Important disclaimer: This blog content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.
To make this blog article easier to follow, I have linked words and concepts to relevant internet articles. Please feel free to explore the links and don’t hesitate to email (firstname.lastname@example.org). If you prefer to read the pdf please click here.
Jeff Bezos, CEO and Founder of Amazon
This quote beautifully exemplifies the extraordinary disruptions that have occurred in Industries for the past twenty years and is projected to accelerate in the coming decades. Some industries such as the newspaper business are a shell of their former selves after the emergence and broad adoption of the Internet. Telecommunications and Media is currently undergoing its business transformation with the emergence of direct-to-consumer business model (Disney Plus, Netflix) and the rapid pace of cord cutting. Healthcare and Auto Industries disruptions are looming in the horizon. Big data and technology promises to transform how healthcare has traditionally been delivered. Driverless and electric vehicles may reshape the stodgy Energy and Auto Industries.
At the beginning of a new decade, it’s an appropriate time to reflect on some of the major themes that shaped the investment markets in the past. Such insight may offer clues on what may impact the future of investments: secular tailwinds that will drive up future cash flows, create competitive advantages and boost shareholder value. I have selected 10 themes that may substantially impact investment returns or create investment opportunities for the next decade.
You will find that my 2020 predictions on investment themes are derivatives of themes that affected the market in the past. Undoubtedly, something extraordinary—a so-called ‘Black Swan Event’-- may develop that is below or even off my radar. It will be the Osler Funds portfolio manager and analysts job as investment professionals to keep on top of investment trends. (We will keep our readers and investors updated with future blogs and commentaries). As you may know, we are value investors first and foremost. We try to find companies that trade below intrinsic value. One of the concerns that individual investors may have about value investing is that value investors miss out on the growth stocks. It is true that we are unlikely to invest in start-ups; however, our theme-based screening does pick up and forecast investment trends. We want to find growth-oriented companies at value investing prices, essentially GARP (growth at a reasonable price) or fallen angels investment strategies. We strive to protect our downside, but will keep on the lookout for the next FAANG type events.
Reflections: Hindsight is 2020
Two themes that drove stock returns in the past 20 years
Tech: Internet, A New Business Architecture
China: New Superpower
Two themes That Drove Investment Returns
There were many themes that drove investment return for the past 20 years, but the two mentioned are arguably two of the most important themes. Internet and other technological advances in the past twenty years created a new business architecture. China was the manufacturing muscle for the world’s economies with its large and inexpensive workforce. Together, these two themes drove the world towards a more globalized economy. There were very few Industries in the past two decades that were not significantly impacted by one or both these investment themes.
10 Themes That May Affect Investments for 2020 and Beyond
1. Tech: AI and Big Data- Is the Hype Real?
2. Peak Globalization
3. Renewable vs. Fossil Energy: The Battle of the Century
4. Space: The Final Frontier
5. Tech: Cloud Everywhere
6. Fintech: Banking At Your Fingertips
7. Environment, Social and Governance: The Movement
8. Passive Investing: A Great Investment Tool but Not Without Risks.
9. Gig Economy: Redeploying the Workforce
10. Big Tech Companies Getting Bigger
‘What the world needs is more geniuses with humility; there are so few of us left.’
American humorist/composer circa 1970 Oscar Levant (1)
I like to start off almost anything I write with a quote, above is my favourite on this topic.
What does humility really mean in this context? For the practical purpose of improving decision-making in both the practices of investing and medicine, I consider humility as being akin to intellectual honesty, or as a propensity to change one’s mind when presented with disconfirming information. In other words, a humble person may be very bright and talented (and realize this), yet fully ‘own’ their mistakes. This is not to be confused with modesty or self-deprecation.
Why even bother trying to be humble? Overconfidence, anchoring biases and cognitive dissonance all contribute to costly mistakes. Although we will all err and will continue to do so in the future, I believe you are more likely to make the same or similar mistakes repeatedly if you are not humble. With humility, you are less likely to take uncompensated risks.
How do I try to embrace humility? (Note: I wrote ‘try’...)
I’d like to finish up this blog post with a few random comments about 3P (4), The Osler Fund and the nascent New Year.
After several years of planning, negotiation and deal-making--while encountering many dead ends along the way-- we built a functioning turnkey solution specifically designed to help highly time-constrained professionals struggling to save enough for retirement. In other words, people just like us. Making the process user-friendly and yet still flexible enough were pain points we aimed to solve and have become our raison d'être.
When we started on this path, we knew that it wouldn’t be easy. In November 2018, I met a value investment guru I had been hoping to talk to for years: Tim McElvaine. I managed to persuade him to partner with him for our nascent value fund, The Osler Fund. David and I both deeply appreciate Tim’s 30 years of professional value investing experience; we are grateful to have his guidance.
We were fortunate enough to eventually find a compatible team behind a robo-advisor with an uber slick graphic user interface called Wealthbar, out of Vancouver. They have been great to work with and offer an attractive value for their service, particularly compared to the mega-bank/brokers we have been accustomed to (don’t get me started on that topic!). Even more, as we grow, the value added and costs are expected to become more attractive. It’s so nice to be able to deal with all the paperwork without picking up a pen or dealing with a post office, not to mention the real-time chat function that gets you dealing with a real person in seconds if there are any glitches.
On a personal note...2019 has been a long, tough year for my family. We have lost 2 family members and a close family friend, amongst other tragedies. To add to this grief, in my medical practice, I believe I saw more young people die or become neurologically devastated by the twin “F” plagues (‘flu and fentanyl) last year than the 10 years combined prior. Being a critical care physician tends to make you pretty tough, but this was still very difficult. This experience has reinforced the message from the ancient Persian proverb:
“This too, shall pass.”
In my interpretation, the proverb indicates that during hardship, loyalty and persistence will prevail. During the best of times, one must savour the moments, as they are ephemeral.
In stark contrast, I believe 2020 looks good for us. Our platform is working well and we have most of the bugs worked out in the pension onboarding process. The Osler Fund portfolio, in our opinion, is well prepared to exploit potential upside and limit downside in either a nasty correction/recession or an ongoing bull market. More on that in another, future blog post.
Remember to top up your TFSA to the new $6000/annum maximum (up from $5000 in 2019). That portion of your savings will be a boon later in life when tax deductions fall off! We offer TFSAs, RESPs, RRSPs, corporate accounts, personal cash accounts and pension accounts. I encourage you to sign up here:
You can easily transfer part or all your account from another institution or just put in some new money. The minimum is $1000. We appreciate your trust: please realize that every dollar you put in the account is invested alongside my own lifetime savings (including my wife’s) and I pay all the same fees that you do. I sleep well at night because I have faith in TOF’s risk-averse investment process, along with the fact that Wealthbar is backed by the giant institution CI Financial and the CIPF (5).
Finally, our survey results indicated that you wanted more commentaries and investment details. We are somewhat constrained by the securities regulations in what we can publish; however, starting next month I’m going to periodically send out a “Stock Focus” blog that uses one of our portfolio holdings as an example. David and I will send out other investing/personal finance oriented blog posts more frequently as well.
We wish you and your family the best of health and prosperity for 2020!
1. (yes, he’s joking…)
2. One can invert a thesis by asking oneself: “Why is this idea wrong?” Essentially, the same principle as a hypothesis.
3. This fascinating and probably underused tool can be explored further here: https://hbr.org/2007/09/performing-a-project-premortem
4. 3P Financial is a division of McElvaine Investment Management Ltd.
5. To read more about the protection of your hard-earned assets see: https://www.wealthbar.com/security
Without wading into partisan politics (I am NOT going there), I think that we can agree that we can expect the following consequences:
At 3P Financial, we believe that it is urgent that Canadian professionals put their hard earned savings to work in a deliberate and tax efficient manner.
We offer you the opportunity to invest alongside us:
Don't forget that you can invest as little as $1000. If you're not sure, just put in a small amount and I'm sure we will gain your confidence over time.
We understand investors have different attitudes towards risk and as such, we have designed five portfolios to meet your needs, from very conservative to aggressive. Please check out our website.
Please If you would like to speak to one of our representatives, please send an email to email@example.com.
As of September 1, 2019, we are excited to officially launch The Osler Funds. It took a 1 ½ years of planning, preparation, partnership negotiations and legal work to develop an investment platform that, we believe, will help physicians and allied professionals in their financial and retirement planning.
Investing specialists can spend decades learning the tools and qualifications to become a designated expert. However, there are financial basics that anyone can learn and employ, relatively quickly, that may make you more financially literate and lead you to financial independence.
We will start with humble beginnings in the hope that our message will resonate with our colleagues and develop a utility for our readers. We aim to provide blog posting on a monthly to quarterly basis. Feel free to forward this blog to a fellow colleague or interested friend. We encourage questions, comments and feedback.
In today’s blog, I will discuss the one financial advice that almost all advisors will agree with: Spend less than you make. It's very simple in theory, but not always the easiest advice to follow. There is a similar medical condition that is analogous: Obesity. Eat less and exercise more to maintain a healthy weight. Again, simple in theory, but not the easiest advice to follow.
One of the biggest benefits you receive after the completion of your medical degree and finish your medical training, is your ability to generate a decent salary. After years of living modestly, physicians transition from an indebted student to the more glamorous lifestyle of a professional. Your older colleagues are living in big houses, driving nice cars and going away to foreign destinations for holidays. It becomes very easy for new physicians to assume a lifestyle and create a spending habit that is beyond their earnings capabilities. This will ultimately lead to a large debt load and create a financial stress/burden that many of our colleagues may have experienced.
Debt is not all bad. What is a good debt and bad debt? In general, debt that will increase your long term earnings capabilities (e.g. med school and residency) or debt that is a lifestyle necessity (e.g. a home, a method of transportation) is justified and a good debt. However, is buying a $500k house or a $1.5 million dollar house advisable? Is that sports car you always wanted something that you can reward yourself with after years of schooling? These are decisions that are made easier once you become more financially literate.
As physicians, we understand that our basal metabolism slows as we age. Eating a healthy well balanced diet and supplementing with modest amounts of strenuous daily physical activity should be a recipe for a better lifestyle. Yet, why is a large segment of our population now overweight, including physicians. According to the 2007 Physicians Health Study, 40% of the 19,000 doctors were overweight and 23% were obese (Physician Obesity The Tipping Point: Glob Adv Health Med. 2014 Nov; 3(6): 8-10)
It's not a wild statement that the “Obesity” epidemic and the “Debt” epidemic are analogous. Too much easily available calories is a major contributor to obesity and poor physical health. Too much easily available debt is a major contributor to poor financial health.
The first step in treating any disease is to recognize that you have that disease. The same goes with financial health. The first step in treating your financial health is knowing your spending habits. Do you have financial discipline? What is your debt load and can you afford the interest payments? In turn, for eating and exercise: Do you have a healthy diet? Are you gaining weight? And if so, does that bother you?
The second step is to create a game plan and develop reasonable goals. For a 30 year-old Internist, her goal is to have $1 million in assets by 40. First, she should create a simple budget or use her bank and investment statements as a guideline to what she is capable of saving yearly. If she is making $250k per year and spending $100k on food, debt payments and other expenses. After taxes of 40%, she would generate excess cash or savings of $50k ($250k-$100k= $150k, $250 * 40%= 100k in taxes, $150k-$100k=$50k yearly savings). $50k for 10 years would get her $500k. She would need to generate approximately 10% per year in investment returns over those 10 years to meet her $1 million financial target at the age of 40. Her financial game plan is reasonable and might be achievable with solid investment decisions.
If you are not financially experienced or uncertain that your financial game plan is realistic; it’s a good idea to talk to a financial advisor or someone you trust that has financial experience. Similarly, if you want to lose weight or maintain a certain fitness level and can not do so, maybe it's time to join an exercise group or talk to a fitness and/or diet advisors.
When you were an undergrad or a med student, you created a game plan on how to enter medical school or enter a residency, respectively. You knew the courses you had to take, the volunteer work required and the relationships that needed to be cultivated to secure your references. As you are reading this blog, have you thought about what your financial goals are for 2020 and 2030? Will you meet your financial goals for 2020? Similarly, did you set a health goal for 2020 and 2030?
After long hours training through med school and residency, I came to an important conclusion. If you are going to work hard for your money, it’s a good idea to make your money work hard for you. As physicians, you are fortunate to have a stable income. To become financially independent is much simpler for physicians than the general public. If you focus on limiting your spending to less than what you earn, your chance of financial independence is extremely high. However, game plans can be easy to create and not always easy to implement and achieve.
In future blogs, Lorne and I will discuss topics that are focused on financial matters that may be of interest to our medical colleagues. Our goal is to assist our readers in becoming more financially literate and better investors. We know that you work hard for your money. It's time to make your money work for you. It’s time to be financially independent.
If you have questions, comments or suggestions, please feel free to email one of us.
“Never, ever think about something else when you should be thinking about the power of incentives.”