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Investing 101 - Risk, Real Estate & Diversity

"As we drive along this road called life, occasionally a gal will find herself a little lost. And when that happens, I guess she has to let go of the coulda, shoulda, woulda, buckle up and just keep going." Carrie Bradshaw

I’m liking her style, let’s climb on board, ‘cause you’re here for the long run! Just like long term investing. You can’t look back at what you shoulda, coulda, woulda, done differently (If you knew then what you know now philosophy). Investing is all about the future. If you think climate change is the number one issue you face and that gets you all hyped – think of your future with no money. How much hype are you going to have when the government is pilfering your pockets then! I am still waiting for the ledgers of where the climate $$$ flows to – no one seems to know – are you also curious?

Studies have shown that investors who hold onto the same stocks for more than 10 years, will be rewarded with higher returns and shorter-term risks. But understand the risk factor never leaves the stage, the spot light is continually on it. It may dim at times and hopefully with age it will mellow. Risk is always in your shadow! On my website, I have a chart, referred to as “The Quilt as per quick reference below that beautifully illustrates the importance of diversifying to meet the challenges of stock fluctuations. Portfolio diversity is a must. It mitigates risk! Over the long term and with the certain strategies you will be the turtle who slam-dunks the hare.

The Quilt - Risk vs Reward - The importance of Diversity


Stage I

1. eliminate credit card debt or initiate a solid program and stick to it.

2. we have now secured a contingency fund for emergencies

3. set up a system to invest your spare change

4. establish a budget you can live with

5. control lifestyle creep

6. turn off the noise of friends and relatives as they expound the next best stock of a life-time

7. focus and buckle up

Stage 2

Investing for the long term!

This takes into consideration your time line horizon. The younger you are the more time you have to grow your portfolio. Nothing surprising in that comment! Here we get to choose investments that are mixed, diversified and are typically more volatile, which is why diversity in investing is a must.

Buffett – the Omaha oracle wrote:

“The goal of the non-professionals should be to not pick winners neither he nor his ‘helpers’ can do that, but should rather be to own a cross section of businesses that in aggregate are bound to do well.”

Stocks are bought from people who are selling. You may think you are smart to purchase a stock at a specific price but the seller also thinks they are smart to unload. Equally, you both have access to the same information. So, who’s right?

If you read carefully what we have said, you will have grabbed onto the number one rule to investing. Diversify: investing in different types of investments / asset classes. Like bonds, real estate, stocks, fixed incomes etc. Again, spread your risk! Look back at “The Quilt” and see if you can guess what will be the next profitable asset class for next year!!! Conciliation: Buffett doesn’t know either.

Think back to 2000 when tech was hot, until it was not! Many investors put everything into the tech market and it crashed and many felt the financial pain.


Markets may be an uneasy proposition and you might think that turning to the real estate market would be more your style.

Real Estate Gurus!

I am sure you have watched amazing transformations on TV of flipping homes as some sort of magic and modern alchemy. So much fun to turn drywall and vinyl siding into gold. Get rich quick? There are also dangers -- ones that sponsored TV shows don’t seem to advise you of. Property insurance, maintenance and taxation upon selling. You have to hire professional licensed individuals to actually do the work or sign off on it. On top of that most people do not match their income tax returns to the property gains. EBITDA! (Earnings before interest, taxation, depreciation and amortization)

Make no mistake, real estate is a business. Did you know that the housing market has increased 200% over the past 25 years. Another statistic is the S&P TSX Composite Index, for the same period was up about 325%. It’s not my focus to pick which avenue to take for investing in your future. Real estate is a forced savings plan for undisciplined investors. Without seeing mortar in their hands they may not save anything at all.

Which brings me to the subject of REIT’s. They should be a part of your diversified portfolio. You get to invest in the mortar without all the pitfalls of owning an investment property. Real Estate Investment Trusts (REIT) are special trusts that sell shares in various real estate investments. REIT investors can spread their risks among thousands of REITS. It’s also important to consider the tax advantages of owning REIT’s.

But all this investing costs money – called fees!

I referred previously to fees. Warren Buffet is famous for saying “value is what you want, price is what you pay”. You are going to read lots of negative references about fees, but there is no escaping them. To reiterate Buffett – it’s value you are seeking and good value always costs. After all, what money would you have to invest if you didn’t charge for what you do now? Always look for how people get paid for their services. It’s a telltale sign. The easiest way to determine this is to ask two (2) questions:

  1. Are you a fiduciary? The answer is only a yes or no! No explanation necessary!

  2. How do you get paid? Fee only or commissions? (you want fee only, they make money only if you make money – incentive is always a good thing) Commissions – they get paid even if your investment heads south)

Next blog will discuss

1. fees in more detail.

2. Understanding MER’s,

3. fee calculations,

4. what asset classes are - large cap, small cap, emerging market, Alts etc

5. why rebalancing your portfolio , mitigates risk.

6. Trust and Trust worthy advisors.

7. Guide to get you moving – no pressure here!

Special thanks the people who gave me guidance and accuracy with a special salute to my advisor and Andrew Goldman's article on Beginner's Investing

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Jerrard Herbert
Jerrard Herbert
15 hours ago

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