EMERGENCY RISK REDUCTION

Many of you may know that I spent 50% of my career overseas. Much of this time was with unpaid or relatively low paying humanitarian work, which was very fulfilling. The compensation was irrelevant. But I did have a number of years with agencies that paid pretty well, such as the US Government, the UN, and consultancies with big firms, including an arm of the World Bank. As I look back, the higher wage was necessary because, in general, this work with high-profile agencies was much less rewarding, much less fulfilling.

I have always lived frugally, arguably too frugally, even single and with ready cash on hand. Unsure where this came from, but I seldom splurged. I am sure to have missed many opportunities, many memories. But maybe I have made a few as well, having worked in 12+ countries on 6 continents, and visited 40+ more.

I didn’t necessarily set out to save money. It just happened. Now in my mid-60s, I have this little nestegg of funds. But it has not been necessarily been cared for. I invested some of it wisely by buying a ‘retirement’ cabin in the mountains of North Carolina. But most went into the stock market, to ride the ups and downs of the market. The jury is out on whether this was wise. Some did well, some did poorly, and sadly, some I don’t know. Herein lies the problem. Managed even conservatively and appropriately, my little nestegg could have tripled what it is now. For years, I just ignored it. Out of sight. Out of mind.

Last Fall, coupled with Canada’s early darkness and cool weather, I decided that enough was enough. I call my November 1 birthday “Black Friday”, because I sold a whack of ‘underperforming’ stocks. And slowly began buying others, with hopefully better track records. I have done this for weeks since then…readjusting companies I own. At my age, financial advisors recommend ‘conservative’ investments – mostly bonds and CDs that ‘preserve capital’…and that pay 2-3% yield. Sorry, but this doesn’t work for me. I like businesses.

My interest in companies is deep rooted. I love entrepreneurship, and learning the history of successful business people – how they and their companies thrive. Some stepped in via wealthy families, but most  from having a vision, hard work, creativity, and wise marketing.  And yes, sadly, some by greed and corruption.  But all are risk-takers. This is a far cry from today. I live near outside the capital of British Columbia, with its thousands of government workers. Virtually all are fairly well paid, with job security and a lifelong pension. Where is the risk? In a union and job security, there is very, very little! What a shame, because so many would be innovators if forced to. The results would be astonishing!  It is no coincidence that my best friends either own small businesses, or are recently retired.  We are like-minded.

Readjusting my business ‘stock portfolio’ has been a process. And for the most part, an enjoyable one.  An important aspect of stock investing is learning about the company, called the ‘fundamentals’. But this takes time – a lot of winter evenings. And there are 1000s of businesses out there. They go far beyond the scope of an Amazon, Microsoft, McDonalds, Fed Ex, General Electric, etc. Again, I enjoy learning about businesses.

I am not a day-trader, but an investor. But unlike years past, I might be considered an ‘active investor.’   The basic strategy is to buy a ‘stock’ at a low price, and sell at a higher price. Sounds simple, but don’t be fooled. I have a Master’s degree in buying high and selling low, as shown when I looked at my portfolio last Fall!  The other decision is the timeframe. My children have many decades for stock prices to increase, and can invest in solid, stable companies for gains over time.  I have maybe 10 years, so have to be more selective. Through study and comments in investment ‘chat rooms’, I try to buy very select stocks for short-term gain, sell them, and move on. This requires not only fundamental but “technical” analysis and is very risky — not for the faint at heart.

But I have always been a bit of a risk taker. I would not recommend this for anyone. I both lose and gain – and only hope the gains outweigh the losses. Time will tell. It is using my own money, and the buck starts and stops here. I heard a trader say that 66% of stocks will go down, not up…and this is about right. The goal is to reduce risk, and this takes research. It is possible to eliminate risk in a 3% bond, but it is not possible in stocks.

Presently, I have about 20 stocks, diversified into 7-8 sectors of the US economy. I am adjusting for 14-15 long term ‘growth’ businesses, 4-5 shorter term ‘value’ businesses, and 1-2 very short term buys with the hopes of quick returns…to be reinvested almost immediately. But all of them are reviewed monthly with a critical eye — to keep or to sell.  Sentiment must be set aside, but it’s a struggle. It’s a constant battle with emotions of ‘greed’ (stock value rising) and ‘fear’ (stock value falling).

So this is the way I spend my Canadian winter evenings. It sure beats Netflix or hitting the bottle! Yes, it’s a far cry from fruit trees and rows of berries presently dormant on the farm.  Soon warmer weather will be upon us, and I look forward to spending more time outside.  This will offer sunshine, exercise, and a necessary balance to my life.  May you enjoy the same.