Blog

The Best Returns in Very Little Time

Top-earning Wall Street/Bay Street bankers make in a week what the average dentist earns in three years. Yes, “in a week” versus “in three years”—this is not a misprint or a typo.

 

Furthermore, investment bankers budget millions for fines related to their misbehavior, much like you and I budget for groceries, rent, or holidays. But how do they misbehave? They engage in market manipulation, insider trading, providing misleading information about securities, omitting crucial information about securities, stealing customers’ funds or securities, and other activities that harm investors if left undiscovered.

 

Who pays for these outrageous incomes and exorbitant fines? Look in the mirror. It could be you.

 

But does it have to be you? Can you avoid being on the hook? Can you make money in the stock market? Over the long run, about 90% of retail investors lose money.

 

An exchange-traded fund (ETF) that tracks the U.S. economy has been the best investment for over 100 years. While individual investments might occasionally outperform, nothing generally surpasses the U.S. economy. Yet, about 90% of retail investors still lose money.

 

So, what does an investor need to do to match the U.S. economy’s performance? There are six key principles to follow:

 

  1. Save: Without saving, the other five principles are meaningless.

 

  1. Be a do-it-yourself investor: It’s easier than most people think.

 

  1. Invest in the U.S. economy through an ETF: SPY is the top choice. Avoid individual stock picking.

 

  1. Buy and hold: Warren Buffett’s favorite holding period is forever. Avoid trading. The average holding period for a U.S. stock is now just ten months, contributing to why 90% of investors lose money.

 

  1. Asset allocation: Maintain about 50% in the market and 50% in cash or near-cash (like guaranteed investment certificates in Canada or Treasury bills in the U.S.). Ratios like 60/40 or 45/55 are also acceptable. The exact ratio is less important than having ample cash. When market movements disrupt your asset allocation, rebalance to your chosen ratio. Rebalancing accounts for the largest share of portfolio returns. Security selection and market timing do not materially contribute to returns, another reason why 90% of investors lose money.

 

  1. Avoid complexity: If you can’t explain an investment to a 10-year-old, don’t invest in it.

 

These six principles constitute rules-based investing, which is consistently effective. The alternative, judgment-based investing, is wrong at least half the time.

 

Would you drive knowing there is a 50% chance of an accident? If not, avoid buying individual stocks and timing the market.

 

Investing following these six rules requires very little time. “The best returns” and “very little time”—who needs more?

Modern Investing, March 13, 2024

Greetings, everyone,

You will enjoy the presentation which follows. 

https://www.youtube.com/watch?v=wVNfFDEFWNY

The presentation is about 40 minutes long, and you could learn something valuable from watching it.

Contact me if you have questions.

I send my best personal regards,

Milan 😃

Put/call ratio? Inverted yield curve?

The put/call ratio for the U.S. market is negative for several weeks. Interpreting this ratio correctly can be complicated.

To review, a put option gives an investor the right to sell an asset at a preset price called the strike price. If the asset drops below the strike price, the investor makes money.

A call option gives an investor the right to buy an asset at a preset price called the strike price. If the asset rises above the strike price, the investor makes money.

If investors are buying more puts than calls, it indicates a bear market.

If they are buying more calls than puts, it indicates a bull market.

Unlike the put/call ratio, which can be difficult to interpret, an inverted yield curve always accurately forecasts recessions. We should watch for an inverted yield curve; the market could drop into bargain-buying territory.

How Canadian Investors Can Earn More Money.

Yesterday, I met with our federal government member, Terry Dowdall MP, to encourage legislation allowing Canadian investors to sell cash-secured puts in their tax-advantaged (registered) accounts. You can see my reasoning below.

How Canadian Investors Can Earn More Money.

How the Canadian Government Can Collect More Taxes.

Most Canadians have one or more registered [tax-advantaged] accounts. They can enhance the income in these accounts by using derivatives. They can write (sell) covered calls on any securities they have in these accounts. Further, they can earn more money by writing (selling) cash-secured puts on these securities. However, they are not allowed to do so in tax-advantaged accounts in Canada.

American investors are allowed to do so in their tax-advantaged accounts.

History shows that securities held in tax-advantaged accounts in an appropriate asset allocation over the long term have been the investor’s best way to grow savings. They will likely remain so for many years if investors use derivatives correctly.

What is an appropriate asset allocation? How can investors best use derivatives?

An appropriate asset allocation can be 50/50 (50% in securities and 50% in cash or near-cash, such as money markets). 60/40, 55/45, and similar allocations also work.

Asset allocation accounts for the largest share of portfolio returns.

It is essential to have a high percentage of a portfolio in cash or near-cash and return to that allocation whenever market movement changes it.

How can investors best use derivatives?

Canadian investors can best use derivatives to increase their returns even more if allowed to write (sell) cash-covered puts. The federal government would collect more taxes when investors withdraw money from these accounts.

The federal government should consider the benefits of allowing investors to write (sell) cash-covered puts in registered accounts.

It is an excellent example of a win/win case.

Modern Investing, March 6, 2024

Greetings, everyone,

You will enjoy the presentation which follows. 

https://www.youtube.com/watch?v=i3-XxALqzo4

The presentation is about 30 minutes long, and you could learn something valuable from watching it.

Contact me if you have questions.

I send my best personal regards,

Milan 😃

About to sell your practice? Careful

 

 

By Leah Nylen

When private equity firms buy out health-care facilities only to slash staffing and cut quality, patients lose out,” said FTC Chair Lina Khan. “Through this inquiry the FTC will continue scrutinizing private equity roll-ups, strip-and-flip tactics, and other financial plays that can enrich executives but leave the American (and Canadian) public worse off.”

If you are concerned, call Timothy Brown, CEO of ROI Corp. 416-520-7420

Is Big Corporate the Best Option?

 

 

We live in a time of rapid change and dislocation that rivals any period in recent history. Anarchists right and left want to dismantle something that has proven to work—flaws and all. The U.S. is in a state of flux politically with sweeping implications. The pandemic has wreaked havoc globally. Big Tech companies provide many platforms where people can publish both their best and worst thoughts and actions—AND allows for the promotion or demotion of a current demagogue seemingly at will. Businesses have been dismantled, diminished and destroyed by events beyond their control. Big and corporate for some of us means better and necessary while others lament over what happens to small, local brokers and entrepreneurs with long standing, often family-based, individualized values. What is fair for the individual health care practitioner who wishes to continue the tradition established by sole practitioners over many years of personalized care centering on the aforementioned individualized service and care model? Many professionals do not want to go the “corporate” route and watch their creation absorbed by a larger entity that pays no homage to tradition and the value of passing the torch to a like-minded “pro” who may take care and service to a higher-level building on the sweat equity of the former doctor. This does and can happen. Many economic gurus are now challenging the wisdom of never-ending growth as a measure of success. We all know that bigger is not always better—that many things get lost in this process. Practitioners accept that there is a time when “enough is enough”. A time to “stick to your knitting” and perfect what you do best and measure success not just in the financial rewards but also in the smiles and gratitude of your clients/patients. This means that your goals shift from money to medical competency and increased health care achievement—something you set out to achieve all those years ago in the midst and miracle of your training to do so. There is an alternative to the corporatization of health care providers and suppliers. History has proven this and will continue to do so.

Written By: James Ruddy

James Ruddy can be reached at jruddy1245@gmail.com

 

 

Modern Investing, February 21, 2024

Greetings, everyone,

You will enjoy the presentation which follows. 

https://www.youtube.com/watch?v=cmUcncBiS-w

The presentation is about 30 minutes long, and you could learn something valuable from watching it.

We will not have a presentation the following week (Feb. 28). Our next presentation will be on Wednesday, Mar. 6. 

Contact me if you have questions.

I send my best personal regards,

Milan 😃

Modern Investing, February 7, 2024

Greetings, everyone,

You will enjoy the presentation which follows. The first few minutes are rough and not as smooth as they should be. Ignore that and follow:

https://www.youtube.com/watch?v=cmUcncBiS-w

The presentation is about 40 minute long and it is quite likely that you could learn something useful from watching it.

Contact me if you have questions.

I send my best personal regards,

Milan 😃