Bill’s Blog | September 21, 2023
Last week, we focused on defense and here is a quick review.
- Track your current spending and create a simple budget. The goal is to save 10 to 20% towards savings each month.
- Develop a saving strategy with multiple accounts with different purposes. I realized I did not mention using a TFSA as an excellent vehicle to consider. First, focus on building adequate savings for emergencies, goals and dreams before investing. Remember, CASH is KING in a Crisis, not DEBT! Once you have adequate savings accounts, add a business or investment savings account to build capital for your first or ongoing venture.
- Insurances (Life, Critical Illness and Disability) are the foundation for protecting loved ones, yourself and your wealth. Ensure you have adequate coverage to achieve your objectives. Talk with an experienced and honest insurance agent who can provide guidance and help you understand your options.
- Continue to educate yourself on the foundations of growing wealth and protecting it. Once you get to the investment stage, this will require a whole new set of skills and knowledge. In my course, I share the importance of mentors and understanding risk and counterparty risks, the dangers and rewards of wealth and critical market cycles. Not taking tremendous losses to your capital on the journey is critical, as this can set you back years or lead to complete failure, which means quitting altogether. It is best to start with a small amount of capital when you first start investing and be prepared to lose 100%. Making small mistakes is normal and healthy when investing and learning the ropes, as it is part of the learning process.
So, let’s transition to growing wealth through investments.
- One of my favourite strategies I have done myself for much of the last thirty years is business ownership. It is essential to understand that starting a business is high risk and tonnes of work. Approximately 90% fail in the first two years, rising to 95% by the fifth year. Why? You will need to have many skills, drive and capital to be a success. Here are a few required skills and characteristics: People and communication excellence, ethics/integrity, endurance/staying focused, developing systems, marketing, organizational, customer service, slowly adding to your team, knowledge and passion, whether retail, manufacturing, online or brick and mortar. Most people fail due to a lack of adequate financial capital or sufficient skill sets to run a business.
- If you like risk and want to be the captain of your own ship, I commend you. Just go into it with your eyes wide open, expect long hours and regular stresses. Consider starting small or part-time until you can build a client base and grow income. Monitoring cash flow and keeping costs to a minimum is critical. You are a rising star if you have the perseverance, skills and capital to make it to five years! It will take you fifteen years to reach a mature business.
- I recommend you find a proven business mentor who understands your venture before you get started and during the journey. You may need a good bookkeeper and accountant to ensure you handle your money well. Success is always a team sport.
- Business ownership is one of the top ways to build sizable and long-term wealth.
- Before I go to the next investment vehicle, I want to point out a crucial point. Avoid investing in any asset class (business, real estate, stocks/bonds/crypto/commodities/technologies) at the peak of their cycles. Understanding cycles is essential for success. Real estate segments and markets have peaked in many parts of Canada. I like real estate as an asset class, but not at these inflated prices in many markets. Avoid buying at peaks, as the asset values will either correct or crash depending on other cycles present. Buying at the wrong time can lead to severe financial losses. Invest and purchase near bottoms, not market tops! Many parts of North America’s stock and bond markets are highly overvalued. Be cautious, take some profits if you have them and consider sitting in partial cash until the correction is over. Then, you can bargain hunt and purchase excellent assets which are undervalued.
- Many commodity experts have argued we are in a commodity super cycle (if you enter early, you can receive significant gains 5X, 10X, 20X or more). But you will need to do your homework, as there are hundreds of different commodities, which are generally very volatile, each with cycles based on supply and demand. Commodities you might consider would be gold/silver/uranium/lithium/copper and oil/gas/ and food over the next few years. If we go into a full recession, industrial commodities will suffer. Gold and silver can be defensive (protects wealth and purchasing power) and offensive and can create tremendous gains in a bull market 5X to 40X, as history has proven.
- Remember, nothing goes straight up, but there will be ups, corrections, trading sideways for a season, and overcoming technical resistance levels. Major economic or geopolitical events can disrupt cycles. Understanding these truths will make you a better investor and prevent you from doing panic selling! That is how you realize massive losses to your portfolio. Remember, the trend is your friend, and so are cycles. So, to be successful, you need to be a good student when investing and monitoring markets, looking for trend shifts. If we think we know it all and stop learning, often this is when a person receives a powerful lesson…pride cometh before a fall!
- When I teach clients about wealth creation and management, I encourage them to consider their investments in three-time frames. Short-term: liquid today to five years. Mid-term: Five to fifteen years. Long-term: Fifteen-plus years. What asset classes would you put in each timeframe? Develop a diversified plan.
- There is a time to purchase an investment and to sell one. Fear and greed are the two emotions we must keep in check while investing. These two emotions create more losses than anything else. So, when you purchase an asset or business, when will you sell it? Set a time frame or a realized gain (put it in your wealth journal) and pull the trigger once your targets are realized. Everything has a time and season, and you will never go broke taking a profit.
- Lastly, significant research proves that generous people are far more fulfilled than those greedy and unwilling to share their wealth. I encourage you to be generous on the journey as you build wealth and include focusing on others in practical and meaningful ways. To me, this is being the ultimate team player in life.
Next week, I will send the ZOOM registration invite for the October 7, 10 AM PST Webinar with Florian Grummes from Germany and Dubai. Florian is a sought-after speaker at many financial, commodity, and cryptocurrency conferences in Europe and the Middle East. Florian is the founder of Midas Touch Consulting and brings over twenty years of investment experience and wisdom. I encourage you to join us for this critical market update, education and what Florian sees coming in the next few months and 2024. Webinar 45 minutes with Q& A to follow. You can invite as many friends and family as possible; please ensure they register. Thank you
Hard to believe fall is upon us, and I wish you great success in both defence and offence in the last quarter!
Bill Westmacott, Financial educator and solution provider.