All posts by Financial Independence Hub

12 Stress Management tips for Business owners

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What is your strategy for managing the stress of running a small business?

To help you find new strategies for managing the stress that comes with running your small business, we asked small business owners and entrepreneurs this question for their best advice. From taking time to enjoy nature to setting boundaries, there are several different ways you can manage your stress.

Here are twelve strategies to managing stress while running a small business:

  • Remember Your Why
  • Regular Trips Out In Nature
  • Think About All The Impact You’re Making
  • Spend Time With Your Pets
  • Take Longer Breaks When You Need Them
  • Schedule Self Care
  • Personal Retreat Sessions
  • Give Autonomy To Your Team
  • Mindset Routines
  • Blocking Time
  • Setting Boundaries
  • Use The Pomodoro Technique

Remember your Why

When times get hectic, like they often do, it’s important to have your why statement clearly defined and visible to see at all times. Usually, when I’m feeling stressed, it’s because I am too caught up in the weeds and working “in” the business. By regularly scheduling time to work “on” the business, I start by remembering our why statement which brings my focus back to the big picture. This helps me get pumped and feeling way less stressed. — Jenn Christie, Markitors.com

Regular trips out in Nature

Here at Cruise America, we believe in working hard and playing hard. That is why the majority of our executives take advantage of our RV fleet and take regular trips out in nature. We find that this time out of the office reminds us of why we started this company years ago and the amazing experiences we provide for our customers. That’s what makes every day in the office well worth it! — Randall Smalley, Cruise America

Think about all the Impact you’re making

It is so easy to get caught up in the stress of running a small business and losing sight of why you first launched your company in the first place! Whenever I feel overwhelmed, I just think about all the good my company has done for cities and their communities over the last 37 years and it makes it all worth it. — Blake Murphey, American Pipeline Solutions

Spend time with your Pets

The best part of working remotely is that I get to spend all day with my dog! Whenever I start to feel stressed or overwhelmed, I love taking him on a walk or playing fetch with him on the beach. It is a great way for me to step away from my desk, get a healthy dose of Vitamin D, and of course spend some time with my fur baby. –– Carol Bramson, Side by Side

Take longer Breaks when you need them

Many people stress at work. They do overtime and compensate by accumulating extra holidays and taking spare time off. But by doing so, there’s also the impending fear of stress from having to go back to work. I make the most of every day at work, with myself, and with colleagues. I take longer lunch breaks when I want to—an extra hour to go to the lake or stroll around the city. And if you find yourself dozing off, ask colleagues to get a coffee outside of the office—or if you’re still lucky enough to get some sunshine—go for a gelato run collectively! Nobody ever says no to ice cream. — Hung Nguyen, Smallpdf

Schedule Self Care

Schedule self-care and breaks into your daily schedule. When you map out each week in your digital calendar or physical planner, schedule self-care, family time, and exercise first. These are your non-negotiables. Then schedule everything else work-related around these non-negotiables. Your self-care is unique to you! It may vary from a scheduled meditation time to daily walks, to 30 minutes reading a fiction book. But if you don’t plan for it, work will chip away at life, leaving you little in the way of work-life balance. — Reese Spykerman, Design by Reese

Personal Retreat sessions

Personal retreat sessions are a wonderful strategy to help manage the stress of running a small business. Retreat sessions create plenty of downtime and space for reflection, which is exactly what small business owners need to move naturally towards solutions that can solve stress-inducing issues. Continue Reading…

The Permanent Portfolio

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By Dale Roberts

Special to the Financial Independence Hub

The traditional balanced portfolio is built for the current economic environment. It is built upon the premise, or guess, that we will remain in a disinflationary environment. It is all that today’s investor has known. In a disinflationary environment US and Canadian stocks and other developed markets perform well. US and Canadian bonds perform well. As you will have noticed, if you have a sensible balanced portfolio or even a portfolio that is heavily weighted to stocks – you’ve done very well. But things could change. The economic conditions could change. For that possibility you might consider a portfolio that is built for any economic condition – the Permanent Portfolio.

The portfolio blind spot

I “got” the portfolio blind spot framing from a Canadian financial planner. The planner stated that for them, inflation was a blind spot. It was not something that the planner understood or knew how to address.

So if many portfolio managers and financial planners don’t consider serious inflation or the possibility for a change in economic conditions (economic regimes) it’s not surprising that the everyday retail investor would not ‘get it’.

And by the way, I am told that advisors and planners are not trained ‘on this.’ They are not trained to protect your wealth in all economic conditions. The word “stagflation” does not show up in their training materials.

And for the record, here are the economic possibilities and what works best in each regime. The chart is courtesy of ReSolve Asset Management.

When you have a blind spot you could get side swiped.

As I detailed in the lost decade for US stocks, there are periods (long periods) when stocks simply don’t work. They deliver no returns, or no real returns (when we factor in inflation) for extended periods – even a decade or more.

For example, US stocks delivered no real returns for a 15 year period from 1968 through 1982. You can thank inflation for that.

Each stock market is different (that is US vs Canada vs other International) but that trend and fact remains. Stocks don’t always work.

All positive US stock gains over the last 130 years have occurred in disinflationary periods.

Not only that, the traditional balanced portfolio can also deliver no real returns for extended periods. The chart is for US stocks and bonds, but the conditions would not change change materially when we substitute or add in other developed market stocks and bonds.

ReSolve Asset Management

Where stock diversification would have helped (marginally) is in the early 2000’s period. Canadian and International developed markets did not suffer to the same degree, as did US stocks in the dotcom crash. It was the US stock market that suffered from greater euphoria and greater over-valuation “issues”. You mean, like today? You might ask.

So how do you build a simple portfolio to protect and prosper through all economic conditions?

The Permanent Portfolio

There are four economic conditions that can exist. The economy can grow or the economy can shrink – economic contraction. We can have inflation and we can have deflation.

And yes we can have periods of stagnation or muted movements for each of the above.

With inflation prices are increasing and so is your cost of living.

With deflation prices are falling and the cost of living is decreasing.

Putting it all together, we can have four quadrants or economic conditions.

  • Inflation in a period of economic growth.
  • Inflation in a period of economic contraction.
  • Deflation in a period of economic growth.
  • Deflation in a period of economic contraction.

Have another look that chart from ReSolve and you’ll see the economic conditions of the last 120 years and more.

Something is always working

The Permanent Portfolio is designed to hold assets that will perform in each economic environment. Something is always working. Continue Reading…

What the CRA already knows or may learn about your crypto portfolio

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Image via Unsplash: Bermix Studio

By Anna Malazhavaya

Special to the Financial Independence Hub

For better or for worse, cryptocurrencies have gained popularity, at least in part, due to their anonymity. As the industry develops and tries to shake the “crypto-is-for-criminals” reputation from its early days, the anonymity in certain areas fades.

Know Your Client requirements at crypto exchanges have become quite sophisticated. News reports keep appearing about popular crypto exchanges, such as Coinsquare in Canada and Coinbase in the United States, handing information about their account holders to local tax authorities.

The price of Bitcoin has more than tripled in the last four months. As lucky crypto investors consider whether to HODL (Hold On for Dear Life) or sell, they can be certain the taxman is watching. When can information about your crypto investments and earnings become available to the Canada Revenue Agency? Here are a few examples.

1.) If you are audited, the CRA auditor can get access to your crypto exchange account

 If you are audited by the CRA for any reason, the auditor may come across a crypto exchange purchase on your bank or credit card statement. If so,  expect follow-up questions from the auditor. If the auditor asks about your assets, you must disclose all your assets, including your crypto portfolio. Lying to the CRA is never a good idea and can lead to criminal charges.

The CRA has the power to compel third parties, including currency exchanges, to disclose information related to your crypto account activity through a so-called Requirement for Information (“RFI”). If a crypto exchange receives such RFI, they must either comply with it, dispute it at the Federal Court, or face criminal charges. Most Canadian-based exchanges will promptly release your information to the CRA.

2.) Even if you are not currently audited, the CRA may get access to your crypto exchange account as part of a so-called “unnamed persons” RFI

In some cases, the CRA can ask the Federal Court for an order to compel third parties to disclose information on a group of “unnamed persons” if the group is “ascertainable” and the purpose of the request is to verify the tax compliance of these taxpayers. A recent example of the CRA successfully exercising this power was a Federal Court order compelling Home Depot to disclose information about the accounts of its commercial customers. It appears that the CRA won’t hesitate to use this power when dealing with crypto exchanges.

In September of last year the CRA filed an application in Federal Court seeking an order to compel Coinsquare Ltd., a popular Toronto-based digital asset exchange, to disclose activity of  its clients. All its clients. And all the way back to 2013, no less. Coinsquare disputed the application arguing that the group was not “ascertainable” and that the CRA engaged in a “fishing expedition” invading the taxpayers’ privacy.

On March 23, 2021, in its blog post, Coinsquare announced that it reached an agreement with the CRA for an order, whereby only a portion of accounts would be disclosed to the CRA on or before April 6, 2021. Coinsquare would produce to the CRA information on accounts valued at  $20,000 CDN or more on December 31 in the years 2014 through 2020, along with 16,500 of the largest client accounts by trading volume during those periods.

3.) Proceeds of Sale of Cryptocurrency can be visible to the CRA

Whether or not you used a popular crypto exchange platform to sell or spend your cryptocurrency, the CRA may question the source of proceeds (traditional currency or assets purchased with cryptocurrency) you received in exchange. If you are audited, your reported taxable income should be consistent with that large deposit in your bank account or that late-model Tesla parked in your driveway. If the CRA finds a discrepancy, the consequences can be very serious.

4.) Crypto investments are only anonymous while your crypto address is not linked to your name. But if the CRA makes the connection, look out

Using the same crypto address for sending and receiving some types of cryptocurrency is like writing under the same pseudonym. If anyone ever connects your real identity to the pseudonym, all you ever published under the pseudonym will then be linked to you. Continue Reading…

Behavioural Finance: We have met the Enemy and it is Us

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By Noah Solomon

Special to the Financial Independence Hub

Behavioural finance is the study of the influence of psychology on the behaviour of investors. Its central theme is that investors are not always rational, have limits to their self-control, and are influenced by cognitive biases. People harbour a multitude of self-defeating behaviours that lead to self-defeating results.

In The Laws of Wealth: Psychology and the Secret to Investing Success, author Daniel Crosby states: “The fact that people are fallible is your biggest enduring advantage in the accumulation of greater wealth. The fact that you are just as fallible is the biggest impediment to that very same goal.”

Confirmation Bias: Letting the Tail wag the Dog

Confirmation bias is the tendency of people to pay close attention to information that confirms their beliefs and ignore information that contradicts it.

Most of us have a really bad habit of only paying attention to information that agrees with our existing beliefs. Our natural tendency is to listen to people who agree with us because it feels good to hear our opinions reflected to us. We also tend to let the proverbial tail wag the dog: to draw conclusions before objectively weighing the facts. We first construct hypotheses, and then subsequently look for information that supports them.

Even some of the greatest investors have fallen prey to the confirmation bias trap. In December 2012, Bill Ackman, Chief Investment Officer of Pershing Square, launched a crusade against Herbalife, a nutritional supplements company, referring to the company as a pyramid scheme and stating that its stock was worthless. After taking a $1 billion short position in Herbalife, he continued to seek supporting evidence for his original hypothesis from Herbalife customers who had poor experiences with the company.

Activist investor Carl Icahn, who had an opposing view, acquired a 26% ownership stake in the company. The epic battle that ensued between two of Wall Street’s biggest titans resulted in a major loss for Ackman. Had Ackman attempted to find potential flaws in his thesis by seeking out customers who had positive Herbalife experiences, he might have either avoided or mitigated the losses which his fund suffered.

Loss Aversion/Disposition Effect: The Pain of Losses is (Myopically) larger than the Pleasure of Gains

Loss aversion does not describe the tendency of people to try and avoid losses, which is completely rational. Rather, it refers to having an economically unbalanced desire to avoid losses at the expense of foregoing commensurate or greater gains, which can cause them to win battles yet lose wars.

Loss aversion can cause investors to refrain from selling losing positions in the hope of making their money back, thereby allowing run of the mill losses to metastasise into “there goes my house” losses.  Loss aversion can also lead to significant opportunity costs, as money gets “trapped” in underperforming investments at the expense of foregoing better opportunities.

Closely related to loss aversion is the disposition effect, which refers to a cognitive bias that causes investors to sell winning positions prematurely and irrationally stick with losing positions. When a position is rising, we get anxious to lock in our gains and sell prematurely. At the same time, people are often too slow to cut their losses on holdings which are losing money and hold on to them in the hopes that they will recover. These behaviours tend to diminish gains and exaggerate losses, thereby leading to poor overall performance.

Fear of Missing Out: There’s nothing more annoying than watching your neighbour get rich

Fear of Missing Out (FOMO) refers to feelings of anxiety or insecurity over the possibility of missing out on an event or opportunity. What is most interesting is that FOMO is an emotional reaction that pushes us to trade or invest in a less disciplined way. Rather than buy stocks when they offer the most attractive risk-to-return ratio, investors are driven to buy them to an even greater degree the less attractive they look technically. Our fear of missing out becomes greater the more the market continues to act in an irrational way.

FOMO is frustrating because it occurs when the market is doing the unexpected and we are sticking to a solid plan. From 1996 to 2000, the NASDAQ stock index exploded from 1,058 to 4,131 points. Many of these technology stocks had little or no earnings yet still commanded steep prices. Investors feared that if they didn’t get in now they would miss out. Millionaires were minted overnight until it all went wrong. The dotcom bubble burst, and trillions of dollars of investor wealth vanished as the NASDAQ plunged to under 2,000 points by the end of 2001. Few did their due diligence on these hot tech stocks to make sure they were the best long-term investments for their personal portfolio and goals. It took many years for the average investor to recover.

In his characteristically folksy yet caustic manner, Warren Buffett used the following analogy to illustrate the absurdity of FOMO:

“Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behaviour akin to that of Cinderella at the ball. They know that overstaying the festivities will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem: They are dancing in a room in which the clocks have no hands.”

The Bandwagon Effect: Making sheep look like independent thinkers

The bandwagon effect describes the tendency of investors to gain comfort doing something simply because many other people are doing it. The tendency of people to prefer doing ill-advised things that others are doing rather than act rationally in isolation is best summarized by John Maynard Keynes:

“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”

Whereas using the performance of others as a reference point for measuring your results mitigates the risk of underperforming your peers, it can expose you to severe losses. The widespread abandonment of reason and rationality associated with a herd mentality has historically resulted in speculative bubbles in which the crowd joins hands and runs off the cliff together. Continue Reading…

The great thing about managing Other People’s Money

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By Michael J. Wiener

Special to the Financial Independence Hub

 

The great thing about managing other people’s money is that you can dip into it to pay yourself.  This might sound unethical or illegal, but it’s perfectly legal if the owners of the money agree to it.

I use the word “agree” in a technical sense here; you really just have to get people to sign a document that points to other documents that bury the details of how you pay yourself from their investments.  You might think that once people notice some of their money is missing, they would become wise to your scheme, but most people don’t notice.  You might think that once such schemes are exposed in the media, people will see that they’ve been had, but most people who read essays like this one just don’t believe it applies to them.  The sad truth is that millions of Canadians allow others to take their money this way.

How to consume 25 to 50% of your savings over a quarter century

Average Canadians invest much of their savings in mutual funds, segregated funds, and pooled funds offered by banks, insurance companies, and independent mutual fund companies.  The bulk of these savings are invested in funds whose managers dip into the funds to pay themselves and their helpers at a rate that will consume between one-quarter and half of investors’ savings and investment returns over 25 years.  This fact seems so incredible that most people will feel sure that it is wrong or at least that it doesn’t apply to them.  But this draining of Canadians’ savings is real.

There are laws that require sellers of funds to disclose how much they take out of people’s savings each year.  For example, when you first bought into a fund, you might remember receiving a large document called a prospectus that you found to be incomprehensible.  Don’t feel bad; it’s designed to be incomprehensible because it contains news you wouldn’t like that might stop you from buying the fund.  At least once a year your account statements have to include information about fees that get deducted from your savings, but these disclosures are often confusing, and they don’t have to include everything you pay. Continue Reading…