For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).
When considering investing in emerging markets, explore opportunities in the rise of emerging economies, exports, and shifting trade patterns
BRICS countries/Deposit Photos
Global trade has undergone a remarkable transformation over the past four decades, with its share in the global economy increasing from 36% to 57% by 2022. This surge in international trade has created opportunities for investing in emerging markets, which have become pivotal players in the ever-changing global trade landscape. Notably, China experienced a remarkable ascent, transitioning from a mid-size player to the world’s largest exporter within a mere two decades. Alongside China, other emerging economies, like Mexico, exhibited impressive growth, propelling them to the top echelons of global exporters.
In fact, Mexico is now among the top 10 exporters and a number of smaller emerging economies are growing their exports rapidly.
China still Dominates Global Exports
Although it has slowed lately, China remains the largest exporting country in the world. It delivered goods worth $3.6 trillion to global customers in 2022, or 16% of all global exports. This was roughly the same value of exports from the second and third-ranked U.S. and Germany combined.
Fellow Asian countries received almost half of Chinese exports while European and North American customers both imported 20% of the total. The largest single-country customers for Chinese goods are the U.S. (16%), Japan (5%), Germany (3%), Netherlands (3%), South Korea (5%), Vietnam (4%), and India (3%).
Chinese exports grew rapidly in the years after its entry into the World Trade Organization in 2001. For the decade after 2001, exports increased by 20% per year and contributed almost 30% of the Chinese economy for that decade.
However, growth in Chinese exports has slowed down over the past decade to around 5% per year. Also, when expressed as a portion of GDP, the importance of exports began dropping — averaging 20% over the past decade, down from over 30% in the previous decade. Continue Reading…
Below is an edited transcript of a podcast interview conducted late in 2023 between myself and Burn Your Mortgage podcaster and author Sean Cooper.
The conversation starts with our thoughts on the high price of housing in Canada and how newcomers trying to get on the first rung of the housing ladder can get a start by saving up in Tax-Free Savings Accounts (TFSAs) and the new First Home Savings Accounts (FHSAs.)
From there we move on a discussion of saving for Retirement, my concept of Findependence (or Financial Independence) and Semi-Retirement: aka Victory Lap Retirement.
Click any of the links below to hear the full audio podcast on your favorite podcast app. Below that is a shortened edited transcript of the interview.
Let’s get started with our interesting discussion today on findependence as well as your daughter’s journey to homeownership. I remember you being on a segment of CBC on the money back in the day a few years ago, with your daughter. So yes, the first thing I want to ask you about is the challenge of younger folks buying a property around that housing affordability issue, so maybe we can talk a bit about your daughter’s journey to homeownership and also about the new First Home Savings Account (FHSA.)
Jonathan Chevreau
Sure. first of all, as an only child, we remind her that eventually we’ll be gone and that this current house will be hers in any case. So that removes some pressure. Is it a challenge right now in places like Toronto and Vancouver to buy a first home? Yes, it is. Is it impossible? No, it’s like anything else in personal finance. It’s priorities. I think I’ve educated her to the point that she’s been saving in a TFSA and maximizing it since she was 18 years old.
The point is between the TFSA and now the First Home Savings Account, it’s a lot better to receive interest than to pay it out once you commit to a house, which is a lot more expensive than the baby boomers ever had to pay … We’d rather collect rent, in effect, or interest income than than pay it out.
FHSA versus TFSA and Homebuyers Plan
Sean Cooper
Could you share your thoughts on how the FHSA compares to the TFSA and the RRSP homebuyer plan?
Jonathan Chevreau
As you know, the FHSA has only been out for about a year. And it allows you to invest $8,000 a year into basically anything that an RRSP or a TFSA would allow you to invest in. So not just fixed income, but you can invest in stocks, ETFs, asset allocation ETFs, etc. And you get a deduction similar to how an RRSP generates one.
But the beauty of it is it’s very flexible, like a TFSA. You don’t have to buy a first home. But it’s only good for people who have never bought a home yet, so it’s a one-time only deal. I would say it would be a priority. But whether or not you think you’re going to buy a home, you certainly will want to retire at some point. And therefore the FHSA does double duty.
Sean Cooper
I agree completely. And the FHSA is a lot more flexible than the homebuyer plan, you can actually use both of them together. So if you have a lot of money in your RRSP, then you can use them in combination. But a couple cool things that I learned is that with the RRSP home buyers plan, there’s actually the rule that basically any contributions that you make, it has to sit in the account for 90 days before you can take the money out. But with the FHSA, it doesn’t have that same rule, you can essentially contribute money and then pretty much take it out. And you don’t have to wait 90 days or anything like that.
Jonathan Chevreau
The good thing about home equity and a paid for-home because as you know, Sean, I’ve written that the foundation of financial independence is a paid-for home, but once it’s paid for there is home equity, then, if you have to, in the last five years of Old Age would tap it to pay for, I don’t know, $6,000 or $7,000 a month for a nursing home or retirement home. Nice to have in the back of your pocket, the home equity.
My view is, there’s no rush to get out there and buy a first home at these high interest rates and home prices are also almost near record high though they’ve come down a bit.
Retirement savings, pensions, CPP, OAS
Sean Cooper
Why don’t we switch gears and talk about the second topic that we want to discuss: financial independence. If all the money is in the house, and you don’t have a gold-plated pension plan, you have a bit of a challenge there. Now, certainly you can downsize but then there is the cost of moving and the land transfer tax, and all that.
Jonathan Chevreau
Well, I don’t have a gold-plated pension. I would call it more like a bronze-plated one. Mostly from National Post, since I was there for 19 years. My wife has no employer pension, but always maximized her RRSP. And we obviously eat our own cooking, so we have maximized our TFSAs since it began. We delayed CPP as long as we could, but didn’t quite wait until 70 because actuary and author Fred Vettese had an article in The Globe the last couple of weeks arguing that those who are 68 or 69 now are probably better off taking CPP a year or two earlier, so you get the inflation adjustment.
Most financial planners would say you should look at CPP and OAS really nice additions to savings and that can be the foundation or your findependence, especially if you don’t have an employer-provided Defined Benefit pension plan. Some worry that if the worst happens, like Alberta leaving CPP, what if somehow they renege on the CPP promise? But I don’t think it’s going to happen.
Retiree money fears and Asset Allocation
Still, it doesn’t hurt to have financial assets so in the end, you’re not going to be dependent on the government or any one employer. One thing you can count on is your personal investments like RRSPs/RRIFs, TFSAs, and non registered savings. Then of course, if you’re managing your own money , you have to worry about the fear of every retiree: running out of money or losing money if the stock market crashes. Asset allocation is the proper protection there: my own financial advisor recommends 60% fixed income to 40% stocks, I guess we’re close to that. Right now GICs — guaranteed investment certificates — are paying roughly 4 or 5%, depending where you go. If you ladder them so they mature one to five years from now, then you don’t have to worry about the reinvestment risk. You just reinvest whenever they come due at current rates. Continue Reading…
Overall, if you were in low-cost, diversified ETFs, including some all-in-one ETFs, it should have been a VERY good year for you!
To answer the question, our portfolio performed just fine – since I/we tend to focus on the meaningful income our portfolio generates to eventually cover expenses along with returns. Staying invested in a number of stocks and low-cost ETFs as we do are designed to generate market-like returns since we don’t trade nor tinker with the portfolio, and low-cost ETFs invested in stocks outside Canada offer growth.
If your bias was more simplicity than my approach and seeking total returns, then these ETFs including some great all-in-one ETFs might have done very well for you in 2023 after a terrible 2022:
ETF
2023
2022
VEQT (100% equity)
16.95%
-10.92%
XEQT (100% equity)
17.05%
-10.93%
ZEQT (100% equity)
16.75%
-5.25%
HEQT (100% equity
22.64%
-19.20%
XAW (100% equity ex-Canada)
18.16%
-11.77%
Beyond some of these great all-equity ETFs for your portfolio, consider these in this post that might hold a mix of stocks and bonds to match your risk tolerance and investing objectives:
No financial advisor or money manager needed for these ETFs. The wise ones would tell you to index invest in some diversified ETFs anyhow. Just food for thought in 2024 if you haven’t considered DIY investing.
Here are some interesting, early YTD returns from the oil and gas sector. Gurgen is a must-follow IMO.
What does 2024 have in store?
I have a few (fun) predictions that I will share soon but they are just that, some thoughts and this is a good reminder that experts know nothing about what the financial future might hold – but they have to put food on the table as well…
Vanguard still took a leap of faith though, will they be right in 2024?
Mark Seed is a passionate DIY investor who lives in Ottawa. He invests in Canadian and U.S. dividend paying stocks and low-cost Exchange Traded Funds on his quest to own a $1 million portfolio for an early retirement. You can follow Mark’s insights and perspectives on investing, and much more, by visiting My Own Advisor. This blog originally appeared on his site Jan. 6, 2024 and is republished on the Hub with his permission.
Here is a quote by Charlie Munger, vice chairman of Berkshire Hathaway, Warren Buffett’s business partner.
“The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do — if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
Right now, my portfolio is over $500,000 but the first $100,000 were the most difficult to get because, of course, I started with $0, in a foreign country (Canada), with no family connections, no intergenerational wealth, no nothing.
Since I arrived in Canada, I have been a janitor, a busboy, a waiter, an Uber driver, a cleaner, a dance teacher, an insurance salesman, a photographer, and a website designer.
If you are a low earner, like me, you can only save $100,000 through a lot of discipline, sacrifices, perseverance, and the right mindset.
Most people, even those earning $100K per year, will never accumulate this amount of money. I feel extremely privileged to have arrived and surpassed this milestone.
I am the kind of person who believes that wealth is available to all of us and if we want it, all you have to do is to reach out and get it.
My biggest teacher in almost any entrepreneurial endeavour has been YouTube. My college education was not a complete waste, I get to go around and tell people that I have a college education, but for any practical purpose, it was useless.
You don’t need a fancy degree from any college to build wealth. Even now, I am teaching myself website design via YouTube.
Having the goal of saving $100K
Goals can also help to look toward the future and keep saving efforts in check. The more money you can save, either from reduced expenses or increased income, the faster you can move toward accumulating your first $100,000. And once you do that, the way to the next $100,000 becomes easier.
Having the right mindset
To save $100K you need to train your mind. Keeping your particular goal in mind can help, but you also need to understand how to achieve your goal with a plan.
From strategic moves in real estate to the expansion of businesses, twelve seasoned professionals share their stories of how calculated risks have shaped their wealth-building journeys.
Spanning from lessons learned in real estate investing to calculated risks propelling business expansion, these insights delve into the pivotal decisions that can make or break financial growth. Discover the risks that reaped rewards and the wisdom gained from taking chances in the world of investment and entrepreneurship.
As a successful real estate investor, taking calculated risks plays a big part in my wealth-building journey, but it’s not something I’ve done well from the beginning. For example, the first property I ever invested in was an old house that ended up having a lot of issues, like animal infestations.
Clearly, I took a poorly calculated risk by buying that property because I wasn’t aware of the problems before investing. But it did help me learn an important lesson: Taking risks becomes a lot more manageable when you’ve done your research and understand the magnitude of the risks involved. If you go in blind, like I did that first time, it’s much harder to make smart decisions.
Thankfully, I did end up earning big returns on that property (and properties I’ve invested in since), so the investment did pay off. And now, I always do my research before signing on the dotted line to help minimize risk. –– Ryan Chaw, Founder and Real Estate Investor, Newbie Real Estate Investing
Successful Shift to Hotel Investments
As real estate investors, my husband and I take calculated risks regularly. The biggest risk we took was transitioning from apartment complexes to hotels six years ago. Moving into a completely unknown industry was an enormous risk, since our entire knowledge base and experience was around long-term rentals. Hotels go beyond rentals; they are a section of the commercial real estate market; they are full businesses with significant demands around 24/7 daily operations.
Our decision to move into this market was driven by reduced ROI in the multifamily space, and we sought a more profitable investment opportunity. This transition wasn’t just about moving into a completely unknown industry; it also required us to place trust in a business partner because, in order to secure financing, we needed to demonstrate an experienced operator who could soundly manage the hotel.
The risk paid off. This particular hotel has consistently delivered high returns: even during the pandemic. It’s led to additional hotel acquisitions and a strong friendship with our hotel operator partner. We’ve built up our expertise in the hotel industry through our experience with this first successful hotel, expanded, and gained a solid understanding of what it takes to run hotels profitably.
We’re exploring international opportunities. All because we took a calculated risk six years ago and moved into hotels. That initial leap of faith opened doors we never could have imagined at the time. –– Nic Stohler, Creator, Nic’s Guide
Daily Risk-Taking yields Flipping Success
I take calculated risks every day in making offers on properties that I’m going to close on and list, or close on and flip. This risk comes in many forms, such as often not having 100% of the information from a seller, not knowing where the market is going to be a couple of months from now, or simply having a project run longer than expected.
These calculated risks that I take daily have helped tremendously in the wealth-building journey, as I’ve been able to complete some very successful flip projects, such as one I purchased last year for $460,000. In this scenario, I opted for the seller to finance me 80% of the purchase price; it was a hoarder house, and I didn’t really know where the market was going to be by the time we finished.
Fortunately for us, by the time we listed it three months later, we were able to get 20 offers and sell the property for $770,000. — Sebastian Jania, CEO, Ontario Property Buyers
Investing in Personal Digital Brand Growth
They say insanity is doing the same thing and expecting different results. Building wealth is rarely easy and requires some level of risk. This year, I risked spending dozens of hours and thousands of dollars to grow my digital brand.
To most people, pouring a lot of energy and money into a business that isn’t guaranteed success is scary and irrational. However, I took the risk anyway because I’d already spent years learning different skills and believed in what I was doing. Despite spending thousands of dollars, my business is now profitable after taxes and expenses.
Even if my business had failed, I would’ve gained invaluable experience I could use toward my next investment. Building wealth can be risky, but you can reduce your risk by taking the time to understand your investment and assess your risk tolerance.-– Chris Alarcon, Journalist/Owner, Financially Well Off
Authenticity drives Startup’s Viral Growth
As an entrepreneur trying to grow a personal finance startup, risks are inevitable. However, one risk that I took early on that paid off immensely was getting vulnerable and sharing my personal story so openly.
Deciding to base my entire brand voice and messaging around my own memoir was risky. I shared details about my failures and shortcomings during my debt repayment journey: not ideals I thought people might want to hear about. But I knew if I only showed the highlights, it wouldn’t be authentic or establish trust. I had to risk being judged or dismissed to remain genuine.
It ended up paying off hugely. By bravely recounting even my toughest setbacks on my blog and social platforms, readers connected with my transparency. They saw themselves in my story. This drove immense word-of-mouth growth for My Millennial Guide in those early days when marketing budgets were non-existent.
Had I played it safe and kept my journey vague and surface-level, I doubt my message would have resonated so strongly. I’m grateful every day that I took the risk to stay true to my vulnerable, unconventional backstory: it fueled my wealth-building journey tremendously. — Brian Meiggs, Founder, My Millennial Guide
Life is all about risk, and your wealth-building is an area that’s no different. Over the years, I’ve taken plenty of risks that have helped me grow my wealth.
One of those is investing in a local comic convention. I saw them make a call for investors to seed some of the celebrity stars they were looking to bring in. This seemed like a great opportunity to invest but also a risky proposition. Thoughts of “What if the stars don’t pan out?” or “How will this impact other opportunities?” flooded my mind.
Thankfully, I took the risk, and it’s paid off not only in my wealth but also in the relationships that I have built. Due to the investments, I’ve received annual returns and opportunities to see new investment opportunities through the people I’ve met. –– Joseph Lalonde, Leadership Coach and Author, Reel Leadership
Google Ads Gamble secures Clientele
I took an $8,000 risk that led to my financial success. When I started my content writing agency in my twenties, I had about $8,000 in my bank account. I knew it would take a while to gain traction and find writing clients, so I took a risk.
I invested $1,000 monthly into Google Ads in an effort to get clients. I gave it my all and knew that if I couldn’t find a new, high-paying client within the next eight months, I’d have to return to my 9-to-5 job.
Fortunately, this risk paid off because I got my first client after four months, and by month six, I filled up my schedule. Because I took this calculated risk early on, I can now live a comfortable life and travel the world.— Scott Lieberman, Owner, Touchdown Money
Toronto Condo purchase defies Market Pessimism
Living in one of the most expensive housing markets in the world means hearing a lot about a supposed real estate bubble. For decades, people in Toronto have claimed we’re on the verge of a mega-correction, and because of this, I’ve watched friends stay out of the housing market; for some of them, it’s now too late to buy in.
It’s a good lesson not to let unwarranted negativity seep in. Continue Reading…
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