Over the last few weeks, I’ve been thinking about my portfolio and reviewed how it has performed year-to-date. Although the dividend income has been on a slow but steady incline, I was thinking more about some investment principles that got me to this place and what I need to focus on going forward to be more successful. With more work to do on my part, to become a better CEO of my portfolio and change the way I think about money, here are those thoughts. Let me know what I missed regarding opportunities to change my financial tune in a comment below…
Whenever possible, avoid buying depreciating assets. Try your best not to compound this situation by financing the depreciating asset. Financing a new car at a high borrowing rate comes to mind as an example.
For the most part, stop obsessing about what our Canadian government does (or does not do) with our tax dollars. Instead, most are better served focusing on our own spending habits because at least we have some control over that outcome.
If you’re not saving money today, realize you’re spending money from, as Preet Banerjee puts it, your future self. The more money you spend today the longer you’ll need to work to recoup this money. Just the thought of that sucks…
Instead of worrying about your mutual fund returns against its benchmark index, you might be better off buying and holding a product that mirrors the index and its performance instead. You can read about some of my favourite indexed products here.
On the topic of mutual funds, there are a gazillion of professional money managers out there. Statistically, a handful of them will clobber the market this year. In the course of doing so, it should make these people famous but longer term, I don’t like their chances of success.
Inflation is the rise in prices for goods and services over time. Realize inflation can have positive and negative effects. Positive outcomes include economic growth and prosperity. Negative effects include the opportunity cost of sitting on cash instead of investing it.
Don’t believe anyone: nobody can accurately predict the future. If you can, email me because we should talk.
With few exceptions, finding new ways to save more money is better than seeking new investments.
Owning a home is not really an asset, especially true if you have a big 6-figure mortgage like we do.
All investing products have risk. You need to decide how much risk you want to take on and for how long.
Some of the most boring companies can make great long-term investments. Think about the things you use or buy every day as a consumer. Start with that list.
Every few years, the stock market will collapse or correct or just simply stall. Get over it. There is nothing you or I can do about it.
Unlike the stock market, investment costs are predictable and manageable. If you lower your investment costs, you’ll get a bigger piece of the investment return pie.
Because money evokes strong emotions, even seasoned investors need to stick to a plan.
Diversification is a powerful investment principle to manage risk. Diversifying across asset classes and within an asset class reduces risk to a particular company, sector, or market segment. While diversification cannot prevent an investment loss, it can help mitigate a catastrophic one.
While financial planning is important, the process of planning is more important since all plans are merely guesses based on what has happened in the past and where we live today, the present. On that note, you can read more about this thesis from this author by entering a free book giveaway right here.
As with most endeavours in life, the secrets of success are not that secretive. You must have 1) an interest in the subject, 2) patience, 3) persistence and 4) the willingness to make mistakes and learn from them.