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 Friedman Investment Group, Value Beyond Returns

Friedman Investment Group

Value Beyond Returns

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History tells us everything we need to know, but do we always listen?

by Alan Friedman

The longer I’m in this business, the more fascinated I become with investors’ behaviour

Intellectually we know that successful investing is all about the long term and what happens day to day, week to week, month to month or year to year will not have an adverse effect on our long term success.

If we make sound, strategic, practical investment decisions, if we ignore the noise, if we stick to our principles and don't panic, get side-tracked by momentary fads or get swayed by others. If, in other words, we're disciplined and let our investments stay the course — assuming you have the right mix for your age.

Having said that, though, it is important to acknowledge that there are concerns currently. The markets are volatile, interest rates are going up, inflation isn't as temporary as we hoped early on, and a recession may indeed be coming. After 12 great investing years, things are changing. And it can be unsettling.

That is all true. But what is also true is that we've weathered these times before and if we learn from history and most successful investors, cool heads prevail.

And we have plenty of role models who prove this theory year in and year out, not the least of whom is one of the world's most successful investors, Warren Buffett who, you may or may not know used all his savings to buy three shares of preferred stock in 1942 and has never looked back (did you know he made most of his money after the age of 65?).

Yet despite the existence of wonderful role models we could follow, we could be better at getting out of our own way

We often have unrealistic expectations and our ensuing anxiety when those expectations aren’t met — which they can’t be — therefore seems almost inevitable. And then there’s Warren Buffett who, in his 2021 Annual Letter to Shareholders, freely admits to “making many mistakes.” 

What Mr. Buffett has clearly learned, which not all of us have, is that the errors and the losses and the downturns and the instability is temporary. It doesn’t last and it doesn’t impact our long term success. So the prudent thing to do is wait it out, bide your time.

But inevitably, with unrealistic expectations comes anxiety. And we just keep going there.

Something else Warren Buffett writes in the shareholder letter — that the Dow closed at 99 that day in 1942 when he used his lifesavings to buy three shares of stock.

In 1942 the Dow closed at 99. At the end of last year it closed at 35,000. As an interesting aside, in 1999 when the syndicated columnist James K. Glassman and the economist Kevin A. Hassett wrote their book “Dow 36,000,” they were laughed at.

I was curious so for fun I decided to see where the Dow was the year I was born, which is 1954. By the end of that year it topped an all-time high of 404.39. 

I kept digging. My eldest daughter was born in 1989 and the Dow was at 2,510.33. When my youngest daughter was born in 2004 the Dow was at 10,315.51. In 2008, the year of the great recession it was 11,244.05, down 33.84% from the year before — which was up 6.43% from the previous year. 

Imagine what your savings would look like if you’d invested in 1954 and left it alone for even 35 years.
 

Make sure you don’t miss any of my posts. Follow the blog and you’ll receive email notifications every time a new post is published. See you soon.

Alan Friedman is an Investment Advisor with CIBC Wood Gundy in Toronto. The views of Alan Friedman do not necessarily reflect those of CIBC World Markets Inc. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client please contact your Investment Advisor. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

 

Why Alan is so passionate about helping investors succeed

 

Why Alan is so passionate about helping investors succeed

You know, I went to university in Toronto, really didn't know what I wanted to do with my career. A good friend of mine actually went into the investment business and I started working with him. I gave him some money. It was all the money I had at the time. Right. Which wasn't a lot. But, you know, within a month, I'd lost it all. You know, not a little bit, not half of it, but I lost all of it.

It was one of those epiphany, one of those wow moments like, oh my God, whoa, you know.

This isn't how I expected it to be. It was traumatic. What transpired wasn't his fault, and I've never blamed him for it. We were good friends then, we're good friends now. What I realized is what I was doing was really speculating. It wasn't investing. But more than anything, I thought to myself, wow, I could do better than that.

I treat all my clients as if it's my money because I don't want you to ever experience what I did. I know the feeling of disappointment when you invest and it doesn't work. And it inspired me really to sort of be a student and learn what works.

My name is Alan Friedman, I'm an investment advisor and portfolio manager, at CIBC Wood Gundy.

Why Alan is so passionate about helping investors succeed

You know, I went to university in Toronto, really didn't know what I wanted to do with my career. A good friend of mine actually went into the investment business and I started working with him. I gave him some money. It was all the money I had at the time. Right. Which wasn't a lot. But, you know, within a month, I'd lost it all. You know, not a little bit, not half of it, but I lost all of it.

It was one of those epiphany, one of those wow moments like, oh my God, whoa, you know.

This isn't how I expected it to be. It was traumatic. What transpired wasn't his fault, and I've never blamed him for it. We were good friends then, we're good friends now. What I realized is what I was doing was really speculating. It wasn't investing. But more than anything, I thought to myself, wow, I could do better than that.

I treat all my clients as if it's my money because I don't want you to ever experience what I did. I know the feeling of disappointment when you invest and it doesn't work. And it inspired me really to sort of be a student and learn what works.

My name is Alan Friedman, I'm an investment advisor and portfolio manager, at CIBC Wood Gundy.

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We’re proud of our relationships with our clients

"...I started working with Alan in the mid 1980s and not only has my portfolio withstood the turbulent times, it has made steady and impressive gains no matter what the financial weather..." —Leonard Simpson

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We’re proud of our relationships with our clients

"To be honest, with all the market ups and downs we were afraid we’d lost a lot of money. But thanks to you, even in times like this, you still managed to make a good profit on our investment." —Vera Fisch

More thoughts from clients

We’re proud of our relationships with our clients

"One savvy friend said: 'choose someone who you can feel totally comfortable with asking stupid questions.' Alan has always been there—educating, advising and giving me the confidence and security I need to accomplish my goals." —Alison Connolly

More thoughts from clients
 

Alan Friedman

Alan's Philosophy

Will I Be Okay?

In 30+ years I’ve yet to meet an investor who's not concerned — myself included — regardless of whether the portfolio in question is worth a modest $100,000 or even as much as $20 million.

Read More

How I Invest my money

When I tell clients I treat their money as if it’s mine, I’m referring to the deep understanding of self, the care, the thought, the planning that goes into successful investing — and the best way of explaining that is by sharing how I invest my own money.

Read More

Our Pledge to Clients

When it comes to investing, successful outcomes require more than portfolio management. Read More

 

Research

Stay connected with these comprehensive CIBC research reports. Read Here

 

Alternate Viewpoints

Stay informed with our in-depth insights, analysis and evaluation of investing strategies, opportunities and options. Read Here

 

 

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