Key Ideas for Wealth Building Success

January 2023

From listening to the media and online commentators, we have identified two key observations that can impact your efforts to build assets and wealth over time.

The first is the way many individual investors place one-way bets on their market investments. As long as the investment is making money, all is good. But the minute the investment sinks for a couple of days or goes negative (relative to their starting capital), they quickly sell.

As famed investor, Warren Buffet says, in the short term the investment markets are voting machines and in the long term they are counting machines - for your wealth. In other words, being too emotional and impatient in the short term may cost you returns and wealth-building opportunities in the long run. Buffet says the real rewards come over longer periods of time by investing in quality companies where profit growth inevitably leads to wealth growth of investors who own these companies via mutual funds or segregated funds.

The second observation is that many individual investors tend to expect that economic news is absorbed by economy and investment markets relatively quickly. These investors expect that new information is "priced" into markets almost instantly.

The challenge with this second observation is the "transmission effects" that determine the time it takes for economic changes to be felt at the household level. For example, when interest rates rise quickly over a short period of time, the impact is usually not broadly felt amongst the populace for up to two years. It can take time for higher interest rates to impact consumer debt or mortgages and the economy in general. One observer noted that - using 5 year term mortgages as an approximation - about 20% of mortgages in Canada renew annually, therefore the impact of the rising interest rates will likely have a ripple effect over several years.

During times of economic uncertainty, our advice is to stay focused on the long term as the economy absorb news or changes. The basics rules of investing remain the same and will seldom change as quickly as market conditions change.

The other chatter in financial news is about how quickly things will return to a pre-Covid "normal". There are several factors to consider when contemplating these ideas:

  1. Rising inflation and rising interest rates are likely to affect overall economic activities for at least several more years. Governments globally are likely to create more money to meet budgetary and debt servicing needs. Since the start of the Covid crisis, the US alone issued the equivalent of about 40% of all the US government debt accumulated from 1776 to the present.1
  2. The USD dollar is increasingly being replaced as the primary global trade settlement instrument. The recent rise of the BRICs currency regime is foreshadowing the likely continued decline of the US dollar as "King" of the global trade system. This new trading bloc is using other global currencies, such as the Chinese Yuan, and gold, to settle trade amongst their members.
  3. Globalism - as an economic operating model - is increasingly being replaced by trade groups and blocs. This long-term shift will likely impact trade flows and the cost of goods for a decade or more. For example, the US is moving to "re-shore" some of their manufacturing capabilities - such as producing basic medicines and the mining of rare earth minerals - to replace Chinese facilities and supplies.
  4. Governments are also increasingly playing a larger role in their economies. Government GDP activity (as a share of overall economic activity) is increasing just about everywhere. The Canadian federal government accounts for about 40% of economic activity, and also for the largest proportion of new jobs created since the Covid Pandemic. In England, the number is about 54%, France about 65% and the US is closing in on 40%. This rise in Statism - and the belief that Governments can solve all of society's challenges - is leading to an increasingly centralized command and control approach by governments around the globe.

For all these above reasons, in the years ahead it will be even more important to have a carefully planned strategy for building and maintaining wealth.

Call us today for a review of your financial strategy to ensure that your assets are properly positioned for today's economic realities.

1 US National Debt Tops 30 Trillion

Copyright © 2023 AdvisorNet Communications Inc., under license from W.F.I. All rights reserved. This article is provided for informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice. It is strongly recommended that the reader seek qualified professional advice before making any financial decisions based on anything discussed in this article. This article is not to be copied or republished in any format for any reason without the written permission of the AdvisorNet Communications. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission.

What our clients are saying...

  • I was looking for a financial planner who could provide clarity and show me the best possible way to structure and plan for my retirement. Anthony’s expertise was clearly evident. He is professional, punctual, and answered all my questions and concerns. I would definitely recommend Anthony to my family and friends.

  • We expect a Financial planner to be thorough, detailed and have a strong understanding of their clients' needs. It was a pleasure working with Anthony and his team. He delivered a tremendous package and reviewed his findings in great detail. Anthony's attention to detail, solutions, recommendations and in-depth reports provides a great deal of confidence in his recommendations. We would absolutely refer our family, friends and associates to Anthony.

  • I expect my financial planner to review and discuss my financial goals along with how my goals can be achieved. I valued Anthony reviewing my investments and the projections of what they will equate to when I reach my eventual retirement. Anthony has certainly met my expectations and I would be happy to refer my family and friends.

  • My expectation was to be provided with the best possible advice specific to my situation (as it evolves) and to be provided with objective, evidence-based solutions which will provide me with the maximum financial benefit (and peace of mind). I valued the very thorough process of gathering all pertinent information regarding my estate, pension, income and expenses in order to produce a very detailed and fulsome projection of my current and future financial situation. I really appreciate the time Anthony has taken to answer all of my questions and provide sound advice based on my goals and concerns. I am really looking forward to continuing my investment and financial planning journey with Anthony. I would certainly recommend Anthony to my family and friends!

  • We valued receiving a detailed report and explanation of our finances. When working with a financial planner, we expect to have our questions answered with adequate detail and to have a plan developed to help grow our money. Our expectations were clearly met and we would be happy to recommend Anthony to anyone looking for a Financial Plan.

  • We valued the fact that you sat down with us, heard what we wanted to say, asked for clarification and offered suggestions, and then came up with a detailed and well-reasoned plan in a short period of time and communicated that back to us so that we knew what we needed to do moving forward. Thanks!

    Our expectations for a financial planner are several fold: (1) Does the planner communicate well, in that they both listen but also offer suggestions and ideas in a clear easy-to-understand way, (2) Are they able to meet their client at the same energy/level and meet their specific needs? In our case we needed a tax minimization strategy within a short turn around time. (3) Did the planner actually do their job, in that were they able to provide ideas and suggestions that helped address the client's asks?

    We came to see you because we realised that we hadn't looked at how to minimize the taxes related to my Father’s estate planning and my mother’s future financial planning, and you were able to tell us things that we didn't know about, and offered us solutions that helped us with our future financial planning.

    You definitely met our expectations! In some ways, you actually exceeded our expectations. We were hoping that you could respond quickly, and you came up with a detailed and well-reasoned plan faster than we expected!

    Our only area of improvement we could think of was, given that the plan was very detailed, if we had an explicitly spelled out action plan with a timeline for completion.

    We are very happy and would definitely recommend you to our family and friends and in fact have already done so!