Guidelines for Prosperity

Problems, threats and looming disasters have a lot of truth to them, but are seldom absolute or certain. Investors are too often over-powered by fear, typically resorting to poor or weak investing action and strategy. Weak investment strategy adds more exposure and vulnerability.

A weather report for North America would not be very useful when you’re living in Metro Vancouver. Neither are macro reports on economies or real estate. While they do have some value, context and specifics matters a lot, especially when you invest in real estate.

While cash and income is important, they are often excessively pursued. An excessive pursuit leads to a systemic weakening of your portfolio. Income investments are unlikely to sufficiently strengthen your portfolio against inevitable setbacks of life. They do not protect against the rapidly increasing cost of living. These costs are not well represented in official inflation reports.
It is easier to create income with wealth than it is to create wealth with income.

Money loses value faster than we realize, mainly due to monetary policies and inflation. Inflation’s devastating effects are generally under-reported. It is difficult to anticipate long term future inflation, other than reverting to simple averages. Inflation is cyclical and uneven.
96% of high net worth individuals underestimate how much money they need for a comfortable retirement

Just because you can do something doesn’t mean you should. Risk is largely a statistic, and the numbers don’t lie.

Often an investor will say: “I made so much doing this”. It is meant to relay significant success, but seldom reflects the risk that was taken. Sometimes it is like saying, “I stood on the highway with my eyes closed for 1 minute and nobody hit me”. Taking on risk is not right or wrong, as long as you understand and accepting the potential consequences.

High risk is often taken with a very small percentage of an investor’s portfolio. We don’t play that game. We are very risk averse. We strategically reduce risk, making it easier to confidently invest larger amounts safely.

Good risk assessment can be very hard, especially when the business plan has a higher degree of operational complexity. Operators should be confident about their risk measures, but they often lose objectivity. Base jumping is considered to be one of the highest risk activities humans undertake. A base jumper might be an expert in his risk mitigation measures. However, his expertise does not remove the fundamental risks involved.

Investors generally rely heavily on the person selling the investment to assess the risk. When confusing, large complex entities or markets are involved investors often over-diversify, which reduces performance.

Overconfidence and a herd mentality are some of the biggest drivers that lead to poor decision-making. When new reports suggest growth in a market, quick money rushes in. It appears as if everybody is going to win. Many do, but cycles are certain to return. Without resilient underlying value the risk of disruption can be painful.

Diversification that are wild and with a shallow understanding will destroy returns. Diversification makes sense when done thoughtfully, and is best practiced after specialization.

Investors often have strategic blindspots. Some examples include:

Short-view over long-view. Being overly focused on the short-term outcome can harm long-term financial strength.

Quality Of Life Sacrificed. Investing, even passive investments often demands more time and stress than what was anticipated. Not all time is equal. Stressful time is much more expensive than peaceful time.

The rule of thumb says “low risk = low returns, and high risk = high returns”.
Can this rule be broken? We believe this rule can be broken with principles of specialization and strength creation.
Our aggressive risk reduction strategy coupled with growing slow certain strength produces high investment value.

Speculative money is moving faster than ever before. This creates quick over-valuations and raises overall risk. It is especially true for liquid investments like stocks or short-term strategies that lack strong fundamentals.
There are certain opportunities in times of fear and chaos, but how can these opportunities be identified and pursued? Just because you can get a steep discount does not mean you should take it. Many investors have purchased highly discounted assets only to realize a potential crushing financial burden many years later.

How do we approach emotional markets, sometimes being in the extremes of fear & greed. Cognitive biases like confirmation bias, herd mentality, and loss aversion can distort investment judgments.

The sheer volume of information can be overwhelming. With AI we have quicker volumes of impressive information available. However, more information can easily increase confusion or fear, and reduce our ability to make sound decisions. Media loves attention and emotions, always competing to draw us in.

The wisdom is to reduce investment risk by investing in what you thoroughly comprehend. It may be a tall order in most cases.