Author: Larry Bates
Published year: 2018
Genres: Investment
Status: Done
The Book in 3 Sentences
Simple successful investing
Low-fee index ETF wins !!
Mutual fund is shit !!
Think long-term, minimize the cost
Top Quotes
- As a long-term investor, you are not a stock market player, but a business owner.
- Business owners don’t waste time on daily changes of their market value. Have less anxiety, just get on with your life.
- Over the long-term, there’s only one single factor to determine the stock price: profits
- Whichever plan, keep it simple, stick to it. Save and invest like clockwise regardless of market conditions. Millionaire teacher
Summary & Reflection
According to the author’s wealth formula, there’re 6 forces to drive your ultimate investing outcomes. Among the 6 forces, 3 are wealth builders (amount, time, rate), 3 are wealth killers (fees, tax, inflation).
Before talking about your shares of real return, those three killers fees, tax and inflation always take their cuts first.
You can’t do much about inflation, your ultimate goal is to increase your real purchasing power.
Long-term compound returns can produce astonishing results over time.
After all your years, the total value of your portfolio at 65 is decided by 2 factors: the fees you’ve paid, and the allocation between stocks and bonds.
Stock price and your gains
From the short-term, the stock price is affected by tons of factors, such as political events(trump), industry conditions(oil glut), interest rate changes, economic forecasts, company management changes, trends, etc. But those “noise” has little influence on the ultimate long-term performance of quality companies, they just create the bumpy stock market ride. Bearing this volatility is the price you need to pay for long-term gains. Over the long-term, there’s only one single factor to determine the stock price: profits (current and expected future profits). Long-term investors simply believe one thing: the ability of North America business to collectively do what they’ve always done: grow profits over time.
TFSA & RRSP
Gains of any kind that are earned on investments held within a TFSA will never be taxed. This allows the magic of compounding to accelerate investment growth within a TFSA, free of ‘tax drag’ along the way. And you pay no tax when you pull money out of your TFSA. For example, if you contribute 25,000, you can withdraw your total of $75,000 (or any part thereof) from your TFSA at any time, tax free.
But, unlike a TFSA, all withdrawals of funds from your RRSP (including both your original contributions and all gains) will be treated as taxable income at the time of withdrawal. Therefore, RRSPs do not eliminate tax. Rather, RRSPs defer the timing of tax.