The Danish Way Of Wealth

Since 2012, the Sustainable Development Solutions Network (SDSN) has undertaken an annual comparative study of happiness within nations. The study measures …

Since 2012, the Sustainable Development Solutions Network (SDSN) has undertaken an annual comparative study of happiness within nations. The study measures a host of variables factored into measuring happiness then publishes its results in something titled the World Happiness Report. Now, for anyone who may be about to raise their eyebrows and question whether the study is nothing more than a hippie dippy tie dyed waste of taxpayers money, check your impulse and have a look at some of the study’s purposes:

  • Mobilize global scientific and technological expertise to promote practical solutions for sustainable development, including implementation of the Sustainable Development Goals (SDGs) and the Paris Climate Agreement.
  • Accelerate joint learning and promote integrated approaches that address the interconnected economic, social, and environmental challenges confronting the world.
  • Enable a large number of leaders from all regions and diverse backgrounds to participate in the development of the network.

Seemingly laudable goals? Sure seems so. And all the better for putting forth ideals recognizing that we live in an inter-connected world, a world where the force of an Australian sneeze may reverberate in Chile; a Chinese smile may ricochet in Iceland.

 

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Building Social Trust, Not Walls

Still, what do these stated goals have to do with Happiness?

To answer this question, I’ll pass the megaphone over to Jeff Sachs, co-editor of the study and director of the Earth Institute at Columbia University.

Jeff says that world leaders need to understand what matters most to people if they are to have any hope of creating sound policy. He goes on to say that,

“Happiness is a result of creating strong social foundations. It’s time to build social trust and healthy lives, not [arm our self with] guns or [build] walls.”

What Sachs is getting at is the idea that trusting each other, our elected leaders, and institutions, is essential for an individual and a society to establish a firmly anchored sense of well being. And the bonus about feeling groovy, about feeling in soulful harmony with our self? Aside from the genuinely positive vibrations we share with fellow humans and other creatures, we’re more productive, more peaceful, more compassionate, earn more, and live longer.

And this is how happiness connects to the study’s purposes: governments that truly wish to build an inclusive society, one that fosters social cohesion and sustainable economic development, first need a baseline assessment of their people’s current state of well being. Then comes the task of figuring out what’s working, what’s not working , and implementing change to make us better.

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Is Denmark Utopia?

Each year since the first World Happiness Report was issued, Denmark has ranked at or near the top. Why? What does a country that is home to less than six million people know that others don’t? A country where people prefer to stay inside for much of November through March owing to the cold, and pop umbrellas open for near 180 days of the year because of rain.

Ya, well, weather is a state of mind as far as Danes are concerned. I mean, we’re talking about a country that entertains a steady flow of foreign government representatives who are on a mission to find out what the heck it is that makes Danes so damn happy.

There’s no such rush to the USA, a country sitting at #14 on the happiness scale. Some argue that this relatively poor showing is a result of misguided political leaders who espouse misguided policies emphasizing economic growth above all else. The thinking among these leaders being that more money translates to a better, happier life. Really? Will they never learn?

Living in a monster house does not bring happiness. Driving a Mercedes does not nurture one’s soul. Having more money than one’s neighbour does not elevate self-worth or contribute to one’s value as a human being. Because here’s the thing: happiness is not driven by the bottom line. And this is where America (and some other countries) falls down; with an overriding emphasis on money, the economy, taxes.

Back to Jeff Sachs, he says,

“America’s crisis is, in short, a social crisis. Not an economic crisis.”

So what may the USA, and other countries (I’m not trying to pick here; every country has their pluses and minuses) learn from Denmark? First off, this Nordic country knows neither economic nor social crisis. Along with the other top 5 countries, they rank high for caring, freedom, generosity, honesty, health, income and good governance.  All reflective of a strong sense of community and understanding in the common good.

But you know what’s even better? You know what puts the Danes over the top? A little something known as HYGGE (pronounced ‘hoo-gah’ – see youtube video link here).

 

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HYGGE Is the Secret

‘Hygge’ is a Danish word. Though there’s no precise translation into English, here’s a few close approximations:

  • Cosiness of the soul
  • The art of creating intimacy
  • Cocoa by candlelight

Whichever definition you hang your hat on, Hygge is about an atmosphere, an experience. It’s about being with people we care for, people we love. It’s a feeling that we’re safe; that we may let our guard down; that we may engage in conversation about “big important” issues or silly nonsense; or that we may be silent in the company of others.

Of course, you could say that while Hygge sounds pleasant, the Danes have other reasons to be happy. Such as free health care, free education (from pre-school through university), subsidized childcare, job training and re-training, generous unemployment insurance (about $1900 USD/month after taxes), fuel subsidies and rent allowance for the elderly.

Yes, these social programs cost money. And to fund these programs, Denmark has the highest tax rates among European countries. Agh! Oh no! Taxes are evil! Or … are they? Is it not possible to find a compromise, a balance beneficial to both citizens and society at large, to the common good? Danish folks would say yes.

They say yes to a social system that has a burgeoning middle class, high taxes are acknowledged as a drag on economic growth but the welcome trade-off is a peaceful, caring society where no one, including vulnerable members of society, is left behind.

And this choice in favor of an expansive social system is made with awareness that collective wealth results in collective well being. In this regard, taxes are far from evil; rather, they’re perceived as an investment in society. They’re a purchase of quality of life. Because sharing and spreading wealth reduces risk, uncertainty and anxiety among citizens. And doing so nurtures happiness. And spreads the joy of Hygge!

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The Humility of Hygge

Oh, there’s so much more to say about Hygge, this word, this concept, this value, embraced by so many Danes, and contributing to one of the most successful societies we know.

Hygge is humble. Hygge is not rushing. Hygge is moderation. Hygge is watching leaves fall, baking cookies, sharing stories and laughter. Hygge is playing board games, swimming in the lake, dining on home cooked food. Hygge is saving money, making do with less, savoring simple pleasures, being grateful for what you have. Hygge is listening to birds sing, watching a child ride a bike or, better yet, riding a bike with the child. Hygge is the right atmosphere, degree of comfort and warmth, wanting to be engaged with people, caring for whom you are with. Hygge is real, balanced, down to earth.

In effect, Hygge is anti-bling, anti-consumption, anti-prestige not for ideological reasons but because it is not possible for money and entitlement to buy Hygge. In fact, if money is used in an attempt to improve Hygge, well, this act in itself is so anti-Hygge that the Hygge factor will be reduced or eliminated altogether!

What else?

Hygge is Candles. The Danes burn more candles by far than any other country. Candles, you see, create the right atmosphere.

Hygge is Presence. In this sense, Hygge is Buddha-like in emphasizing that we Be Here Now; welcome each and every moment.

Hygge is Simple Pleasures. Coffee, cake, cookies, chocolate. Whatever relaxes your mind and warms your heart.

Hygge is Equality. ‘WE’ takes priority over ‘ME’.

Hygge is Gratitude. Enjoy what you have; do not envy others.

Hygge is Harmony. Life is not a competition. We like you for you, not because of your achievements.

Hygge is Comfort. Get cozy. Relax. Take a break. Sip tea.

Hygge is Compromise and Truce. No drama. Let’s be kind and get along.

Hygge is Togetherness. Building relationships.

Hygge is Shelter. Your home, your country, this world, is your tribe. A place of peace and security.

If nothing else, my hope is that by reading the word ‘Hygge’ so many times that you now feel somewhat comfortable enunciating the word out loud (H00-gah). May you embrace Hygge!

ps. thanks to Meik Wiking, chief executive officer of the Happiness Research Institute in Copenhagen, for writing The Little Book of Hygge: The Danish Way To Live Well. A warm, inviting read that inspired this post, inspired me to continue learning more about Danish society, and to welcome more Hygge into my life.

 

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MEIK WIKING jacket.jpg

 

 

Amazon Prime: The Inside Story

When shopping for books, my first choice is to buy used at the online marketplace, AbeBooks, a company that sources books from local bookshops around the world.

The fact that the books are used? Not an issue at all. I pay a whole lot less than what I would have paid if buying new, with the added bonus that every book I’ve ordered arrives in excellent condition.

The downside, if you can call it that, is that books may be mailed from countries like Australia or England and not arrive for anywhere between 7-21 days or so after placing an order. But I’m good with that. Because it’s rare, if ever, that I absolutely need a book immediately. And you know what? It’s fun waiting. It’s fun anticipating arrival, not unlike looking forward to going on vacation. Waiting reinforces my understanding of the phrase, ‘patience is its own reward’.

Besides, if I need a book immediately (owing to impulse control system shutdown), it may be available at a local bookstore. If not, there’s always Amazon.

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Prime Time With Amazon

Amazon bills its annual Prime Day as ‘a one-day only global shopping event exclusively for Prime members!’ Oh, how exciting, more shopping, more deals, more spending, more getting excited about … stuff.

Sarcasm aside, Amazon is not (surprise, surprise) acting out of the goodness of its heart when enticing consumers to shop until they’ve maxed out their credit card. Nah. Instead, Amazon is intent on taking over the consumer world (chewy thought: given Amazon’s voracious and insatiable growth, will the federal government step in one day, brand Amazon a monopoly and require it to break up into smaller pieces? Stay tuned).

And here’s where Prime Day greases the ravenous machine. July being a quiet retail period, Amazon offers big time deals. In the process, they attract new third-party sellers to their site (which, in turn, enhances product assortment) and persuade more consumers to sign up for Amazon Prime. Because, remember, this is a member’s only sale. And as one credit card company put it in an advertising campaign of years past, ‘membership has its privileges’. Right. The privilege to buy more stuff. Whooo Hooo (ooops, sarcasm reflexively returned).

Jeff Bezos, Amazon’s founder and CEO, knows exactly what he’s doing. Bezos knows consumer behaviour inside out. He knows that the first two Prime Days (this year is #3), generated profits 4x greater than the typical daily profit haul. And he knows that getting consumers to pay $99 to become a Prime Time member is only part of the pitch.

Because internal research has shown that Prime members spend more time noodling around Amazon’s ecosystem of services, and they spend more money. All of which further cements Amazon’s retail dominance.

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Why I Shop At Amazon

More and more, I buy stuff at Amazon. At first, it was only books that I couldn’t find on AbeBooks (did I mention that Amazon bought AbeBooks in 2008?), because even if they didn’t offer a new book priced lower than competitors, they offered free shipping. And convenience. And reliability. And excellent customer service if a package got lost or was damaged during shipping.

Now, for all those reasons, I’ve been buying other stuff at Amazon. And, obviously, I’m not the only one, their reach now being far (think India and China) and wide (think decimated mom and pop bookstores, not to mention the once substantial, now deceased, Borders and Circuit City, and the recent acquisition of Whole Foods). Recent talk of Nike selling their products on Amazon was enough to boost Nike share price and drag down their competitors (Foot Locker fell 6%; Dicks Sporting Goods dropped 5.3%, Under Armour shed 1.5%).

The thing is, Amazon lives up to its name in breadth. The company is a huge distribution channel and only getting bigger, selling everything from clothes to cat litter to car parts. So other retailers want access to that connection to massive hordes of consumers. And not having that direct line to potential consumers is proving damaging as people continue to shop more online than in store. So damaging that some are closing up shop (for example, Sears is now kaput and Macys has shut 100s of stores).

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It’s Just A Store

Amazon makes shopping easy. And the prices are good. The sales even better. Fine. Still, it’s just a store. It sells stuff. You want to spend $99 to become a Prime Member? That’s your call. But don’t buy stuff just because its ON SALE or a GREAT DEAL or a LIMITED TIME OFFER. Don’t fall prey to the marketing jargon, the nonsense, the only purpose of which is to get you, the consumer, to open your wallet and fatten Amazon’s profits.

As for me, I’ll survive just fine without Amazon Prime and their promise of delivery within 2 hours or 24 hours. Sure, it’s a convenient service. But is my personal convenience really that important? Nope. I don’t need it. In fact, I don’t want it. Because I prefer not living life at high speed. I prefer anticipation. I prefer the wait. And I prefer not to buy more than I need.


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Enter Buddha

To be impatient is to be anxious, uneasy, even greedy. Patience, however, is alert, active, expectant. Patience is not dull, it is radiant. It is a flame burning bright.

 

Buy Substance, Not Image

Last week, my Apple MacBook gasped, wheezed, and hiccupped uncontrollably. Then there was silence. After more than eight years of devoted service, this was the machine’s way of saying goodbye. I said my thanks, expressed gratitude, and made arrangements for its various parts to be recycled. Moments later I was online at the Apple Store purchasing a replacement, a new MacBook Air.

And I didn’t think twice about shelling out a fair bit of dough for another pricey Apple laptop. Because the brand has earned my trust. Not owing to superficial matters such as the ‘cool, hip, styyyyllllish factor’, slick marketing or product packaging. But because my experience with Apple products has led me to associate the brand with superior quality, durability, reliability, and ease of use.

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Brand Power

Branding is important. It sells an image. From a consumer’s perspective, the brand communicates what the organization is all about. And it speaks to more than the utilitarian function or benefits of a particular product or service; it’s also intended to speak directly to each consumer, to make each consumer feel special, to tap into our emotional network for the purpose of bonding consumer with brand thus giving birth to Loyal, Repeat, Profitable Consumer.

If this seems part science fiction, part Dr. Evil (cue Mike Myers), well … welcome to the mercenary underbelly of marketing (cue sinister laugh of Vincent Price – have a listen, and a laugh of your own, @ https://www.youtube.com/watch?v=fRamB30E9mU).

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Okay, maniacal chuckles aside, it’s time for a real life example: Nike (NYSE:NKE). The shoe manufacture of sizeable fame and fortune that takes its name from the Greek goddess of Victory.

The corporation that became known as the ‘Just Do It’ brand. And in bringing to life one of the most successful slogans ever, Nike knocked the socks off the advertising world. More importantly from a shareholder’s perspective, they gained millions of new, faithful, true believer customers, enabling them to sprint miles ahead of the competition.

Why has ‘Just Do It’ been so successful? Well, even though their primary product back in 1988, when the slogan first aired, was shoes, Nike didn’t position themselves as shoe sellers. Instead, Nike was selling courage.

Here’s what I mean: the slogan speaks to laziness. To varying degrees, happens to everyone, right? We get lazy. And laziness is our foe. That’s where magic shoes come to the rescue, shoes marked with a simple swoosh, shoes ushered into the public consciousness with a battle cry, shoes urging you to wrestle with your inner sloth, shoes beseeching you to suck it up, get off the couch and DO IT!

Do whatever it is that’s necessary to reach your goals, be they business or personal. And know that when you DO IT, when you engage in hard work and personal sacrifice, when you roar like a lion (or a highly paid athlete) you empower your self.

For close to thirty years, the Just Do It message has resonated with huge numbers of consumers worldwide and facilitated Nike’s continuing success.

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Whatever You Do, Don’t Identify With A Brand

That’s all well and good for Nike. But what about the consumer? Is it in the consumer’s best interest to attach them self to a brand? To be hypnotized by a swoosh? To believe that one kind of shoe or computer or car or anything else being sold in our hyper-competitive commercial markets is better or awesome or desirable simply because of a logo or a slogan or an all too common celebrity endorsement for those companies lacking the oomph! of a Nike slogan?

Frankly, it’s delusional on the part of the consumer to think this way. To think that marketing campaigns are anything but surface bluster, hype and showmanship the sole purpose of which is to stimulate sales, NOT to accurately reflect quality or value. Or to think that celebrity endorsements have any substantive value whatsoever when it comes to the worth of a product.

Ahhh, but mine appears to be a lonely voice in the wilderness (said with an Irish lilt).

Because brands, together with marketing campaigns, are powerful. Moreso because consumers want to believe the fanciful imagery being sold.

They want to believe that slipping into a pair of new Nike shoes will let them soar like Michael Jordan or slice and dice a tennis ball like Roger Federer. Consumers want to believe that dabbing on Chanel No. 5 will increase their sex appeal because Nicole Kidman is paid $4 million/year to shill for the perfume. Or sipping Nespresso, owned by Nestle (OTCMKTS:NSRGY), the $275 million consumer products giant, is fashionable therefore desirable because George Clooney takes home $5 million/year for being its poster boy.

Fascinating really. Actors, athletes … celebrities of all stripes, are people hired by for-profit organizations to capitalize on their ‘star’ power, to seduce wide eyed consumers. Consumers who spend too much money, sometimes more than they can afford, sometimes taking on destructive debt, sometimes losing or misplacing their sense of self, as a result of buying into the celebrity brand.

Why, is the question someone as naïve as myself asks? Why does the magnetic celebrity pull exist? Is it because the consumer wants to feel like the celebrity? Is it because the consumer admires the celebrity’s image (because that’s all the public is privy to – an image), and feels connected to the celebrity when wearing clothes or perfume that the celebrity endorses? And this makes consumer feel better about them self?

Hmmm. This is what I’m going with: bewitched consumers, having fallen prey to the misguided notion that in buying a product they are connecting with the ‘star’, feel a sense of belonging, camaraderie, and all around feel good.

An accurate understanding or not, what’s more important is for consumer to ask: what is the benefit, and what is the cost of my expenditure?

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Who Do You Trust With Your Life Savings?

Financial institutions do their own form of branding.

Wealthsimple, one of the larger independent American Robo-Advisory companies, recently circulated a money focused article apparently written for them by Kevin Bacon, the actor (https://www.wealthsimple.com/en-us/magazine/money-diary-kevin-bacon). All I can say to this is that Bacon may not want to give up his day job.

Why would Wealthsimple want an actor to write an article about money? Straight up, they’re banking on his status to attract new customers.

Colonial Penn, an insurance company, uses Alex Trebek as their spokesperson. And why not? He has hosted the most popular television game show ever, Jeopardy, for more than 30 years. So, clearly he knows what he’s talking about when it comes to insurance products. Okay, sarcasm aside, Trebek is an excellent front man. Widely recognizable name, calm presence, pleasant on stage personality; everything about Trebek says he’s a perfect fit for a staid industry.

But does this mean you should do business with Colonial Penn? I really don’t know. Because I haven’t researched the company. That said, there’s no way I would make a decision based on a T.V. personality pitching their products. Because it makes zero impression on me, the fact that someone who earns their living playing someone who they’re not on an entertainment show is now their public salesman (because that’s what actors do, they play, and as they play, they sell an image void of authenticity; and this is what earns the public’s trust, an inauthentic image, and the more the public fawns over the image, the more the actor is paid for their role, the more this reinforces the actor’s inherent narcissism … and the public continues to buy in???).

What matters is substance, not image. If Colonial Penn, or any other company for that matter, backs up image with substance, then it’s all good. Apple backs up image with substance, with quality and value. So does Nike. As do some other companies.

For the sake of your wealth, whether your buying products or services, financial or otherwise, ignore the show, the glitz, the imagery intended to sucker you in. Instead, dig deep into the notion of value, fully understand costs and benefits before making the call or clicking ‘purchase’.

I mean, we’re all consumers of one sort or another. And in the consumer role, it’s always to our advantage to be fully informed.

Power to Robo-Advisors

The word is that Robo-Advisors are good for your financial health. Why? Because they offer similar services as the human kind of financial advisor at lower cost. If you’re paying less in management fees, your returns are higher, your portfolio fatter. That’s the dominant sales pitch. And with the nascent industry growing from $16 billion (USD) under management in 2014 to more than $160 billion today, there’s reason to stop and look at what a Robo-Advisor may do for you.

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Financial Giants Muscling Into The Game

As retail investors flock to Robo-Advisors (i.e., software programs using mathematical algorithms to generate investment advice and manage your portfolio), pioneers like Wealthfront and Betterment must now compete against big boys such as Charles Schwab, TD Ameritrade, Vanguard Group, and Fidelity Investments.

And the bandwagon keeps growing. Bank of America activated Merrill Edge Guided Investing earlier this year, Morgan Stanley announced that they’ll be launching Morgan Stanley Access Investing in the fall, 2017, and Goldman Sachs is gearing up to introduce its own Robo-Advisory services.

In Canada, several independent firms (i.e., WealthSimple, QuestTrade Portfolio IQ) offer Robo-advisory services with Bank of Montreal being the only bank having a firm foothold. With momentum and money on the side of robots, it would be surprising if Canada’s other big banks didn’t roll out their own Robo-Advisor in the next year to secure their slice of this particular money pie.

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How Does It Work, This Robo-Advisor Thing?

Robo-advisors are a third option for investing; doing it your self and full service financial advisory services being the other two options.

Robo-advisors are convenient (24/7 online access) and more accessible and affordable than hiring a financial advisor (you often need a minimum of $100,000-$250,000 to retain the services of a financial advisor; as for Robo-advisors, some do not require a minimum balance to open an account, others are as low as $500).

Depending on the specific Robo-advisor, they offer different degrees of automation: fully automated or a hybrid set up offering access to old fashioned humans for an additional fee.

Either way, getting started involves you answering some questions about your age, assets, financial goals, risk tolerance, investing time horizon, etc. Moments later, computer algorithms propose a cookie cutter portfolio most suitable to you.

Available investments typically include a range of exchange traded index funds. The software continually monitors your portfolio and periodically buys and sells to maintain your stated risk tolerance and financial goals.

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Hype or Substance?

Despite impressive growth of Robo-Advisors in a relatively short period of time, $160 billion is no more than a few drops in a financial industry bucket worth somewhere around $20 Trillion. Still, this niche is expected to continue growing thus more players entering the market.

So … should you bite?

That depends.

  • If you have less than, say, $100,000 for investing, and you want some guidance, then definitely give it a go.
  • If you prefer interfacing with computers rather than humans, again, Robo-Advisors are for you.
  • If you’re currently working with a financial advisor and are not entirely satisfied with the value they bring to the table, then consider opening a Robo-Advisor account to see if it better suits your needs (this may include intangibles other than fees such as guiding you on debt reduction issues, divorce, house purchase, loans, estate planning, and any other financial issues not directly related to investing).

Well, what if your advisor places you in passive funds? They’re still charging you 1 or 2 points. Why pay high fees when an effective Robo-advisor portfolio may be built for less than half the cost?

  • Back to value, let’s give a little more space to fees.

Depending on your robot of choice, we’re talking management fees in the neighborhood of 0.25 – 0.50% for a Robo-Advisor.

Compare this to financial advisors of the human variety who typically charge between 1.0 – 2.0%.

Seems like a small difference in fees? It’s not. Fees matter.

Consider a simple example: your portfolio is worth $500,000. Fees are 2%. Total fees for the year equals $10,000. For simple illustration purposes, if your portfolio remains at $500,000 for 30 years, that’s $300,000 in fees paid. Compare that to 0.5% fees that results in annual fees of $2,500. After 30 years, the final tally is $75,000. Either way, that’s a whole lot of dough toward fees but the 75k is much more palatable than 300k.

Of course, you could slash fees even more by avoiding both humans and robots. Instead, open a discount brokerage account, buy exchange traded index funds, and pay the $5-$10 transaction cost for each buy and sell.

But … what if you’re not the do-it-yourself type when it comes to investments? What if you don’t have the time, knowledge or inclination to manage your investments solo?

Well, then a Robo-advisor would be your next best choice.

 

 

 

 

 

 

The Rabbi, The Monk, The Money

I know, the headline sounds like the beginning of a well-worn joke or a film title that’s trying too hard to be irreverent. But here’s the thing: this post is really about a Rabbi, a Monk, and Money, as odd as the title may seem. Then again, this is BuddhaMoney. And we’re known to sprinkle spirituality into the money mix, you know, for the sake of leading you toward a balanced, fulfilled life. Because, hey, this is who we are and what we do.

Digging deeper than the snappy title, this post is about whom you choose as a financial advisor, mortgage broker, or anyone else hired to care for money related aspects of life.

That said, it’s not that you need to choose folks of the cloth for financial guidance. And, anyway, it’s not like there’s a whole lot of spiritual gurus out there who double as profit seeking money experts. But there are some. Or a few, anyway. Um, well, let’s say four that I’ve come across. Still, regardless of scarce availability of sage-turned-crackerjack-financial-pro, we can learn from the ones who do exist.

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Does Money Matter? Oy! Do You Really Need To Ask Such a Question?

There’s this guy named David Frankel. Frankel works as a mortgage broker in Philadelphia. His previous gig included, among other responsibilities, officiating at weddings and bar mitzvahs as a Rabbi.

Like other quality mortgage brokers, Frankel knows the ins and outs of mortgage related issues. And he surely does his best to secure the lowest possible rate on terms most favorable to clients.

Okay, sooooo … what differentiates Frankel from competitors? Given that there are other quality brokers out there, what makes Frankel a guy you want to hire? Does his rabbinical knowledge and experience translate to a business edge?

Lets answer this by turning back the clock to the middle / late aughts. Remember 2007-2009, when the financial world imploded? And the building blocks for the economy busting meltdown were constructed with unsavory, immoral, dishonest (I’m being kind here) people and institutions intent on making a buck for them self any which way they could?

There was something missing from these kind of people, the kind who didn’t think twice about taking part in the Get-It-While-You-Can-Get-It-While-Its-Hot festival of selfishness and greed. What was missing? How about a crazy little thing called Integrity.

And this is Frankel’s edge. Integrity. In an industry where self worth is measured by net worth, this is where Frankel, and others (spiritually learned or not) with equal parts Integrity excel. These are the kind of people who stitch together the fabric of society. These are the kind of people, truthful people, who you want to hire for money matters.

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In the mortgage business, people like this do not try to provide you with the largest mortgage possible (so the lender may make more money) nor an elephant size Home Line of Credit (so you may be tempted to borrow more against the equity in your home thereby increasing your debt so, again, the lender may make more money). Instead, their purpose is to provide you with nothing more than a mortgage that suits your needs and fits your financial circumstances.

And before rushing through paperwork and sending a bucket of money your way, they patiently learn your needs through asking questions. And listening. And caring. And encouraging you to consider what a home means to you, what money means to you. And when all is said and done, the person with Integrity is just as satisfied with a fair transactional profit as they are with knowing that you, their client, is equally satisfied.

Frankel, and people like him, are the kind of people you want to deal with. Genuine people whose actions are guided by honesty, compassion and a sense of fair play. Guided by a crazy little thing called Integrity.


 Chewy Bit

For a riveting ride inside the minds that cratered Main Street and Wall Street, read The Big Short. It’s a movie too but the book offers way more detail and is equally fascinating.


Suffering Prevention Specialist

The basis of some religious teachings is something along the lines of … ‘suffering exists; we will teach you how to overcome suffering.’

Doug Lynam, former Benedictine Monk, current Financial Advisor, sees himself as a Suffering Prevention Specialist. (Gotta love the job description!) Like Frankel, Lynam truly cares about his clients, saying that his work “requires all of my mind, heart, and devotion”.

Specifically, he’s focused his efforts toward reducing suffering among schools and their employees. Seems that there have been too many schools farming out employee retirement plans to incompetent, or even negligent, money managers. The result being the blowing up of later in life dreams through depletion of pension assets.

Lynam’s response? Instead of smoke billowing out his ears or filing a frenzy of lawsuits, Lynam calmly steps up and takes action by devoting him self to helping schools build more effective retirement plans. Because it wouldn’t be enough to only sympathize with the plight of those who have suffered financial wrongdoing. The sympathy, the compassion, has to be combined with mindful action that helps people.

And together with other caring people working at LongView Asset Management (including a Hindu Nun and a Buddhist Chaplain), Lynam takes action not only through constructing and implementing sound financial plans. He also walks the extra mile for clients … because that’s who he is.

In this sense, Lynam helps people work through other issues loosely related to finances:

“Perhaps one of the cardinal sins that I see the most, though it’s not a popular one to talk about, is sloth.

Some people are afraid but also a little lazy, and they don’t really want to do the hard work of facing their mistakes or lack of organization and knowledge on these subjects and take responsibility.”

Here, Lynam recognizes the life challenges and difficulties people experience. And he does what he can to educate, guide, and help people alleviate their suffering.

Well, I wouldn’t be going out on a limb here in saying that Lynam is certainly not your typical financial advisor. But he is the kind of financial advisor from whom most everyone would benefit.

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Integrity Is Available For All

Like I said earlier, there aren’t a whole lot of spiritual gurus out there who double as money experts. But there are others plying their trade in the financial industry whose principled, stand up values inform their work and their approach to business relations. These are the kind of people you want to do business with; people who show by their words AND actions that they care about you and your family. People with Integrity.

 

Optimists Make More Money

Several years ago, believers in the ‘Peak Oil’ theory prophesized that our world had reached the height of oil extraction. Moving forward, they said, oil extraction was doomed to permanent decline before eventually ceasing altogether.

A friend of mine (“Squawker”) was an unwavering proponent of the theory. He was bug eyed passionate about telling all who would listen that when oil supplies get squeezed way, way tighter than the early 1970s oil embargo, our economy and lifestyle will spiral down. And the only thing you’ll be able to count on will be the fact that imminent disaster is just a matter of time.

You see, said Squawker, once oil prices skyrocket, transportation costs will be prohibitive. This will translate to an exorbitant rise in the price of food, since food cost is closely tied to oil cost.

And the next domino to fall will be the suburbs, which will transform into ghost towns. Because extraordinary fuel costs will essentially shut down individual commuting and public transportation. Biblical proportion exodus from nationwide suburbs will lead to higher and higher density and massive congestion (we’re talking Hong Kong style density multiplied by 100) in urban centers convenient for walking and cycling to work.


Squawker Does Not Come Home To Roost

Of course, Squawker was wrong. He was also wrong about impending Armageddon resulting from the Great Recession of 2007-2009. And he was wrong about returning to the gold standard and consequent end of paper money’s reign owing to perceived incompetence and self-interest of central banks worldwide.

I could go on but the point is not to flog Squawker. He’s a good person, smart guy, big heart. And as much as I shrink from labeling anyone, from boxing anyone in with a fixed, unchangeable trait, more often than not Squawker sees life’s glass as half empty.


 Enter Buddha

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Your mind belongs to you. Your perspective belongs to you. You may always choose what you see, and the way in which you see life.


Here’s the thing about pessimism: it rests on the notion of a perceived problem, or even crisis, that cannot be solved. Pessimism says that once we enter economic recession, especially a once-in-a-many-generations-shock-shiver-and-quake-in-your-boots-to-the-financial-system-set-back, you may as well drop the curtain and cut the lights because the party’s over. Pessimism says human ingenuity and capacity for problem solving is limited and finite. Pessimism says that never before seen difficulties, puzzles, and complications cannot be solved so it’s best to run and hide.


Optimists Rock

Optimists have another take. And Optimists, thankfully, dominate our scientific, engineering and business world, especially those in the following countries: South Korea, Japan, Germany, Finland, Israel and the USA. These six countries sit atop the Innovation List.

And individuals resident in these six countries are positively changing the way we live, empowering more and more global citizens through inventions that solve humanity’s problems and raise our standard of living.

Of course, residents of other countries contribute too, but I’d hazard a guess that there’s something about the culture of the six leading countries that encourages and cultivates an outsized share of Optimistic Thinkers and Do-ers.

Moreso than other countries, there’s something in the air or the water or the general rights and freedoms given to people in these six countries that facilitates determination, resilience, perseverance, strength, motivation, enthusiasm and flexibility, all traits common to the glass half full folks.

Unlike Pessimists, Optimists are fond of saying, hey, we sure would prefer to see human and economic development advance on a straight line up. But we’re realists too, and we know that just isn’t going to happen. We know that there are, and will continue to be, hiccups along the way. Two steps forward, one step back, and all that jazz.

And when the step back happens, we don’t freeze up, we don’t wallow and moan and hunker down with a multi-year supply of food, water, guns, and a mind wracked with fear. Nahhhhh! Optimists recognize the step back for what it is, knowing forward movement will soon resume.

As for us folks in the investment game, we know that the step back in the form of economic recession or a particular, fundamentally sound, company falling off the revenue/profit rails for a short time period presents prime opportunity to buy top quality shares on the cheap, paving the way for juicy long-term gains.


Enter Buddha

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The Pessimist complains about the wind. The Optimist expects it to change and adjusts her sails.


Optimism Leads to Success

Some folks attribute Warren Buffet’s unrelenting optimism to the fact that he’s the most successful investor ever and, for those keeping score, the third richest dude on this planet.

But here’s what Bill Gates, Microsoft founder and numero uno on the global rich list, says about his friend Warren:

“Warren’s success didn’t create his optimism; his optimism led to his success. Because optimism isn’t a belief that things will automatically get better; it’s a conviction that we can make things better.”

One research study after another has shown that optimism favorably impacts success of any endeavor. Because those who are optimistic, those who are able to envision a brighter tomorrow, are resilient and don’t hesitate to dust them self off after falling down, again and again and again.

What exactly are the ingredients stirred into the optimist’s mix? Dr. Susan Kobasa (1982) found that ‘resilient’ folks have certain characteristics that contribute to their constructive, positive perceptions:

  • Curious.
  • Accept that change is part of life.
  • Accept that change is essential for growth.
  • Believe in them self; believe that they make a difference and influence change by what they imagine, say, and do.
  • Are intent on making their life experiences meaningful and interesting.

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Looking On The Bright Side

Our brain works kind of like a muscle. Work it, and it grows stronger. Keep it idle, and it atrophies.

Our mental perspective operates in the same way. Grooves for cynical, pessimistic thought are dug deeper, little by little, each time such a thought takes root in your headspace. And if pessimism dominates thinking for an extended period of time, well, that’s going to result in an awfully deep hole, one that will detrimentally color your views on life, including investing and money management. Unfortunately pessimists often seek company from other pessimists, people who think like them, thus reinforcing the dark loop. And the longer the loop persists, the tougher it is to find an exit.

Looking on the bright side comes naturally to some; others have to work hard for it. Take Thomas Edison. Apparently, he ‘failed’ close to 1,000 times before perfecting the light bulb. And he had many other ‘failed’ inventions. Here’s a glimpse into Edison’s mindset:

“I have not failed 10,000 times—I’ve successfully found 10,000 ways that will not work.”

Getting back to Squawker. In 2008, he sold all of his stock market investments at a loss. Then he bought gold bars. And to this day, he holds the gold and hasn’t returned to the stock market. A stock market (let’s use the Dow Jones Industrial Average here) that has gone from a low point of about 6500 to today’s close above 21,000. A gain of about 325%. Easy pickings if he’d just stayed in a DJIA based passive index fund; if he just stayed invested in equities, which is a bet on the global economy, a bet on human resilience and innovation, instead of letting fear lead him astray, to the detriment of his personal finances.

Life, finances, investing … it’s sooooo much about perspective. And perspective is a choice you can make each and every day.


Enter Buddha

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The Optimist believes they are living in the best of all possible worlds. The Pessimist fears this may be true.

 

 

 

 

You Can Have It All

I’m of the view that I can learn from anyone. In this sense, we are all each other’s teacher.

As for money matters, sure, I know a fair bit about finance and investing. Still, that doesn’t mean I’m done with learning more. Because when it comes to learning, less is NOT more. Nope. More is more. And my plan is to keep on thirsting for knowledge, to continue growing, until my departure date from this planet we call home.

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If You Want It, Here It Is, You Can Have It

My 17-year old son tells me that he’s terrible at managing money.

My 26-year old niece says she doesn’t even know where to start when it comes to investing.

My 42-year old friend complains about mortgage debt and making ends meet.

My 47-year old friend fears for his financial future, knowing he has contributed way too little to his retirement account yet remains unwilling to reduce borrowing and spending.

My 59-year old relative, who has crazy long longevity in her family, plans to continue working into her 80s despite a decent sized nest egg because she’s concerned she’ll run out of money before she runs out of breath.

My 81-year old Uncle, who lost any sense of purpose after his wife passed way, does little with his days but review his substantial investment accounts, the size of which seems to be the only support for his sense of self.

Whew! Not a content bunch, at least on the financial front. And these are some of the folks I learn from, with my primary takeaway being this: freedom is often a perspective, an outlook. And this includes financial freedom.

Because, the thing is, if you want financial freedom, you can have it. But not in the conventional way of thinking, i.e., not by earning or inheriting a gazillion dollars. Rather, through adjusting your relationship to money, by empowering your self through learning about money matters, by tweaking the way you manage money, this is how you achieve financial freedom.

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Money Troubles: Two Sources

1. I Want It!

When did so many of us so-called adults revert to an adolescent mindset? A sense of entitlement, a demanding, impulsive neediness to have what we want when we want it?

A long, long time ago (say, when Elvis first popularized hip gyrations), credit was virtually non-existent. So if you didn’t have the money to buy stuff, well, you didn’t buy it.

The obvious upside of this sort of system was no debt. The perceived downside was you either didn’t get stuff or your possession of stuff was delayed until you could save enough dough.

Then along came credit. And people feeling it was their ‘born in America right’ to possess material things that they cannot afford. And lenders, in business for the purpose of earning bucks from lending, were all too happy to lend.

As for the deep dark debt holes being dug by Ms. and Mr. Consumer, well, that was the lender’s business only if they didn’t get repaid. Otherwise,  Consumer would bear the burden and the strain and the stress of debt.

And why shouldn’t they? I mean, presuming Consumer is of the age of majority, presuming Consumer has been wearing big boy / big girl pants for some time, isn’t it Consumer’s responsibility to manage their finances?

It’s not like Consumer is being forced to borrow money, to max out several credit cards, to finance a luxury car or take out a McMansion home mortgage. So in the end, if Consumer is voluntarily taking on debt, then Consumer alone is responsible for that debt, and all its attendant headaches.

… Stop Wanting! 

You know a simple, entirely effective way to eliminate debt, to prevent that pulsating ulcer from ever happening?

For the single purpose of your financial health and resulting freedom, turn the clock back to the 1950s. Pretend credit does not exist. Pay all cash for each and every purchase, whenever possible, except for your home. And even then, borrow only the absolute minimum. And be certain you can and will repay the mortgage within the contractually agreed upon timeframe.

And recognize that not having the money means you cannot afford the purchase. And that’s okay. There’s no need to keep up with the Jones because the Jones are dead. This is 2017, not 1950. Once you stop wanting what you cannot afford, an amazing thing happens. The leaky boat that is your financial house soon repairs itself. Clouds disperse revealing blue sky, sunshine, and calm waters. Your sense of freedom expands, and life is good.


2. Greed Sucks

You can’t have it all and pay for it later. Thinking otherwise defines greed. Inherently, greed is destructive. It will mess with your moral compass. Blow up relationships. Leave you empty.

So how do you quiet your wants so they’re reasonable and not obsessively focused on Self?

Give some away. Really. Giving away money or possessions has the effect of taming the greed monster. In effect, you become more of a Giver, rather than a Taker. And once you start down the Giving path, here’s what happens:

  • Compassion. Prioritizing the needs of others ahead of your own wants not only reduces selfish desire, but also contributes to you seeing how much you already have, and caring for others.
  • Generosity. When you realize how fortunate you are to have what you have, in terms of the people in your life and material goods, then you become grateful. The natural outflow of a heart filled with gratitude is generosity. Generosity subdues greed. And inner peace and contentment then thrive.

But don’t take my word for it. Try it your self; see what happens. And if you’re so inclined, you might want to think about the following:

  • Regular Giving. Determine how much money, stuff and/or time you will give away, and when you will make your gifts, i.e., monthly, annually, etc.
  • Others First. Give to others before giving to your self.
  • Plan. Take time to devise a thoughtful giving plan.
  • Voluntary. Giving comes from inside you, not from social pressure. Be driven by issues close to your heart, issues that engage and excite you, whatever those may be.
  • Happy. Generosity brings happiness to you and the recipient just as surely as miserliness brings misery.

Yours For The Taking

All those people I mentioned in the second paragraph, if they take on the perspective that learning is a never-ending process, and if they are patient and kind to them self, then financial freedom is waiting for them. Because through giving to others and our Self, we’re all allowed to take freedom and feel good about it.

 

 

 

 

 

 

 

 

Cars Are Terrible Investments

Here’s what one journalist wrote about Tesla cars: ‘Tesla fans are crazy advocates. They attach deep emotional significance to the car. They’re not just paying for a mode of transportation, they’re paying for a slice of the future.’

Yup. There’s a whole lot of wildly passionate car lovers out there. People whose emotions drive them to buy a cool, fast or stylish car. People who see their car as a reflection of them self, an object that reinforces their self-image. People who want a visible status symbol broadcasting to others that they’ve arrived, have dough, care about the environment, or lean left or right in the political sense.

Then there are the folks who don’t get caught up in the hype. These people don’t quite understand why others form an emotional bond to a 4,000-pound hunk of steel, aluminum, glass and rubber.

They see cars as utilitarian objects, the purpose of which is to efficiently transport you from A to B, from home to the office, school, the grocery store, kids soccer games. And just like the dreamy car lovers, the emotionally-detached-from-cars types let the world know who they are through choosing a car based on safety ratings, fuel efficiency, and price.

Still, no matter who you are or what your reason is for owning a car, be it a luxury or economy model, cars are terrible, horrible, no good investments.

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Virtually Guaranteed To Lose Money

Question: Name an investment that loses 25% of its value immediately upon purchase, and even more value down the road?

Answer: Your Car.

As soon as you sign the transfer papers for that $30,000 car, its resale value drops about $7,500. Because a car is what’s known as a depreciating asset, meaning it loses big value, fast. Own a collector’s classic that has held or exceeded its original sticker price? That’s all fine and good, and your car would be an exception. But for the overwhelming majority of owners, cars are a non-stop money burn.

Question: Aside from a lower resale value, will I incur other car ownership costs?

Answer: Oh ya, a whole lot more!

We’re talking annual insurance payments, licensing and registration, repairs not covered by warranty, and ordinary maintenance costs including gas (or electricity), new tires, brake pads, etc.

Question: How else will I lose money from car ownership?

Answer: Finance your purchase.

Look, if you don’t have enough money to buy the car, then don’t buy it. Think about it: if you borrow funds for the purchase, just like taking out any other loan, you pay interest. So if you’re paying interest for, say, five years, you’ve not only shelled out 30k, you not only incur ongoing expenses, but you also pay even MORE than the sticker price thanks to interest payments.

Question: What’s even worse than financing your purchase?

Answer: Leasing.

Leasing is renting. You’re renting the car for several years. At the end of the lease term, you have zero equity in the car. Yes, when the lease expires you’ll have the option to purchase the car but don’t expect to get any sort of deal. You’ll be paying full price. And usually, you’ll end up paying more for the car than if you had purchased it at the outset.

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So What Do You Do?

Cars are expensive. Cars are money pits. But a bicycle, scooter, or hoverboard doesn’t suit your needs. So what do you do?

Ideally, make an all cash purchase of a used vehicle sporting high resale value. And keep the car forever.

By not shelling out for a new car every three to five years (and remember that the resale price of your old car will not even come close to paying for new wheels), you’ll save serious dough that may be put toward saving and investing. That’s the beauty of cutting expenses: more money in your pocket, more financial stability, more freedom today and down the road.

If an all cash purchase isn’t possible, then hold your breath and go the financing route.

Borrow the least amount necessary and no more. Don’t get sucked into the ‘low monthly payments’ sell job. Fact is, with any sort of financing you’ll end up increasing the bottom line price for your car. And work out the money details before you commit to the buy, i.e., know what you can afford, and know that you will pay off the loan within a fixed time period.

Finally, do your best to negotiate cost downward. Because in the car sales business there’s a few things you absolutely need to know:

  1. You can always negotiate on price. And if the dealership refuses, then take your business elsewhere. That said, they all negotiate. It’s part of the game. But the onus is on you to insist on a better deal.
  1. Car dealerships are not in the business of losing money. Keep this in mind when they’re tossing sales pitches your way. You know, stuff like ‘$2,000 cash back offer!’ or ‘employee discount available for a limited time!’.

The usual nonsense where dealerships try to make you believe (‘make believe’ being the key phrase) that you’ll get the car for less than dealer cost. The thing is, dealerships are profiting on every sale. And they should. I mean, if they didn’t turn a profit, then they wouldn’t be in business for long. But instead of fattening their profits, you should be looking to minimize their take by driving the best bargain possible.

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Pad Path To Wealth By Keeping Emotions in Check

Car ownership is a lifestyle choice. And it would be wise to make choices that do not hamstring your finances, negatively affect your way of living, or interfere with your financial goals. With more money in your pocket, those leisurely Sunday drives will have you smiling.

 

Are Hedge Funds A Con?

There’s this guy named Ray Dalio. He’s a multi-billionaire. And he makes his money running hedge fund company, Bridgewater Associates. Bridgewater is the biggest boy on the hedge fund block, managing $160 billion (USD) on behalf of investors. In 2016, when the S&P 500 clocked a total return of 12.25%, Bridgewater’s largest fund, Pure Alpha, returned a measly 2.4%. Dalio’s reward for huge underperformance? Take home pay of $1.4 billion.


The Big Fat Pitch

You see, hedge funds are something of a … hmmm, let’s be kind and call this sort of corporate structure a promotional vehicle. The sales pitch goes like this:

‘We have access to information that you don’t; we’re smarter, more knowledgeable and more talented than you when it comes to managing investments; AND we will earn you higher returns than anyone else.’

For the past few decades, wealthy investors and institutions (those who typically have access to hedge funds) greedily swallowed the pitch. And they paid big time fees for the privilege of handing over millions, or hundreds of millions, of dollars to this or that star studded hedge fund.

What kind of fees give investors access to media savvy, hot shot fund managers promising outsized returns?

Fees higher than most any other fund out there. Standard industry practice among hedge funds is what’s known as ’2 and 20 compensation’. Meaning, hedge funds charge fees equal to 2% of funds under management and 20% of profits earned above a certain threshold.

To make this clear, let’s use Dalio’s company as an example. As mentioned, Bridgewater manages a tidy $160 billion. Two percent of that is $3,200,000,000. And Bridgewater skims this ten–figure fee off the top regardless of investment performance. Rise or fall, Bridgewater collects the fee.

Ahhh, but that’s not all that has Bridgewater and other hedge fund managers salivating.

Typically, if hedge fund returns hit 8%, then the fund is entitled to receive 20% of any profits. This is on top of the 2%. The upside here for investors is the incentive. Presumably, Bridgewater strives for returns higher than 8%. If achieved, both investors and funds managers benefit. If not achieved? Well, think of it as foregoing a bonus payment. Because the 2% ($3,200,000,000) isn’t exactly a paltry payday.

So you see, the hedge fund game is even more about attracting money as it is about performance. Because the more money a hedge fund manages, the more guaranteed money it makes.

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Are The Gazillions Justified?

Does Dalio, or any other hedge fund manager, deserve such lavish sums for his work?

Well, that depends on your perspective. I mean, here you have Dalio saying, ‘I’m the best at what I do and this is my fee, pay me or take your money elsewhere’. And investors pay. So in this sense, sure, he deserves the money.

It’s not like Dalio is forcing anyone to hand over their money. He’s simply tossing the sales line, and investors are biting. Presumably, these are wealthy, sophisticated investors who have read the fine print, understand the risks, and know the cost.

Okay, sales pitch aside, greed, ignorance and lemming like investor behaviour aside, does Dalio and other hedge fund managers offer substance? Sure, these guys are consummate salesmen, but are they excellent money managers? Do they generate fat returns for investors? Is their alleged talent worth the price?

I can’t answer these questions any better than Warren Buffett who said,

“There is huge money in selling people the IDEA that you can do something magical for them.”

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Index Fund Trounces Hedge Funds

In 2007, Buffett made a million dollar bet with Protégé Partner, a New York based hedge fund. You can read Protege’s … uh, um, say, questionable sales pitch here.

The bet was simple: over an extended period of time, an S&P 500 Index Fund (in this case the Vanguard 500 Index Fund Admiral Shares with a, get this … 0.04% management fee) would outperform a portfolio made up of several different hedge funds.

Ten years later, the results are in: Index Fund up 85%. Hedge Funds, 22%.

In the financial world, this is a total wipeout. And it’s largely, though not entirely, owing to fees charged by Hedge Funds. Deducting fees would have seen a return of close to 50%; better but still not even close to a passively managed index fund.

Instead of gloating about his win, Buffett took the opportunity to:

  • Reinforce the fact that excessive investment fees destroy wealth.
  • All investors, including the wealthy, are better off placing their money in a low cost index fund.

And investors seem to be catching on.

In 2016, a record amount of money (close to half a trillion dollars) flowed out of active funds and into passive index funds. Also in 2016, hedge funds saw their first annual outflow of money ($28 billion) since 2009. The reason is simple: high fees and poor returns. Expect the bleeding to continue.



Even If It’s Not a Con, Don’t Believe The Hedge Fund Hype

Though there are active fund managers who are able to consistently (i.e., minimum 10 year stretch) beat passive funds, they are few and far between. As for hedge fund managers, Buffett said it best when rhetorically asking:

“How many hedge fund managers in the past 40 years have said … I only want to get paid if I do something for you? Unless I actually deliver something beyond what you can get for yourself, I don’t want to get paid.”

Of course, no one has said this. Because they do not, and cannot, do anything for investors beyond that which an Index fund may do.

As for Dalio, if huge investor fund flows into passive funds are any indication, it could be that he’s a dinosaur. An absurdly rich dinosaur no doubt. But maybe, hopefully, for the sake of investors, for the sake of fairness, honesty and transparency, him and his kind are on the verge of extinction.

 

 

 

 

 

 

Avocado Toast Ruining Retirement

Avocado is a pear shaped, alligator skinned nutritional powerhouse, a veritable stand-in for your one-a-day multivitamin. Humble, ordinary, unassuming, The Avocado is packed with protein, carbohydrates, healthy fats, fiber, zero sodium and a teeny amount of sugar (0.7 grams per 100 grams of avocado); boasts more potassium than the mighty banana; is high in antioxidants such as Lutein and Zeaxanthin, both beneficial to eye health; is loaded with heart healthy fatty acids such as Oleic Acid; and is chock-full of other vitamins and minerals, including calcium, iron, magnesium, copper, manganese, phosphorous, zinc, vitamins C, B6, B12, A, D, E, K, thiamine, riboflavin, and niacin. [big thanks to healthambition.com for providing the link to The Avocado – yes, minor plug here, bit of a positive energy exchange, with no money changing hands].

As extraordinary as this fruit is, spread avocado on toast and you better buckle up. Prepare your self to enter the fifth dimension. A dimension above and beyond sustenance and dietary needs. A dimension indifferent to price, but focused only on what is hip, trendy, and fashionable.

 

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YOU PAID HOW MUCH?

A super food if there ever was one, in the USA average cost for one avocado is about $1.30 (USD). As for Canada, land of minimal corporate competition and resulting higher prices, you’re looking at about $2.25 (CAD) per avocado.

But … once the green on the inside avocado is slathered on a piece of toast, gussied up to induce maximum salivation, and served at a stylish cafe/restaurant, the price rockets to $7 (USD). Sure, bread adds to the total cost and the bread is pricier when artisanal. Still, bread doesn’t add much since you could buy a whole loaf of most breads, artisanal or not, for $7 or less. Assuming a conservative estimate of 15 slices per loaf, that works out to about $0.47 per slice.

Tallying up the numbers, we’re looking at $1.30 for the avocado and no more than a buck for two slices of toast. Grand total cost: $2.30, but that’s only if you dare to toast your bread at home then mash up the avocado on the toast.

Yet, people are more than willing, to fork over more than 3x cost for avocado on toast. Why?

Maybe the following online review of a certain café will give a glimpse of the what’s important for the I-Don’t-Care-What-It-Costs-Because-I-Love-It-And-Toast-Is-Way-Cool crowd:

Their avocado toast is amazing. A clever balance of soft and crispy textures that appeals to both sweet and savory taste palates.”

Okay. Whatever gets your eyes and stomach dancing, I suppose. Although, I can’t help but think that when you pay that much money for simple food requiring so little preparation, you have to rationalize cost somehow.

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Hold The Toast and Choose to Salivate Over Your Growing Wealth

The preceding paragraph was completely judgmental. But not in the way you may think. I’m not judging the ways in which people spend their money. It’s their money to do with as they wish.

What I am judging is the choice to make a habit of dropping $7 on toast. Because small discretionary purchases add up. Just like the $5 specialty coffee adds up when you’re a regular customer. And if purchases like these are part of your budget, you should be aware of the downside. You should know that this sort of spending cuts into savings, and lessens the odds of financial freedom today and down the road.

This is the spiel I gave to my 26 year old Toronto dwelling niece. And she shot back,

‘I like going to cafes. I like getting my coffee on the outside. And if I indulge in avocado on toast now and then, I’m okay with that too. Besides, it’s not like I’ll ever be able to afford a house in this city so this is what my friends and I spend our money on.’

Have you done the math? Coffee $5/day, 30 days/month x 12 = $1800. Add in trendy toast, say twice/week for 52 weeks working out to about $730. Total bill: more than $2,500 per year.

‘Sure, I get it. That’s a fair bit of money. Still, you know much the average home costs here. Almost one million! Trust me, abstaining from toast and coffee is not enough for me to accumulate a down payment.’

She’s right. But the thing is, it’s not just about the toast, avocado and coffee bill. Rather, it’s about a way of thinking, it’s about perspective and goals.

As for perspective, if you’re only thinking about the here and now, not the future, then odds are savings is not a priority. And if indulging now is the priority then, without a doubt, large purchases, such as a home, will not happen. As well, current debt, such as student loans or credit card debt, will not be paid down, and financial strain will weigh heavy on your shoulders.

But if you have one eye toward the future, if one of your goals is to become financially independent and free, then it makes sense to sacrifice some small pleasures.

These sacrifices yield immediate results in the form of increased savings. Savings may be invested. Investments grow. And, eventually, you just may have enough for that down payment. And your future self will thank you for your foresight, for your balanced approach to life.

As for avocado on toast? No need to fret; you can still indulge. But at home. With you and your friends taking turns at the toaster, spreading on the avocado, and making coffee. Try it. You never know, this way may be even be more fun.


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Enter Buddha

Ordinarily, our minds impatiently grumble about that which has not happened. Instead, learn to be patient. Express gratitude for that which has already happened, and patience for that which will happen.