You’re Retired! Um … Now What?

During the late 1990s hi-tech boom when I ran my own law practice, I had a client who was the CEO (Big Shmo) of a publicly traded company. The company was successful and Big Shmo was handsomely rewarded through a combination of salary and capital gains made through cashing in stock options.

So there was Big Shmo, a guy in his early forties, self-made son of an immigrant, married with one child, rich enough to gain entry to the top 1%. Yet, he continued working 10-12 hour days, 6 days / week.

‘Why not retire?’ I asked him.

Big Shmo smiled and waved away my question.

‘Listen’, he said, ‘I get what you’re saying. I’ve amassed a small fortune so why should I continue working? You want to know why? Because for me, working is not about the money, it’s not about earning more. I don’t need more. In fact, I don’t need most of what I have. But what I need is the challenge! I love building the business, the competition, working with people, giving it everything I have. That’s what matters for me. Besides, with what I do everyday, I don’t even consider it work.’

It took me a few moments to realize what Big Shmo meant by ‘I don’t even consider it work’.

What he meant was that he lived in a state of Flow.


Chewy Bit. Flow refers to an energized focus allowing for total involvement in the process of activity to the best of your ability.


When you live in Flow, you understand that life is a process lived on a continuum; it is a direction not a destination that involves stopping and starting.

I learned a lot about living in Flow from Big Shmo. And I’m certain that his perspective on life played no small part in leading him to achieve balance and financial freedom.

Getting The Party Started?

One day you’re hunkered down in your cubicle, walled office, or on a kitchen stool plugging away at work earning your keep. The next day, a day you planned for, dreamed of, for a decade or two or three, you’re free. Retired. You have enough dough to make it through the rest of your life. WHOO HOO! You did it. Good for you. Now, looking forward … what’s next?

If you’re like most people planning for retirement, you focused on hitting the magic number that would bring you to this day. Then … it happens! And you celebrate for a day, a week, a month, maybe more. But eventually you stop and reflect and realize that, uh oh, you didn’t give anywhere near as much thought to planning what life would be like after you closed up shop.

Adjusting To The Retirement Stage

If you thought of retirement as a ‘stop work … start the rest of my life event’, you’ll experience a period (how long it lasts is up to you) of significant emotional and psychological adjustment.

Why?

Because retirement is a HUGE life event! You have just abandoned your sense of purpose, removed your self from a social group, relinquished your calling card, all of which tends to bring about sadness stemming from a sense of loss, isolation, and vulnerability to suffering from fear of the unknown.

And when you experience this adjustment, it’s not uncommon to ask yourself:

  • Who am I?
  • What’s my identity?
  • What do I contribute? Am I useful for anything?
  • Will I lose touch with my workplace friends?
  • Will my other friends still like me, respect me, find me interesting?
  • What about my spouse? Will she/he want to be with me?

Dark Side of Retirement

The truly unfortunate folks fall into depression or debilitating addiction. The worst of it: suicide rates are highest for those over age 65, moreso men than women. The thinking being that men more often have their identity wrapped up in their career; occupation being the primary source of self-image, a marker for measuring your self, for finding a place for your self, a sense of belonging.

Not so for women. Generally speaking, women tend to engage in fulfilling activities outside of their career, throughout their life, intuitively gravitating toward a life of Flow.

Bright Side of Retirement

For many others, retirement is a beautiful blank slate. An opportunity to design your life any which way you like: pursuing new activities and adventures, forging new or deeper connections with friends and loved ones, engaging in long delayed dreams.

Resetting The Dial

Here are a few tips for finding your Balance and getting into Flow:

  • Stay socially connected. We are social animals. We need other people.
  • Contribute to life. We feel good about our self when we are helping others.
  • Volunteer. Get involved in your community. Join a club. Take a class.
  • Make plans, but be chilled about your plans. Be flexible. Leave time to just “be”, daydream, meditate, go for ice cream, ride a bicycle, read a book for fun.
  • Stay active. Be physical. Keep the body healthy as well as the mind. Body, mind, spirit, it’s all connected.
  • Be kind to your self. Be patient. Accept that your life will change and know that you will adjust on your own schedule.

Find Your Flow, Find Your Wealth

Regardless of whether you experience fear or excitement or both post-retirement, if you don’t find your Flow then the stage of life known as retirement will not be the party you dreamed about, no matter how much money you have.

 

Blissful Money Rules

Last week, my 27 year-old Niece called me.

“Hey! BuddhaMoneyLama, I have a problem I’d like to talk about.”

“Sure, kiddo.”

“Well, with my new job, I’m finally making decent money. I mean, after paying for rent, food, utilities and other necessities, I actually have money left over.”

“Too much money? This is a problem?”

“Ha ha, you’re so funny. The problem is that I don’t know what to do with my money. No one ever taught me and I feel like I don’t even know the basics.

“So you called me? Such a sweetheart!”

“Can you help?

“Are you kidding? BuddhaMoneyLama lives for these situations!”

“So, where do we start?”

“Where would you like to start?”

“That’s the thing; I don’t know. All I know is that I want to buy a house one day. But I don’t know how to get myself to a place where I’ll have enough money to afford a down payment and all the other costs that go along with home ownership.”

“How about we start with talking about the Blissful Money Rules.”

“Uh, okay?”

“These are Rules that you absolutely, positively, unequivocally need to know to empower yourself, and get your self walking on the path toward home ownership and greater wealth.”


Blissful Money Rule #1 … What’s The Plan, Stan?

Some folks prefer to surf on a hope and a prayer when it comes to money issues. Not BuddhaMoney. Instead, we favor creating a detailed plan for your self. Because a Money Plan plots your best path for taking control of spending and saving. Do this and you’re halfway to reaching your financial goals.

“I’ve never written a Money Plan. Help?”

“What do you say we walk this path together, step by step.”

  • Goals. Write them down. When you know what your goals are, saving is easier. For you, dear Niece, your medium term goal is to buy a home. Keep this in mind every day when you’re spending money. Because every dollar you spend somewhere else is a dollar that’s not saved toward your dream home.
  • Expenses. Once you know your goals, write down all of your expenses and figure out which ones may be reduced or cut out altogether. And the beauty of cutting spending? Reduced expenditures automatically translates into more money in your pocket. Obvious? Sure. But some folks need to be reminded, to stay focused on their goals.

Here are some examples for you to chew on:

Cable. Cut the cord. Who needs to pay for cable? Really, who needs television at all? For all those who haven’t completely abandoned television, there’s Netflix at about $10/month, and other free and inexpensive viewing services available online.

Cell Phone. Check out discount carriers and do not sign up for a large data plan. If you need some data, go for the minimum. Because you just don’t NEED to be constantly surfing the web on your phone. It’s a bad habit for too many of us. Your time would be better spent daydreaming or, Buddha forbid, reading a book, or tuning out and just being quiet. You’ll be amazed at how quiet time recharges energy and lifts spirits.

Home and Car Insurance. Shop around and compare prices. All the insurance companies offer the same coverage but prices may vary a fair bit. Be sure you’re not overpaying.

Coffee/Tea. Drop $5/day getting your coffee on the outside, multiply by 365 days, and that’s $1,825/year. Yikes! Is it worth it?

Fuel. Fill up your gas tank once a week at $50/pop and that’s $2600/year – compared to paying nothing for riding a bike to get around town (other than initial bike cost) or much less for car sharing or public transit.

Restaurants. Watch this one. It’s too easy to drop big dollars when eating out. Allow yourself a certain amount each month and stick to your budget.

  • Track Money Flow. Once you’ve listed all of your expenses, and considered what to eliminate and what to reduce, it sure helps if you track your spending. Do this the old-fashioned way using pen and paper, a journal is a good idea, or use an app of your choice; here’s a few worth checking out:

https://www.levelmoney.com

https://www.mint.com

http://www.dollarbird.co

  • Bottom Line. Really, it comes down to a matter of priorities. If purchasing a new home is your priority then you’ll start making a habit of cutting spending.

Blissful Money Rule #2 … Save, Save, Minimize Spending, and Save Some More

You’ve heard it so often that maybe you’ve tuned out. Well, BuddhaMoney is here to tune you back in: save your money. Make saving a habit. Because you need savings to achieve financial freedom.

How much should you save? Calculate savings as a percentage of your net your income, after deducting expenses. Ballpark number for savings: 10%. If you can save more, good for you; you’ll achieve your goals that much sooner.

And once you commit to a percentage, stick with it! No creative rationalizing (i.e., but I really need to drop five grand on a vacation to Mexico and I swear I’ll make up the lost savings soon), and no inventive, trivial justifications (i.e., it was a once in a lifetime sale and, really, the more I spent, the more I saved).

Of course, if you spend less than you earn, then staying disciplined about savings is that much easier. If you spend more than you earn, well, you’ve got work to do because at this rate there will not be any savings, and financial freedom is a fantasy.

No matter what you earn, you can save when you cut down expenses. Sure, you may have to ditch old habits and establish new ones, but it will be well worth it. Every step closer you walk toward your savings goal or eliminating debt will feel, well, quite excellent, and will reinforce your desire to continue saving, largely because you’ll know that you’re taking control of your finances and your life. And that feels right and it feels good.


Blissful Money Rule #3 … You Do NOT Want Debt

The blissful truth: there’s no freedom in carrying debt. And your goal should be financial freedom, which translates into minimal money related stress and headaches.

That said, not all debt is created equally.

Mortgage debt for example, serves a worthwhile purpose. Homes cost a fair chunk of change, and few people are able to pay all cash for their home. So, you borrow from a financial institution. Okay, this is all good as long as you can afford the mortgage payments. Because as long as you have the mortgage, yes, you’re building equity. Kudos. But you’re also paying interest. Drag on your savings. So, before you sign up with your friendly neighborhood banker for that big ticket mortgage, draft your self a mortgage repayment plan, and be sure this is a plan you can follow through on.

As for credit cards, the goal is to NEVER pay a cent of interest for credit cards. If you cannot afford to pay the balance owing each month in full, then don’t use a card. Carry interest and you’ll be paying an annualized rate of close to 30%. Robbery? Yes. Legal? Yes. Why do you think Visa (NYSE: V) and Mastercard (NYSE: MA) are massive companies each with a stock market value north of $100 Billion? Charging interest is a wonderful game to play when you’re the lender.

So what do you do? Toss all credit cards from your wallet except one. Suggest keeping a Visa or Mastercard as these are accepted by most every merchant. Use the card only when necessary (other than Sweden, most countries remain on board with coin and paper currency – http://www.newyorker.com/magazine/2016/10/10/imagining-a-cashless-world).


Blissful Money Rule #4 … Invest Your Dough

Don’t leave your savings in a bank account earning practically nothing. Invest your money. When you invest, your money is going to work, not you. This is what you want. The more you can afford to invest the better. And, similar to being disciplined about savings, be disciplined about building your investments. Set aside a certain amount each month that makes its way directly to the investment account.

Here’s a nut and bolts illustration that may whet your investing appetite: if you invest $10,000 at a 5% annual return, you will earn $500 in one year. In year 2, the $10,500 will generate $525, for a grand total after two years of 11,025. After 20 years, the $10k turns into $26,532.98. This is the power of compounding returns and a long-term investment horizon.


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Enter Buddha

The second Noble Truth teaches that trishna (thirst or craving)  causes stress or suffering. Wanting to own a home, wanting to be financially secure is perfectly fine and good. The challenge is to avoid clinging to these wants such that wants become obsessive cravings and we forget what’s important: to be grateful for our life, for who is in our life, and for what we have.


Blissful Money Rule #5 … It’s All About You

Here, I’m talking about stepping up and taking responsibility. No one will walk the path for you (although BuddhaMoney sure will guide you in the right direction). It’s your decision whether or not to empower yourself, take control of your finances, and eventually achieve financial freedom.

 

 

Excellent Investors Meditate

CNBC’s Mad Money with Jim Cramer has been on television for close to 12 years. You ever watch it? Here’s what CNBC (http://www.cnbc.com/mad-money/) says it’s all about:

Cramer is your personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind — to help you make money.”

Curious, I watched the show. And from up high, I banged my gavel and pronounced the following judgment: it’s loud, it’s obnoxious, and Jim Cramer’s persona is manically unhinged. But hey, what are you gonna do? It’s show business.

And Cramer is the show’s lead character. Sure, he talks knowledgeably about stocks and the world related to finance. And underneath the noise, the bluster and the ranting, maybe some of his advice is sound. Still, it’s not the kind of medium I would turn to for investing guidance.

Why not? Never mind that I needed to pop a capsule or two of extra strength Advil after watching, the thing is that … the show isn’t about investing! Contrary to CNBC’s marketing pitch, the show is about trading, about how to make fast, easy money through buying this and selling that. And chasing fast, easy money is a fools game.

Peace is the Word

You know what BuddhaMoney investors chase or, rather, seek? Peace of mind. For the simple reason that a calm mind leads to:

  • Clear thinking
  • Maximum focus
  • Emotional stability
  • Decreased anxiety
  • Increased happiness

When you’re calm, you’re able to better process information. You’re able to sift through the avalanche of media generated content and recognize what is useless chatter, and what may be of actual benefit to you.

And, hugely important as an investor, you’re less likely to be governed by the Twin Evils: fear and greed. The result being that you’re more likely to make sound financial decisions advantageous to your well-being, and your wealth.

Often easier said then done, this business of attaining a calm mind, no?’

What, you’re throwing up obstacles before even trying? Easy or hard, is this what makes something worthwhile?

No but …

Listen, at this stage, just set your intention to try and try and try, and eventually, if you’re patient with yourself, more calm will find its way into your every day existence.

Oh ya?? How? Are you offering use of your magic wand?’

Meditation.

Uh, what about meditation?’

It’s your pathway to calm.

I don’t see myself as being the type to sit cross-legged with my eyes closed. I’ve got a bad back, you know.’

Let me ask you this: after a restful sleep, do you feel good?

Yup.’

Clear mind?

Yup.’

Well, there you go.

There I go … what?’

That’s the purpose of meditation, to refresh and rejuvenate your mind.


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Enter Buddha

Our minds are compulsive workaholics, running 24/7/365. We replay the past, fabricate fears about tomorrow, gossip about everyone we meet, compare our self to this or that person often judging our self inadequate … all of which prevents us from learning how to relax in the present moment.


The choice is simple.

Option #1: The mind runs the show, we spend too much of our life thinking about yesterday and tomorrow, and we remain unsettled about becoming something or somebody because we do not accept who we are.

Option #2: We locate the off switch. We use our mind when needed, and rest the mind when not needed. And when we give the mind rest, it works that much better when needed. By being present, by not incessantly ruminating about yesterday or tomorrow, we learn to get the most out of each moment, and the most out of our life.

What Is Meditation

At its core, meditation may be thought of as silent witnessing. Watching thoughts pass through your mind. Not controlling your thoughts, not judging, not commenting. Just watching and acknowledging that, whatever comes into your head or whatever you feel, these are only thoughts and emotions coming and going as they please, and they do not define you.

When engaged in meditation, you activate the off switch that allows you to rest and rejuvenate. Simple as it sounds, this sort of resting acts as a balm to the mind, bringing calm and balance. And we need to rest our mind every day, just like we need to rest our body. If we don’t get rest, the mind wears down just as the body would without rest.

Why Meditation Increases Ability To Become Wealthy

Think about it: the last time there was a stock market meltdown, did you panic? Feel any fear at all?

Wouldn’t it be amazing if you didn’t experience fear when you open your account statement and it shows a 10% or 20% decline? And, rather than being controlled by fear and other destructive emotions, you are able to objectively assess the state of the markets, and rationally decide whether to sell, buy or sit tight? Would this sort of calm mind make you a better investor? Absolutely.

Or how about when you’re out shopping and you cave to an impulse buy, with your mind working overtime to justify the purchase? Well, what if you could tame those flaming impulses and, before buying, are able to consider the consequences to your budget? Would this sort of thinking add to your savings and further you on your path toward financial freedom? Absolutely.

Because when you’re relaxed and alert to what’s going on within your self, when your emotions are not ramped and your mind isn’t buzzing, you are more likely to make good decisions that benefit your self today and tomorrow.

This is why shows like Mad Money are harmful: they serve to elevate our emotions, get us all excited, and put us in a mental state not conducive to making wise financial decisions.

The Pros Meditate 

Okay, still, meditation is not a cure-all, and you may certainly achieve calm and balance without ever meditating. So if you’re one of those people who experiences body/mind harmony most of the time, that’s amazing, good for you. For anyone else (including yours truly) who has difficulty sustaining a calm mind for prolonged periods of time, you may want to give meditation a try.

It’s not that scary. And it’s not just for folks who choose to tune in, turn on and drop out. In fact, Goldman Sachs offers daily meditation classes for its employees, and some high profile Wall Street hedge fund dudes swear by meditation as a tool to increase wealth (i.e., Ray Dalio, Paul Tudor Jones, Daniel Loeb). So it could be that your road to riches is paved with meditation too.


ps. for anyone who wants to learn more about meditation, here’s a few of my favorite teachers and one their books:

  • Jon Kabat-Zinn, Wherever You Go There You Are
  • Sylvia Boorstein, Don’t Just Do Something, Sit There
  • Thich Nhat Hanh, The Miracle of Mindfulness
  • Chogyam Trunga, Meditation In Action
  • Jack Kornfield, Meditation for Beginners

 

 

 

 

 

 

 

 

 

Are Banks Evil?

Sure, I know, the title brings up images of smarmy, briefcase carrying men dressed in pin striped suits, black polished shoes, and a smirk who play the system for their benefit, take risky gambles with other people’s money knowing they can rely on a government safety net to bail them out should any bets turn sour, or turn a blind eye to Rocky Mountain size bags of cash deposits the source of which happens to be drug money proceeds

And the image sticks. Not least owing to gobs of money paid annually to self-professed masters of the universe whose respect is reserved for money and power. Is the image well deserved?

Well, the 99% might think so, not least because the American financial industry was exposed in 2008 as a glorified Ponzi scheme that eventually collapsed and sunk Western economies into the deepest recession since the 1930s. Oh, and those gazillion dollar payouts to the bank’s head shmos?  These certainly do nothing but reinforce the perception that bankers are self-absorbed, greedy, icky people.

Talking Numbers

What kind of money are we talking about? Check out a sampling of recent compensation packages bestowed on the head shmos:

  •  JP Morgan Chase. Jamie Dimon. $27 million (2016)
  • Goldman Sachs. Lloyd Blankfein, $22.6 million (2015)
  • Morgan Stanley. James Gorman, $21 million (2015)

Sure, you could say, are you $%#*&! kidding me? But before you do, know that Gorman’s compensation represents a pay cut of $1.5m, and Blankfein lopped $1m off his total compensation as compared to the prior year. Shedding tears, anyone?

Look north to Canada’s biggest banks, as measured by market value, and you’ll see how poor the Canuck commanders are compared to their American neighbors:

  • TD Bank. Bharat Masrani, $9 million (2015)
  • Royal Bank of Canada. David McKay, $11 million (2015)
  • Scotia Bank. Brian Porter, $11 million (2015)

Do Canadians settle for less because they’re too nice (in that Canadian way) to ask for compensation on par with New York’s elite ? When the numbers are this big, do we care? Not really.

How Much is Enough?

Evil Banker Guy: ‘Hey, BuddhaMoney, there’s always two or more sides to a story, you know what I’m saying? Maybe these guys are rewarded for being the best in the world, top notch leaders who treat their employees fairly, grow their business well and, as a result, benefit shareholders with increasing share value and regular dividend increases. You ever think about that before spouting off?’

You may be right on point there, Evil Banker Guy. Still, if you’re bringing home that kind of dough, you’re rich. Stinking rich. So, in an attempt to understand, because we here at BuddhaMoney like to think, reflect, and understand the world that we live in, I have to ask: what drives a person  to want more and more and more money?

To shine some light on the matter, what do you say we invite into the discussion a certain guy named Warren Buffett. Like the bankers (though he’s not a banker), he too is a rich guy. I’m talking … beyond-your-dreams-it-would-take-thirty-six-lifetimes-to-spend-all-this- money-rich.

For about 50 years, Buffett and his partner, Charlie Munger, have been at the helm of an extraordinary company named Berkshire Hathaway (BRK:NYSE). So extraordinary that if you had bought $1,000 worth of BRK way, way back in 1964, it would be worth more than $11 million today. Holy doodles!

And you know what? For the past 25 years, these two dudes, Munger and Buffett, they’ve been taking home a salary of $100,000. For what they do, that’s peanuts. Nah, peanut shells. No question, they could choose to take soooooooo much more money. But they don’t. And to tell you why, here’s Buffett himself speaking in his 2015 annual letter to shareholders, talking about who will eventually replace him as CEO (Buffett is 86 and still going strong):

“[The next CEO] will be plenty wealthy so don’t complain about pay. And don’t be greedy. It’s important that neither ego nor avarice motivate [the next CEO] to reach for pay matching his most lavishly compensated peers, even if his achievements far exceed theirs.”

Is Buffett a finance / investor / all around human being superhero to me? Ah, come on, you already know the answer to that one.

(http://buddhamoney.com/financial-freedom-and-balance/is-warren-buffet-buddha/)


unknownEnter Buddha

Greed is one of the three poisons. A dangerous toxin; the source for unquenchable thirst for more and more possessions. Greed is often manifested by stinginess, lack of compassion, hoarding or self-indulgence.  When one suffers from greed, one lives in a state of delusion, having become attached to material things, believing that more is better, and that material possessions will bring happiness.

poisons


So What If Bankers Are Evil?

Do we care if bankers are evil? I don’t ask the question flippantly. And my intention is not to minimize the impact of rich, powerful people who negatively affect the common good. Because ethics matter. Values matter. Right actions matter. For the individual, the community, society at large. We’re all in this game of life together, affecting each other in small and large ways.

But we BuddhaMoney folks aren’t fond of complaining. When a complainer-whiner-why-aren’t-I-getting-my-share person gets going, they kinda suck the energy out of a room, content to grumble rather than take action to change the situation.

BuddhaMoney folks have a constructive attitude. When they’re ticked off about what’s happening in their world, they size up the situation, brainstorm a plan for moving forward, and then do what needs to be done.

What can you, as an investor, as someone who is building your wealth and your financial freedom, DO about bankers driven by ego and greed?

First, put a smile on your face. Smiles are known to bring about Balance, and other juicy feelings. Second, shrug at the knowledge that some bankers earn more in a year than you will in a lifetime. So be it. Third, to better your financial position, consider BUYING BANKS!

Go Shopping for Banks

As an investor looking for steady-eddy-retirees-can-rely-on-this-and-it-pays-a-healthy-dividend kind of stocks, I’m all for banks. Not just any bank though. You should be picky.

You should invest in financial institutions whose business is largely made up of deposit taking and mortgage lending, who pride themselves on solid risk management, returning capital to shareholders, and have a history of efficient, profitable operations.

In other words, companies that engage in good ole’ fashioned boring, boring, boring banking business. The kind of companies who avoid  business activities that make for screaming headlines, have a long history of increasing dividend payouts, and whose share price gradually increases most years.

And when you find a bank like this, be sure to buy ONLY when shares are on sale. So that excludes the present time given the outrageous run-up in share prices of many financial institutions since the US presidential election. Be patient and wait for a pullback in share price, which is only a matter of time.

Check Your List Twice

If buying individual stocks is not for you, and you want to add specific exposure to the financial sector, then look at Exchange Traded Funds (ETF) such as:

  • iShares U.S. Financials (IYF). This ETF holds shares in 286 financial companies listed on U.S. stock exchanges and charges a management fee of 0.44%.

(https://www.ishares.com/us/products/239508/ishares-us-financials-etf)

  • Vanguard Financials ETF (VFH). This ETF holds shares in 402 financial companies listed on U.S. stock exchanges and charges a management fee of 0.10% – Vanguard’s fees are phenomenally low!

https://personal.vanguard.com/us/funds/snapshot?FundId=0957&FundIntExt=INT


For exposure to Canadian financials, review these two ETFs:

  • iShares S&P/TSX Capped Financials Index ETF (XFN).

This ETF holds shares in 27 financial companies listed on Canadian stock exchanges and charges a management fee of 0.55%.

https://www.blackrock.com/ca/individual/en/literature/etf-summary/xfn-summ-doc-en-ca.pdf?nc=true&siteEntryPassthrough=true

  • BMO S&P/TSX Equal Weight Banks Index ETF (ZEB)

This ETF holds shares in only the top 6 Canadian banks, measured by market capitalization, and charges a management fee of 0.62%. Basically, it’s a bet on the Canadian banking system. That said, if history is any guide, it’s a safe bet given the historical performance of Canadian banks. An investment in this ETF near the end of 2009 would have seen you nearly double your money by today.

https://www.bmo.com/gam/ca/advisor/products/etfs#fundUrl=%2FfundProfile%2FZEB%23overview


If you’re comfortable with the volatility of individual bank stocks, and have a long-term investment horizon, then consider these stocks on the New York Stock Exchange:

  • Wells Fargo (WFC:NYSE)
  • US Bancorp (USB:NYSE)
  • Bank of New York Mellon Corp. (BK:NYSE)

The following Canadian banks are dually listed on the Toronto Stock Exchange and the New York Stock Exchange:

  • Bank of Nova Scotia (BNS:TSE) (BNS:NYSE)
  • Royal Bank of Canada (RY:TSE) (RY:NYSE)
  • Toronto-Dominion Bank (TD:TSE) (TD:NYSE)
  • Bank of Montreal (BMO:TSE) (BMO:NYSE)

Solid Foundation

Keep in mind what I mentioned above: financial stocks have had a wild run since November, 2016, and many are now trading near their all time highs.

Sure, you have some talking heads salivating at the prospect that financials will continue to charge ahead, higher and higher. And that may happen. Still, the safer course of action is to be patient and wait for a market correction before bringing banks into your portfolio. You won’t rake in +$10m/year but if history is any guide, as a shareholder, you will reap the trickle down reward: increasing share price and generous dividend payments. The result being a solid asset foundation and income generator for your portfolio.

Ethical Investing … Why Bother?

‘Good People’ have a moral compass. ‘Good People’ adhere to universal ethics. ‘Good People’ care about others. ‘Good People’ care about more than just making money. Therefore, ‘Good People’ who invest their money engage in Socially Responsible Investing (SRI). Following this line of thinking, ‘Bad People’ do not engage in SRI, are selfish, greedy, and immoral.

Yikes! On several fronts that’s too, too, too … it just doesn’t sit right with BuddhaMoney. Okay, still, is it True? False? Simplistic? Naïve? All or None or One or more of the above?

SRI Investors: Who Are You?

Before picking a side and jumping to conclusions, let’s flush out the concept of SRI or Ethical Investing, two terms often used interchangeably.

At its core, SRI implies investing in companies that meet a certain standard of corporate responsibility regarding social, environmental and ethical considerations. Generally, investors who take an interest in SRI fall into two camps:

  • Camp 1: SRI is an investment with a charitable component, in which non-financial rewards of the investment are just as important, if not more so, than the rate of return.
  • Camp 2: While corporate SRI practices may add value to their investment strategy, potential rate of return is the dominant consideration.

SRI Fans

As with any issue under the sun, there are proponents and critics of SRI.

Proponents believe that SRI is about ‘doing good’ by seeking a blended return, i.e., investing in companies that offer both strong financial return and social return.

That said, proponents do not hesitate to acknowledge that a business must turn a profit if it is to survive. But, they say, if the only focus is profit then survival is far from assured.

SRI Boo Birds

As for SRI critics, they hang their hat on the words of renowned free market economist Milton Friedman:

“There is only one social responsibility of business: to increase profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”.

Friedman’s followers lay responsibility for social issues at the feet of government, not private enterprise. Further, they assert that SRI investors are willing to accept lower financial returns for only the promise of vague and loosely measured social returns.

What’s the Purpose of Investing?

I’m not looking for a right or wrong answer, or to label anyone Good or Bad. For me, this is a personal issue to be determined by thoughtful examination of your conscience, your beliefs, and by asking your self, what is your purpose for investing?

  • Is investing about ‘doing good’ by seeking a blended financial and social return?
  • Is it about making a difference by supporting organizations that take a stand against human rights violations, lax environmental controls?
  • Is it about penalizing organizations that sell liquor or tobacco, that facilitate gambling and enable addicts?
  • Does ‘doing good’ mean you do not buy shares of companies that bribe government officials, lie and cheat, do not provide safe and fair working conditions for employees?
  • Or does it mean that, although an organization is not blatantly or even slightly offside on the ‘sin scale’, it just doesn’t measure up for other reasons, and whatever those reason are justifies steering clear.
  • Maybe investing is a simpler, singular, concept. I mean, why should it be about anything more than making money?

The thinking here is that if you want to support charitable causes, if you want to ‘do good’, then you will do so through donation of your time and/or money to registered charities, not through investing. Further, so goes this line of thinking, by not restricting your self to investing in SRI organizations, you have so many more available investment opportunities. And the better your investments perform, and the more money you make through investing, the more you are able to support worthy causes.

What do you think? There’s no right or wrong on this one, although some may disagree. The best you can do is to follow your conscience and avoid investing in organizations that do not meet your standards, whatever these may be. Because you have no one to answer to except your self.


Here’s the conventional thinking about SRI Investing:

Advantages

Social Fairness. Through investing, supporting companies that you believe promote social fairness.

Ethics. You vote with your dollars to support organizations that adhere to ethical business behavior.

Disadvantages

Poor Investment Returns. Companies pursuing socially responsible activities may not maximize shareholder value since all capital in the company is not primarily used to increase profits.

Increase Risk. Because there are fewer companies that qualify for SRI, there are fewer opportunities for portfolio diversification. In turn, this may increase overall portfolio risk. As well, companies engaged in socially responsible activities may have higher risk due to lower gross profit margins.

Lost Opportunity. You may be leaving potentially strong investments on the table not necessarily because the company is inherently evil or even terrible on SRI issues but because they don’t measure up to someone else’s standard of what qualifies as an SRI worthy company, even though that company’s products/services do improve the human condition in some manner and creates jobs.

Spin. Few companies do not employ marketing spin. Meaning, the company may be adept at creating an image of social responsibility but less competent at engaging in socially responsible activity. So, it’s essential to do your homework, to know that the company’s actions are in line with its image.

I know, that’s a a fair bit of information to chew on. So, hey, go ahead, take your time, there’s no rush. Once some clarity comes your way on this issue, and if you decide you would like to put dollars to work, you might start by researching the Funds listed below (big important note: I do not hold any of these Funds nor am I endorsing them):

  • iShares MSCI KLD 400 Social Exchange Traded Fund (DSI:NYSEARCA)
[https://www.ishares.com/us/products/239667/ishares-msci-kld-400-social-etf]
  • Domini Social Equity Fund (DSEFX)
[http://domini.com/domini-funds/domini-social-equity-fund]

 


Now, if you decide to buy these Funds or other Funds or companies falling under the SRI umbrella, just remember that your ownership of such securities doesn’t qualify you as ‘Good’ or ‘Bad’ People. Nah. No value judgment. Instead, you’re an investor doing what is best for you and your family.

 

Happiness = Your Favorite Cheese

There’s this store in Vancouver, British Columbia, called Les Amis Du Fromage. In English, the store name translates to ‘Friends of Cheese’. Hmmm, okay, not much marketing pop there. Alright then, good for the owners who chose to use the French language on this one.

Besides, the way I see it, all cheese stores should have a French name. Because the French know cheese. They love cheese. They are extraordinary cheese makers. And happy cheese eaters, often serving at least three kinds of cow, sheep, goat, or buffalo cheese after the main course and before dessert.

My worldview on naming cheese stores aside, some thirty years ago, Les Amis Du Fromage saw fit to bring more than 550 different kinds of cheese wheels (known as ‘truckles’) to Vancouver. And what happened? The locals surveyed, tested, and sampled each of the truckles before giving a thumbs up and an encouraging, ‘bring it on cheese maven dudes!’ … or words to that effect.

Cheesemonger’s Delight

When you enter the store, competing aromas invade your nose whether you like it or not. If not, if cheesy smells don’t do it for you, then your brain revolts. And it’s not a pretty sight. Eyes water, nose throws a tantrum, limbs sometimes flail, and you exit as fast as you can, gasping for cheese-free air and renouncing any sort of friendship you may have had with cheese.

But if you secretly or proudly identify as a cheesemonger, then this little shop of cheese may as well be heaven.

Nostrils flaring to allow for maximum air flow, you excitedly distinguish the many scents: grassy, nutty, barnyard, yeasty, fruity, earthy, floral, gamey, musty, funky, ripe, buttery, creamy, rustic, etc. Then you buy your favorites. Then you drive or cycle or walk home. Fast. You unwrap the cheese. You admire its appearance. You take hold of it. You smell it. You put it in your mouth. You savor every morsel. And throughout the process, your cheese hormones (oh yeah, these exist) are exploding with pleasure.

Ms. Cheese Lover Goes Shopping

Personally, I don’t know much about cheese. And I knew even less before I met my cheese loving wife. On our first date, she starts asking me whether I like cheese and before I could reply she’s off on a passionate rant about the wonders of cheese.

Cheese? I’m sitting there thinking, who gets excited about cheese? And since she can’t claim French ancestry, I was at a loss to understand her fascination. Well, since it was evident that Ms. Cheese Lover had a host of other delectable attributes, I interpreted the cheese spiel as a character aberration. One which may or may not have contributed to our eventual marriage. And yes, among other food, cheese was served at the reception, as if you had to ask!

Ms. Cheese Lover brings home two or three different cheeses every few weeks. Each cheese is individually wrapped in paper that probably cost more than the half-pound basic cheddar you buy in the grocery aisle, the kind that I grew up on. And the wrapping paper has a price sticker on it. The first time I read the stickers, I could feel my arteries clogging.

‘Sixty bucks for cheese? Are you kidding me?’ I would mutter to myself because I didn’t want to offend Ms. Cheese Lover. But after a few months of seeing how much cheese was piling up in the fridge, and knowing the cost, I couldn’t hold back:

“What’s wrong with store bought cheddar?”

“What?”

“Cheddar.”

“There’s nothing wrong with it.”

“Then why don’t you buy it instead of all this other cheese?”

“Because I’m a cheese adventurer!”

“It’s an expensive adventure.”

“It’s super delicious cheese.”

“We may have to take out a loan to cover the cost.”

“Oh?”

“Have you compared prices?”

“Yes, dear, I am aware of the prices.”

“Then you know the cheese you buy is silly expensive?”

“Cheese is a hobby for me. You know that. Anyway, I thought you were developing a taste for good cheese?”

“Maybe. But that doesn’t matter. What matters most is the cost.”

“Is that so?”


unknown

Enter Buddha

Neither our words nor our manner of communication should be impolite. Nor should either be intended to sow disharmony. Rather, speech should be kind and respectful, used to promote harmony and goodwill.


I messed up. Clearly. I mean, who am I to tell Ms. Cheese Lover that she’s spending too much money on cheese? If I was concerned about the expense, and I was, then I should have remembered what Right Speech is all about. If I did, then I would have engaged my wife in calm, polite discussion.

Honor Thy Big Cheese

‘Is That So?’ she said. And that’s all it took to knock sense into my in-the-moment-frustrated-money-centric-male-brain. With raised eyebrows and a heart perpetually churning compassion, with those three words Ms. Cheese Lover was telling me to think before I speak.

Here’s my thinking: Ms. Cheese Lover is cost conscious. She does not spend money without first considering whether an expense aligns with her values, and our values. That’s just who she is and who she was long before we met. As for her cheese habit, it’s an ‘extra’ ordinary expense, falling outside her usual spending boundaries.

That’s okay. Because the thing is, tasting different kinds of cheese is fun for her. And she’s not breaking our bank. We can afford her cheese indulgence. And if it gets to be too much, we’ll cut back somewhere else.

Tracking The Money Flow

And that wouldn’t be difficult to do. Because we know our money flows: how much comes in and how much goes out. Tracking incoming and outgoing money gives us a clear picture of the state of our current finances. In turn, knowing our financial situation at any given time makes it easier to decide where we can spend a bit extra or where we need to cut back.

This knowing the state of our finances contributes to maintaining our calm (ahem, not always but, hey, we’re human). And contributes to our happiness, because happiness and its foundation, psychological/spiritual balance, doesn’t just come from pinching every last penny, and forsaking treats and delights.

Ms. Cheese Lover likes cheese? Good! Go crazy, indulge, become a cheese expert, as long as the cost is within her means.

Maybe your thing is live concerts, perfume, travel, sports, shoes, theatre, stamp collecting, cars, music, cooking … the list is as long as you want it to be. And if occasionally indulging your wants leads to achieving financial wealth six months, one year or five years later, well, maybe that’s a good thing.

Happiness For No Reason Brings Wealth

There are two kinds of happiness.

The first is known as Worldly Happiness. This means that our happiness is dependent upon circumstances, such as experiencing pleasure of the senses (think anticipating, tasting, smelling cheese, or anything else that turns your crank), connecting with others, or personal achievement. These all make us feel good, and bring us happiness. Excellent!

But what about the times when life is not going according plan? What about the times when Ms. Cheese Lover is not in her milieu with cheese? (please excuse the French; the thing is, it just goes so well with cheese). Which is, um, well, ah, oh … most of the time?

Well, fortunate for Ms. Cheese Lover and her spouse (that would be me), she seems to inhabit this rare place, the second kind of happiness we’ll call Happiness-For-No-Reason.

This means that her happiness is not dependent on circumstances (right, you know what I’m going to say) i.e., not dependent on the presence of cheese).

And when happiness is not conditional, when we accept what comes our way in life, be it joy, sorrow, celebration or loss, then we begin to know true freedom.

We see people for who they are and drop our expectations. We accept life for what it is, knowing that all events are temporary, that we are temporary, just passing through, with a definite beginning an end.

And how does Happiness-For-No-Reason help our finances?

It lets us look at life, including our finances and our financial goals, through a perspective that says: absolutely go for it, go for everything that you want, give it your all, and while you’re doing that, enjoy the ride. Because that’s where you’ll experience happiness and achieve wealth, in the ride.

 

 

 

 

 

Your Brain on Stocks

I have a friend whom I’ll call Anxious Guy (AG). Kind, caring, hard working, AG is a self-taught investor who muddles his way through managing…

I have a friend whom I’ll call Anxious Guy (AG). Kind, caring, hard working, AG is a self-taught investor who muddles his way through managing his family’s $500,000 portfolio. Why does he muddle? Partly because his central nervous system runs too hot. It’s just the way he is. And that’s all fine. Except that when it comes to investing, too much wayward nervous energy is a marked handicap.

For the ten years or so that AG has held the investing reins, his portfolio has returned about 5% annually, net of trading fees. A decent number but nothing to brag about when your portfolio is +90% stocks. I mean, if you’re overweight stocks, you want to see a return higher than 5%, especially when broad equity indexes, such as the S&P 500, are blowing past that number, as it has for the past six out of eight years. This is a matter of looking at investing through the risk/reward lens: because stocks represent higher risk than fixed income investments, you should expect higher reward.


Chewy Bit

‘Stock’ refers to a share in the ownership of a company.


And while AG knows his performance is subpar, he’s oblivious as to why. He doesn’t get that his fired up central nervous system is not advantageous in the investing world; that his emotional entanglement  is busting his investing chops and preventing him from moving the needle past a 5% annual return.


unknown

Enter Buddha

Knowing your self is the highest calling. In learning to know your self, you will understand when to turn left, when to turn right, and when to sit still.


Welcome to Your Brain

Brain exploration. This is the adventure that every determined investor must take. It’s a lifelong voyage and its well worth the trip. And what better place to start than here, with BuddhaMoney as your guide.

Let’s start with the basics.  As a human primate, you are a complex character, with your physical body hosting three brains bound into one.

Three brains? What? When did this happen?

Well, our most esteemed scientists seem to agree that the first inklings of the three-brained human appeared somewhere around the time that our ancestors began walking upright.

But I’m getting ahead of myself. You see, the creatures existing before humans were simpler. Being simple creatures, they had simple brains. As evolution progressed, and a wide variety of new creatures emerged, more advanced brains sprouted from the old ones. These new and improved brains superimposed themselves on, and co-existed with, the old model brains.

Alright, generalities aside, let’s talk specifics in the form of a compact, less than 400 word summary of the history of human brain evolution:

Brain no. 1. Reptilian.

Anyone ever call you lizard brain? Well, don’t take offence because it’s true. We’re all part lizard, not just the guy from high school with the creepy long tongue. But hey, we’re better off knowing and accepting who we are, right?

Made up of the brain stem and cerebellum, Reptilian Brain (or Lizard Brain, just for the fun of it) controls movement, breathing, circulation, hunger and reproduction. Lizard Brain is all about ‘me’; it’s about territory, social dominance, and instinctively responding to life circumstances by fleeing or fighting.

When Lizard Brain detects threat or conflict, whether real or imagined, our fear/stress response is triggered to varying degrees. And though Lizard Brain continues to serve a purpose, it is prone to leading us astray. Why? Because its responses are largely unconscious and automatic.

So when it comes to navigating the wide world of stock investing, with all of the markets ups and downs sparking wild oscillations between fear and greed, we would be better off with Lizard Brain disconnected. However, purposefully or not, the manufacturer did not install an on/off switch.

Brain no. 2. Mammalian.

Climbing up the evolutionary ladder, the revamped model belonging to mammals is fittingly known as Mammalian Brain.

Designed to integrate with Lizard Brain, the Mammalian Brain tacked on body temperature and hormone control, connected feelings/emotions to behavior and events, and allowed for memory formation and long-term memory.

And though both Lizard and Mammalian brain primarily operate on a subconscious level, Mammalian comes equipped with a new and improved bonus feature: it’s programmed for self-discipline, allowing us to harness the otherwise automatic responses of Lizard Brain.

Brain no. 3. Thinking.

Ohhh, the cutting edge version! Wrapped around Lizard Brain and Mammalian Brain is the Thinking Brain or Neocortex.

For fans of the original Star Trek series, think Spock personified.

Neocortex allows for logic and rational thinking, decision making, planning, information processing and purposeful behavior. Present in all primates, but most highly developed in us folks, the humans, Neocortex operates mostly on a conscious level (unlike Mammalian Brain). Meaning, when properly nurtured and skillfully operated, Neocortex may dominate, and effectively shut down the other two models.

Make Friends With Your Brain … Pick Winning Stocks

Now that we’ve had our entirely thorough and informative lesson on brain functioning, you may be asking … so what? Why should you care? How does this help you build a portfolio of mostly winning stocks?

Well, it’s about getting to know your self at the most fundamental level. If you know that there are three different primary parts to the human brain, each part serving a different function, each part integrating with the other though often operating at competing ends, then you may be able to better recognize, understand, and direct your own behaviour.

And clear understanding of your behaviour feeds into wise decision-making. Put in a way that makes sense to your portfolio, excellent investors have learned to tap into rational, non-emotional Neocortex.

As far as Anxious Guy is concerned, he’s been at the investing game a long time. But he still isn’t tuned into him self. So what should he do? Get to a couch. One where he may lay down and open up to study and analysis by a competent professional (oh, I don’t know, say someone like BuddhaMoney). Someone who would work with AG to strengthen his Rational brain for the purpose of subduing Lizard brain, and its prone to flee (investor translation: fear) or fight (investor translation: greed) instinctual responses.

With findings in hand, AG may then decide whether he is up for the challenge. And if he is, it would be really helpful if he considered the following Need To Knows before resuming his picking stocks ways:

 1. Buy Value


Chewy Bit

Never buy a stock when it’s trading at or close to its 52-week high. Sure, the price may continue to rise. And if it does, oh well, let it go and look for the next opportunity. Because odds are the price will drop before it resumes an upward climb. So wait for the price to pullback, to go on sale, then go shopping. This is how you maximize profit: by maximizing value.


Unfortunately for AG, he does not honour this Chewy Bit. And as if buying high weren’t bad enough, he sells low, when stock market hordes are delusional and panicked with fear. Oy! What are we going to do with you, AG?

You’ve probably heard this before: the basic rule with stocks is buy low and sell high. How many investors actually do this? Way too few.

Because Lizard Brain takes over and manipulates investor lemmings into running for cover when it appears the doomsday comet is moments from implosion (fear spreads, selling intensifies) or piling in when word spreads that stock prices are on a one way ticket skyward (greed surges, indiscriminate buying results).

The thing is, comets rarely strike and stocks are not immune to the law of gravity. By not paying attention to these realities, AG’s profits are minimized when he buys at a high price, and his holdings get burned each time he sells at a bargain basement price to some other primate with a more finely tuned Neocortex.

Buy low, sell high. A simple formula rarely executed. You’ve got to master this if you’re going to invest in stocks. You’ve got to tamp down fear when the market has fallen 30%, sit tight and wait for the rebound. Better yet, when turmoil strikes (not if, but when) and the share price of your favourite, fundamentally sound company has fallen near its 52-week low, gather the courage to buy more because its share price is likely to bounce back once market wide fear subsides. And when it does, and the shares approach their 52-week high, you then have to crack the whip at greed (it will go higher and higher, forever and ever – NOT), and take profit off the table; then put those funds to work again in a company that offers better value.

2. No Sure Thing

There are no guarantees, no certainty, in the stock investing game. If someone tells you about a ‘sure thing’, run the other way. Fast. Because they are wrong.

3. Tune Out

The stock market should come with a warning label: Watching daily stock market gyrations may cause you mild to extreme discomfort. Knowing this, do yourself a favour … stop watching.

Unless you’re a day trader (I’ll write about this another day; for now, know that you should never day trade unless you suffer from the ‘I-want-to-lose-my-money-real-fast-and-kick-myself-real-hard-afterward’ disease) there is no reason to check stock prices or your portfolio daily other than to give yourself an ulcer. Sure, you should monitor your portfolio on a regular basis, say once every few weeks, but if you’re locked in every day, you’ll drive yourself nuts.

4. Ignore Headline News

If your ulcer wants company, say hello to migraines by reading the financial pages every day.

Don’t give media the power to influence how you feel. Remember that media is in the business of attracting eyeballs and clicks and advertisers. Boring does not make for a good story. Sensationalism sells. Objective facts get in the way of selling news. Go ahead and stay informed about domestic and global events, but don’t let headlines influence your investment strategy. Sound research and objective information should be your sole sources of investment decisions.

5. Can You Afford To Lose?

If you cannot afford to lose your investment dollars, then don’t buy stocks. Go enjoy life and be content with the knowledge that your principal is protected with low interest, low risk and/or guaranteed return investments.

6. Know The Risk

Stocks are volatile. You know this. But does this mean they are inherently risky? (‘Risk’ defined as the chance of losing money).

Risk and volatility are not the same. Stock volatility, now that is constant, it isn’t going away, let’s say ever. And stock risk? Well, the risk attributed to a well designed all stock portfolio is largely a function of time.

What this means is that, given a short-term investing period, say 1-2 years, stocks are a riskier asset class than bonds or cash-equivalent instruments. But here’s the thing: when you look at a 5, 10, 20 year or longer investing period, non-stock portfolios are actually riskier than well designed stock portfolios. How so?

First off, take a look at history. According to Morningstar (MORN:NASDAQ – investment research company) since 1926, large cap stocks have an annual average return of 10% and long term government bonds have an average annual return of between 5-6%.



Chewy Bit

‘Large cap’ means a company with a market value of more than $5 Billion.


The risk with fixed income does not necessarily come from excessive risk of losing money. Rather, it’s the lost opportunity from not investing in a better paying investment.

Think about this: if you’re earning 5% on a bond, and inflation is running at 2%, and taxes take 1% of the investment return, your net return is a mere 2%. Now, today, we could only wish that there was a safe 5% bond yield on offer. If you can get 1-2% on a blue chip corporate bond, you’re doing well.

But guess what? With a current inflation rate of 1.5%, that 2% return becomes 0.5% (inflation erodes your purchasing power, reducing what you get for your money; at a minimum, you want your money to grow at a higher rate than inflation to maintain your purchasing power). After taxes and after inflation, that 2% bond return likely reaches zero or negative. Sad but true.

Granted, history does not predict the future but it may offer a general guide. And with a long-term investing horizon, investing in stocks appears to be a worthwhile risk.

7. Seek Dividends

Dividend paying stocks offer compensation not offered by non-dividend paying stocks.


Chewy Bit

‘Dividend’ is a payment made by a company to its shareholders. Depending on the company, a dividend is paid monthly, quarterly, semi-annually or annually. 


Let’s use Ford (F:NYSE) as an example. If you owned Ford in 2015, you would have seen a share price loss of more than 5%. But with the company paying a dividend of more than 4% during 2015, your loss would be in the neighborhood of 1%.

Generally speaking, unusually high dividends (above 7% and we’re getting into the ‘high’ category) should be closely watched owing to increased risk. If a company’s earnings are weak or there are insufficient funds available to pay dividends, then the dividend payout will be reduced or cut altogether. When this happens, share price often tanks.

8. The $64 Question: Is Your Brain Wired For Stock Investing?

Many, many books have been written about stock investing. If you want to dig deeper, please inform and educate yourself by reading and studying some of the classics. Here’s three of my favorites:

  • The Intelligent Investor, by Benjamin Graham
  • How To Make Money In Stocks, by William J. O’Neil
  • Stocks For The Long Run, by Jeremy Siegel.

And remember, even if you read these books, and other books, and an array of financial publications, and glue your self to the business section of the Wall Street Journal, Financial Times, Barrons and other notable major media outlets, and you listen to the so-called experts, and talk to as many people as you can who work in the financial industry, and make the annual pilgrimage to Berkshire Hathaway’s shareholders meeting to listen to Warren Buffett and Charlie Monger share their wisdom, and you amass all the knowledge about finance and business and investing that this universe has to offer, you still have to ask the question that only you may answer … is that sexy and wonderful brain of yours made for stock picking?

 

Cheat Sheet to Stock Investing

This really smart guy I know, lets call him Really Smart Guy, has made a whack of dough through his business. He’s married with two kids and owns a beautiful house in a so-called desirable neighbourhood in stunningly beautiful, and outrageously expensive, Vancouver, British Columbia, that’s worth a few million bucks. His excess cash he shovels into residential real estate, buying homes and renting them out.

Why residential real estate? I’ll leave that one alone for another blog entry, since the topic demands a space all its own. For now, let’s just say that Really Smart Guy bought into the conventional wisdom that bricks and mortar is always a good investment. And for the most part, he’s done well.

Is That a Brick In Your Head?

The other day he was talking to me, telling me how he sold two properties at a slight loss. Feeling sorry for himself, he says to me, ‘you know, if I had invested the same money in Royal Bank of Canada back in 2008 (Canada’s largest publicly traded financial institution with a market value of about $140 Billion Canadian dollars [RY:TSE] – or about $107 Billion of the more valuable American paper [RY:NYSE]), I would have tripled my money! Shoot, I’d be really rich by now!’


Chewy Bit

Every publicly traded company (i.e., company listed on a stock exchange) is given what is known as a ‘ticker symbol’. The purpose of a ticker symbol is to identify a particular security listed on a particular stock exchange. The ticker for Royal Bank of Canada is RY. Since it is listed on two stock exchanges, RY:TSE indicates Royal Bank of Canada, Toronto Stock Exchange. And RY:NYSE, indicates Royal Bank of Canada, New York Stock Exchange.


I’m listening to Really Smart Guy, not saying anything. But I’m processing what he just said, ‘I’d be really rich by now’. And I say to myself, Wow.

Here’s someone who owns his own business, runs his days however he wants with no one telling him what to do, he and his wife and two children are all healthy and thriving, and he’ll likely never have to worry about paying rent or a mortgage, putting food on the table, or providing shelter or clothing to himself and his family. Not only are his basic needs taken care of but he has the wherewithal to satisfy most any other need or want.

Batshit Blind

Yet, Really Smart Guy doesn’t see it this way. He’s already sailing with the top 1% but that’s not enough. He wants more. He wants to be ‘really rich’, whatever that means to him.

Channeling Buddha, I say to myself, okay, here’s a person who’s filthy rich and doesn’t know it. What should I say, what should I do? Well, my perpetually smiling friend tells me:


unknown

Enter Buddha

There is nothing ‘to say or do’. Really Smart Guy is on his own path. Who are you to tell him to be grateful for what he has, for what he’s accomplished? Maybe his perspective will shift one day, maybe it won’t. Either way, your role is not to offer unsolicited advice about living life. What you’re here for is to offer investment advice; that’s the only thing Really Smart Guy asked of you.



blog-3


This Way or That

After some more talking about how rich he could have been if only he knew then what he knows now, Really Smart Guy tells me he has never invested in the stock or bond market and he wouldn’t even know where to start.

I get it. There’s so much noise out there coming from mainstream financial media, banks, investment houses, mutual fund companies, exchange traded fund companies, financial newsletters, economists, analysts, central bankers, blogs (except BuddhaMoney, naturally), advertisements, well-meaning but misinformed friends …

… and the noise can be persuasive, pulling you every which way, screaming at you to BUY this; SELL that; stocks are best for the long run; balancing stocks and bonds is essential; buy gold, dump everything else, the system is crashing, paper money will soon be worthless; no, no, no, cash is your best friend; mutual funds are the only way for most people to adequately diversify; scratch that, mutual funds are too expensive, buy me, I’m an Exchange Traded Fund (ETF) that is essentially a mutual fund that charges you lower fees; global markets are down 4% and falling fast, the sky is falling, sell SELL!; global markets are up 4%, sunny days ahead so buy now while stocks are on sale, buy stocks, buy real estate, buy commodities, buy, buy, BUY!

If you want to ride an emotional rollercoaster and in the process drive yourself completely nuts, read these kinds of headlines everyday. That said, because you’re here, cozying up to BuddhaMoney, I assume you shimmy toward inner peace and balance. Bravo.

And if you’re a daily follower of the markets frenzied gyrations then, at this very moment, you agree to take a solemn vow to change this behaviour, to stop allowing mainstream financial media to push your emotional buttons, simply because it will be good for you, good for your BuddhaMoney soul, to shut out the noise.

Still, how do you know what to tune into and what to tune out? What sources are objective and reliable, not touting their own self-interest? How do you know what to buy/sell, when to buy/sell, how much to buy/sell?

Check out our next blog post (ahhh, the cliffhanger), I’ll be talking more about stock market investing, where to start on your investing journey, and how to figure out what’s best for you.