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Success Bias



I mean, we all have it, “success bias”, to some degree? I know I do! If you have had any success in your financial journey and it’s realization it is natural to believe you can rinse and repeat that same success over and over doing exactly the same thing. Very likely you will develop the bias that your way is the tried and true way? But is that true? Absolutely not! There are multiple ways to skin the perverbial retirement cat. No one approach fits all, and you can learn a lot and pivot your plans by examining people’s different approaches to retirement, especially when times are changing, and/or new risks and opportunities are emerging.

Lately, risks emerging include realty and currency risks, supply chain risks, and runaway inflation. Examples of changing times include new market movers like crypto, and technology stocks like Tesla and Shopify. Lately there has been a lot of posturing in the markets, with people moving out of fad or meme stocks back into value stocks. These risks and the changing times have the ability to erode your existing capital and your income through major increases in company expenses, major reductions in their revenues, or major shifts in market caps into new places and away from your current investments. For example, this has been playing out big-time in the crypto world, with a whopping $2.7 trillion or 5.73% of global investment tied up in global crypto markets!!!! The money volumes trading in this market today are crazy, $102 billion in 24 hours (a few days ago)! This is money that was deployed or saved elsewhere before crypto came along. It’s sometimes very hard to not take notice and get involved in these new investments. Marketing, social media, and the news are very good at making you think you are missing out. As always, it’s really is a question of your time horizon and risk. But crypto, for example, has been gaining credibility in the last year, and banks are starting to take notice and put R&D into developing their own blockchain technologies. It will likely eventually become mainstay and backed by governments, though I doubt it will continue to evade regulation (my opinion only).

In the realty markets inflationary fears combined with fears of increased lending rates have lit up the real estate markets. People (local and foreign) are in a buying and building frenzy in the last year that has driven housing prices out of reach for many, many Canadians and dashed the hopes of the majority of younger Canadians ever owning a home. The Canadian government is currently looking for ways to cool the housing market down and lower home prices, including a potential, near-future increase to bank lending rates and putting more restrictions on foreigners buying Canadian real estate. If you were wanting to buy a home now, you may want to think about sitting this one out, continue to rent, and see where it lands in the next few months? The UK was first to raise their bank lending rates this week to combat inflation, resulting in a temporary bump up in their currency value.

There are many ways to invest and generate income leading into and in retirement (or semi-retirement). And there are always new products and risks presenting themselves. There are the tried and true ways, and there are new and scary ways emerging. Some eventually become part of the indices like the marijuana market when it was legalized in Canada, and some die a slow death like Gamestop. I really try to just let my index funds do their job. They will pick up any future opportunities if they are reliable market movers and fit the fund goals. I don’t need to overthink it or have any FOMO (fear of missing out). I have found the market (index) always eventually wins and/or corrects, and finds a way to rebalance and deliver continued value.

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