Jan 272020
 

Why it’s hard to replicate success

After celebrating my millionaire status last year I reflected on my past and examined what factors contributed to my financial growth. I’ve realized that a big part of my wealth comes from simply being in the right place at the right time. 🙂 Sometimes good things just happen to me for no apparent reason. In order to make better decisions going forward I believe I need to understand what my undeserved privileges are, and not take them for granted.

Here are 5 advantages that I had no control over, yet have helped me grow my net worth. 😀 And due to the serendipitous nature of these advantages, it’s not likely for others to make use of them all.

  1. I’m a millennial.
    Fund manager Peter Lynch says regular retail investors have an advantage over professional stock pickers. We can identify opportunities in our areas of expertise. What has been the best performing stock sector over the last 10 years? Technology. 🙂 Which investor age group is the most familiar with technology? Millennials. 🙂 This inherent advantage has made me so much money as I followed Peter Lynch’s advice: Know what you’re buying. And know why you’re buying it. Millennials are better educated about stocks than any prior generations. We have so much information at our disposal. And we know how to use it. We grew up with Google, Apple, Amazon, Netflix, Tesla, and other tech companies. We know these brands intimately because we use their products and services religiously, and have a better sense of which brand will become the next big thing. This gives us a unique advantage over older generations. If something attracts you as a consumer, it should also interest you as a potential investment. 🙂
  2. I started my career in 2008.
    Lots of companies were restructuring in 2008 and didn’t have the budget to hire expensive senior workers. They could however afford to bring in juniors at that time. As someone who just finished school I was cheap, available, and eager to prove myself. Since most unemployed people were looking for jobs that required experience, I didn’t have much competition at my salary level. It didn’t take long before I landed my first job in the graphic design industry.
  3. I was given a large severance.
    My employment abruptly ended a couple of years ago. But I already had a contingency plan prepared. So I got back on my feet pretty fast. I actually started to make more money than before. 🙂 Plus I received a five figure severance package from my old employer since it was a no-fault termination. Things couldn’t have turned out better for me. 😀
  4. I’m not American.
    Several years ago I tried get into a venture capital deal in the U.S. I asked the company if they accept Canadian investors and they said yes. So I wired them $55,000 to put into a startup business which delivers online music streaming, and some other companies. I imagined my seed money was going to turn into $500,000 when the company eventually goes public. 😀 But a few months later they refunded my $55,000. It turns out they can’t accept my money after all because I’m not American. Thankfully my investment didn’t go through – I just found out that the music streaming company ceased operations last month. Its user base has been shrinking and it ran out of operating money. So I definitely dodged a bullet there. Phew. 🙂 I clearly didn’t know what I was doing. But something beyond my power saved me from making a huge mistake.
  5. I grew up in Vancouver.
    Vancouverites talk about real estate more than we talk about the weather. Most already own their homes, and the rest are just waiting for the right entry point. So growing up in this environment has made me naturally biased towards favouring home ownership. I purchased a condo in 2009. Property prices here have doubled since then. But the same can’t be said about other Canadian cities like Calgary or Ottawa where price growth is slower. A big part of my net worth today comes directly from the tremendous growth in the local real estate market. So where you live can have a big impact on your finances. And I just happened to be lucky enough to live in a city with a strong real estate market.

Making smart financial choices obviously helps. But not everyone can save and invest their way to wealth. Some are just born with certain privileges. Even Warren Buffett admits that luck is important to success.

Buffett said he is lucky to be born in America. If he had started his life in Africa he would have become some animal’s lunch because he can’t climb trees very well, lol.

We all have different stories, different beginnings. There are many things that we cannot change. But it’s important to develop a positive, growing mindset to face the world. The more we concern ourselves with the things we can’t control, the less we can affect the things we can control. 🙂

I believe everyone has innate advantages that aren’t shared by most people. 🙂 Let’s all keep our eyes open for opportunities that are unique to ourselves – or else they will pass us by and we will have squandered our privilege.

 

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Random Useless Fact:

Actor Leonardo DiCaprio has never been married before.

Sep 102018
 

Billionaire investor Warren Buffett recently celebrated his 88th birthday and told CNBC in an interview that he thinks stocks are still more attractive than bonds or real estate. In fact his company Berkshire Hathaway recently picked up some more shares of Apple Inc (AAPL) making it the largest position in the holding company.

The value of BRK.A shares increased by an astonishing 1,000,000% between December 1964 and December 2015. Meanwhile the S&P 500 market index increased by only 2,300% during that time. This is a testament to the will and dedication by Buffett & his team to create wealth for shareholders. I suppose you can say that if Berkshire has a will, Berkshire Hathaway. 😎

One thing to remember when investing is to keep it simple. You don’t have to be a genius to be good at it. 🙂

When we keep track of something it tends to grow. Building up investment experience is no different. That’s why every investor needs to track their investment decisions. This is going back to basics but it’s crucial to becoming better investors.

Investment Tracking 

This can be done by creating a simple table or spreadsheet like the following, and updating it over time. You can think of this like an investment journal. 🙂 I will demonstrate using the 2 new companies I blogged about purchasing earlier this year.

InvestmentTypeActionReasons for decisionDateExit plan
  • Parkland Fuel Corp (PKI.TO)
StockBuy 100 shares
  • Large network of retailers
  • Stable dividend yield (with growth)
  • Recession resistant
01/02/18Hold into retirement
  • Automotive Properties (APR.UN)
REITBuy 190 units
  • High 7% dividend yield
  • Relatively low payout ratio (60%)
  • Canadians love to buy cars
01/02/18Hold into retirement

 

Here are some additional columns we can add to track our investment decisions even more closely:

  • Timeline horizon (how long we plan to hold something)
  • Current market value of said investment
  • How to measure the success or failure of our decision
  • Any concerns that go against our final decision
  • Does the original reason for buying a stock still apply in the present day
  • What process did we use to evaluate the investment, eg: P/E ratio, Graham formula, or analyst predictions

No matter how good we are at evaluating investments, we’re eventually going to be wrong. Sometimes we may be wrong due to unpreventable reasons. But there are many factors that we can control, such as our own psychology and behavior.

Keeping a detailed investment journal of our decisions is the best way to remind us in the future of the feelings we had at that time to avoid making the same mistakes again. We’ll understand why we made the choices we did, whether or not it was worth it, the process behind our decisions, which strategies worked and which didn’t, and do our best to hopefully replicate past successes. 🙂 Hindsight is 20/20, but only if we remember how we thought and what we did in the past that lead to the current moment.

 

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Random Useless Fact:

What it’s like having a motorcycle.

Feb 092017
 

I recently watched an HBO documentary called “Becoming Warren Buffett,” which features the life of the man himself. The show gives viewers an extensive look at Buffett’s achievements, struggles, and challenges with his career, and probably more importantly, with his personal relationships.

Buffett started making money at a young age selling gum door to door, and delivering newspapers. He began trading stocks in his early teens and started college when he was only 16 years old. Today everyone knows him as the investment guru who is currently worth about US $72 billion, which makes him the second richest person in the world, right behind his close friend, William. 🙂

becoming warren buffett review

The documentary covers his family background and personal relationships. It felt like I was watching an honest biography about Warren. For the first time ever I got an inside look at the day to day events and lifestyle choices of Warren Buffett. It has been a real eye opener! For example on his way to work in the morning, he often stops by a McDonald’s and orders a Sausage McMuffin.

Doh! :/ No wonder I’m not rich yet. This whole time I’ve been ordering the Bacon ‘N Egg Bagel like a peasant. If only I had known his secret earlier. 😛 Below are some other important lessons I learned from watching “Becoming Warren Buffett.”

  • Live close to work. It takes Warren only 5 minutes to drive to his office everyday. And he’s been taking the same route for 54 years! Not wasting much time on commuting is why he gets so much done.
  • Be smart. Warren admits that he’s wired in a way that gives him an advantage over others when it comes to understanding businesses. He was always good with numbers starting at a young age and learning about the financial markets comes easily to him. Unfortunately for some, intelligence is largely genetic.
  • Read a lot. Every day Warren goes to work and reads books, newspapers, financial reports, or various other material for 5 to 6 hours.
  • Have role models in your life. In the documentary Warren said, “the best gift I was ever given was to have the father that I had when I was born.
  • Develop your own inner scorecard. Don’t let other people’s standards and expectations define who you are or what makes you succeed or fail.
  • Learn from people you trust. Business partner Charlie Munger helped Warren realize that in order to build immense fortune, it’s better to look for great businesses at reasonable prices rather than okay businesses at cheap prices.
  • Develop focus. Warren believes this is the most important quality to have if you want to be successful.
  • Have patience. The biggest factor to making money is time. Warren says you don’t have to be smart to become wealthy. You just have to be patient. 🙂

If we keep in mind these simple guidelines from Warren then I’m sure his wisdom will have an impact on our lives. Depending on different sources, Warren appears to have either an ISTJ or INTJ personality type. This mean he is a rational planner who likes to keep to himself most of the time. As an INTJ myself I understand what it’s like to live inside one’s own head sometimes. It’s probably why I can relate to his investment philosophy. 🙂

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Random Useless Fact:

Aug 152013
 

Earlier this year in April I started a swing trade which included some Suncor stocks. I mentioned how it was an undervalued company and how the stock will likely make a comeback 🙂 So I bought 100 shares at $28 each. Well I just heard on the news that Warren Buffett also bought some Suncor shares for his holding company Berkshire Hathaway 🙂 Hey, maybe… just MAYBE.. he reads my blog and that’s what gave him the idea to invest in Suncor as well (^_-) Hi Warren 🙂 I’m a big fan!

Buffett had picked up 17,800,000 shares of Suncor 😯 When the oracle of Omaha is confident enough to put over $500 million into a company, you know it’s a good investment 😎 Right now Suncor is the only Canadian holding inside Birkshire. Yay, go oil sands!  Represent Canada! I”m not sure what price Buffett paid for his SU shares, but I managed to get mine around when the stock bottomed, so this could mean I’m a better investor than Warren Buffett 😆 Or I just got lucky I suppose. But now I’m faced with a dilemma. I was planning to sell my swing trade when I made $1,000 from it, which I have now. The stock climbed to $35/share today. But now that the world knows Suncor is in Berkshire Hathaway’s portfolio there may be increased global interest in this company. Selling when Warren Buffett is buying may not be smart 😕13_08_suncorchart

Eventually though I will have to sell and most likely make a nice profit from it. But one drawback of making money through any kind of investing is those darn taxes on dividends, interest, etc (>.<) Here’s a simple tip to save butt-loads on investment taxes. Before you invest, give the money to someone else in a lower tax bracket whom you trust, and invest the money under his or her name instead of yours 😀 Continue reading »

Feb 182013
 

When we entrust money to a professional portfolio manager with billions of dollars under management we might assume that these people are better investors than you or I (^_^)  After all they get paid huge salaries and oversee important private equity funds, mutual funds, or even pension funds like OMERS, CPP, California Public Employees, NY State Teachers, etc. Everyone’s future to some degree depends on how well these professionals manage our money. But I was watching a talk by Warren Buffett and I found it a bit disappointing when even large fund managers can fall pray to the herd mentality.

Pretty much for every consecutive decade in the last century our lives have been improving and we’ve been getting wealthier, as measured by GDP per capita. But investors tend to look only at the past performance of a chart rather than the future outlook of the underlying economy. When stocks are doing well they get very excited and think “well I made money last year, so this time I’ll make even more.” And when times are bad they think “Stock market sucks. I’m going to do something else with my money.”  Pension fund managers apparently also follow this thought process. This is why we have huge swings in the stock market even though the economy tends to improve more gradually over time.

stock market, professional fund managers, dow historyBuffett said he wrote an article for Forbes in 1979 about investor behavior. He wrote how come that pension funds in the early 70s allocated 100% of their net new money into the stock market because they were wild about equities. Then when stocks dropped and became a lot cheaper in 1978, pension funds put in a record low of just 9% of their new money into stocks. Does that make any logical sense to you? (O_o)

Back to the talk he said “People behave very peculiarly…because they’re human beings. They get excited when others get excited….They get fearful when others get fearful. And they’ll continue to do so…This makes for huge opportunities…. The country will do very well over time, but you will see these huge waves [in the stock market.] If you can stay objective throughout that. If you can detach yourself temperamentally from he crowd, you get very rich. You don’t even have to be very bright. It doesn’t take brains. It takes temperament. ”

So if we can remain objective with our investment strategies and look at underlying fundamentals of businesses and the economy instead of how stocks have moved in the past then we can probably outperform even pension fund managers (゜∀゜)

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Random Useless Fact:  Moose have no upper front teeth.

moose taking a photo, professional investors