Issue #30 - Don't miss out on one of the best investments on earth.

Read time: 3 minutes

Hello everyone and welcome to all the new subscribers this week!

Long time readers know the drill and put up with my nonsense. Many have told me they make a point of reading and then discussing with their spouses - which is absolutely amazing and I'm grateful people are enjoying it. Or they are close to me but are too afraid to "unsubscribe" and so have put me on auto-delete, can't please everyone right?!

Anyway, glad to have you here. I like to keep it fun, educational, motivating, sometimes I rant and swear. 

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Finally, I have been passing thoughts along as the  Dictatorship saga in Venezuela continues. In the last week: opposition leaders Edmundo Gonzalez and Maria Corina have urged the military to fill constitutional duties; meanwhile the Dictator Maduro has launched a full-scale criminal investigation against them; Maduro has urged Venezuelan's to delete WhatsApp accusing it of being a threat to the country and is working on a new law that could regulate free speech in the country; reports emerge that detained women are being sexually abused by police; and more victims continue to be arbitrarily detained on the street with police reviewing your iPhone to see if you stand for or against Maduro. These are crimes against humanity in real time. Over 8 million people have already fled Venezuela over the years, and more will seek refuge.  

1. Personal Finance

Be smart, but don't let smart stop you. Better yet, just start.

You won't get everything right immediately. 

You'll have to make a few decisions and adjust along the way. Some common things to review:

• pay yourself first or pay someone else first
• week-daily door dash dinners or once-weekly
• discuss money with your spouse or be secretive
• evaluate the need for 5 streaming services or just 1
• fill up an empty room with erroneous junk or buy a smaller house
• whether a TFSA or RRSP or a S$utTheH#LLUP is a better account
• if that $200,000 wedding might be better used as a down payment
• whether your wife should get a diamond ring for her 40th birthday at the expense of your retirement portfolio 

Some consequences will be worth more than others.

Some will seem like bigger sacrifices than others.

And sometimes, money should come second to the qualitative benefit.

Just remember the airplane mask rule. Put your mask on first. 

This includes health and wealth.

So just get started.

2. Stock Markets

The S&P500 is one of the best investments on Earth.

Below are some Pros and Cons (with rebuttals).

 Pro: Diversified

• You're automatically diversified.
• 503 stocks that represent the best-of-the-best in the USA, and the world for that matter.

Pro: Dynamic

• Darwin's survival of the fittest reigns supreme here.
• The S&P 500 is like a living, breathing thing, constantly evolving with new companies.
• And it's all done automatically for you.

Pro: Performance

• Historically, the US stock market return is ~8-10% over the long haul. 
• Unless you invest in equities, you will lose your money to inflation. 

Pro: Outperformance

• The S&P 500 is the crème de la crème for a reason.
• Most hedge funds can’t beat it, either before or after fees.
• Beating the S&P isn’t just hard—it’s nearly impossible.

 Con: Misses International

• The S&P 500 is all-American. 
• Haters will say you miss out on the rest of the world. But most of these companies do business internationally.
• Therefore, the haters are wrong (or at least not wholly correct). You are indeed exposed to the rest of the world. 

Con: Foreign Exchange Fees

• S&P500 is in US Dollars, meaning if you are Canadian, you are exposed to USD currency risk and forex fees.
• However, you can buy a Canadian listed S&P500 ETF like XSP.TO that is hedged to Canadian dollars. Heck, you can buy a TSX listed S&P500 ETF that is currency exposed like XUS.TO. 

Con: Concentration

• Increasing concentration in the S&P500 for the top 10 companies means diversification is lacking historically.
• BUT, people have been suggesting equal weighted S&P500 ETFs for years and have horribly underperformed.
• Best to ignore the sales pitch, and buy the damn S&P500.

You can (and likely should) augment your portfolio with other ETFs. I’m just saying, the S&P500 is pretty crucial in any investment portfolio.

In my Simply investing Masterclass I provide an excel resource kit that includes a sample list of available ETFs from iShares and Vangaurd that I discuss in more depth. It also includes many useful calculators that will help you improve your financial life.

3. Real Estate

Now that 5 year bond yields are sub 3%, conventional 5 year fixed commercial mortgages (at least for the product we are after) are hovering around 5%.

This is a stark difference vs last year at 6-6.5%.

All of a sudden, some of the expensive 5%-6% cap stuff is skating onside, at least from a positive cash flow perspective.

Doesn't mean deals that were horrible are now fabulous. Indeed, there are both quantitative and qualitative elements to acquiring real estate. It just means that the financial engineering component is now becoming easier. 

We shall see how activity in the CRE world goes this fall as Vendor's may try and bring things to market at a time of more favourable interest rates for the buy side. 

1 Quote

"Stop wasting your precious time, your precious life, in search of 'cons'. If you do, you'll never do anything, you'll have no money, and you'll have no fun."  

- yours truly

A Question

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Thank you

Eddie Gudewill, CFA
 

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