Double Your Money

If you put $C ($500,000) into investments that pays r% (3%) each period, then after n (24 years) periods the amount of money will be P ($1,016,397). (Example is italicized)

P = C (1 + r/n) nt

    P = future value
    C = initial deposit
    r = interest rate (expressed as a fraction: eg. 0.03)
    n = # of times per year interest in compounded
    t = number of years invested

Most people are fooled by bigger returns on a mutual fund leaving them exposed to fragility (read all of Nassim Nicholas Taleb’s books esp: Antifragile: Things That Gain from Disorder. An unknown downside (could lose everything) don’t make a decision based on the past.  Limited upside.

3 Rules

  1. Minimum $50,000 or 40% CDIC protected cash.
  2. Optimize the ROI on your business assets. Get out of your mutual funds and stock market (you don’t have a lifetime of contributions to make up for the upcoming correction).  Invest in yourself and in YOUR business (unlimited/exponential upside) – stuff that increases your productivity.
  3. Cover your living costs with insured GICs/multi-tenant real estate. Avoid leveraged real estate investments unless you are doing it right: if you can flip it for 50% increase on your purchase price after putting 25-33% down and doubling or tripling your investment in fixing it up.  Maximize your CDIC coverage for everything you can not afford to lose. 5-year GICs under $100K each paying 3%. ($3 million in CDIC protected GICs will in aggregate pay you $90,000 per year to cover your living expenses without even decreasing your principal.)

Wealth Composition

95% of your wealth should be safe: cash + business + multi-tenant real estate

5% of your wealth should be in high-risk investments. Losing 5% will not wipe you out, but it’s enough to efficiently increase your wealth. Once your principal doubles, take back your principal and put it back into you safe mix and re-balance as required.