Set a no obligation financial planning and portfolio analysis with Joanne David CFP FCSI. Review your bottom line today.
Set a no obligation portfolio analysis and financial review with Joanne David CFP FCSI. Review your investments today.
I have been in the financial services industry for a couple of decades. There are a few things I have learned about investing and managing money, and about my clients. Here are the top things I have learned about investing:
No two investors are the same
I have worked with a lot of amazing people. Not one person or couple or family, has the same goals or thinks the same about their present and future financial plans. It never stops to amaze me this uniqueness.
Have an emergency fund / Protect against emergencies
There is a saying that we are all just one tragedy away from bankruptcy. I have personally met far too many people that met with a tragedy and their life fell apart. Have an emergency fund that will carry your expenses for 6 months to a year. Consider the worst possible emergency tragic situation, and know how you are preparing for it.
Be a minimalist
Be a minimalist and want less. If you think you need ‘things’ you are actually needing just things. The most important aspects to life don’t cost a penny. Go for a walk. Spend time. Help someone. And this will definitely help your long term retirement plan and personal cash flow too.
Money has diminishing value
There is perhaps one common denominator. Early in your savings career. If you don’t have enough for retirement, you will need to focus on what is lacking, and perhaps think that you will ‘never get there.’ Yet, it happens. If you plan correctly, you will find financial and personal freedom. Then what? Money as we age, truly has diminishing value. Think of your legacy, both personally and financially. Have a balanced life. What is important in the end is never ever about money, so long as you have enough. Plan for that.
It’s true that 70-90% of people don’t (or can’t or won’t) save enough for retirement
What is saving enough for retirement? Having enough means personal freedom to handle all of your expenses and desires without worry. Many people don’t plan for this, and don’t get there. This tells me two things. First, make a very real solid long-term financial plan. Second, be grateful for that plan, including your present and future self at retirement. Be smart and make that plan.
There is no substitution for a written long-term financial plan
It does not count if your plan is in your head. I know you think it is a plan. But the only plan that I have ever seen work is a written plan. There is something extremely valuable (and perhaps magical) about placing your plan to writing. As I often say: “A written plan is 90% there.” It enters your consciousness and you will do everything to make that plan happen.
Valuation work is important
Qualified investment managers spend copious amount of their time evaluating and selecting investments that will perform over the long run. They often look for companies that grow their dividends with low yields over those companies that in the short-term outperform with high yields but no dividend growth. These experts are trained to calculate low valuations and review balance sheets, and know if holdings will raise dividend or buy back stock. Leave investment selections to the experts that spend expert time. Your job is to take advantage of their expertise.
Ignore the noise
Investors often start by wishing to listen to many other people’s opinions including friends, family and the media, but this never works out. I will personally never make an investment decision based on noise, and will thoroughly research my own investment choices. I always recall my mentors saying to me “Do as the 90% will not do.” There is a lot of truth to this. This is where professional help really shines. We are trained to evaluate opinions and suggest the path forward. Your job is to focus on the end game.
This is worth repeating. Diversify. No one can perfectly predict the the future of the economic marketplace, its currency fluctuations, or interest rates (or anything else). We can pay attention to the movement of large economic trends and make educated guesses, but we cannot predict with perfect accuracy if Canadian (or foreign) large cap equity investments will outperform neutral or value based equity indexes. The best portfolio is one that is effectively diversified.
Emotions must be removed from all investment decisions
Emotional decisions never ever work out. Money is emotional. The market goes up and it goes down. In my experience, every single downturn in the diversified marketplace has come back up again has served as a buying opportunity for many. This has been true since the beginning. Think of a bear market like a roller coaster, it will ride back up again full force. A professional can help you navigate and understand these cycles.
Buy and hold for the long-term
The best client success is one where they purchase for holding over the long term, and monitored and adjusted for effectiveness. Speculation rarely, if ever, works. Successful clients are not ‘cliff divers.’ Patience is the only real value that brings long-term results.
Cash flow is king (or queen)
The best well made plans are useless without enough cash to carry us through the rough parts. It is shocking to learn statistics such as 67% of people over age 58 still holding large monetary loans such as mortgages that can never be paid off. Most often upon closer look this happens because over the years they have used far too much total debt for their income. Be a minimalist. Preserve cash flow. Save your excess cash flow.
We cannot predict the market but we can plan for buying opportunities
There are many people talking at certain times about how terrible things are in the marketplace. People will talk negative and rarely positive. Always think like a winner. If the market economy is in fact down, this may be a long-term buying opportunity. We cannot predict or time actual market performance, yet we can pay some attention to making some purchases when the ‘negative noise’ is the loudest.
Look forward and be boring
People often complain that ‘nothing is happening’ with their portfolio. Trust me. Boring is good. The only thing that matters is if your plan will meet future opportunities in our economy. Understanding the amount of risk that is inherent in your investment plan and know that this is difficult. A professional can help you navigate.
Every day there is something new happening
Enjoy it! Be a life-long learner.