Issue #3 - Dumb Money

Feb 02, 2024

Read time: 3 minutes

Hello friends! Thank you for the feedback last week, and to all the new subscribers - welcome! Let's dive in. 

1. Personal Finance

I had a number of inquiries about the budget template last week - you can download it here

+  cash in
-  cash out
= net cash flow

Simple, powerful.

Do this once a month - get your stuff on track - enjoy the rest of the year.

Make sure to count your Valentines day gifts - February 14th in case you were trying to forget :)

 

2. Stock Markets

My wife and I watched Dumb Money - The GameStop Story, a David vs Goliath movie of how retail investors (so called 'dumb money') took down Wall Street. 

Wallstreetbets, an online chat room with 6 million strong, said: if we all buy the stock, we'll bankrupt the Billionaires (who were betting the company would fail). 

And so it went, everyone bought stock, and held on for dear life (HODL). GME went from $2.50 per share in 2020 to $483 in 2021.

One hedge fund, Melvin Capital, went bust. 

The hype made some people hundreds of thousands of dollars, millions in some cases.

A nurse had a negative $45,000 net worth. Then she bought GME - at the peak of the GME hype, she had $500,000 in GameStop!

As she leaves for vacation:

--Coworker says: "nice, you sold and are using the profits for your trip!"

--She responds: "no, put the trip on my credit card and I'm flying first class."

But GME stock crumpled just as wildly as it went up, and she lost her $500,000...back to negative $13,000 net worth.

So, while trying to find the next GameStop is tempting, it's simply a hope trade with far reaching consequences.

Instead, simply invest in low cost ETFs, buy consistently and don't time the market.

Otherwise, it's just gambling. 

Anyway, the movie was excellent and highly recommend.

 

3. Real Estate 

At a Real Estate conference last week, a gathering of thousands of folks from all across the supply chain: tenants, landlords, architects, engineers, appraisers, property managers, contractors, developers, brokers, bankers, lawyers, politicians, asset managers, pension funds, etc. 

Tell me the Canadian economy depends on real estate, without telling me it depends on real estate.

That's all. 

 

1 Quote

"I am convinced that life is 10% what happens to me and 90% how I react to it...and so it is with you, we are in charge of our attitudes"

- Charles Swindoll

 

A Question  

If you could do just one act of kindness today, what would it be?

 

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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.