Issue #22 - Good things happen when you just show up

Read time: 3 minutes

Hey everyone! A couple of cool things from this week and a lesson.

One - I had lunch with my two former bosses from 2012 this week. Great catch up - the guys are amazing, they have built an incredible business and I'm so proud to have worked for them, learned from them, and to keep in close touch 12 years later. 

Two - remember the rant against DoorDash? It ended up reaching far and wide, and I was humbled to receive a 'like' from a major Instagram influencer with over 600,000 followers that really inspires me (Jeremy Schneider of @Personalfinanceclub). 

Lesson? Good things happen when you just show up. So pick up the phone, visit your long lost friend or relative, and reach out to people you look up to. You never know what joy and luck you might create.

1. Personal Finance

Following last week's 'loser cruiser' story and thoughts on buying cars, here is a post I made on Instagram this week on the subject.

Look at the chart. Look how fast that new shiny "asset" loses its value as soon as you drive it off the lot.

Instead, buy a good used car 5-10 years old and drive that thing into the ground.

Your upfront cost will be significantly less, so you can invest the rest into Index Funds.

And your total cost to own, over the life of the vehicle, maybe 20-25 years, will be a lot lower as well. Again, leaving more room for investing in assets that actually go up in value.

What are your thoughts on buying new vs used? 

2. Stock Markets

People always ask - where do you get the 10% return? Right here folks. 

The S&P 500 hit an all time high last week. It's 5-year compound return is 13% and it's 200-year compound return is 9%.

Of course, in the short term, daily, monthly, and annual returns are spurious at best.

So, there is no guarantee that the next month, twelve months, or 3 years will be positive. 

But with a sufficiently long time horizon, i.e. a minimum of 5 years, those returns are indeed achievable.

However, if you let your emotions get in your way, if you let the news cycle influence your trading patterns, you will always and forever underperform the broad market average.

This is why the accounts of dead people are literally the best performing accounts.

The best thing to do is invest consistently every month no matter what. 

Furthermore, it is a widely known fact in the investment business that the average investor's return severely underperforms the index and/or a mutual fund return simply because the investor attempts to game short term movements.

The investor sometimes gets lucky with such “timing” activity, which then leads to overconfidence bias, which then leads to big mistakes, ultimately setting fire to your future net worth CAGR with no way to ever catch up.

So just be careful out there!

Spend wisely and invest calmly.

3. Real Estate

After the rate cut last week in Canada, thought I'd check in on the publicly traded Canadian Real Estate Investment sector.

I was somewhat surprised to see that the REIT index fell following that announcement. 

Classic example of buy the rumor (REITs went up in anticipation of the rate cut) and sell the news (REITs declined on the official announcement). 

A few observations:

1. Don't make bets on short term announcements. 
2. When everyone says asset values will go up based on future rate cuts, maybe consider that herd mentality is often wrong (remember when the whole world said the stock market would be screwed if Trump won in 2016? Stocks gapped down the day of his win but then swiftly proceed to go on a multi year tear based on his business friendly policy).
3. Reminder to diversify. Some of the REITs individually are down 25-40% this year, while the overall REIT index is down only 8% and the broader Canadian stock market - which includes exposure to the REITS themselves, is up 4% YTD.

1 Quote

It's impossible to waste time when you do everything with intent.

- Will Tarashuck

A Question

How many of you are reading this Journal? Are you enjoying it? Are there any topics or ideas you want to dive into? Your feedback is so appreciated as most of my ideas are inspired from friends and other readers.

Thank you for reading today. 

-----

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

Thank you

Eddie Gudewill, CFA
 

Investing Course

If you want to learn everything you need to know to be a great investor, consider my self guided ETF investing course. 

Customer review:

"Hey Eddie - your course is precisely what I have been missing and has been so helpful in giving me more confidence to invest myself" - 30 year old MBA student.

What you get

✓ 2 hours video content

✓ Take at your own pace

✓ Training by a real portfolio manager

✓ Excel templates i.e. budget, retirement calculator, rebalancing spreadsheet, and more

✓ Unlimited lifetime access, and all future updates at no cost

✓ 100% money back guarantee. If you don't like it, let me know and I'll give you your money back.

I'm trying to make you a millionaire - not sell you some junk.

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

Learn more here