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Wealth Building Strategies

How To Trust Your Gut Instinct

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Posted by Eamonn Percy - The Percy Group

on Tuesday, 15 December 2015 15:11

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“I am not a product of my circumstances. I am a product of my decisions.”
-Stephen Covey
 
Decision making is rarely a rational exercise.  We hardly ever have the complete information available to us.  It is usually irrational, with an overlay of rationality to give us inner comfort and at least a sense of order to calm our troubled mind!.

As you accumulate experience over time, you learn to depend less on the objective side of decision-making and more on the intuitive side, until it becomes a habit.  

In a difficult decision making environment, it may be hard to discern between emotion and intuition.  I believe intuition is drawn from the accumulation of previous similar experiences that enable us to recall lessons or extrapolate results in a way that gives us additional guidance.  Whereas, emotional decisions are based on human nature and undisciplined forces, that trigger negative behaviors.  With personal experience, the difference between the two will become more clear to you.
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Trusting our gut does not come easily since we are often overwhelmed by human nature (for example, fight or flight response) or become frozen by indecision (fear). In addition, we may use confirmation basis to seek out more information to justify the decision, rather than trusting our own experiences and gut.

It is not something that comes to us easily, as we need evidence that our intuition will help us through trial and error, so, with time, we determine after the fact whether or not it worked. We use this feedback to improve our intuition once again.

Don’t be hard on yourself if you have not really developed a high level of intuitive decision making yet. Just be mindful of it over time, develop confidence in your inner strong voice as you trust it to help you make decisions.

How do you go about doing that practically? Do the following:



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Wealth Building Strategies

Financial Advice for My New Son

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Posted by The Motley Fool

on Sunday, 13 December 2015 09:53

Screen Shot 2015-12-13 at 8.53.55 AMYou'll care about this one day.

My wife and I welcomed a son into the world on Sunday. It's the coolest experience anyone could ask for. 

His only interest right now is keeping us awake 24/7. But one day -- a long time from now -- he'll need to learn something about finance. When he does, here's my advice. 

1. You might think you want an expensive car, a fancy watch, and a huge house.But I'm telling you, you don't. What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does -- especially from the people you want to respect and admire you.

When you see someone driving a nice car, you probably don't think, "Wow, that person is cool." Instead, you think, "Wow, if I had that car people would think I'm cool." Do you see the irony? No one cares about the guy in the car. Have fun; buy some nice stuff. But realize that what people are really after is respect, and humility will ultimately gain you more of it than vanity.

2. It's normal to assume that all financial success and failure is earned. It mostly is, but only up to a point -- and a lower point than many think......read more HERE



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Wealth Building Strategies

Negative Interest Rate Policy (NIRP) and How to Shock Proof Your Business

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Posted by Eamonn Percy - The Percy Group

on Wednesday, 09 December 2015 08:24

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“Life is 10% what happens to me and 90% of how I react to it."
– Charles Swindoll
 
Earlier today, Mr Stephen Poloz, Governor of The Bank of Canada, announced a series of unconventional policy tools which may be deployed during an economic crisis.  Among these, was a policy decision to set a new benchmark low interest rate to minus 0.5 percent, below the previous floor of 0.25 percent.  Yes, you read that correctly, negative interest rates.  

By adopting a Negative Interest Rate Policy, the Bank of Canada is at least signaling its own preparedness for an economic crisis or a period of sustained deflation.  Given the sluggish Annual Growth Rates of advanced economies in 2015 (2.1 % versus 4.2% for Emerging Economies according to the IMF) and the continued decline in the Canadian Resource, Energy and Oil Sectors (WTI at $37.51 USD today), it is probably just prudent planning for a worst case scenario.

However, if preparedness is good enough for The Bank of Canada, isn't good enough for you and your business? 

If so, here is what I recommended in a September, 2014 article in the Globe and Mail - Report on Business.  I believe the course of action outline below, combined with building a strong cash position, focusing on sales expansion and leveraging the relationships with your current customers, will separate the winners from the losers in the turbulent period ahead. 
 
When business cycles change, it may not be the end of the world as we know it, but it certainly feels like it



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Wealth Building Strategies

What Are ETFs and Why Are They So Popular

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Posted by Paul Philip

on Monday, 07 December 2015 14:27

etf1Many people confuse Index Funds with ETFs. They are not the same thing at all. And ETFs are definitely not a one size fits all solution. At the end of the day, ETFs can still be actively managed - which has inherent risks and costs associated... CLICK HERE to watch the complete video

The Evidence-Based Investor Video series is a service provided by Paul Philip and the team at Financial Wealth Builders Securities



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Wealth Building Strategies

Market Buzz - Lessons on Value Investing from the World’s Greatest Success Story

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Posted by Ryan Irvine - KeyStone Financial

on Friday, 04 December 2015 23:11

If you have been in the investing world for any period of time you are undoubtedly familiar with the man who many label as the greatest investor of all time – Warren Buffett. For those who require a little background, Warren Buffett is the self-made billionaire who built an empire through an unwavering focus on the simplest tenets of value investing. For nearly 50 years, Warren Buffett has earned prominence as the genius behind Berkshire Hathaway and has generated its investors a staggering average compound rate of return of 21.6% per year (1965 – 2014), compared to the S&P 500 which has produced an average return of 9.9% over that period (less than half of Buffett’s return).

Many detractors to Buffet’s value-investment style claim that his success cannot be replicated by individual investors. Often cited is Buffet’s solid reputation as a capital allocator and the deep investigative resources of his investment company Berkshire Hathaway. Undoubtedly Warren Buffet is a genius and we would not expect that any but the most gifted individuals would ever be able to replicate his success in its entirety. Nevertheless we can easily dispel the myth that reputation and resources were the ingredients to his success. Going back to 1956, before Buffet was a world famous billionaire (or millionaire for that matter), he was a relatively unknown man who operating his first investment partnerships out of an office in his bedroom. The limited partnerships were started with his own capital and a few some contributions from family and friends. He had no world renowned reputation, no staff of highly-skilled MBAs, and no special resources outside of himself. Buffet recognized the most basic and useful facets of valuing investing and applied the concepts to generate great success. Throughout the years he has participated in numerous interviews and writes a letter to his shareholders on an annual basis. Through these small snippets of information the general public has been able to gain some insight into how Buffet views the investing world. The following are a couple of his most well read quotes with a little insight into how anyone can use them to better far more intelligent investors. 

“Price is what you pay. Value is what you get.”

Separating value from price is the most fundamental tenet of Buffet’s investment strategy. Pretty much everybody has a basic understanding of what the word “value” means but unfortunately this is rarely applied to investment decisions. There is a saying that most investors spend more time researching the purchase of their television set than they do their investments. This is largely due to a lack of knowledge and valuation skills which is why many investors rely on stock price movements as a signal of investment quality. When Buffet starts researching a stock he says he intentionally will not look at the market price. Instead he starts with valuing the underlying business as if it were a private company. He looks at the cash flow...he determines whether or not the business model is sustainable and if the earnings are being inflated by too much leverage (debt). Buffet then determines what we would pay for the actual company without any consideration for the fact that it is publicly-listed. If after making this determination the current stock price is significantly below his measurement of intrinsic value then he may move forward and make his purchase.

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

Don’t worry...nobody is planning on closing the market for the next five years. What Buffet is saying is that he doesn’t buy a stock with the intention of following the short-term market fluctuations and selling in and out on whims. When Buffet buys a stock, he is buying an ownership interest in an underlying company. This is largely the reason that Buffet is so successful. Rather than wasting his energy following day-to-day market oscillations (as many investors do), he focuses on the business that he has acquired and gauges success based on sustainable generation and growth of the underlying cash flow. Many businesses generate returns for their shareholders through the distribution of cash flow in the form of dividends. A successful company will also be able to grow their dividends over time. Eventually success is recognized in the markets. Although it can take time for value to be realized, there are very few examples of companies that produce strong and growing cash flow over time without either this eventually being recognized in the share price or by an independent buyer looking to acquire the company.

images“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

We are often asked by clients whether or not we utilize a timing strategy to move in and out of the markets with changes in the business cycle. Although market timing may appear to be a sound investment strategy, in practice, the results investors generate are far from astonishing. “Hindsight is 20-20, while foresight is legally blind”. The truth is that there are no



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