How millennials can find Financial Independence

Great stuff. You have found your passion with investing for sure. How did you get started with investing? When did you start investing? What is your investing approach?

In 2009 I wanted to move out of my parents’ basement. After considering my options I concluded that buying was better than renting. So, I purchased a 2-bedroom apartment in Vancouver for $230,000.

This was my first investment, and my first home. At this time, I had $15,000 in personal savings. Not much. But it was enough to cover the downpayment and closing costs. Then I began to invest in the stock market, and other asset classes.

My investing approach can be broken down into 2 parts.

The first part is to mimic the strategies used by the best investors.

Allan Mecham was a college dropout like me. But he managed a fund that compounded at 30% a year.

Activist investor Bill Ackman produced a 70% investment return in 2020. But his long-term record is more like 20% a year, which is still pretty good. Macro investor George Soros managed a fund that returned 30% a year on average for many decades. And of course, value investors like Mohnish Pabrai and Warren Buffett have outstanding long term track records as well.

These public figures in the investment sphere have written books, appeared in interviews, and spoken on podcasts to discuss their ideas, strategies, and outlooks on the markets. Bill Ackman even has a list of 8 core principles that he uses to screen investments. Whenever he deviates from those principles his performance suffers. Furthermore, it’s easy to find exactly what these investors are buying because they have to submit 13F filings regularly to disclose their holdings publicly.

By understanding what these successful investors are doing with their money, I can essentially copy their methods and buy the same stocks as them. This naturally leads to my portfolio having the same kind of high returns as them.

Often the top performing investors will like the same stocks. But sometimes their strategies diverge so I have to decide which one works the best for my situation.

This brings me to the second part of my investing approach, which is to document my investment transactions and track the results. I like to use a spreadsheet for this. I also like to track my thought process, and the reason for making my decisions. This allows me to go back, review what happened, keep what worked, and throw away what didn’t so I can improve my process for next time. This experience has helped me become a better investor over time.

Copy the best, or at least tailor what the best do for you. Good stuff. So Liquid, like some other millennial bloggers are you a fan of FIRE? Why or why not? Have you achieved FIRE or FI? What is the key difference in your opinion between FIRE / retired early or FI or are they same to you?

As a kid I was constantly being told what to do (or not do) by others, and it was frustrating. Despite all the guidance I still felt a lack of direction. However, once I grew up and started to live on my own terms, I began to discover more purpose in life. I was free to make my own decisions and it was liberating. There was just one problem. I still had to work to put food on the table. That’s when I discovered financial independence.

I deeply value freedom so I made it a priority to become wealthy. I’m a fan of FI, but I don’t know about FIRE. I achieved financial independence in 2020 so I consider myself to be FI right now. I’m turning 35 later this spring. And that’s when I will hand in my letter of resignation and quit my 9 to 5 job permanently. Although I will be retired from full time work, I wouldn’t consider myself to be “retired.” There is no universal consensus on what retirement means anymore as the world embraces Web 3.0 and the gig economy.

You’ve had some interesting investments over the years on your path to FI. Can you highlight some investing successes or mistakes along the way? What did you learn from those lessons to help you move forward that might help other millennials reading this?

I’ve been very fortunate to see high returns investing in exotic assets such as Zimbabwe’s banknotes and Playboy magazines.

(Mark: that’s funny but good!)

But I often learn the most from the investments that didn’t do well.

One of my earlier investing mistakes was buying a leveraged volatility ETF that makes trades in the futures market. I knew this fund was risky, but I didn’t really understand what made it so. I initially wanted to make a quick swing trade. But when the ETF’s price fell, I held on – waiting for a reversal instead of cutting my losses. That was the wrong decision. Eventually a lower VIX and the adverse effects of contango wiped out 99% of my position, and I lost $2,000. From then on, I only invest in things that I actually understand. I learned the importance of knowing what I own. Today I can explain any investment I have to a 4th grader, and I can delineate why I own it.

Another time where I made a mistake was being too complacent with my farming business partner. He was working on site and making more than his fair share of the operating profits. I knew he was taking advantage of me but since I lived 2,000 km away there was little I could do remotely. Eventually I sold the farm for a tidy profit, but I should have screened for a different person to work with. Warren Buffett famously said if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes. That sage advice translates to people as well. More important than what you do is who you do it with. So, it’s necessary to conduct your due diligence on the people you expect to spend time with. If you can’t see yourself working with a person for 10 years, then don’t work with them for 10 minutes – whether it be an employer, a business partner, a spouse, or a tenant. Surround yourself with high quality individuals who have integrity and long-term aspirations. The only relationships that are worth investing in are the ones that last.