Thinking About Investing In A Condo?

There’s something about owning real estate that gets folks going all ga ga. On a primal level, we humans crave to see, touch, even smell (ya, odd, but hey, we’re a diverse species) our investments, and real estate offers the chance to do just that and more.

The more part? Well, there’s the Sunday drives where you may visit your property for inspection or simply wave hello, and feel good about a particular piece of wood, brick, steel or stucco belonging to you. And you may show your friends and say things like, ‘hey, lets meet at my investment property before we go for dinner’. And all that will give you the warm and fuzzies like no stock ever could.

But, putting on my investor cap, aside from being a source of the occasional feel goods, does it make money sense to buy a condo for investment purposes?

Talking This And That

Alright, first off, I can’t give you a blanket yes or no to that question. There are just too many variables, too many ‘it depends on this and it depends on that’ scenarios such as: the particular neighborhood where you buy; is property demand growing owing to neighborhood/town/city growth; is the condo structurally sound or will the building need major repairs in the near future; did you lock into a smoking hot deal, like those on offer in 2008-2009 in many parts of the USA; what are your financing terms; did you hire a property manager or will you be responsible for dealing with maintenance, repairs and tenants; do you enjoy being a landlord? do you understand that property ownership is a business in itself, requiring your commitment of time and energy if it is to be successful …

All of these issues will affect both your income stream (i.e., rent) and whether or not the condo’s value increases over the years to come.

Uh Oh, I Didn’t Think About Those

Look, I’m not trying to dissuade anyone from investing in a condo. But I am saying there’s a good chance that it may not be all your friends say its cracked up to be. And I’m saying that you have to look at downsides and potential pitfalls, you have to fully inform your self as to what you’re getting into, before starting any business or venturing into any investment.

Working For A Living

Running your own property investment gig takes commitment, skill, and energy. And to do so successfully, you need to know how the game works. In this regard, consider the following Need-To-Knows:

  • Condo Fees

You’ll pay a monthly fee, akin to a maintenance fee, that goes toward keeping the building in good working order. When you’re budgeting expenses, be sure to factor this into ownership costs. And count on the fee increasing at least as much as the rate of inflation.

  • Who’s Running The Show?

Owners are elected to the Condo Association, which is usually made up of between 5 to 9 people. When owner-occupiers serve on the Condo Association, they typically take better care of the property. Landlords not so much as they’re more concerned with keeping monthly fees to a minimum so they can maximize personal cash flow.

  • Condo Rules

This condo rule thing, it’s fairly wide open as far as what may or may not be permitted. Common examples include: uniform colors throughout the building, no pets, and even no kids. For the potential landlord, well, it goes without saying that you need to ensure that the rules do not prohibit renting.

  • Joy of Assessments

Let’s say the building needs a new roof or owners vote to replace single pane windows with double pane. To pay for it, the Condo association has the power to assess a special levy on all owners. Meaning, you’re obligated to pay your share of repairs whether you want the repairs or not.

Typically, it will be a lump sum payable by a certain date. In the Pacific Northwest, during the past twenty years or so, many buildings constructed of wood in the 1970s or 80s needed to have the entire building enveloped and repaired owing to structural water infiltration. The cost per owner? Somewhere in the ballpark of $30,000 to $60,000. Not pocket change.

And once in a while, a rebel owner would put on their complaining pants, state their objection, and refuse to pay their share of the Assessment. What happens then? The Condo Association has the right to put a lien on Rebel Owner’s unit that may prevent future sale of the unit. Okay, all fine and good and just and fair but, in the meantime, funds need to be raised for repairs. Who shoulders the extra cost? The other owners.

  • Condo Association Finances

Before buying, you absolutely must review Condo Association finances. Even better (and highly recommended) is if you have an experienced condo lawyer review the books because they will know exactly what to look for, and what to flag.

Common issues include:

Financial Reserve. Does the Condo Association maintain a financial reserve? If so, how much is the reserve? If the reserve is on the teeny tiny side or there is none, don’t be surprised to receive occasional assessments for major repairs.

Condo Fee Steady. If the Condo fee hasn’t risen for several years, expect an increase soon. And if the fee was recently raised, find out why. It’s possible that an increase reflects a need to raise more funds to pay for repairs.

If The Purpose Is Investing, Think About A REIT Or Two Or Three, Instead Of A Condo 

If you’re not too keen on expending the time and energy required to run your own property investing business, i.e., manage repairs, attend to tenants, fill vacancies, arrange a mortgage, and pay property taxes, then consider investing in REITS.

A Real Estate Investment Trust (REIT) is a company that owns or finances income-producing real estate.

Many REITS are publicly traded so owning shares is a simple matter of paying under $10 to your discount broker and making the buy. Yup, it’s that simple. And you get to keep your evenings and weekends free (instead of fixing the toilet in the condo or meeting with the bookkeeper) while earning a monthly dividend of anywhere between three and ten per cent (the dividend yield depends on the particular REIT) and reaping the benefits of any share price increase.

So what’s not to like about a well managed REIT? Well, before I blather on about the benefits of REITS, here are two potential downsides when compared to being a property owner:

  • First, you’re not in control of the property. Instead, you’ve outsourced control to the REIT management team. Personally, I don’t see an issue here, to farm out management to people who are skilled and experienced in the real estate investing game. That said, property owners enjoy doing business their way, they want control.
  • Second, REIT share prices don’t zoom to the moon. So, if you own property in a neighborhood where prices are skyrocketing, then your property investment will likely perform better than a REIT.

For those of you who do not wish to speculate on property prices, are not built to be a landlord, and prefer a virtually stress free property investment vehicle, choose REITs because …

Diversification

REITS offer diversification in that they hold many properties situated in different geographical locations. And they operate in all sorts of property related businesses including: office, industrial, healthcare, shopping centers, mortgage/finance companies, student housing, hotels, self-storage, and apartment buildings.

Steady Income

A solid REIT provides stable monthly income and annual dividend growth. Think of each dividend increase as a rent increase charged to tenants – the beauty of it is that you don’t deal with any tenants.

Outsourcing Management

Instead of you taking care of buying, managing and selling property, with all its attendant costs and demands on your time, REIT owners are investing in the company’s property management expertise, and their ability to effectively run a public company, including improving its share price and cash flow.

Low Stress

Every month, the REIT drops a dividend payment into your investment account, and occasionally you check the share price. Stressful? As much as a day on the beach.

Liquidity

On any given day that stock markets are open for business, you can sell shares in your REIT for a total transaction cost of under $10 (assuming you’re using a discount broker). Not so with real estate. Rather, it takes time to find a buyer. There is a waiting period up to ninety days before closing. And you need to hire a lawyer and real estate agent, at a minimum, and often pay a government land transfer fee in the thousands. Typically, closing costs run anywhere between four and eight per cent of the sale price.

What Works For You

If you haven’t guessed by now, I’m more of a fan of owning solid REITs instead of income producing property.

REIT ownership is simple, and I don’t have to bother with (re: stress) buying, managing and selling property; which leaves more time for life outside of investing such as hanging out with my kids, going for a walk with my wife, hiking and yoga. Balance.

Still, it’s not a matter of one being ‘better’ than the other. If you enjoy being a landlord and all its responsibilities, and are committed to making your own property investment business a success, then go for it. For those who want exposure to real estate but do not have the time and/or inclination to be a landlord, REITs are an excellent alternative.


ps. huge thanks to American Advisors Group for their permission to use the image introducing this post!

Should You Trust Your Bank?

My 25-year young niece (let’s call her Millennial Woman) is employed full time earning a reasonable income. Being a savvy saver, she’s now taken the first step to becoming an investor by opening an investment account with her friendly neighborhood bank. Why did she choose Friendly Neighborhood Bank? I asked the same question.

Millennial Woman (WM). “Well, I have my bank account with them so I thought it would be convenient to have my investments there too.”

BuddhaMoney (BM). “And the bank suggested what for your investments?”

MW. “The person I dealt with was super nice and said my money should go into a Balanced Mutual Fund.”

BM. “Why a Balanced Fund?”

MW. “I don’t know exactly but the bank said it was suitable for me given my age and risk tolerance.”

BM. “Hmmm. As for the Balanced Fund, is it managed by Friendly Neighborhood Bank.”

MW. “Yes, how did you know?”

BM. “Call it a wild guess. Did the bank suggest any other investment options?”

MW. “No, but it seemed fine and, like I said, the bank person was so nice.”

BM. (silently) Oy.

Banks Are In The Trust BUSINESS

TD Bank is the 10th largest bank in the USA (NYSE:TD), 2nd largest in Canada (TSE:TD), and ranks number 13 globally. Here’s what Bharat Masrani, CEO of TD Bank, recently said:

“TD is in the trust business. We know we must earn our customers’ trust before we earn their business.”

https://www.thestar.com/business/2017/03/13/report-that-td-bank-employees-broke-law-doesnt-reflect-workplace-culture-ceo-says.html

Masrani is absolutely correct. People deposit their money with financial institutions they believe are trustworthy.

From what I gather, Millennial Woman agreed to open an investment account with Friendly Neighborhood Bank, and follow the financial adviser’s advice to place her funds in an investment product managed by Friendly Neighborhood Bank, because the financial adviser came across as ‘nice’. And ‘nice’ translated to trustworthy.

Look, here’s the thing you have to recognize: first and foremost, banking is a Business. A huge business with tremendous profits at stake [in December, 2016, TD reported quarterly profit of $2.3 Billion (CAD); in January, 2017, Wells Fargo – the largest American bank – reported quarterly profit of $5.3 Billion (USD)]

In business (I’ll state the obvious here), you’re selling services and/or products. And when you’re selling something to the public, the odds of closing the sale are a whole lot higher when you put on a smiley face and make nice with the buyer (i.e., you, the potential bank customer, are the buyer).

So when you’re saying that the salesperson (i.e., financial advisor) is ‘nice’, I’m saying: that’s all fine and good and yes most, if not all, of us would prefer to interact with kind, respectful people. But when it comes to deciding how best to manage your money, really, the salesperson must be offering something more than a pleasant disposition, an attractive face, or a free pen! The salesperson absolutely must convince you why Friendly Neighborhood Bank is the best place for your money to grow.

Banks Are In The Sales, Sales, SALES BUSINESS!

The above quote from Bharat Masrani? It was given in response to media stories detailing TD Bank’s aggressive sales tactics at its Canadian based branches.

Should I be shaking my head, waving a finger, or judging TD Bank for allegedly aggressive sales tactics that are nevertheless within ethical boundaries? Nope. I mean, come on, banks are in the Sales Business! You want to be successful at sales, well, you’ve got to step up and SELL (i.e., persuade, convince, coax, sway, influence, cajole …).

And as a potential customer, my responsibility is to know who I’m dealing with and what is their objective (SALES!). My responsibility is to know that one of the prime mandates of business is growth, and growth comes both from attracting more customers and selling more products and services to existing customers.

Not so coincidentally, Wells Fargo (NYSE:WFC) was recently subject to similar charges as those levelled against TD Bank. The difference being that Wells Fargo was found to have gone a step further, crossing the ethical/legal line of permitted sales practices and subsequently having their knuckles rapped by financial regulators.

https://www.washingtonpost.com/business/economy/it-goes-beyond-wells-fargo-concerns-grow-over-sales-tactics-in-banking-industry/2016/09/16/d83bf4c0-7b73-11e6-beac-57a4a412e93a_story.html?utm_term=.114a4f895a41

Let me be clear here: banks crossing ethical/legal lines should be held accountable and the public should be protected from predatory practices. That said, there’s nothing offside about driving employees hard for the purpose of increasing sales and thereby increasing the bottom line. It happens, and it will continue to happen, and blathering and complaining about a bank’s behavior won’t do much but raise the complainer’s blood pressure.

So … as a consumer, my best line of defense is educating myself about the workings of the financial industry. Because the old saying, ‘knowledge is power’ rings true. And I’m a HUGE fan of self-empowerment.


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Enter Buddha

Unconditionally trust your Self, advocate for your Self, know when to place your Self first.


Trust, But Not Blindly

What could Millennial Woman have done differently?

  • Before meeting with Friendly Neighborhood Bank, research the competition. Learn about the offerings of other financial institutions. With this knowledge in hand, MW would be in a strong position to determine whether Friendly Neighborhood Bank is truly offering the best solutions for her.
  • Recognize that, while an effective salesperson will make you feel good about your self in the moment, employees of Friendly Neighborhood Bank are not in the business of making friends. They are in the business of sales. So put your ego aside and don’t be flattered by the salesperson’s fawning attention. This is a part of their job that assists with closing the deal with a potential customer.
  • Knowing you are dealing with a salesperson, ask questions. For example, given that there exist thousands of mutual funds offered by hundreds if not thousands of mutual fund companies, why should MW buy a mutual fund sold by Friendly Neighborhood Bank? Is there a conflict of interest here? (short answer: yes, of course there is; banks push their own products not because their products are necessarily best for you, the consumer, but because this is more lucrative for them because they earn management fees from their own Funds).
  • Ask not only why you should buy a particular mutual fund, but why you should buy a mutual fund at all? This doesn’t mean that you should not buy a mutual fund, but you should explore the investment universe, and especially consider Index Funds, which typically carry a much lower management fee and perform as well or better than an actively managed mutual fund.
  • Ask why you even need a financial adviser when a Robo-Advisor may perform better for your portfolio.
  • At the end of the meeting, do not commit one way or the other. Simply say that you will think about the information you have been given and will contact Friendly Neighborhood Bank shortly to let them know of your decision. This avoids you being pressured into making an impulsive decision, and gives you time to conduct as much research as necessary to determine which financial institution and which investment products best suit your needs.

Caring For Your Self

As for MW, she’s one amazing person who’s excited and nervous about  entering the world of investing. And she’s agreed to think about what I’m saying here in this post, and to take time to process how this all applies to her situation. Because while she’s still holding fast to her opinion that the financial advisor at Friendly Neighborhood Bank is nice, she also recognizes that her financial future is best cared for when she’s fully informed of all options, and by making decisions that are best for her financial health.

Day Trading: How To Lose Your Money

A website banner advertisement on the front page of a major online news site read: ‘Free Day Trading eBook – The Complete Guide to Day Trading’. I clicked on the ad, curious as to how exactly ‘Day Trading’ was being peddled this time, and was greeted by the following screaming headline: ‘THERE’S NEVER BEEN A BETTER TIME TO TAKE CONTROL OF YOUR FINANCIAL FREEDOM’.

Manure For Sale

Talk about selling a big ole’ stinky pile of manure! Let’s get this straight right off: if it smells like manure, it is manure. Day Trading will NOT lead you anywhere close to financial freedom. In fact, the gigantic, overwhelming, stupendous odds are that you will lose money, time and again, if you try your hand at Day Trading.

Why? Because Day Trading is gambling, buying and selling securities on the same day, placing bets as to which securities will go up, which fall down, during a time period lasting anywhere from milliseconds to seconds to minutes to several hours. And just like casino gambling, the odds are hugely stacked against you. Oh, sure, you might garner a win here and there, enough to keep your hopes up, convince your self that you should stay in the game. But eventually, losses will far outstrip gains.

And despite what Manure Salesmen tell you, a Process, a Strategic Game Plan, will not help. ‘Naturally’, these folks say, ‘you’d be a fool not to have a Process before you start trading, you know, because a Process allows you to succeed no matter what the market conditions. A Process moves the odds in your favor so it’s not about dumb luck, it’s not gambling. Rather, it’s a proven method that leads to your success!

A Process? Strategic Game Plan? More and more and more Manure! 99% of those who stay at day trading long enough will lose all of their money. Ah, but what if I’m in the 1%, you ask? Well, if you want to take on those odds, go for it, roll the dice, knowing that you will most likely, almost definitely, probably certainly, lose.

Sure, there exist a tiny percentage of people who consistently make money at Day Trading. But let me tell you something about these folks: typically, they work for large financial institutions; trained in the field of finance and have years of work experience; use other people’s money; have access to company specific and market moving news before the public; and benefit from computers programmed with the most current analytical software designed to make trading decisions every millisecond based on a thorough review of fluctuating prices, incoming orders, and financial news.

As for go-it-alone individuals, they have limited technological resources, bet with their own money, are less skilled, and are prone to let negative biases and emotions interfere with rational decision-making. The result? Risk of loss is much, much higher.

Who Makes Money

Manure Men, predators, scam artists, who pitch ‘Read my book! Attend my seminar! Sign up for my online course guaranteed to make you rich!’ – these are the ones who make money. And they do so off the backs of vulnerable people who fall for the pitch delivered by people lacking a conscience, blind to ideas of ethical right and wrong, all too willing to sell a Brooklyn Bridge or two to anyone who comes calling.

But hey, we live in a world of buyer beware, right? Besides, as Manure Men will tell you, ‘I did so incredibly well at Day Trading that I felt compelled to share my secret because I want everyone to be rich like me.’

When I hear baloney like this, I laugh and cry at the same time. I laugh because the claim is so absolutely false and ludicrous. And I cry because vulnerable people believe it, then end up losing money, maybe even their life savings.

Why People Willingly Step in Piles of Manure

What’s the hook, the angle, the catch that keeps drawing in more customers? It’s a multi-layered lure.

Part 1

Independence. Ditch your 9 to 5 job and work at home on your own schedule but within market hours.

Part 2

Easy Money. On the surface, this is how Day Trading is sold. ‘I became rich day trading – you can too!’ Driven by greed, seduced by the fantasy of fast, easy money, time and again new victims buy into the program only to lose their shirt.

Part 3

Thrill Seeking. The forces that light up the human mind when playing a slot machine, buying a lottery ticket, or sitting down at a Las Vegas table to play Texas Hold’em, are the same forces operating for Day Traders.

There’s an adrenaline rush, an instant feedback from trading (whether win or lose) that satisfies the appetite for instant gratification. Buy and hold a stock for a few months or years? How boring is that!


unknownEnter Buddha

The goal is not to achieve wealth as soon as possible because to arrive all at once would be self-defeating. The goal is to grow – be it material, spiritual, psychological and emotional growth – and in the process experience all that life has to offer.

Be An Investor NOT a Day Trader

Day Trading is not Investing. Do your self a favor: don’t even consider Day Trading. Ever.

Unlike Day Trading, investing is not about entertainment. Investing is boring. It should be boring. Because investing is about:

  • Diligently and wisely putting money to work for you.
  • Accepting a level of risk that allows you to sleep well.
  • Understanding your investments. And if you don’t understand the investment, then don’t invest.
  • Knowing the associated costs, whether these are transaction fees, account fees, fund management fees, and tax treatment of income, dividends or capital gains.
  • Diversifying your holdings to minimize risk and reduce volatility.

Invest in YOU

If financial management is not your occupation, and you’re not really interested in managing your investments, then hire a Robo-Advisor or Financial Advisor. What’s most important is to invest in YOU!

Whatever your strengths, your passions, invest time and effort in developing your self further, going deeper, because bringing value to your self, your family, your community, is a worthwhile endeavour.

 

 

How Media Influences You

No matter who or what is your source of information, how do you know whether the information is accurate or trustworthy? And even if you discard the information as bunk, how do you know that the information you have read, watched, or listened to has not somehow seeped into your subconscious thereby influencing your decision-making without you even knowing?

The Business of Imagery

Within moments of logging onto the Internet, flipping through a magazine, or leaving home and entering an urban village brimming with signs, signs, everywhere signs, we are inundated with images. All these signs, all these images, they’re ‘normal’, just the way things happen to be in our world. And we don’t often think twice about it.

I mean, we know that the underlying purpose of images, particularly when used in advertisements, is to grab your attention, and ultimately sell products or services. But what else do we know, or don’t we know, about the way in which marketing employs images to connect not just with our pocketbook but our heart? Because it’s the emotional connection that advertisers want with consumers; the emotional connection that forms an attachment between consumer and product / service; the emotional connection that seduces us to buy, buy, BUY!

Image Maker Take #1: Don’t Follow The Bus

I can’t seem to get away from it. Nearly every day that I drive, I find myself behind a city bus transporting the image of a beautiful woman with glowing skin shilling for a dermatologist. Having seen the image so many times, I started thinking about its purpose.

The image exists to tell me, the viewer, the consumer, maybe eventually the sucker, that my skin is deficient. And the solution to my deficient skin? Retain the services of this particular dermatologist and I too may be blessed with glowing skin just like the woman in the ad.

And wrinkle / blemish free skin is not the only promise. Oh no. In this case, the effects of beauty are more than skin deep. Below the surface, what is being promised is that glowing skin will transform me into a beautiful person, someone whom others envy, someone who will be liked and loved by more people. With glowing skin, I will no longer feel anxious about my appearance. As a result, I will be happy and life will be good. So you see, that’s the real promise of the ad: happiness.

Image Maker Take #2: What Price Thy Vacation

The back cover ad on an internationally distributed magazine shows an athletic man wearing nothing but a swim suit, a pretty woman decked out in a small, colorful bikini, and two cute kids, a boy and a girl, all of whom are shown to be smiling and running on a golden sand beach fronting turquoise colored ocean water.

The ostensible purpose of this image? To sell vacations somewhere in the Caribbean or Mexico or the Mediterranean or Hawaii or Spain or any other destination that may be packaged and sold as a dream getaway.

And like the bus ad, the underlying message is meant to trigger anxiety, i.e., my life is deficient because I am not half-naked playing on a beach. Gee, the people in the ad seem to be having so much fun. I want to have fun too. Sign me up!

The image is designed to have me compare my life to the fantasy portrayed in the ad. And I will find my life lacking. And I will be envious; I will want the fantasy to become my reality. And if I’m primed to suspend reality for long enough, I’ll decide that, for the price of vacationing in an Eden like hotspot, I will be transformed into someone just like the models in the ad. Then I will be fulfilled, happy, life will be good. As a bonus, my ego will be stroked when friends and family envy me because I have (temporarily) escaped the doldrums that is their life.

Agh! It Works!

Advertisements may useful by informing people of their choices. It’s a medium for spreading messages that we may not otherwise hear, and that may be to our benefit.

But here’s what we may not be considering: ads tell us that we’re not good enough. That if we have this or that product or service then we will be better, our life will be better. And reality just doesn’t play out that way.

The financial industry, including financial media, often promotes a similar message: if we become richer, if we retire early, and are then able to devote our life exclusively to play or leisure (as opposed to purpose) then we will be happy and fulfilled.

Money: The Source of True Happiness.

Hah! Quite the subtitle, yes?! Alright, backing up here, let me be clear: the subtitle is drivel, hooey, nonsense.

But that’s not what media would have you believe. I mean, does a day go by where one publication or another does not publish a mindless article about who is now the richest person in the world? How much money a superstar pro athlete is being paid for playing catch or bouncing a ball? Telling readers about all the expensive cars and homes and jewellery and clothes owned by this or that celebrity?

Why do we need to know who has what stuff? Well, we don’t. But the thing is, we live in a consumer society. If you stop buying as much stuff, and corporations sell less, then the wheels of our system grind down. So, to grease those wheels, illusory need is manufactured.

This is done through publicity that makes the 99% feel deficient for not having enough money nor enough stuff. And savvy media knows that effective publicity is tied to a story, preferably told by a well- known person who offers an image that aligns with the product/service being sold. And people see this well-known person and, presumably, say to themself, well, if its good enough for so- and-so celebrity then it’s certainly good enough for me. Human see, Human do.

Let’s say a luxury car maker placed an ad that said: ‘Buy the X car because it’s a solid, reliable car.’ That’s it. That’s the sell. How many cars do you think would be sold? Other than me, I’m guessing not too many consumers would even consider the car. Why? Because the ad doesn’t tell a story and the message is not delivered by someone whose face is on television or film. With no story delivered by an attractive pitch person, why would I buy the car? Why would I feel that owning the X car would fill a psychological/emotional emptiness in me?

Just take a look at the recent Mercedes ad placed during this year’s Super Bowl. Background music for the ad was the song, Born To Be Wild, and it starred (now ads have ‘stars’!) Peter Fonda, 1960s counterculture icon, who was in the 1969 film, Easy Rider (to sum up the film ever so briefly, the script followed two rebel motorcycle riders through the American South).

The message that was sold through the story? Aging Baby Boomers don’t ride bikes anymore, they drive a Mercedes. So if you’re a Boomer in your 60s or 70s with excess dough, and you want the cool, rebel image (i.e., fantasy) of Peter Fonda in this particular ad, then get yourself a cool, rebel car, a Mercedes. Then you’ll be happy and fulfilled and your friends will envy you.

Living The Good Life

Believe it or not, my intention is not to be cynical in this post. Rather, if you don’t already have your eyes open, I’m trying to give you a little nudge in that direction. Trying to get you to think about the stuff that you buy; the services you pay for; the resulting benefits you receive; why you buy what you buy; and who or what is influencing your decisions. Then maybe you’ll assess what belongs in your life and what doesn’t; and hugely important, what’s holding you back from feeling free and unencumbered.

Because I can tell you this: in itself, having enough money, being rich, being able to buy, and buying, STUFF, will not bring about feelings of peace and freedom. The human animal just doesn’t operate this way. I mean, when we buy something or pay for a service we want, sure, desire is fulfilled but only for a moment. When that moment passes, new desires arise. And on and on it goes, where it stops … it doesn’t.

Same as when you earn lots of money. Your portfolio grows, you feel good watching the numbers go up, but this too is momentary, there is no lasting satisfaction no matter how high the number climbs. And your search for freedom remains never ending until you realize that ‘The Good Life’ is a state of mind, a perspective, it’s being grateful for every moment that you’re walking this planet. And doubly grateful if you’re fortunate enough to have family and friends in your life, a rewarding occupation, hobbies you enjoy, and peace. Huge bonus points if you’ve brought a dog (I’m partial to dogs but any other non-human creature is just fine, more than fine) into your pack.

So when financial media repeats the same stories, tirelessly yakking about how to save for retirement, how to retire young, how to become a millionaire … basically, why you should worry about your financial situation until the day you die, well, tune it out. Money is an ongoing concern, you know that and you don’t need to be told repeatedly. Because you’re a member of the BuddhaMoney community who knows that when you increase savings, are wise about spending, and pay down debt (i.e., The Middle Way, the balanced approach to money) then you can feel good about turning your focus to all the other parts of life that matter.

 

 

Fight Fear, Get Rich

Shortly after the end of the 2007-2009 recession, a relative (between you and me, we’ll call him ScaredyPants) asked me to manage his money. He was seventy, widowed for many years, generally a happy-go-lucky sort of guy, and his portfolio was worth about a million bucks.

Eighty per cent of the portfolio was cash, the other twenty per cent was invested in one-year term deposits with the total portfolio earning less than 1.0%.

In 2010, inflation ran at 1.5%; in 2011, 3.0%. Meaning, as long as the rate of inflation exceeded investment return, ScaredyPants was losing money. But he was fine with the slight hit to his portfolio. Because after the Great Recession, ScaredyPants was terrified of losing money.

Today, more than eight years later, ScaredyPants asset allocation has not changed. Drawing seventy-five thousand a year for living expenses and to pay income taxes, having no revenue sources other than his portfolio and a small government pension worth about sixteen thousand annually, his liquid assets have dropped from a cool million to less than $500,000. At this rate, ScaredyPants will be broke if and when he reaches the age of eighty-five. Yet, he refuses to change his portfolio – such is the debilitating grip of fear.


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Enter Buddha

It is perfectly natural to be fearful. When fear comes upon you, embrace it, watch what is happening to your physical body, how it tightens. Watch what is happening to your thoughts, how they turn cloudy and negative. And wait for the feeling of fear to pass, because it always passes. And once fear passes, only then may you make wise decisions.


Sidestepping the Groove

Here’s the thing about fear: it stops us from getting to that really groovy place where we want to dance and sing and shake it all out because we feel financially independent and free!

As investors, as managers of our own money, we don’t have a whole lot of constructive use for fear. Rather, fear is a destructive emotional anchor, driving us to stuff money under the proverbial mattress, miss out on investment opportunities, let cash sit in a bank savings account earning next to nothing, or invest in ultra-safe-barely-pays-any-interest federal government bonds. All of which are surefire ways to NOT walk the path toward financial freedom.

Nervous Nellies

No one enjoys lingering in a state of fear or high anxiety. Still, it happens to all of us because we’re biologically wired this way: fear being an evolutionary mechanism designed to (1) signal danger, threat or conflict, and then (2) activate an adaptive response.

Okay, so we’re locked into human biology. But for the purpose of retiring early AND not running out of money before reaching our final resting place, isn’t it possible for savers and investors to flip the fear off switch?

Hey, smart guy, look around. The world is crazier than ever; the reasons for being fearful are endless!

I know, I get it, you don’t have to look too hard to find one geopolitical crisis or another that makes you want to stockpile supplies and hide out in a desert bunker. On top of this, there are your personal financial circumstances, be it shaky job security, unexpected expenses, or any other uncertainty that holds you back from contributing more to investments.

But the thing is, running away from financial markets is not the solution to being the CEO of your own show one day. In fact, it’s the exact opposite. If you let fear stop you from investing, then financial independence will remain a pipe dream.

Shift Your Perspective

To manage fear, to build wealth, shift your take on events. For example, when ScaredyPants thought of investing in the stock market, all he could see was the risk of loss. Well, there’s also the other side of the coin, the risk of gain, especially for long-term investors.

Granted, ScaredyPants represents an extreme example. For many others, risk is acceptable when it seems there is little chance of loss. So … when does the stock market offer such conditions? Well, when stock prices are going up, positive vibes fill the media, and fear has been relegated to the backseat. But, but, but … this is the exact wrong time to invest!

You want to invest when fear is in the air, when stock values are depressed and ON SALE.

But this is not what happens for most investors. Instead, time and time and time again, people do the exact opposite of what should be done; they buy high (when fear has receded) and sell low (when fear is ascending).

Your path to financial freedom would be that much shorter if you could shift perspective, and see depressed prices as actually presenting less risk, and potentially greater reward.

Easier Said, But Definitely Do-Able

Here’s BuddhaMoney’s guide to what needs to be done to address your fears, and maximize portfolio performance:

  1. Diversify. You’ve heard it so often that maybe you tune it out: don’t put all your eggs in one basket. Because a diverse pool of assets goes a long way to reducing fears, minimizing risk, and lessening major moves in portfolio value.

What kind of risk gives rise to fear? Market performance, economy performance, interest rates, inflation, and longevity (the possibility that you will outlive your money). To alleviate fear (and ulcers) caused by stock market value gyrations, hold some bonds. If you think the domestic economy is about to tank, buy foreign securities. If the bull market is slowing and you’re fearful of an impending crash, increase your cash position.

  1. Balance and ReBalance. Naturally, given that you’re a BuddhaMoney devotee, you have an investment plan setting out how much money is allocated to certain assets. For example, 60% stocks, 30% bonds and 10% cash, invested in domestic and foreign securities, exchange traded funds (ETF) and/or individual securities.

Well, if your stocks have increased in value and now make up 70% of your portfolio, then its time to rebalance, to sell 10% of the stock holdings (sell the winners; and when you sell at the ‘high’ price, it sure feels good) and allocate the proceeds to bonds and/or cash. Why do this? Because rebalancing reduces risk, reduces those situations where you feel fearful, and when you have a thoughtful investment plan in place its best to stick to that plan to achieve future goals.

  1. Pay Less Attention

The stock market is a roller coaster. And the ride makes a whole lot of folks queasy. But by no means does that mean you should jump off. Instead, tweak your behavior: stop checking prices every day or even every week. Because it’s dangerous for your health. When your hyper-focused on daily stock prices, you become more and more emotionally invested in both small and large movements. In turn, this may cause you to forget your long term goals and make poor decisions based on short term price swings.

  1. Keep Costs Down

Managing costs contributes to minimizing financial risk, i.e., the lower your investment costs, the more money in your pocket.

This may mean choosing low cost Index Funds; using the services of a Robo-Advisor; managing your own investments with a discount broker; or negotiating lower fees with a financial adviser.

  1. Recognize Noise For What It Is

Media knows that we read what we connect with, and most often that connection is on an emotional level. When the stories lean negative, this may affect our decision-making, and not necessarily for the better. So don’t let the stories suck you in and throw your well thought out plan off course. Because your financial plans, your financial future, should not be adjusted based on media stories or even what you discuss with friends. Instead, your plans should be based exclusively on your current needs, short, medium and long-term goals, and tolerance for risk.

Sure, we’re all susceptible to fear. But when you’re able to harness that fear, you sure do stack the odds in your favor that financial independence will be reached according to your plan.

Money Rules For Women

My fifteen-year young daughter (‘SmartyPants’) is brainy, enterprising, kind and compassionate. She cares for her family, friends, thirty-seven chickens, eight goats, four cats, two dogs, and one parakeet. Elected president of the poultry chapter of her local 4-H club (https://en.wikipedia.org/wiki/4-H) for the past two years, SmartyPants knows her calling is to be a Veterinarian, her love for animals is so deep.

 

34-budgerigar-strzelecki-qld

 

Like many girls / women, SmartyPants is a Giver, a Nurturer, often putting the concerns of others ahead of her own. All of which is wonderful and amazing and beautiful and I’m super proud of her. Still, with a nod to one of the 4-H mottos, To Make The Best Better, I’m supporting her to become better in the sense of Balance.

In other words, I’m encouraging SmartyPants to take care of her self, to cherish her self, to give time to her self, as much as she does for others. And part of taking care of her self includes learning to take care of money.


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Enter Buddha

Self-care is not the same as being selfish. Rather, caring for your self is positive, constructive, makes you stronger, and gives you more energy that you may share with others. If your energy is depleted because you have given it away, what use are you to others, and to your self?


Venus Is Her Name

Okay, I’m definitely not going to wade too deep into the arena of gender differences; I’ll leave the heavy psychological lifting to the folks who think women are from Venus, men from Mars. My planetary domain, as you know by now, is money. So, I’ll stick to what I know and talk about the unique financial concerns facing women.

  1. Permission To Look Out For Your Self

In the event of an emergency, airline flight attendants give instructions to place the oxygen mask on our self before helping the child sitting next to us. Upon hearing this announcement, the frightened parent responds, ‘No! I have to take care of my child first!’

Sure, I get the selflessness that comes from love. But what happens if the parent passes out before they are able to assist the child?

I know, I’m repeating what I said to SmartyPants, about taking care of your self first, but it bears repeating. In the context of finances, if you’re faced with the dilemma of paying for your child’s non-essential items or retirement, choose retirement. Same with paying for your children’s education or saving for retirement, choose retirement if you don’t have enough money to contribute to both.

Your children can work, they may apply for scholarships or other financial aid. No such aid is available for retirees with inadequate savings. And if that doesn’t persuade you, think about this: guess who becomes financially responsible for your retirement years if you haven’t saved enough? Right, your kids.

  1. Longer Life

Women typically live longer than men. So … women need more money. The challenge is complicated by the fact that women generally earn less than men (the usual statistics show women earning about 75-80% of what men earn for doing the same or comparable work. Why? Gender bias, plain and simple – and irrational and harmful and hurtful and foolish and backward and …).

Still, take up the challenge by making saving a numero uno priority. Because your future self will thank you for wisely funding your retirement, and providing your self with financial security.

  1. Be The Change

The more money you have, the more you may give to others. Consider that at most income levels, woman championed homes (i.e., women who earn more than their husband and enjoy fairness and respect in their relationship, and women who are single, divorced and widowed) make more charitable donations than homes where men make the financial decisions. Meaning? Meaning that more women earning more money and taking responsibility for making financial decisions results in more sharing of wealth and, ideally, a more just and equitable world.

  1. Take The Reins

You love your spouse, your partner. Excellent! But this is no reason to stick your head in the sand and charge him/her with exclusive money management responsibilities.

Here’s the thing: a whole lot of women are comfortable with paying bills and making decisions about household expenditures. Good! Everyone (that includes you too, guys) should have at least basic knowledge (although more is better in this instance) of budgeting and saving.

But then along comes this, this, this … way of thinking that says, when it comes to investments, that’s a guy thing or … what do I know about investing or … I don’t have time for managing investments. Effectively (and unfortunately), this type of thinking strips women of control over their financial destiny.

This way of thinking has got to go. Take off the blinders and, if not manage your investments then, at a minimum, learn and educate your self about investing so you may know what’s going on and may take a seat at the table when it comes to planning your financial future.

Yes, yes, I know, investing can be intimidating, it can be boring, it can be this and that. Alright, now, get over it. Because the earlier you start investing, the more likely you will be walking the path to financial freedom. The earlier you adopt a laser focus on building wealth for the long run, and recognize that it is not your patriotic obligation to spend money needlessly, the more your savings will grow and the wealthier you will become.

  1. Set Goals

Let’s say you want to buy a new home but can’t afford to do so today. Okay, how long will it take you to save enough for a down payment, and what changes will you make to your saving, spending and investing to help your self reach this goal?

Goals help to motivate us. Goals help us to not buy that new pair of pants because even though you look amazing in them, you have lots of pants and really don’t need another pair. AND, it’s better that you forgo the expense and put the money towards saving for your goal. Because your goal, buying a home, is your priority.

  1. Ask And You Shall Receive

My wife and I were walking through Carmel Market, a Tel Aviv bazaar jam packed with merchants selling everything from jewelry to linens to spices, clothing, electronics, flowers, appliances, fruit … you name it, the market sells it. And there were a million different scents in the air, and so many people, and it was loud and festive and incredible fun. For the kids, I was on a mission to buy t-shirts emblazoned with the Coca Cola logo in Hebrew script. Because they asked for it and thought it looked cool. So who am I to argue about taste?

coke

I approach the merchant and ask the price for 3 shirts.

“100 shekels,” he says.

This works out to about $26 USD, which seemed like a decent price for three shirts. Still, this is the Middle East. They negotiate here. For everything. It’s just the way it is. And they expect you to negotiate too.

“75,” I counter (about $20 USD).

After more posturing and gamesmanship, we agree to 90 shekels. Was it worth it, to bargain for a price reduction of less than $3? Yes! Because it’s a game, and it’s a marketplace with buyers and seller, each vying for the best possible price, and why should I pay more than necessary? The merchant knows his cost, he knows his lowest price where he will still make a profit. And he knows the game better than most buyers. So it’s up to me to ask for a price lower than advertised. If I don’t ask, I won’t get.

In North America too, we are better off if we learn to negotiate, especially when we don’t like the price of what’s being offered. Of course, we don’t have bazaars, and retail stores place a bland price tag on merchandise and we robotically pay the list price. But we can negotiate matters in life; because it’s a matter of advocating for your self. And advocating for your self is akin to taking care of your self.

Want a lower price on that new car, expensive shoes, luxury handbag? Ask for it. Demand it (in a kind, respectful, BuddhaMoney sort of way).

More importantly, advocate for your self when it comes to your personal value. In this regard, employers or clients, should ALWAYS pay full price for your goods/services. If you’re an underpaid employee, if the guy working next to you, doing the same job as you, is making 10% more, then you deserve a raise. But you’re employer may not even think about giving you a raise if you don’t ask for it. I mean, if you don’t fairly value your self, is it realistic to expect others to do so?

And if your goal is a financially secure life, then you have to ask for what’s fair to you. You can’t settle for less to please other people because you’ll be harming your self. It’s about putting your self first because you matter.

  1. Vulnerability Is A Strength

There are soooo many resources available to assist with any and every aspect of money management. If you prefer to learn on your own, well, of course BuddhaMoney is here to assist! That said, do an online search for whatever it is you’re looking for and a slew of websites will pop up. For human guidance, consider consulting with an experienced and competent CPA or certified financial planner who is able to review your financial situation and provide direction. However you go about your learning process, know that educating your self is self-empowerment. Self-empowerment leads to more knowledge that leads to more effective decision-making, and greater wealth.

SmartyPants Rules

SmartyPants is an amazing girl. And I have no doubt she will grow into an amazing woman, as will so many more girls of her generation. These are girls who will continue to be true to their inner nature, to compassionately care for others, and also know when it’s important to place them self first, and be comfortable doing so.

 

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Pot Investors Go Up in Smoke

Marijuana investors are stampeding for the exit these past few days. Why? Well, in keeping with herd-like behavior, there isn’t a rational explanation. Rather, this is a classic example of investor anxiety running rampant.

Here’s what stoked a fearful run for the exit: Bill Blair, leading the Canadian Federal government’s legalization effort, commenting in the Globe and Mail on the timeline for recreational legalization stated, “We will take as much time as it takes to do it right. I’m pretty reluctant to suggest a specific time frame, frankly, because I don’t know how long this will take in each of our 10 provinces and three territories.”

http://www.theglobeandmail.com/globe-investor/investment-ideas/marijuana-stocks-drop-as-trudeaus-pot-czar-says-canada-wont-rush-into-legalization/article34230589/

It’s All Been Said

So, this comment alone is reason enough to bolt from pot stocks en masse? The thing is, Blair is not saying anything that hasn’t already been said. Consider the following:

  • November 27, 2016. The Globe and Mail quotes Anne McLellan, marijuana legalization task force chair, who says that marijuana will be moved “… from a criminal regime, where this was an illegal substance with criminal sanctions – some of them very serious – to a legalized product in a regulated marketplace. It’s important to move slowly, and deliberately, in implementation. [emphasis added]

http://www.theglobeandmail.com/news/politics/report-on-marijuana-legalization-in-canada-due-this-week/article33065608/

  • November 30, 2016. The Financial Post (FP) quotes Brendan Kennedy, CEO of private equity firm Privateer Holdings, “It’s a long path to legalization. Investors sort of have these expectations baked in that are unrealistic. I think January 1, 2019 would be optimistic … even 2020, when all said and done.” FP goes on to repeat Anne McLellan’s statement that ‘it is critical the government goes slow on reforming the laws. [emphasis added]

http://business.financialpost.com/news/agriculture/long-path-to-legalization-marijuana-companies-not-convinced-of-legal-recreational-market-by-2018

  • January 2, 2017, Canadian Broadcasting Corporation (CBC) reports “While the federal government plans to table its new marijuana legislation in the spring of 2017, it will take much longer to study the bill and eventually pass it into law. It will likely be at least 2018 by the time the legalization process is complete.”

http://www.cbc.ca/news/canada/toronto/marijuana-toronto-2017-1.3896575

  • March 2, 2017, the Canadian Department of Justice website states, “In the spring of 2017, the Government of Canada will propose to Parliament and Canadians a new legislative framework for the legalization of cannabis.”

Addressing the issue of when legalization will happen, the website states, “It’s a serious, complex matter that will take time.” [emphasis added]

http://www.justice.gc.ca/eng/cj-jp/marijuana/info.html

The Facts Please

There you have it. No new information was announced. Neither Bill Blair nor the Canadian government changed the game.

Any informed investor knows that, owing to the nature of the legal and consultative process, it is not possible to give an exact date on which marijuana will be legalized for recreational use. And any of the listed marijuana companies worth their buds know full well that the magic date may not happen until 2018, 2019 or 2020. And these companies have organized their business model accordingly.

On the face of it, the fundamental nature of the business of producing, distributing and selling marijuana remains the same; and the prospects for a massive market remain the same (report from Deloitte estimates a +$22 Billion industry in Canada – http://www.businessinsider.com/deloitte-weed-could-be-226-billion-canada-2016-10). Then why are investors panicking?

Chalk it up to blind fear and a crowd mentality where one lemming follows another off a cliff simply because that’s what the other guy is doing.

Unfortunately, too many investors are short-term players who pay too little attention to available information. These are the investors who foolishly sell at a loss, because they’re consumed with fear, then kick themselves when the stock bottoms and resumes its upward climb. The winners are those who sit tight or, better yet, realize the opportunity and buy stock at depressed levels.


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Enter Buddha

When fear and panic arise, accept these feelings. Recognize and make friends with them. But do not take action while in their grip. These feelings will pass. And once they pass, and your mind is clear, only then may you make wise decisions.


And Then There’s Organigram

A few days before the general downturn among pot stocks, Organigram Holdings Inc. (CVE:OGI) was hammered owing to filing of a class action lawsuit. The basis of the lawsuit is a claim that the company sold pot containing unapproved pesticides.

Now, if OGI had intentionally or grossly negligently spiked the weed to juice harvests, then it may well be on the financial hook for some serious dough beyond the retail cost of product. As importantly, if not moreso, the OGI brand would take a big hit, with the possibility that it would not recover. And a serious haircut to OGI’s stock value would be warranted, at least in the short term.

But none of the facts point to OGI being guilty of corporate shenanigans. Which brings up the question: what’s the deal with the extreme reaction by investors? Did investors inform themselves of all details concerning this issue or did they simply scramble to sell as soon as the plaintiff’s law firm informed the media of its filing? My guess is the latter.

The Facts Please

An exhaustive internal corporate investigation was unable to determine the source of pesticide traces. And Health Canada responded to the issue by:

  • Stating that it had not received any patient complaints about adverse reactions from product recalls;
  • Confirming its own test results determined that the affected products represent a low health risk; and
  • Declining to take any enforcement action against OGI.

That’s all fine and good but couldn’t OGI still be held liable for damages, or agree to a settlement payment just to make the lawsuit go away? Yes, to both of these questions.

Fortunately, the company employs a skilled management team that has taken the following actions to diminish any financial fallout from the lawsuit and, in the process, bolster its performance and its brand:

  • All potentially affected product were voluntarily recalled and destroyed;
  • Enhanced testing protocols, exceeding Health Canada’s regulatory requirements, have been implemented;
  • For the purpose of transparency, as of mid-March, 2017, future test results will be posted on the company’s website;
  • All customers who purchased affected product have been issued a credit equivalent to their cost;
  • According to OGI, the majority of its customers have accepted, and are using, the credit; and
  • Financial exposure has been minimized by allocating sufficient funds to cover losses related to the recall.

In addition, OGI’s currently suspended organic certification, which sets it apart from its pot growing peers, will likely be reinstated by Ecocert in March or April, 2017. Ecocert validates organic standards (http://www.ecocert.com/en).

Crystal Ball

Where will OGI go tomorrow and beyond? As you know, stock market investing does not offer guarantees. But if we keep our eyes open, if we take the time and exert energy necessary to fully inform ourselves about a particular investment, and not let emotions carry us away, then we stack the odds in our favor as far as good, and profitable, decision-making is concerned.

Full Disclosure: As of the date of this article, I’m a chilled shareholder of OGI.