Making Money Minute with Ron Hiebert - Concentration & Returns

Diversification in a portfolio is important because it spreads your risk across many assets and lowers exposure to any one of them. The problem, is you seldom get market beating returns owning dozens or even hundreds of securities. Oversized gains require concentrated portfolios. For example, Bill Gates has a 50 billion dollar investment portfolio. 79% of it is in only 4 stocks - Microsoft, Waste Management, Berkshire Hathaway and Canadian National Railway. The stocks high quality lessens the risk, but the concentration danger that goes hand in hand with oversized returns is still there.

Making Money Minute with Ron Hiebert - Time in Retirement Grows

Since the year 2000, the costs of basic needs—such as home ownership, healthcare, and education—have consistently outpaced wage growth. This trend is expected to continue. As life expectancy increases, the amount of time we spend in retirement grows as well. By 2043, the average retirement may be 21 years. As a result, Canadians need to re-examine their financial goals. Success could mean saving more, working longer, seeking higher returns on investment or a combination of the above. The more time you have to make these adjustments the less likely you will be to outlive your retirement savings.

Making Money Minute with Ron Hiebert - The Cockroach Rule

If you have ever had cockroach’s in your kitchen, you will know there is never just one. The same advice holds true with loan portfolios of financial institutions like banks and trust companies. When a particular institution starts writing off aggressive, high risk loans, it is often a signal that there are more to come. Mistakes are seldom solo. If a lender likes a sector, they will green light staff to approve more loans in the same line of business. When a bank has to write off a bad idea, investors need to beware. Just like cockroaches, there are usually more than one.

Making Money Minute with Ron Hiebert - Up 2/3’s The Time

There are two things new investors need to understand about stock markets. The first is markets go down much faster than they go up. Stocks seem to take the elevator down and the escalator up. This can be scary until you understand the second major trait of stock markets. And that is that they go up far more than they go down. In fact they go up 2/3rds of the time and down a 1/3rd. This mean s they are rising twice as often as they are falling. Investors who focus on the first trait and get scared off are the ones who don’t make any money. Those who recognize the long term trend is up are the big winners.

Making Money Minute with Ron Hiebert - Seeking Excellence

One of the best ways to protect yourself in volatile markets is to focus on owning the best of the best, the standouts, the cream of the crop. These are the companies with better execution, better products, better service and superior profits. David Gardiner co-founder on Motley Fool and one of the best growth investors of our era, defines the job of an investor as finding excellence, buying excellence, and adding to excellence over time. Sticking with this strategy also means ruthlessly pruning mediocrity. The point is to water the flowers and pull the weeds.

Making Money Minute with Ron Hiebert - AI’s Circular Money

People are wondering where the profits will come from to justify the trillions being spent on AI infrastructure. Of the 100’s of millions of people who use AI, only 3% are paying customers. Right now lots of money is pouring in. ChatGPT is buying billions of dollars worth of servers from Oracle, who are buying billions of dollars worth of computer chips from Nvidia. How is ChatGPT paying for all this. From a 100 billion dollar investment from Nvidia of course. There are plenty of these circular deals moving money around the industry, but virtually no discussion of how any of this will generate enough profit to pay for it.

Making Money Minute with Ron Hiebert - Perks Working For Government

If you are looking for a career path, two options are working for government or private industry. On average, government pays 4.8% more in wages or salaries than the private sector. Also, if you work for government, you are 2.3 times more likely to have a pension - guaranteeing income at retirement. Government jobs are 50% more flexible in allowing days off for personal reasons, have more job security and on average allow workers to retire 2.2 years sooner than employees in the private sector. Working for municipal, provincial or Federal governments has its perks.

Making Money Minute with Ron Hiebert - Lobbying Works

Since 2008, US Corporations have spent about 3.3 billion dollars a year employing 13,000 lobbyists to sway the US government into enacting favourable legislation for the companies and industries they represent. The reason there are so many lobbyists, is because what they do works. Studies show that companies generally get more financial bang for their buck lobbying than spending the same dollars on research and development. Saying that America has the best government money can buy, is no joke.

Making Money Minute with Ron Hiebert - Speculation In TFSA’s

The advantage of a TFSA is that investment gains within it are tax free. This makes it tempting for investors to put their speculative investments inside this shelter. If they hit a home run on one of them, the investor won’t have to share gains with the Canada Revenue Agency. The problem with this argument, is most speculative investments lose money. By putting them in a Tax Free Savings Account, you are unable to write losses off against capital gains, like you could in a regular investment account. Thus losing a major tax deduction. For more information, listen to our Making Money podcast hosted by Ron Hiebert and Gord Whitehead at letsmakemoney.ca or CFCW.com.

Making Money Minute with Ron Hiebert - The Halo Effect

They call it the Halo Effect. When people are really good at one thing, it can trick them into believing they are qualified, to weigh in on other areas as well. This happens frequently in the investment arena. People might be accomplished actors, sports stars, scientists or politicians, but few have the skills to understand, much less predict, future economic events and the markets reaction to them. What’s worse, is the public also gets mesmerized by the Halo Effect. We are willing to give people financial credibility because they are good at something else - big mistake.