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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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Wealth Building Strategies

Forget Multi-tasking - Focus!

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Posted by Eamonn Percy - The Percy Group

on Tuesday, 01 December 2015 15:42

“Concentrate all your efforts up the work at hand. The sun’s rays do not burn through until brought into focus.” 
– Alexander Graham Bell
 
AAEAAQAAAAAAAAR8AAAAJDE4OGU2YzA5LTNmZWUtNDViZi04M2ZkLWJiN2M3ZjlmNjljYgWe are inundated by tasks throughout the day. These tasks are big and small, important and non-important, urgent and non-urgent. Some are our own priorities; many are the priorities of others. We can easily become overwhelmed by these tasks and risk becoming ineffective or stressed, and making mistakes. Many of these tasks contribute very little towards our achievement of big goals.

We naturally default to a system of managing multiple tasks, based on our past experience, and we often do not stop to reflect whether or not our multi-tasking is effective. We tend to believe that multi-tasking is a good thing because we often confuse being busy with being effective. Multi-tasking gives the impression of momentum and activity, which can feed our need for accomplishment.

The digital distraction environment has made this phenomenon more pronounced. Between email, phone calls and other forms of communications, it becomes almost impossible to focus on a single task for more than a few minutes during a normal workday without closing the door, turning off the phone and disconnecting the computer.

I am here to break the news to you that you are likely much less effective multi-tasker than you think. A number of recent neuroscience



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Wealth Building Strategies

Why don't we care what our investment costs are?

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Posted by Sensible Investing TV

on Tuesday, 01 December 2015 11:50

The 2nd part of the incredible behind the scenes look at the multi- billion dollar investment industry. The stories fund managers world-wide would rather you didn't see!

 

time for a change“If you are serious about investing and building wealth the video documentary series ‘How To Win The Losers Game” is a must see. It’s excellent. 

After watching the video if you want to learn more about better low-cost, long-term, low-maintenance, diversified investment strategies, download our free guide “12 Essential Ideas For Building Wealth” by clicking on the banner at the top of this page.

Paul Philip, Financial Wealth Builders Securities

 



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