Getting Rich Carefully vs Getting Rich Quickly

Are you a big risk taker? I’m not.

But I must admit to feelings of jealousy when I hear about some people hitting the jackpot by investing in or starting companies in Canada and the US.

Here are some headlines that generated a bit of envy lately:

“Elon Musk is the World’s Richest Person in 2021.” According to the article, his net worth rose by 548% in a single year.

“Shopify CEO Tobi Lutke joins ranks of Canadian billionaires as shares of tech company take off.” The 37-year-old founder of Shopify is one of the few billionaires in this country to get rich from Canadian-made tech, says the Financial Post.

Even on my Twitter account, I come across stories like that of 39-year-old Jason DeBolt, who plans to retire from the profits he made by investing in Tesla.

Here’s his January 7 tweet –

Yes, I am jealous of this group of investors, and I often wish I had started a world-changing company or invested in the likes of Google or Apple or Shopify when they were still small.

But the truth is, I’m not a big risk taker. It’s not in my DNA.

There are also those Toronto real estate investors who, over the last 15 years, have profited from declining interest rates, net positive immigration trends, and a strong local economy. Many have become “rich” by investing in single-family homes or multi-family properties or even buying land across the GTA.

But like I said, I’m not a major risk taker.

I diversify my investments.
I cap my exposure.
I avoid start ups and Initial Public Offerings (IPOs).
I buy dividend growth companies, such as the bank stocks (TD Bank, Royal Bank), utilities (Enbridge, Canadian Utilities), consumer stocks (Metro, Dollarama, Canadian Tire), Railways (CNR) or insurance companies (Power Financial, Intact).

They are profitable companies, dominate their industries, and have a history of consistently growing their dividends.

So the question you might be asking yourself is, “Why isn’t Richard investing in the high flyers and getting rich quickly?”

The answer lies in the old adage: know thyself.

Last week, I offered different traveller profiles: those who seek cliff diving thrills and those who prefer to tour Scotland’s whisky distilleries. There’s a good time to be had in either case, so long as the trip matches the traveller’s personal risk tolerance.

I also made the argument that the same risk tolerance analysis helps investors select the appropriate split between risky and virtually risk-free investments. Investors with low tolerance to market swings up and down feel comfortable investing a larger portion of their portfolio in guaranteed investments, such as GICs or Government bonds, thereby minimizing the downside but also capping the upside potential.

The same is true when it comes to determining why I have never invested in a stock that has hit the moon and made me instantly rich. The answer is that I simply don’t have the personality to make the investments of money and time needed to become super wealthy.

I tend to worry too much.

So if I was in that situation, my worry would likely lead to rash, emotional and, ultimately, poor investment decisions.

It’s not like I have never bought a flyer thinking or hoping that it will become a 10 bagger. But whenever I take this approach, I find myself obsessing about the stock, which overwhelms my limited brain capacity and makes it difficult to think about my other investments or business and professional responsibilities.

Advice from a wealth advisor? Hope is not an effective or sustainable investment strategy.

Invariably, I sell the high flyer, usually at a financial loss and after many hours of wasted time and thought…It’s just not worth it.

Over the years, I have concluded that I’m not a big risk taker, and the outcomes are better for me and my family when I live my life within this framework.

I’m not saying the people who pursue a high-growth strategy are doomed or careless. I am saying, I personally don’t have the intestinal fortitude required to make a life-altering bet on a single idea. I know myself, and I cannot live under this type of financial strain.

Over the years, I have learned that I feel comfortable with a “get rich carefully” approach.

And when I start fantasizing that I can become the next Jeff Bezos, I quickly remind myself that I am not him. My approach to financial independence is my own, and I should not compare myself to anyone else.

My occasional comparisons are not limited to industry billionaires. I sometimes compare investment returns with friends or peers and feel defeated if mine are inferior. When this happens, I remind myself I have a unique risk tolerance, and my stock selection fits my personality and, consequently, the investment returns I achieve.

Comparison is the thief of joy. I firmly believe this adage. To sum up: Personality -> risk tolerance -> stock/bond selection -> unique investment returns.

Allow me to explain how my personal investments are arranged in order to achieve my “get rich carefully” goal.

Here are my six strategies:

I own a home in mid-town Toronto that is debt free and will remain debt free: I know I could leverage the property and have the equity working harder, but I sleep very well knowing that if my business goes poorly, I will still have a roof over my head and should be able to weather the storm.
I use Mint.com to track my expenses and help avoid overspending: And I save approximately 20% of my net income.
Approximately 20% of my portfolio is in guaranteed investments: I like investments such as GICs, providing some downside protection.
I own and rent out two multi-family income properties in mid-town Toronto: The buildings are fully rented, and rent covers the mortgage payments and all the operating expenses. The mortgage balances are currently less than 30% of the value of the properties and, when fully paid off, the rent will form part of my retirement income.
I own an investment portfolio of dividend-paying stocks: See the Richard Dri Dividend Growth Model, and they will also provide a growing source of income in retirement.
When I turn 65 (it’s getting closer!), I will be eligible for full CPP and OAS payments: These payments are worth approximately $20,000 per year plus a defined benefit plan pension from Scotiabank worth approximately $40,000.

Next year I turn 60, so my accumulation of wealth and achievement of financial independence didn’t come quickly.

Instead, it was a slow march over many years, involved raising three kids, and included a few missteps. But I can honestly say that my “get rich carefully” approach works, fits my personality, and has allowed me to enjoy my journey.

If you’re in the wealth accumulation stage and need help determining your personal risk tolerance and investment strategy, please call my office and make an appointment to speak with me.

I have been successful in achieving financial independence for many clients, for myself, and I can help you too.

Never Retire Profile

Bill Belichick

It’s hard to argue with 17 AFC division titles, 13 appearances in the AFC Championship Game, nine Super Bowl appearances, and a record six Superbowl titles. That’s why, at the age of 68, Bill Belichick continues to serve as head coach of the New England Patriots, after having helped the New York Giants, much earlier in his career, to two Superbowl titles. Off the field, in June 2020, the NFL’s longest-running active head coach and the Patriots’ ownership responded to the Black Lives Matter movement and the death of George Floyd with a public statement denouncing systemic racism and pledging to advance equality. When he declined the Presidential Medal of Honor offered this year, Belichick said, “One of the most rewarding things in my professional career took place in 2020 when, through the great leadership within our team, conversations about social justice, equality and human rights moved to the forefront and became actions.” The Patriots won’t win the title this year, but Belichick keeps coaching and leading the way.

The process of finding a wealth advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary Wealth Navigator Process is designed with you in mind. It’s structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the Wealth Navigator Process or our team, call me any time at 416.355.6370 or email me at richard.dri@scotiawealth.com.
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