All posts by Financial Independence Hub

Is it Work or is it Passion?

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Billy and Akaisha Kaderli

By Billy and Akaisha Kaderli

Special to the Financial Independence Hub

While taking a break from the sun and surf, relaxing in my hotel room in a tiny beach town on Mexico’s rugged Pacific Coast, my cell phone rang.

“Howdy, Beautiful!” my friend of four decades shouted from snow country, thousands of miles away. “Been watchin’ your website for years and I read all your stories. Love ‘em. But I thought you were retired!”

How many times over the twenty-plus years since we left the conventional work force have we heard that challenge? Our responses have ranged from surprised silence to justification of our volunteer work, to just laughing out loud.

We run a popular website, photograph our travels and share our lifestyle adventures with people like you. Some think that by doing this, we have somehow become unfit to call ourselves “retired.”

Once findependent, you’re free to choose how to spend your time

Today I would like to pose this question to you: “Once you leave the mainstream labor-for-paycheck world and become financially independent, aren’t you free to choose what you do with your time? When is something considered work, and when are you pursuing a passion?” Continue Reading…

Behavioural Finance: Coping with Losses

Depositphotos_65204705_s-2015By Aman Raina, Sage Investors

Special to the Financial Independence Hub

In the 20-plus years I have been investing, I have yet to meet or work with anyone who enjoys losing money.

I’ve met people who have lost money (yours truly included) and I can’t say it gives anyone or myself great satisfaction. We spend all of our time trying to make investment decisions that will be successful.

Unfortunately and it’s nobody’s fault, we don’t spend enough time understanding what losses mean and how they can impact our future decision making beyond the tangible reduction in our RRSP or TFSA broker account.

In my previous post, I discussed a concept involving the Endownment Effect that Richard Thaler observed in his book, Misbehaving: The making of behaviorial economics. According to Mr. Thaler, the Endowment Effect feeds into a general discussion on how we behave when it comes to losing and making money. Conventional thinking suggest that because we don’t like losing money that we will tend to take less risk to minimize loss and conversely take more risk when we are making money.

Losses “hurt” more than “gains” provide pleasure

Continue Reading…

FWB TV video: Can we expect lower returns in the future?

Screen Shot 2016-01-18 at 2.07.41 PMThe latest FWB TV video is now up now here and at FWBSecurities.com, titled Can we expect lower returns in the future?.

As usual, it will also be housed at Findependence.TV.

The preamble to the 3.5-minute video observes that If you have invested for any length of time, you will have heard the expression “Past results are not an indication of future performance.” The best minds in the investment industry not only agree with that but some feel that in the coming years we should prepare ourselves for lower returns than we are used to.

The corollary to this is that If the markets are indeed prepared to not be as generous, then keeping fees as low as possible has never been more important. We need to keep as much of the overall return as possible. Continue Reading…

Volatility is a natural part of investing

Bull market risk financial concept as a heavy bullish beast walking on a high tightrope shaped as a stock market profit chart representing the investment danger ahead.

By Ermos Erotocritou, CFP, CPCA 

 Special to the Financial Independence Hub
 

After a lengthy period of stock market gains, volatility has once again returned to the markets. While volatility can be unsettling, it’s important to remember that it’s a natural part of investing. In fact, it tends to occur far more frequently than most people realize.

Since 1956, there have been 22 occasions when the TSX declined by more than 10%. When you calculate the average of each of these occurrences, you discover that we have experienced an average decline of 19.5% every two and a half years.

Yet the S&P/TSX has delivered an annualized return of 9.2% since that time and has proven to be quite resilient through the worst market conditions that have occurred. Despite the frequent occurrences, the market has always recovered, achieved a higher level, and rewarded those investors who remained patient and stayed true to their investment plan.

Keep a long-term perspective

This stresses the importance of maintaining a long-term perspective. Volatility often causes panic and fear, which leads to investors making regrettable decisions, like liquidating and consequently locking-in investment losses. We need to accept volatility as being a common occurrence on the road to achieving our financial goals. When we consider the natural trajectory of the market is upward-sloping, it becomes clear that maintaining a long-term approach is really the best strategy to effectively deal with these inevitable declines.

As simple as this advice may be, it’s sometimes difficult to accept when the headlines scream it’s time to get out. There is vested interest in pessimism. No journalist ever captured the front page writing a story about how disaster was unlikely to occur.

Short-term market movements are mere “noise”

While it’s reasonable to monitor day-to-day events, it’s important to keep in mind that daily, weekly, monthly, even quarterly market movements are often little more than noise for an investment portfolio that likely has a time horizon of many years. That’s why it’s so important to practice patience and discipline by remaining in the market, as opposed to abandoning it believing that is the best way to preserve wealth.

There is no guaranteed formula to identify when the best and worst time to be in the market is. However, ensuring your portfolio is well diversified and by sticking with a long-term plan, the volatility you may experience today will become a distant memory as you work towards achieving your financial goals.

Warren Buffett says “The stock market is a device for transferring money from the impatient to the patient.” My advice to you is to remain patient, it will get better.

It’s times like these that people have lots of questions. Feel free to pass this blog on to friends and family that you think may benefit from this information. I will make myself available to anyone who wants to ask me any questions. There is no obligation to meet with me or become a client. It’s important that people are educated and don’t end up making a decision they will regret later.

Continue Reading…

The Art of Boring: Three Investment Lessons from 2015

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Kara Lilly

By Kara Lilly, CFA

Special to the Financial Independence Hub

Every year our team devotes a couple of our regular Wednesday morning meetings for reflection on the year that has passed. This is a chance for our team to review the insights, errors and observations that were made in the preceding twelve months and learn from each other.

We thought we’d share three of these lessons with our readers:

1.) Beware the assumption of mean reversion

One of the greatest surprises to investors this year was the continued slide in the price of oil. Like other structural/thematic trends, the decline in the price of oil due to international oversupply and weakening global demand has gone on far longer than some initially anticipated. Many assumed that prices would dip and then return to a more normalized range between $60 and $80. This is a good example of assuming mean reversion, i.e., that prices will naturally revert back to their mean. Continue Reading…