Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

An advisor’s six top tips for personal finances

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AdrianBy Adrian Mastracci, KCM Wealth

Special to the Financial Independence Hub

Investors know that not all parts of personal finances are created equal. Some areas definitely have more impact on the money strategies.

Questions always arise as to which ones to best consider closely. I’ve identified a half dozen key money moves for practically everyone.

A smart step for individuals and families is to prioritize my six core financial matters. Place them at the front of the line and attend to them in detail.

Try not to start the discussions within the comforts of your home. Instead, plan a few walks with your spouse and, perhaps, Fido.

It’s a great way to enjoy the outdoors and have a relaxed chat about the finances.
Make it a fun outing by indulging in that favourite treat.

My suggestions touch on the core of investing, estate planning and retirement.
Your mission is to ensure that each area delivers.

Explore whether a few tweaks would fortify your foundations.
You want each area to fit like a glove into your total game plan.

I summarize six core areas that benefit from your focus: Continue Reading…

How buying a Home makes you Financially Independent

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Home insurance concept and family security symbol as a bird nest shaped as a house with a group of fragile eggs inside as a metaphor for protection of residence or parenting.

By Jam Michael McDonald,  Zoocasa

Special to the Financial Independence Hub

Buying a home takes a lot of planning and can be an expensive endeavour. You have to think about your down payment, your mortgage and mortgage payments, your expectations on your space, your timeframe, your closing costs—the list is endless.

So if you’re spending a bunch of money, how can buying a home make you more financially independent?

First, change your perspective

Some investments are a lot clearer: put your money into this GIC and you’ll receive this return in this many days. It’s easy to see, easy to calculate, and easy to do.

Investing in real estate is an entirely different game, so you have to think of it differently. You’ll have initial costs, you’ll be forking out money, and you’ll feel kind of broke. And that’s okay. These “expenses” when buying a home should be looked at as part of the overall investment. There are some that are pure cost—home inspection, lawyer fees, other closing costs—but they all allow the transaction to occur, and they’re not extravagant compared to the cost of the home.

Think of a real estate investment as long-term, not short-term; complex, not simple; hands-on, not passive.

You can make real decisions about your home to save you money

As a renter, have you ever received your hydro bill and become really agitated? It’s a common experience: you can’t control your heat (or you only can to a certain extent), so why should you pay for something you can’t control?

As a homeowner, you can make changes that could save you money, with some even boosting the value of your home. You can put in energy-efficient appliances, or replace the windows, saving you on your heating bill while improving the look and value of your house.

The flexibility to cut costs that you possess as a homeowner is far greater than as a renter.

With the right home, you can rent to tenants

Continue Reading…

A Walk along Risk Road #3 — The Disruptors vs. The Disrupted

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MAWER_Cameron-Webster-4x6-Formal-blue-bg
Cameron Webster

By Cameron Webster, CFA

Institutional Portfolio Manager, Mawer Investment Management Ltd.

Special to the Financial Independence Hub

At Mawer, we spend a great deal of time asking and answering the question: So what? A company’s share price is down 6% … so what? A central bank moved interest rates up … so what? Google re-named itself Alphabet … so what?

It’s not always an easy question to answer and often leads us to ask even more questions in an effort to develop key investment insights.

“So what?” is one of the questions that can lead us to investment action (or inaction) in our process of building well-diversified, resilient portfolios. In an effort to pass on our “so what” learnings, I interviewed our Chief Investment Officer, Jim Hall, with specific questions pertaining to his views on risks in the current environment.

Cameron Webster: Jim, we decided at the conclusion of our slow growth world discussion that we’d address technological disruption. Let’s get into the “so what?” of it. What is technological disruption?

MAWER_Jim Hall 4x6 Formal blue bg
Jim Hall

Jim Hall: It’s many things. It has happened in many industries; rail to auto, telegraph to telephone, typewriter to word processing, CD’s to online music. Of interest to me is where an innovation ends up displacing a whole industry and the ones that support it—and sometimes changes society too.

For example, take e-commerce and the sharing economy. Companies like Uber and Airbnb are changing the economy in significant ways through the application of technology. These companies are growing very fast and they are stealing business from other companies. This may lead to lower growth overall, at least temporarily. That’s the disruption. This dynamic has been around a long time. Clayton Christensen called it “disruptive innovation” and John Maynard Keynes called it “technological unemployment.” Many people have written and talked about the consequences of structural economic disruption over the years—and many are fretting about it now.

CW: How does the disruption manifest itself? Continue Reading…

Stop making investing mistakes, avoid junk science

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stevelowrie
Steve Lorie

By Steve Lowrie, Lowrie Financial

Special to the Financial Independence Hub

You probably first heard this classic joke years ago. Maybe you even laughed at it once or twice:

Patient: “Doctor, doctor, it hurts when I do this.”

Doctor: “Then stop doing it.”

Yes, it’s silly … and yet wise. We’ve all been known to ignore what is painfully obvious, especially as investors.

For example, even though we know it’s a mistake to buy high and sell low, there’s ample evidence that this is exactly what most of us end up doing anyway. In “How Investors Leave Billions on the Table,” Wall Street Journal columnist Jason Zweig shared a litany of analyses on how investors lose available returns through hyperactive trading. Zweig published his post in 2013, but human nature hasn’t changed, so the stats undoubtedly remain relevant: We’re hard-wired to trade at all the wrong times.

Why we make mistakes

Continue Reading…

Can you put the number “Trillion” in context?

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Money background with US dollars, British pounds, Lithuanian litas and Zimbabwe hundred trillion dollarsBy Ian Campbell

Special to the Financial Independence Hub

I recently had dinner with the owner of a large, successful U.S. family business. Between the main course and dessert he asked me for my thoughts on the U.S. presidential race and economy in the context of family businesses.

When the conversation turned to existing and prospective government debt I asked him if he had ever put “a trillion” in context. He certainly could identify with “a million.” We were having dinner in a house worth at least that. He knew “a billion” was “one thousand millions.” He also knew “a trillion” was “one thousand billions.”  But in terms of comparisons that he could identify with, the best he could do was say that “a trillion” was a humongous number.

About the word trillion and its meaning

“Trillion” without context regularly rolls off the tongues and pens of politicians, economists, executives, and lots of others. So I gave my friend the following comparisons to think about. His reaction: one of real shock at just how big a number “a trillion” is. Continue Reading…