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:

Jan 012016
 

Year End Review – 2015

I remember 2015 like it was yesterday. 😛 I hope everyone is having a great New Year so far. Let’s review some of the biggest financial news and stories from 2015.

  • Falling commodity prices. – The Standard & Poor’s GSCI commodities index plunged 34% in 2015, down 80% from its peak. It’s now at the lowest level since 1999. This doesn’t directly affect me since I don’t work in that field, but I like how this keeps inflation at bay. Cheaper oil, metals, and other natural resources mean I pay less for transportation, furniture, groceries, and other goods.
  • China’s slowdown. – The Dow Jones industrial average dropped 11% in August on fears that everyone had underestimated China’s troubles and their global impact. This isn’t necessarily a bad thing. High rates of growth is unsustainable. And a market correction is an opportunity to buy stocks at a discount.
  • Interest rate hike in the U.S. – The Federal Reserve raised the short-term rate by 0.25% in December. This increases the value of the U.S. dollar. Meanwhile, the ECB, Bank of Japan, and China continue to go in the reverse direction to expand their money-easing policies.
  • Slide in the Canadian dollar. – Canada’s economy was weak in 2015 due to lower oil prices and we spent half the year in a recession. So naturally our loonie’s value fell compared to the $USD. This is good news for me since I collect a lot of dividends in $USD. 🙂
  • Continuing expansion of the freelance economy. – Uber, Airbnb, Etsy, contract workers, and indie app developers have helped to create an economy where more people are working in a freelancing capacity rather than a regular job in a traditional workplace. Even old trades like construction is being effected because carpenters can sell their services on sites like Thumbtack. I like this trend of becoming a more free and open society with less red tape.
  • Massive corporate mergers. – Mergers and acquisitions worldwide totaled $4.8 trillion in 2015, a new record. This may not be a big deal to some, but it has real implications for stock investors. For example, it’s how I made a large profit when Burger King bought Tim Hortons back in 2014.
  • Lack-luster stock market returns. – According to the CBC, the Canadian stock market index was down 11%. The U.S. markets did better but both the Dow and S&P500 were down. The technology heavy Nasdaq however was up 6%.
  • 16-01-stock-return-for-2015

Personal Goals

At the start of 2015 I set 2 financial goals for myself; have a net worth of $400,000, and make at least $16,000 in passive income. 🙂 Fortunately I was able to hit both by the end of the year. I’ll post my net worth breakdown next week. My pre-tax passive income came from roughly $9K in rent, $5K in dividends, and $2K in interest.

What I learned from the past year is that it is harder than ever before to predict how the markets will change over the next 12 months. This is why it’s important to have financial protection in place and to diversify our investments. Canadian stocks and bonds as a whole did not perform very well last year. But according to the Real Estate Board of Greater Vancouver, the price for a detached house in Metro Vancouver climbed 22% from the previous year. The average condo price was up 14%. The stronger U.S. dollar suggests Canadians who invest in U.S. stocks should have seen some good returns as well. 🙂 So a diversified portfolio of equities, fixed-income, real estate, commodities, and other currencies would have actually performed okay last year despite the stagnant economy in most parts of the world. On average I was able to earn a double digit return in 2015 on my overall investments. I’ll make some new goals for 2016. But first, I need to do some bookkeeping. I haven’t looked at my bank account since last year. 😉

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Random Useless Fact:

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Dec 302014
 

Financially speaking this has been the best year for me so far. Here’s a 2014 year end review and some updates about what’s been going on in my personal life.

Braces Removed

Earlier this year I decided to get braces for financial reasons. According to my research people with very straight teeth make more money than the average person. The total cost was $2,000 but I think this will turn out to be a great investment in the long run. So here’s an update. A couple of weeks ago I got them removed!

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My teeth look great and I’m more confident about my smile 😀 which, according to science, should help me earn more money. 😉 The only issue now is I have to wear a retainer pretty much all the time which makes me sound kind of funny when I talk lol.

Stock Markets Climb

Last year in 2013 the U.S. stock markets gained 30% so many investors decided to sit out in 2014 because they thought stock prices were overvalued. But the Dow in the U.S. gained 9% this year, and up here in Canada the TSX gained about 7%. These 2014 gains are on par with average historical stock market returns. This just goes to show that we should not try to predict future market performance using information from the previous year.

Buy stocks for the profitable companies they represent. For example, I posted my analysis for Dollarama, and explained with logical reasoning why this recession-proof business should outperform going forward. I also blogged about investing in Time Warner, and 21st Century Fox and discussed why these are excellent long term investments.

Today, Dollarama shares are up 34% from when I bought them. Both Time Warner and Fox shares have also returned double digits from my purchase price. No wonder my net worth has been growing like a weed. 🙂 It’s no big deal really. I’m not a stock picking wiz or anything. 🙄 Investing simply works for anyone who follows the basic principles of buying great companies at decent valuations! 😀

Oil Price Slump

Unfortunately, not everything is up this year. The one area of my portfolio that suffered lower prices was oil companies. Luckily I’m well diversified so the impact wasn’t that bad. The important thing is to hold onto large cap energy producers like Suncor and Canadian Natural Resources. Despite the oversupply of oil in the world Suncor shares are still worth more today, $37/share, than when I purchased it last year at $28/share. Large companies don’t get hurt as much when the sector in general underperforms.

Tim Hortons Resolution

Many of you have asked me what I plan to do with my 20 shares of Tim Hortons now that Burger King is buying them. There are usually a few options for shareholders when their company is being taken over. My 3 options, specifically in this case, are:

  1. Cash Tender – To receive $88.50 CAD for each common share of Tim Horton Incorporated tendered.
  2. Stock Tender – To receive approximately 3.0879 common shares of Holdings (to be renamed later) for each common share of Tim Horton Incorporated tendered.
  3. Cash & Stock Tender (Default Option) – To receive $65.50 CAD plus approximately 0.8025 of a common share of Holdings (to be renamed later) for each common share of Tim Hortons Incorporated tendered.

I am going with the default option number 3. I purchased Tim Hortons share for about $50 each back in 2013. Option 3 basically gives me an immediate 30% return on my investment, plus I’ll receive shares in the new holding company, which is a nice bonus. 🙂 I also don’t have to worry about taxes because the transition will take place in my Tax Free Savings Account.

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Dec 282012
 

It seems like other bloggers are doing their year end goals reviews so here’s mine. In January I set out to accomplish 6 goals by the end of this year. Let’s see how I did.

1) Make at least $4,000 more than last year.

  • (Pass) Got a small raise at work. But the biggest factor to this number is my growing dividend income. Pays off to invest as early as possible.

2) Put $10,000 into my retirement accounts.

  • (Pass) Took out a $10,000 RRSP loan from my bank earlier this year and threw that into my registered trading account at TD.

3) Put $5,000 into my TFSA.

  • (Fail) I only invested $3,000 into my TFSA this year because I ran out of funds after saving to buy a property. If only TFSA loans existed at my bank  :O(

4) Put $25,000 towards other investments.

  • (Pass) Bought a farm earlier this month with a $37,500 down payment. 

5) Have a six-figure investment portfolio.

  • (Fail) The net value of all my investments including RRSP, TFSA, farmland equity, and non-registered funds, comes out to only $97,800, so close (>_<) Off by 2.2%

6) Increase net worth by $40,000

  • (Fail) Right now I’m only worth about $37,000 more than this time last year. Off by $3,000. Unless we see a huge bounce in the stock market on Monday, it is very unlikely I will hit the $40,000 mark.

Overall I did okay. Three out of six is still 50% so that’s a pass in my books :0) Hope everyone else did well with their goals too.

setting goals for myself

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Random Useless Fact:  Student loans are usually forgiven if the borrower dies or becomes disabled  So it’s safe to marry someone who is deep in student loan debt because you will not be responsible for the remaining balance if something were to happen to your spouse. Some exceptions apply, for example, if you happen to co-sign for your partner’s loan.