Saturday, January 5, 2019

Losing it all

Over the last month, I had visions of losing it all. Everyday opening the news paper showed a new calamity. The stock market fell at one point close to 20% and I feared for my stock portfolio. Oh, I lost 20%! 20% of what?  I have diversified my assets and even my stock portfolio does not equal the Dow or the S&P500!

In fact, close to half my assets are in real estate and then there is my business. Granted Alberta real estate hasn’t done well over the last number of years but when I look at its overall performance going back to 2000 it has done OK; if not very well. Especially taking into account the rental profits, which to top it off are ‘tax advantaged’ – talk to your accountant. In fact, with my current project: building a new residence, I will make another big haul nearly tax free! What is my loss in net worth? 

None, yes even if my stock portfolio was just the S&P500 then I might have gone down 10% (0.5 x 20%) in net worth but that is offset by aforementioned project.  And… I did also own in that stock portfolio gold and goldminers and they have recovered if not gained over the recent stock market turbulence – being it a correction or a bear market.  And… I did have quite a cash reserve that I currently use to pay down my loans for building the new residence!  My return on cash is NOT zero it is making an after-tax return of 4.4% (because of savings on non-tax deductible interest payments).  And… then there were GICs in which I invested and preferred shares and some bonds!  The latter also went a bit up! 

Thus, although I felt miserable every day last month because of the stock market decline; the Trump noise and the Trudeau incompetence, my net worth actually went up! That is the power of diversification. It would be a very rare event that makes the entire world come to an end – no matter the ‘headline risk’. One thing goes down, something else is likely to stay the same or even goes up. We know what to do about Trudeau this coming October. I do not have a lot of confidence in the Canadian voter, so we probably will get a Trudeau minority government. Canada loves ‘incompetence with a smile’ especially the demented hordes in the East! Do I irritate you with my stark statements dear reader?  Well, others smarter than you, will love it! Yes, I am proud to say, “I am a bigot”; “I am a racist” and “I am a denier”. These, I will wear like badges of honor to show my disgust of Canada’s moralizing, virtue signaling leftist anti-democratic, self-righteous masses that always blame others for creating their own troublesome financial affairs. Go to hell along with your leader Justin!   He, he, now that is off my chest 😊

It seems true that being wealthy has a lot to do with your attitudes and values. Integrity, self-accountability and giving back to your community - values now forgotten in Canada. The new overriding attitude seems to be: political correctness, virtue signaling and hypocrisy, oh… and as so clearly illustrated by Canada’s tax system: stealing from those who work hard and save!  If you take from your hard-working neighbour 70% of his or her money then why do you think he/she would want to stay around?

Thus, dear appreciating reader, if you can overlook my little rants, focus on your ‘inner investor being’: focus on saving, living below your means, and keeping it away from the tax man; focus on self-reliance and self accountability; focus on buying value and do not care about what is fashionable. Finally focus on achieving your and your family’s personal goal(s) in life.  Make your own ‘Belize’ become reality. Even if you don’t make the whole trip, you should always be closer to its end than when you travel your life road in random fashion – although some do win the lottery. Really, don’t look for others to be fair or reasonable towards you but from your side, always try to be fair and reasonable. Thus, you will make your life useful and fruitful and that is in the end why we are here. 

One final thought: in the unlikely event that you lose it all; you have now learned how to deal with your finances and those skills, which you will never lose, should help you rebuild if not regain it all.

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