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.

Oct 282014
 

Retirement Number and The Rule of 300

The common question that comes up when people think about retirement is how much money do you need to retire comfortably? This is sometimes known as the retirement number. It’s a dollar figure that essentially represents financial freedom. 🙂 It’s important to realize that there isn’t a precise answer to this question because the retirement number is a moving target that changes all the time. However there is a general guideline that many financial experts use. It’s called the rule of 300.

14-10-retirement-number

The rule works like this. Imagine how much your average monthly expenses would cost if you retired. Then multiply that number by 300. The answer represents how big your retirement nest egg should be before you retire. This idea works because it’s the inverse of the 4% rule. Retirement Number = Monthly Expense x 300

Yay! Now you know how to calculate your retirement number. 🙂 But it’s important to realize this number only points you in the general direction of your investment target. It may be even way off from how much you actually need to quit your job. But at least it gives you a starting point to knowing how much to stash away into a RRSP or 401(K).

Why is the Retirement Number important?

By having a rough estimate of your retirement number you can gauge how much longer you still need to save for retirement. There are plenty of retirement calculators on the internet that you can Google. Most of them require you to input some probable assumptions and then they give you a result. But the 3 main factors that determine when you will retire are…

  • Your current retirement savings (including all RRSP accounts and defined contribution pension balances.)
  • Your rate of savings per year.
  • Your expected rate of return on your investments (after inflation.)

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