2 Concepts That Changed Me

Nov 07, 2011 Comments Off by
Here are 2 concepts that have changed the way I see my investment future.
1. Live below your means
I learned this idea from my uncle who is a wise conservative investor. It doesn’t matter how much I make, whether it is $40 000 or $250 000 per year, I still need to live below my means. It is easy to fall into the lifestyle inflation trap where I can easily spend more than I make. Buying a new luxury car, new clothes, personal care, a big house and all the nice stuff that needs to fill it would make me go over my means. I settle for a lot less but this is a constant battle that I will live with for the rest of my life.
2. You can either bet FOR or AGAINST the economy
This concept I also learned from my uncle.
Betting FOR the economy
I buy real estate because I think the economy is going to grow in the long term and that we are going to continue to have inflation. I think that Asia is going to be the next significant economical powerhouse that the US has been over the last 30 years. I bet that the Canadian and US stock market is going to continue to grow over my lifetime.
Betting AGAINST the economy
I’ve been exposed to much survivalist and dooms day ideals. One common thread is the idea of buying gold and silver in the form of the real metals or buying precious metal mine stocks. Many people have told me not to buy real estate in the last 5 years because they believed the real estate market was going to crash further, look who’s laughing now (me). When would you want to bet against the economy? I would bet against the economy only when we are at a peak. Again, the markets are difficult to time.
My aunt Betta bets against the economy. She believes that the US is going to fail by going bankrupt or that the world economy is going to go in chaos as it reaches peak oil. She has bought precious metal stocks in preparation for these events. Is this possible? There is a slight chance that this can happen but I’m not placing any bets on it.
What Betta doesn’t get is that she has a 100% plan for the economy to fail but has a 0% plan for what she will do if the economy continues to grow in the long term.
Timing
It’s important to have a plan to determine if you are placing your bets in the short term or long term. If you have place your bets against the economy, then it’s important to sell your precious metal investments while the economy is down. Since I bet for the economy, I am buying as much real estate as possible during the first half of the economic cycle.
Frugality, Goldeneer's Story, Strategy

About the author

Clara Cannes, the chief author from Goldeneer is a Canadian that works as a full time employee in the engineering field. Her passion is real estate, entrepreneurship and sustainability. Clara has finally reached financial independence in her late 20's and is on the path to a comfortable retirement by 35.
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