The Goodwill Investing Journal - Issue #13

Listened to a podcast interview of Marc Cuban this week. Interesting guy, highly successful businessman with a different perspective than most Billionaires and also has a beef with Elon Musk. His final words emphasize curiosity and finding things to smile about in life.  

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1. Personal Finance

53% of Canadians are making a horrible mistake. 

→ they don't have a Tax Free Savings Account (TFSA).

The TFSA is the greatest investing tool that Canadians have at their disposal (the equivalent is the Roth IRA in for people in the United States) because interest, dividends, and capital gains on investments like stocks are tax free for life.

It's such a powerful tool, the government only lets you contribute a maximum of $7,000/year ($583/month).  

There are also no penalties for withdrawals (unlike an RRSP or an IRA), so money can be accessed quickly, tax free, on short notice. 

Power of Investing Tax Free vs Taxed:

• Investing $7,000 per year at a 10% return for 40 years with no tax consequences = $3,414,962.

• Investing $7,000 per year at a 10% return for 40 years with a 1.5% tax consequence = $2,252,708.

• More than $1,000,000 difference. 

Not everyone can invest or should invest in a TFSA. For example, you may have an outstanding credit card balance - that should be prioritized and paid down first.

But 90% of people should. If you are reading this and you don't have a TFSA, I highly recommend going right now to Wealth Simple and opening one. It's free, it takes 5 minutes, right from your smartphone.

PS: note for business owners that have been advised NOT to withdraw corporate funds to invest in a TFSA, I think that's poorly informed. To maintain brevity of this newsletter, I simply direct you to this article: Should I invest in a TFSA or leave excess funds in my corporation? 

2. Stock Markets

Some dude on LinkedIn took issue with a post I wrote about how $10,000 invested in the S&P500 in 1950 is now worth $32,000,000 in today.

Commenter:

"Inflation adjusted, that's nearly $130,000, which is less than the average American has today.

And yeah, it's up the past 18 months. How about the 18 months before that?

S&P guys love using broad data points. If I relied on traditional retirement strategies, I'd just give up."

My Response:

"Dismissing this by saying "but it's only $130,000 inflation adjusted" is problematic.

First of all, 13x is pretty good on an inflation adjusted basis.

More importantly, what are you judging it against that makes it unsatisfactory?

What is gold worth inflation adjusted? (not as much)

What is the 1950 average salary worth today, inflation adjusted? (not as much)

What is the average value of a home today, inflation adjusted? (not as much)

Name one asset class with a minimum 74 year history that has done better than 13x inflation adjusted?"

→ to the commenter, and to all readers, please don't give up on "traditional" strategies.

3. Real Estate 

Greater Vancouver commercial and residential listings and sales volumes are way below 20 year averages. 

And when inventory is put on the market for sale, there is so little to choose from that prices are still sticky. In other words, you are still paying pretty rich prices for real estate. 

Indeed, it is rare, if not impossible, to find a deal in this market where the cap rate (income / price) is higher than the cost of mortgage financing. 

At Narland, we continue to look to the prairies for opportunity where pricing dynamics are more favourable. This, along with the positive demographic tailwinds of provincial in-migration due to lower cost of living and a better economic opportunity set for young families and entrepreneurs, has us bullish on the flat lands. 

1 Quote

“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.” 

-Warren Buffet

A Question

What consistently brings you joy?

For me - laughing with my wife.

—

If you enjoyed this issue, please forward this email to your friends to subscribe. 

Thank you

Eddie Gudewill, CFA

P.S. How I Can Help You

If you want to learn everything you need to know to be a great investor, you can take my self guided investing course. 

You will transform from being unclear and apprehensive, to a capable and confident investor.

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