Issue #2 - Slowly is the fastest way to get to where you want to be

Jan 26, 2024

Read time: 4 minutes

Happy Friday everyone, welcome back to the Journal!

January 2024 is flying by. My 2 month old daughter Julia Sofia has nearly doubled in size, and the days seem to only speed up. They say time moves slowly, then quickly, and so I want to take a moment to reflect on how precious each moment is.

So, without further ado - I hope you enjoy todays issue. 

 

1. Personal Finance

Treat your household finances like you would your business. 

Business owners track cash in, cash out, assets and liabilities. Identifying new revenue streams, wasteful costs, and if the asset/liability mix is optimal for the financial performance. It is just good business. That, and lawful tax reporting requires it. 

The idea today is to take on your household finances just as a business owner would. Too often there are old subscriptions and unused gym memberships bleeding the credit card. Or expensively leased cars that get us from A to B at the same speed (speed limits). Or there may be new income opportunities available (side hustles or working toward a promotion), or household items to sell on Facebook. 

Point is, start tracking your incomes and expenses, identify what bad debt you have that needs attention, and ask yourself - is your personal “business” being run efficiently?

This is where a monthly budget comes into play. It can sound daunting, but after one or two months of doing the exercise, you will be able to increase your cash flow and ultimately feel liberated.

I do this monthly, sometimes more frequently, and it always helps. 

There are online tools that are great, but I like my trusty spreadsheet. If you want to use it, let me know - it’s super easy to use. 

 

2. Stock Markets

On average, the stock market earns 10%/year. 

Many investors scoff at a 10% return - they think - that's not worth my time. 

So they either:

1. Gamble and try to pick the next Tesla or Microsoft, only to find out later that of the top 10 companies in the world today, 90% of them won't be in the top 10 in a decade from now, or

2. Avoid investing altogether.

Indeed, 10% doesn't sound like a lot. Invest $1,000 today and you make $100. Big whoop. 

But when you look at the 200-year history of the US Stock Market that turns a $1,000 investment into $4,800,000,000, you begin to understand this: 

Compound interest works slowly, then quickly.

So learn to treasure the 10% return, it's most likely the highest you'll get through an investment lifetime. 

And if you play your cards right, teach yourself and your kids about compound interest, and they teach their kids, and their kids, etc - a small investment today can turn something small into a dynasty.

Note: The S&P500 - the most liquid and innovative capital market in the world, was up 25% in 2023.

And it just hit an all time high last week.

 

3. Real Estate 

The message today revolves around diversification.

It's no secret that many of the great fortunes in the world have come from Real Estate. 

But not all real estate is made equal.

The last 18-24 months of rapid interest rate hikes have shown that many real estate investments that were previously 'great deals' are now under pressure. 

Not just rising mortgage rates, but construction costs, insurance rates and taxes have increased.

Development projects have gone belly up or require cash injections, which only exacerbates the housing crisis as we are in desperate need of new supply. 

COVID repercussions are impacting Hotels, and work from home preferences have crushed the Office sector. 

So now more than ever, it is important to diversify your exposures. You can't just buy real estate to buy real estate - you need to assess risks and opportunity by each asset class, geography, and project specifics, and spread your investment capital around a little bit.  

Here is a chart showing the dispersion of returns in the Canadian Public REIT sector for 2023.

The only thing I can say with certainty, is this time next year, the chart will look different. 

Again, not all real estate is made equal. And remember, high yield usually means risky yield.

 

 

 

1 Quote

"Slowly is the fastest way to get to where you want to be" - André De Shields

 

A Question

Ask yourself:

- am I investing time in what truly matters to me?

 

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If you enjoyed this issue, please forward this email to your friends to subscribe

Thank you

Eddie Gudewill, CFA

 

P.S. How I Can Help You

If you want to learn everything you need to know to be a great investor, you can take my self guided investing course

You will transform from being unclear and apprehensive, to a capable and confident investor.

If you aren't satisfied, there will be a 100% money back guarantee. 

Easy and actionable ideas to take you from Good to Great Investing.


Every Friday you’ll get three ideas from me, one in each of these areas: personal finance, stock markets, real estate.