is $100,000
• You save 10% or $10,000/yr
• You invest at a ~5% return

→ In 10 years, you have $142,000. Almost 52% more.

Early in your career and investing journey, your SAVINGS RATE, meaning, how much of your income you actually don't spend on useless crap and invest, is WAY more important than the 10% return on investment.

In fact, by saving 10% of your income, you are therefore earning 10% on the best and most valuable asset in your portfolio - yourself.

Of course, with time and compounding, a 10% return and a 5% savings rate will eventually catch up (approx 23 years in this example), and outpace the 5% return.

Point is, start building good saving/investing habits early and your future report card will look excellent.

2. Stock Markets

When in doubt, zoom out. 

3. Real Estate 

Continuing to underwrite some interesting opportunities.

As usual, it will come down to pricing and vendor's willingness (or need) to sell. 

Worth considering, and granted without yet a true understanding of the future ramifications, is the rather ridiculous increase in the capital gain inclusion by the feds (I wrote a post on LinkedIn and also left a little video rant on Instagram)

In any case, maybe there will be a window of opportunity before June 25 to buy from a motivated seller who owns a property with a decent size gain, big enough to care about the tax increase and therefore willing to sell at a what we believe is a below market price.

Ultimately, tax isn’t everything. There has to be a story, and business plan to add value and deliver strong returns from day one. 

We’ll see if anything shakes loose.  

1 Quote

"I might not always be on time, 

but I’ll always leave early.”

-Me! As a young intern whippersnapper 15 years ago lol

A Question

Do you arrive early or fashionably late? What about the exit?

These days, for me: arrive early, leave early 😎

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Thank you

Eddie Gudewill, CFA

P.S. How I Can Help You

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