The Goodwill Investing Journal - Issue #36

Hello everyone!

First, some housekeeping I need your help with please. I am trying a new email service provider because it will make the weekly mailouts much more efficient. But with any tech transition, there’s bound to be some bumps along the way.

Could you please respond to this email so I can be certain you received it? Example responses could be: yes, take a hike, don’t be a gazelle… You choose, all I ask is a quick response and we’ll put this behind us.

On to business.

1. Personal Finance

One of the the most important concepts you can learn for your financial future:

Time Value of Money...say what?

Based on the simple idea of:

A dollar today is worth more than a dollar tomorrow.

Rather than throw a textbook answer at this, I’ll try and explain in real life terms.

Essentially, if you have a dollar today, you have options. You have choices. You have power.

You can:

• Spend it on necessities of life (food, water, shelter)

• Spend it on stuff that isn’t necessary, but fun for you, or fun for someone you love

• Give it away to a good charity, or give it to your grandkids

• Save it

• Invest it

• Leverage it

Those options before you are exactly why the dollar today has more value than tomorrow.

Because today you are alive, tomorrow you may not be.

Time for us is finite, but the options of that dollar today are infinite.

An interesting paradox indeed.

That option value is worth something. Otherwise called interest.

Others that may not have that dollar today, but want - or need - that option value to make their own choices, can take your dollar, and in return, they have to pay you back tomorrow, with interest. To compensate you for giving them the benefit of your choices, in other words, your dollars.

This is the essence of borrowing, interest rates, and investing.

I guess a simple question to ask that explains this most basically...….If you could have $10,000 today, or $10,000 in one year, which would you pick?

Voila. You just mastered the concept of the so called TVM.

Next up, is making smart choices with those options, your dollars, so you can relax, thrive, and enjoy your time while you are here, however uncertain that time may be.

2. Stock Markets

To be clear, none of the financial or money concepts explored in this Journal are new. The only thing different is the delivery man.

And so while it is my honour to have you here reading on a weekly basis, in case you're tired of yours truly, today I'm sharing the top 5 investing/money books that have greatly influenced my career and life.

For both stock market and personal finance enthusiasts, these are guaranteed to impact your vision of the world of money, so you can make more of it. 

1. The Intelligent Investor, Ben Graham

This is the bible for value investing according to Warren Buffet, who studied under Ben Graham at Columbia. For the serious stock pickers out there. 

Buy it on Amazon

2.  The Psychology of Money, Morgan Housel

Money is a bad word and often misunderstood. This book takes it past the spreadsheet and shows you how to develop a better understanding and relationship with money. I am re-reading this book as we speak. Highly recommend.

Buy it on Amazon

3. The Little Book of Common Sense Investing, John C Bogle

Jack Bogle invented the index fund and completely leveled the financial playing field for everyday folks. He shows you how to easily guarantee your fair share of stock market returns.

Buy it on Amazon

4. Rich Dad Poor Dad, Robert Kiyosaki

My Dad bought me this around the age of 16. He cut a $50 bill in half and said, Eddie, when you're finished reading it, you get the other half. I got that chedda, and a lot of wisdom, too. Young or old, this book will teach you critical investing lessons and how to approach money.

Buy it on Amazon

5. The Bitcoin Standard, Saifedean Ammous

Essentially the Bible for anyone that wants to (should) learn about Bitcoin. Read this and your view of how the money world works will forever change. Not an endorsement to buy Bitcoin. Just putting it here because I think it is important to learn about, regardless of your personal views of the asset. 

Buy it on Amazon

Disclosure: if anyone decides to buy a book through these links, I will make $1,000,000. NOT. I may earn a tiny, microscopic sized revenue share. The potential commission will not change my financial life, but the books may change yours.

3. Real Estate

Whether you are a buyer, seller or broker in this business, transparency is key.

If you are a buyer, you must lay out your purchase terms very clearly, including timelines and due diligence requirements, most of which is written into a legally binding Purchase and Sale Agreement. Dropping the ball here will get you into trouble and hurt your reputation.

If you are a seller, it is paramount to convey your expectations clearly to the broker representing you here. Especially with respect to pricing. The broker’s job is already tough enough as a conduit for information and if there is any miscommunication between the seller and the broker, who then passes along the [insufficient] details to a potential buyer, time and money are wasted and deals will collapse.

If you are a broker, you have a challenging job, which is to make a market. That is, identifying assets/vendors that may be the right fit for a certain buyer profile and proceeding to close the bid/ask gap. It is not like the stock market, where equity prices are public and bid/ask spreads widely known. No, in real estate land, the broker ultimately facilitates the bid/ask. And this requires transparent communication.

This doesn’t mean you have to show all your cards as a buyer or seller…information is king in negotiation and opinions differ. It could be that a buyer sees market rents differently than the seller and therefore a buyer could be very pleased with a certain transaction value at the same time the seller is extremely happy to sell. This is what makes a market. But this doesn’t apply to simple things like pricing expectations - at what price is the buyer willing to purchase and at what price is the seller willing to vend.

I write this with a tiny bit of annoyance as we recently sent out an LOI for a high quality asset with a sticker price that we were informed was in the realm of getting a deal done.

The day after we sent it, broker responds, “sorry, but after speaking with the vendor they have informed us that pricing expectations are $4,000,000 higher”.

Prime example of a Vendor who has done a disservice to themselves. And to the broker who is also a subscriber here, thank you for the opportunity, and sorry that they made your job even more challenging.

1 Quote

A Question

What is the one thing you could change about the way you handle money?

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

Thank you

Eddie Gudewill, CFA
 

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