Here we go again. The resolution continues. How many of you are still thinking of your New Years’ Resolution? Are you tracking your progress? How are you doing so far?
As my readers know, my New Years Resolution is to spend no more than $1250 CAD per month during 2018, or $15,000 for the year. In January and February combined, I ran up a bit of a budget deficit, and going into March was about $900 behind on my goal already.
I was much closer to my budget this month, having reduced my spending from February. Considering that my time spent in Mexico in March was a little more expensive than usual, and that I had to replace some of the underwear and T-shirts the folks at the Laundromat seem to have been misplacing*, I’m still quite satisfied with my performance and still on track for the year to spend less than ever and save more than ever. After all, March was my best month of the year so far.
That said, I have added to the deficit. I spent $1,500.94, $250 more than my goal. My daily average cost in March was $48.42, and my grand average for the year is $55.38 so far, with a new total deficit of $1,203 . Although it was my least expensive month of the year, with its added deficit, I am now on track to have a annual deficit, albeit small ($37). Hopefully I can make that up somewhere between here and there rather than add to it, and finish in the green, although if I finish the year having spent $15037, I will of course consider it a resounding success.
Also, for anyone holding equities, the last few months have been less thrilling. In fact they have probably been more painful than pretty much anytime since 2009. I suspect that, like me, many of us out there haven’t been through a downturn like that yet, and have now received a small taste of what it might be like.
I have only been directly investing in equities for the last few months**. In that short time, I have seen the peak of the Marijuana market’s speculation bubble followed by some of the worst days/weeks/months and, just since today, fiscal quarters in years. I have erased almost all of my windfall gains from December, but I have learned a heck of a lot in such a short period of time and am happy with my current positions and my strategy and resolve for my future of investing.
Don’t count your chickens before they hatch. The reason you should assume a modest return like 7% in your retirement planning, is because there WILL BE downturns. Which means there will be entire YEARS or more where your account is bleeding, and you have to sit pat or even invest more to maintain the desired asset mix in your portfolio. Unless you plan to spend your lifetime trying (and failing) to time the market, you have to be prepared to live with that. It’s easy during the good times to start to look forward, using current return rates to calculate returns into perpetuity, and laughing all the way to the bank about how easy it is to get rich. But that’s now how it works. The best thing to do is to check in monthly or quarterly to make sure your desired asset mix is in tact, and nothing else.
Although the advice “don’t buy individual stocks” is hardly novel at this point, most people still do. And in any case, it is more of a note-to-self than anything at this moment. Most stocks don’t exist just a few years after their inception. Decide on your Equities:Fixed Income (i.e. stocks:bonds) ratio, diversify your risk, stop checking your Stocks App every hour, and hold on for the long term without wasting your time, energy and mental capacity trying to follow every single move in the market and associated onslaught of opinions associated with them.***
No matter how strong of a stomach you think you have, the most tempting time to buy is when the market is at it’s highest while the most tempting time to sell is when the market hits rock bottom. Over time, this is what will play out on average, even for the most strong-willed person with a ton of trading experience and financial ‘expertise’.
In fact, I was checking just today actually, and found that the Emerging Markets ETF that I hold (IEMG), includes about 500 companies from all over the world, with no single company making up more than 4% of the fund.
How much easier does it get to diversify than to buy funds like that, with a high diversity and a low cost?
Be smart, find your thing, and do it while you enact your money plan and ignore the noise. Before long you’ll be in a position to live your life on your terms, where the biggest concern will be deciding what you will do now.
*Noone said preparing for early retirement was going to be particularly exciting or sexy. Yes, t-shirts and underwear are all part of the equation, unless your mom still gets you some every Christmas still.
**i.e. buying Stocks and ETFs using Questrade. I have been using Wealthsimple for some time before that although they do the purchasing after you deposit your money.
***Again, noone said preparing for early retirement was going to be particularly exciting or sexy. Putting your money away in diversified ETFs with a logical asset mix and continuing to add to it regularly while trying to ignore its existence as much as possible is the scientifically proven way to maximize your likelihood of maximal returns on your investment.