The Goodwill Investing Journal - Issue #38

Hey friends! I hope everyone is doing great.

Thank you to all subscribers old and new. We have an incredible group of readers and contributors that keep inspiring these weekly journals with ideas.

It’s really heartwarming to see people reframe the money world from bad to good.

And with a little bit of effort, we can be great.

1. Personal Finance

I was chatting with a friend who runs a top quality wealth management and financial planning shop in Calgary.

He told me one of the questions he asks his prospects, friends, clients etc:

How much do you have in your TFSA?

If you are 35 or older living in Canada and the answer is less than $227,000…

Then you are either:

1. not taking advantage of the most powerful wealth creation tool known to Canadians, or

2. you are picking stocks and doing a terribly bad job of it.

For those that don’t know, a TFSA (Tax Free Savings Account) was created in 2009 and is simply:

1. an investing account

2. income and growth earned in the account is tax-free

3. withdrawals are tax free

4. lifetime contribution total so far: $95,000

5. 2024 contribution room: $7,000

Take a look the chart below. Really look at it for a minute.

It shows the incredible power of how small annual contributions AND earning a 10% return on investments creates huge portfolio balances - and in this case, tax free!

Maybe you want to argue against using a 10% return in the calculation. Fine, ignore this Journal and stay broke. By the way, the S&P500 has averaged 12% since the TFSA was invented in 2009. Use 8% then. Or even 5%. Just make sure to use it or you will definitely lose it.

But do you know what’s even crazier? The average 35-39 year old in Canada has an average TFSA balance $17,154. Again, not using the TFSA or spending too much time buying their friend’s junior oil stock picks because some billionaire is backing it (who by the way got 20,000,000 shares at $0.005 while they sold to you at $0.50 cents).

And by the way, yours truly - a former “pro” - only has a TFSA about half the size it should be for my age (35). That’s because in my ‘formative’ years when the world was easy and I could easily beat the market (hope you catch my sarcasm), I made plenty of investment mistakes usually based on research (research doesn’t equal alpha) or tips from ‘smart friends’ that always went south.

Even people that trade on illegal insider information have TFSAs that are virtually empty.

Anyway, all this is to say, take advantage of the TFSA. If you don’t have one, open one now, like literally right now. If you do have one but you hold individual stocks. Sell them. Contribute the maximum amount each year. And invest in diversified ETFs.

Don’t make the same mistake I did. The good thing is, if you’re like me in your mid 30s you still have a ton of time to catch up. And if you are a new parent, also like me, your time horizon has just magically been extended anyway. For every dollar that we invest is now earmarked for when our baby girl Julia turns 40. And it’s invested in low cost ETFs.

The power of the tax free growth and withdrawals cannot be overstated.

Your move to make.

PS Let’s both get $25 when you fund a Wealthsimple account. Use my referral code: PRGS3Q

2. Stock Markets

Middle East conflict escalates into shouts of WWIII, a US jobs report that came in higher than expected putting a question mark on interest rate cuts, and a US Presidential Election in 31 days has financial markets unsettled this week.

For most of 2024 we’ve been hearing headlines like this in some form or another. In fact, we hear this every, single, year.

Why is it, though, that when everyone’s favorite Lululemon pants go on sale people rush the door to buy, but when stocks go on sale everyone gets really sad and scared?

Not that I encourage short term trading, but typically when the fear gauge (Volatility Index) spikes, prices fall. And that is the best time to acquire more stocks for the same dollar amount.

Stocks or socks, I like ‘em on sale.

For everything else - and readers of this Journal - just keep buying every month.

There is really no other option.

3. Real Estate

I acquire Canadian Commercial Real Estate for a high quality Real Estate company, Narland Properties, and our Limited Partner investors.

We target Value Add transactions across all asset classes and geographies that have ~12-15% annualized net-to-LP investor returns.

What is Value add?

Identifying an asset that is not performing at its full potential, ie:
-poor tenant mix
-under market rents
-under-utilized space
-in need of capital or facade improvements
-indentifying PAD/development opportunities.
-etc

We won’t just buy a cap rate deal and “hope” the value increases. Because hope is not a business plan.

Each asset we invest in must have a clear path to increasing the income generated by the property.

Therefore, value increase.

We won’t just buy real estate to buy real estate.

There has to be a “story”.

If you are an accredited investor and are interested in learning about future investment opportunities, send me a note.

1 Quote

A Question

What is or was your best subject in school?

Math was my best. English was my wurst!

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

Thank you

Eddie Gudewill, CFA

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