Gordon Stein, Author at Cashflow Cookbook

Financial June 14, 2018

The Secret to Great Investing

In Cashflow Cookbook, I curated 120 of the best ideas to free up cashflow for debt repayment or increased investment. Through the power of compound growth, relatively small monthly savings can result in building real wealth over time. Many of my readers have applied the concepts and are now keen to get their money to work for them. One of the most common questions I get is, “What is the secret to great investing?”

At a recent speaking engagement, a similar challenge was raised. An audience member was interested in the ideas in the book but questioned an example I had used of an investment growing at 7%, seeing that as unattainable. Looking at the history of the stock market over the long haul, the rate of return of money that stayed invested through wars, recessions, 9/11 and every other type of peril is about 7%. The Vampire that drains investing returns is usually the investor them self, pulling money out of the market when things look scary (selling low) then clamouring back in as markets rise (buying high). Not a winning approach. Studies have shown that fund investors typically underperform the funds themselves for exactly that reason.

So what is the secret to great investing?

But back to the question, what is the secret to great investing? There is no shortage of analysis of stocks, many with conflicting opinions. And many studies show that researchers carry a bias toward positive reviews to avoid the conflict that comes with a negative one. So how do you pick the winners and what is the secret to great investing?

I don’t know that there is a single secret, but I think that one of the keys is to understand the major shifts that are happening and ensure that your portfolio is on the right side of those shifts. Let me give you some examples from the last few years of some of these structural changes and some of the investments that I made.

Major Trend or Shift(s)	Company	Last 12 month’s Performance
Artificial Intelligence, blockchain, machine vision	NVIDIA	+82%
Outsourced IT, IT Infrastructure	CGI	+25%
eCommerce (software)	Shopify	+94%
eCommerce (shipping packages)	FedEx	+24%
eCommerce (core business)	Amazon	+79%
Mobile Computing	Apple	+32%
Out of Reach Housing Costs	Canadian Apartment REIT	+27%
Social Media and Digital Advertising	Facebook	+26%

Are technology trends the only thing to consider?

Did I win on every investment I made? Absolutely not. Could these stocks have suffered from some calamity that might have thrown off their returns? Absolutely. Should investors conduct other types of securities analysis and ensure that possible investments are secure. 100%. As an example, FedEx rival UPS was more or less flat over the past year. Not all trends are technology-related. The housing cost one above is an example. Global warming leading to more violent storms is another. And bear in mind that a trade war, misguided nuclear missile or even, ahem, a bad tweet could drive a big dip across the overall market.

But all things being equal, why not have the wind at your back as an investor? By overlaying known trends in addition to sound analysis, there could be some incremental gains to be had. Could Lance Armstrong beat me in a bike race? Sure. But what if I had a huge downhill and he was climbing over the same distance? Well, OK, he would likely still beat me. But you get the idea.

What are the shifts ahead that will impact stocks?

So the history lesson was great, but what is the secret to great investing going forward? And where do we find the trends that will provide the right kinds of tailwinds? One of my investing favourites is Mary Meeker’s Internet Trends Report. It comes out every year around June 1^stand it is one of the best ways of learning about the tech trends in the year ahead. Best of all, it is free. You can have a look at it here. The McKinsey Insights iOS app is another great and free source of information on emerging trends. The Motley Fool website has tons of great articles on these kinds of trends. For each trend, think about the securities you hold. Will the company benefit from using the new technology? Are they a maker of the technology? Or will their company become roadkill as the technology becomes more popular? Younger people aren’t familiar with the old red and yellow Kodak logo, but today it serves as a grim reminder of the effect of being on the wrong side of a technology shift.

How do you apply your knowledge of the trends?

Once you build your knowledge of the trends, how do you apply it? Work with your financial advisor to discuss how some of these trends might affect your portfolio. If you invest on your own, look at your holdings to see how they might be affected by some of these technology shifts. For many of these trends, there are exchange traded funds that focus on the themes. Examples would be Vanguard’s VGT, which holds high technology names, or HACK, a cybersecurity focused fund. Be sure to balance these ideas with other blue chip holdings of the broader market.

The securities mentioned are for illustrative purposes only. Investors should always conduct their own research and consult a financial advisor before buying any security. Stock markets are subject to volatility and investors should ensure that any investments are suitable for their risk profile.

Disclosure, I hold all of the securities above personally.

Where are you getting your information on trends? What trends will affect share prices going forward?

Photo credit Chris Lawton – Unsplash

Household June 7, 2018

Do It Yourself Savings. With Help!

The boards were rotting and turning black in spots. A racoon tribe had been digging into the wood for unseen treasures. Some of the planks had split open and a previous deck expansion had made the surface look a bit like a patchwork quilt. Eventually most of the usual husband denial tactics failed and it was time to actually get the deck rebuilt.

Getting the work done by a pro would cost a good $8,000. Enough for a fun trip, 1/3 of a year of university costs, some debt pay down or savings. A do-it-yourself deck replacement was an option, but the thought of prying out 250 square feet of old, nailed-on 2×6’s and replacing some of the framing underneath was a bit daunting. The deck is an irregular shape which would lead to some tricky angle cuts. The clock was ticking though, as the deck had to be ready for our daughter’s 19^thbirthday.

Was this a candidate for do it yourself savings?

I costed out the materials and everything could be had for just over $1,000. Time to call my buddy “Rip” – a retired high school shop teacher turned home renovator and get a sense of what he might charge to get the work done. I then offered up myself as a helper, unsure as to whether that would raise or lower his price and whether I would speed or hinder his progress. He agreed to take me on as an apprentice and we booked a weekend for the work. I ordered the materials and had everything on site ready to go. Rip’s skills gave me the confidence that the job would end well. How can you go wrong with a home renovator named Rip? The greater concern was the 56-year-old “apprentice”.

Rip arrived brandishing the nation’s largest pry bar and a pickup truck filled with enough power tools to make Mike Holmes blush. We filled fresh mugs of black coffee to add some workman vibe, then intimidated the planks off with the monster pry bar. By noon, we were down to the bare framing. Which was great, other than trying to get around on a deck with no planks, 10 feet off the ground. Rip had a good laugh at my knees knocking, even though we had appropriate safety measures in place.

I tried to minimize my interference while he worked

After lunch, we added some more framing underneath and then started screwing in new deck boards in a “frame and panel” approach that had a “frame” of 3 planks all around the perimeter, then boards installed in the usual way inside the frame. This design meant a better looking deck, but more work.

On Sunday, lots more coffee and some tricky angle cuts, which were no problem for us. Actually, they were no problem for Rip and I tried to minimize my interference while he worked. After a while, we got into a rhythm; hauling planks, cutting and screwing them into place.

By Sunday night, the sun was low in the sky, the deck was beautiful, we were covered in sawdust and aching muscles. We loaded the last of the tools into Rip’s truck and high-fived our success. A big pile of wood offcuts was next to the garage. I learned a bunch of new skills from Rip and he learned a few old jokes from me. I swept the new deck as Rip’s truck backed up our driveway.

The do it yourself savings weren’t the biggest part of the story…

The deck replacement was a success and saved thousands vs hiring out the whole project. But the do it yourself savings weren’t the biggest part of the story. The fun of learning from a pro, and of building something with my own hands led to a great sense of satisfaction. And there is something about a couple of days of hard work under a beautiful blue sky with an old friend.

Learning some DIY skills can provide major savings, the fun of learning and the buzz of accomplishment. Working with a pro helps you learn how to build things to code and work safely. Skills learned on one project let you take on the next one with confidence.

Where do it yourself savings aren’t an option, always be sure to shop around for price and quality – it works on just about everything – even veterinarian bills. Pay special attention to recurring monthly costs as I did in a post about commuting costs. Use the freed up cash to pay down debt or build savings.

What do-it-yourself projects have you tried and did you get help from a pro, a book or a YouTube video? Let me know!

Household June 1, 2018

Veterinary Savings and the $1,000 Phone Call

Veterinary savings don’t get a ton of press with financial bloggers. But the price of dog spaying forced a bit of shopping around on behalf of little Zara once she reached her 6-month birthday.

You could argue that this is not the sort of birthday present most of us would want, but such is the life of an urban pet. And, as aging humans, we too are subject to various proddings, inspections and other personal violations, all in the name of good health.

The local veterinarian office answered the call and indicated that they would be pleased to conduct the procedure and had some availability over the next couple of weeks. Ah yes, and the costs would be $1,300 plus applicable taxes. Ouch, and I wasn’t even the one going for the procedure.

It’s kind of a personal thing between you and your dog

Now on the one hand, dog spaying is not the type of thing one would think to negotiate. It’s kind of a personal thing between you and your dog. A just-get-it-done-and-move-on kind of a thing. Can’t do comparisons on Kijiji (more on Kijiji techniques here). Not something to bid on over at eBay. And our friends who ship the smiling packages aren’t in that business. Yet.

Second call was to a vet a little further afield, in a neighborhood with fewer Starbucks. Down to $850, all in with the necessary shots included, plus taxes. How can the government add taxes to dog spaying? Hopefully this isn’t a line item somewhere between softwood lumber and dairy in the new NAFTA agreement or we may see duties as well as taxes.

Anyway, with about $500 saved with just a second phone call, I wondered how far I could take this. I reached out to a buddy with 2 dogs to see who he used. Turns out he had paid a similar $850 but had heard talk that the local Humane Society (SPCA for my American friends) will do the spaying for much less. Buoyed by the success of my first two phone calls, I elected to do some online research to pursue this new lead.

Kind of a dial-in lottery for veterinary savings

The Humane Society site indicated that they do perform the operation, but you need to call early on the prescribed day each month to secure your spot. Kind of a dial in lottery for veterinary savings. Not the most high-tech solution. But the price was an incredible $150, all in. Worth a few minutes of aggressive dialing to secure a spot.

The waiting room was less plush than the local vet and there were no dog-eared (sorry about that) magazines on the coffee tables. And no complimentary coffee. But when Zara emerged, she had proudly attained the same infertile status as any of the dogs whose owners had paid nearly ten times as much. She continues to enjoy ball fetching with occasional returns to her master, unproductive squirrel chasing and even has a few doggy boyfriends, all platonic of course.

What unusual things have you been comparison shopping for? Share your stories!

For saving ideas that can add over $2 million to your net worth over the next 10 years, check out Cashflow Cookbook. Available here.

Transportation May 14, 2018

Commute Costs – How to Actually Save

With gas prices rising, articles have started to appear about how to save on your commute costs. Some suggest moving closer to your work. There is undeniable logic about that one, but a house move is a drastic change with large switching costs, and there is no guarantee that your work won’t move a month after your house does. Other articles suggest switching to a more fuel-efficient vehicle. Sage advice! The idea can work when it’s actually time to change vehicles or when you’re in a position that you no longer need to haul 3 kids and goalie equipment to practice every week.

Does it make sense to shop for gas prices?

Most baffling is the business of shopping for the lowest gas prices. The reports on AM radio are a curiosity, dutifully reporting whether gas prices will rise by 2 cents or fall by 1 cent overnight. But what do I do with this information? Let’s say I have a 60-litre tank that is half full, and that I learn that gas prices will rise by 1 cent overnight. Should I spend 40 cents in gas to drive to the station and back to fill up a half a tank, thus saving 30 cents over tomorrow’s prices? What if the price falls by 2 cents the next day and I missed a further 30 cent savings?

If the conventional ideas don’t help much, how do you actually save on commute costs? One obvious one is public transit, where that falls along your route. Let’s look at some other ideas that can be implemented right away that can save no matter where you live and work.

Look more closely at parking costs

A great place to start is with parking. If you don’t have paid parking, take some time to shop around for parking in your area. Over lunch, look at prices of nearby lots. Check online for parking rates in the area of your work. The Best Parking site is a great place to start. See if nearby apartments or condos have space for rent. Adding a 200-metre walk at the end of your commute can add some needed exercise to your day – bonus. If you are paying weekly, see if you can switch to monthly. Saving even $5 on parking daily is worth over $100 monthly!

The best commute is no commute, or at least fewer of them

Have a chat with your manager – can you work from home one day a week? Set commitments of what needs to be done and show how you can achieve them as well or better from home. With an average Canadian commute of 26 minutes, you can free up an extra hour of work time. This approach saves 20% of commute costs including parking, gas, car maintenance and road tolls. At even $5 per trip for gas and $20 for parking, this change is easily worth another $100 monthly.

Save half of your commute costs while greening the planet

Can you carpool with friends or coworkers? Carpooling isn’t new, but it still works and can cut the cost of commuting by half or more. Let neighbours and coworkers know that you are interested in ride sharing. Waze’s carpooling app isn’t yet in Canada but stay tuned for new high-tech ways of finding a ride. Between parking, toll roads, gas and maintenance, splitting the costs can save an easy $150 monthly and help green the planet. With 2 in the car, you can take advantage of HOV lanes and speed the commute.

Keep commuting, just without the car

If your office is less than 10 km from home, what about biking to work? Even for a day or two a week? See if your building or an adjacent one has showers. Or at least a washroom where you can do a quick wash up. Bring a pack with a change of clothes and a compact camping towel from MEC. A bit of logistics, but great exercise, reduced commute costs and maybe a chance to drop your gym membership. Check online for bike lane locations. Two Wheel Gear has a site with lots of resources and products. At 2 days a week, this can save $10 weekly in gas and $40 in parking. Total monthly savings can run $200 just on those 2 factors. Bonus, your work day starts with a fresh head brimming with oxygenated blood.

Save on your commute and add $50,000 of wealth

Somewhere in these ideas is a new approach to your commute and a chance to save at least $100 monthly. Use the savings to pay down debt or invest it to add over $50,000 to your net worth over the next 20 years when invested at 7%.

Spend more time reading, staying fit, enjoying family time and taking in art and music. Less time chasing gas prices.

What did I miss? Do you have more ideas on reducing commute costs? Let me know in the comments.

For more ideas on real ways to save on your expenses to build wealth or reduce debt, check out Cashflow Cookbook.