Barenaked Ladies released their classic track in 1993, If I Had A Million Dollars.
Over the last 27 years, the increased cost of living combined with stagnant wages reveals a difficult truth: if you had a million dollars and attempted to purchase the items listed in BNL’s classic tune, you wouldn’t be rich but you could be comfortable if managed properly.
Being in the financial business for more than 2 decades a lot has changed since then and things are moving even faster with technology allowing us opportunities and a platform to reach millions.
Let’s take a quick trip back in time stockbrokers were managing money today there as common as a payphone our phones now allow us to buy and sell easily and quickly.
This can be good and bad as the internet is filled with advice and if it on the internet it must be true. (not) Unlike regulated and licensed advisor anyone and everyone is free to speak there mind and offer advise.
The other thing that comes to my mind is Pension plans I won’t get into the different types like stockbrokers pension plans offered by a company and individuals starting a career at the same company until retirement is similar to stockbrokers and drive-up pay-phones a rarity.
More people have become entrepreneurs by default paving there own future to success along the way of sacrifices and determination the road has been bumpy towards every milestone.
There Long hours and determination if the ups and downs and challenges faced we’re not enough of running a business trying get financing to grow the business was just another of there many challenges.
After 20years working with clients I seen there was a disconnect between the banking system and our entrepreneur warriors.
Milestones Financial was created after 2 decades in business and seeing this firsthand were here to bridge the gap entrepreneurs face but also people looking for more than a financial advisor selling products. We will touch on that in later articles for now let’s get back to if you had a million dollars from BNL. You can take a look at the words yourself if desire I thought it would be interesting to look at few of the main lyrics.
If I had a million dollars, I would buy:
You a house – $586,000
Accordingly to the always-reliable Internet, the average cost of a Canadian home is $586,000. The song seems to suggest that the house in question will be nicer than average, so we’ll tack on another $100,000 in 2020 your not buying a house in the GTA possibly a condo if you meet the stress test rules.
The average price of a Canadian home that sold last month was $586,000. That’s up 18.5 per cent from the same month last year. CREA says the average price can be misleading because big sales in expensive markets like Toronto and Vancouver can skew the number.
Furniture for your house – $25,000
It’s fair to assume you’ll spend at least 10% of the cost of your home on furniture, especially if you’re purchasing items such as “a nice Chesterfield or an ottoman.”
Or maybe not because the condo won’t fit any of those.
A K-car (a nice Reliant automobile) – $35,000
The “K-car” is an outdated reference. The modern equivalent would be a recent Kia Sorento 2019 models start at about $35,000.
There’s a lot of looming questions and a lot of potential challenges for this market as we head into the the end of the year and the 2nd waive of lock downs.
The real question is what the new year and market looks like… it’s a bit counterintuitive and it’s unclear to me that this can be sustained going forward.
Congratulations you won 1 million dollars what would you do with it the beauty of the question is some of you reading this might buy real estate under your small business with the money, which would mean guaranteed return and cash flow. Others might leave the money in cash and figure out what to do with it later.
I’m approaching the question from my experience with the financial markets. I’d personally prefer to invest the money in real estate, (not being a landlord type investment) and the markets .
To this point the target would be.
- Support 5 percent annual withdrawal rate, adjusted annually for inflation (if desired, though fixed percentage withdrawals tend to have smoother outcomes than fixed amounts).
- Spend less than 5 hour per week managing the portfolio.
Many investors have limiting beliefs that they can’t beat the market, they won’t be able to retire, etc. The way that the typical investor manages their money, these beliefs are often debatable. Your first step is to define realistic investment goals and time horizons.
Without further ado, here’s how I would invest $1 million to meet my goals.
(Factor–based indexing is the next generation of ETFs, allowing investment advisors to tilt portfolios toward one or more important factors in an effort to deliver stronger risk-adjusted returns than more traditional, capitalization-weighted indices.
The foundation of the strategy is to invest in index funds. Finance theory holds that your risk-adjusted return increases by the square root of the number of independent investment opportunities that you can invest in. In plain English, this means that more broadly diversified investors do better than concentrated ones, on average. To improve your investment returns, you either need to improve the strengths of your investment forecasts or to diversify.
My opinion is that I diversify because I’m smart enough to know what I don’t know and can use leverage and diversification to paper over my lack of accounting knowledge.
The idea behind factor-based investing is that there are statistical factors that identify sources of risk and return. For example, research has shown that companies that pay dividends have tended to outperform those who don’t pay dividends in the long run. For example, one study examines the components of total equity returns of U.S. stocks from 1802 to 2002. Over the 200-year period, dividends (plus real growth in dividends) accounted for fully 5.8% of the 7.9% total annualized return.
That’s where BMO US High Dividend Covered Call ETF ( ZWH.TO)
ProShares S&P 500 Dividend Aristocrats (NOBL) comes in.
The iShares Edge MSCI Min Vol USA ETF (USMV) and the iShares Edge MSCI Min. Vol. EAFE ETF (EFAV) are low-volatility funds that play on the same idea.
Owing low-volatility ETFs is a way to guarantee that nothing you own will go bankrupt on your watch. This lets your winners run and cuts your losses.
Investors tend to plow money into big well know companies. You can get better dividends and returns in companies that are smaller for the most part at least. Look at Apple (AAPL) and Microsoft (MSFT), dividend or lack there of both of which I hold.
Apple was trading around 10x-12x earnings, and now it’s a 31x.
I’m a strong believer in technology, but feel that the concentration of stock picking your better to diversify.
The NASDAQ-100 Equal Weighted Index Shares (QQQE) is the Nasdaq, but equal-weighted.
Many investors like to play value stocks with ETFs, but my experience has shown that ETFs are exceedingly bad at identifying good value stocks. Therefore, I would take $100,000 that I would invest in a value ETF and go buy the most unloved of the unloved stocks. I’d buy more of my life insurance companies, REITs, banks, and maybe even an oil company or two. The idea is to hold everything at least 1 year and slowly rotate into whatever is both out of favor and has sound financials.
Research has shown that stocks with higher credit ratings outperform stocks with low credit ratings.
The strategy here is pick
Individual Dividend/Value Stocks
$100,000 in 10 stocks avg. @ 5 percent yield.
Traditionally, risk parity strategies would borrow to invest.
The idea is that you have the ability to borrow at today’s low rates and can leverage your money in stocks/bonds, so one good use of that leverage is to use the money to diversify and rebalance.
The beauty of using a risk parity strategy like this is that you can boost your expected return without boosting your risk as long as the long-run return of the assets you buy is above the rate of return of cash.
In less than 5 years there have been 2 corrections one in 2018 and another in 2020. While there are many ways to invest, I think that factor-based indexing, value investing and risk parity are the safer ways however this doesn’t mean there’s no risk involved.
Whether you should attempt these or not depends on your knowledge, comfort level and time managing and reviewing. You should always seek advice if your not familiar with any of strategies.
Whether you should attempt to live off of an investment portfolio alone is another discussion I get (the answer is probably no). Despite the drumbeat of warnings of poverty from the mainstream media, the typical retiree can live well with a combination of social security, an intelligently invested portfolio and a paid-off house.
This article expresses my own opinions and investment strategies and not intended to offer advise not all investments are suitable for everyone and you should contact your advisor.
I have no business relationship with any company whose stock may have been mentioned.
How would you invest $1 million? Share your thoughts in the comments!
If You had a Million Dollars What Would You Do?