The Canadian Investor - The Power of Compounding and Diversification

Episode Date: April 11, 2022

In this episode of the Canadian Investor Podcast we answer some listener questions. We answer questions about diversification, emergency funds, high interest savings accounts, GICs and entry points for stocks. We then look back at Berkshire Hathaway’s historical returns and what outcomes someone could have had if they had invested in Berkshire over long periods of time. Tickets of stocks mentioned: BRK-B Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Check out the Yes We are Open Podcast from sponsor MonerisSee omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Live from the great white north, this is the Canadian investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Today is April 6th, 2022.

I am Brayden Dennis, as always joined by Simon Belanger. Simon, we are now into the second quarter of the year and you know what that means here in Canada. Some warmer weather. You are firing up the grill this evening. Is this your first grilling session of the season or what? No, it's not. It's my third of this season.

I'm pretty excited. I love grilling, and we actually have like a Kamado grill. I don't know if you're familiar with those. I don't know if I am. They're like ceramic grills where you actually put some wood in there. So wood, especially for grilling. So you can use it as a slow cooker, I guess, or a smoker. But you can also use it as a grill, this one.

And it's really, it's delicious. It just takes a bit more time to heat up than propane. Oh, you're fancy, huh? Okay. All right. I like that. Well, I mean, we got lots of fun stuff coming up then because my golf course opens up on monday you know where i'll be you can find me

there yeah i might go mountain biking first time this weekend so yeah how'd a boy you love to see it things you love to see that is one of them all right we got a mailbag a little section we're going to reach into the mailbag, answer some of your questions. And then we have some other couple fun topics about long-term compounding, how to make a gazillion dollars if you're patient. So stay tuned for that. Simon, I'll read off the first question here and then you can take it from there. Hello, Braden and Simon. I would like you to both know that your podcast is my favorite within the investing community. Well, that's very nice. Thank you very much. I am 42 years old and thanks to COVID, I found time for podcasts in 2020. Well, that's good. You know, there's some positives. My question is, how would you structure

your portfolio based on the type of companies? For example, one from tech, one from utilities, one from here, et cetera. Thank you for your time. Signed, Chris. And PS, go Leafs go. There you go, Chris. Go Leafs go. Yeah, that's a great question, Chris. And definitely, I think the Leafs will be interesting to watch this playoffs. I'm a Habs fan.

I had a great ride last playoffs. I do, you know. You had your moment there. Yeah, no, you know, I do wish actually like the Leafs that they actually go far because they're a fun team to watch. Right now, I mean, would they lose 7-6 last night in overtime against Florida? But they're entertaining, man. That's all you can. I lost so much hair last night watching that game. Oh, good thing it matters right now. Anyways, I digress. So it's a great question, Chris. I think it's something that a lot of self-directed investors struggle with when

picking stocks. Diversification can actually be different things. So it can mean diversification within an asset class like you're talking about for stocks, but it can also mean diversifying between different asset classes like stocks, bonds, real estate, crypto, and there's other asset classes as well. By diversifying, you can reduce risk and volatility, but it doesn't mean that you will eliminate the risk and volatility. And I think that's really important because sometimes people think if they're very well diversified that they eliminate all risk, and that's simply not true. Let's look at it from a perspective of your question, which refers more to diversification within stocks or equities. There's look at it from a perspective of your question, which refers more to diversification

within stocks or equities. There's a lot of different ways to achieve diversification. You can pick stocks that cross different sectors, like you're a bit referring to in your question. You can choose a broad-based index fund that will automatically diversify your holdings. You can choose a consolidator like a Berkshire Hathaway that will diversify you across quite a few industries. Or you can actually pick a combination of all of these, which is what I do personally. So for example, if say you have 50% of your portfolio in a S&P 500 index fund and pick individual companies with the rest. By doing an approach like that, you have 50% of your portfolio in a well-diversified vehicle and then another 50% where you can decide

if you actually want to concentrate that 50% a bit more into certain sectors or companies. Picking a company from each sector, like you is a reasonable approach but you might have a harder time for certain sectors. Also you may not want to invest in certain type of sectors. For example of people are reluctant of investing in. I'm not saying they're bad investments per se, but I think from an ethical perspective or even ESG perspective, a lot of people will not want to invest in those type of companies. And like I said, personally, I do a hybrid approach. I'm concentrated definitely a bit more in certain sectors. I'm thinking here technology and infrastructure. Definitely a bit more in certain sectors. I'm thinking here technology and infrastructure. But I also have about a third of my portfolio in index funds, which is with my work pension, my DC pension with my work.

And that gives me a lot of exposure to other sectors. It's a good question. And I'm going to take it a slightly different route. Simon, your answer is good, makes a lot of sense. And I'm going to just talk about the way I think of this. Now, I do for myself track to a very high level what my sector exposure is. But to be honest, I have a little bit of a counter view because I'm so bottoms up approach it, like focused. I'm so company level focused, not on the macro. And the analogy that I like to use, say personally me, Braden, me, I own hypothetically in my example

here, 20 software companies. Okay. I only own one today in 2022, but I want to own a bunch in my lifetime. So let's say 15 years down the line, I own 20 private companies, all in software, in addition to my stock portfolio. Okay. Now let's say these 20 software companies, but two of them help companies do their payroll. It's like a B2B thing. One of them's an e-commerce brand consumer facing. It sells candles. I don't know, just random e-commerce idea. One is for software that does marketing for LinkedIn. It can help you do marketing on LinkedIn. And then we got Stratosphere.

It gives you data analytics for investors. One's a SaaS applications for podcasters to grow their show, manage their content flow. That's actually a pretty good idea. Maybe we should make that business. They're all tech, right? If you run this through, what is your exposure to sectors? They're all tech, but they serve completely different customers and industries. And that's why I wanted to talk about that quite a bit, because I'm hesitant to go with typical rules of thumbs around diversification. I'm'm hesitant to go with typical rules of thumbs

around diversification. I'm actually typical to go with any rule of thumb in finance in general, but especially on diversification. Sometimes it seems like you're putting square pegs in round holes by just saying, okay, I'm diversified across utilities. I'm diversified across oil and gas and energy and consumer staples. That being said, in my example, if they are public stocks and they all are in tech, they're going to trade together for the most part. They're going to have very similar corresponding performance because in markets, in the short term, they trade on factors and momentum and sector rotations. So if you are trying to limit volatility in the short term, then diversification, as you're suggesting, across sectors is super important and is traditionally thought of as a great idea.

I'm with you. I'm there. I get it. However, if you don't really give a shit what happens in the stock market performance-wise in your portfolio in the short term, and you care about what businesses are doing long-term, then I think that has a slightly over emphasis on importance. But again, I talked about a bunch of scenarios here, you as well. This is a really personal thing. Yeah, yeah. And I like you added, it's a personal thing, because that, you know, I think I speak for you, but also myself, like we can handle a lot of volatility, like everyone knows I have a lot of crypto, a lot of Bitcoin, and I do have some Ethereum as well. I can handle some really big swings. You have to.

Yeah, I've seen 50, 60 percent, if not more in terms of swings from the top to, you know, a bottom. And for a lot of people, they would not be able to sustain that. They would panic and they would sell. And same for you, right? You've seen some big swings with some of the tech companies you own. And for a lot of people, they would see those swings and they would probably panic sell because they just can't handle the volatility. And I think that's a great thing to say that it is personal because you have to know yourself.

You know, if you're doing what brayden is mentioning or you're doing what i'm mentioning it might work for me might work for brayden but if you don't have the temperament for it it's going to blow up in your face yeah and this is just like an example on my emphasis on it really matters about the companies and yes like what you're talking about it really matters your temperament. Because like, if you look at my portfolio, I'm not saying I'm all in software, the top three positions are tech. And then we have like infrastructure, engineering, payments, banking, more tech, garbage consolidators, a little bit more tech, credit rating agencies,

you know, like, I'm not all in tech. I'm just really trying to emphasize the point there and that it is really personal. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get

exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think

it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra forward slash host. That is airbnb.ca forward slash host. All right, next question. We got question from Brayden with a Y. I am Brayden without a Y, but Brayden Russell, he's a great dude on Strycer Forum. He asked this question, say you've got a company on your watch list and decide to buy it. Okay. So now he's in this position. You go to purchase and see that the stock is not only moving upwards, but has for a while. Should you completely ignore the recent stock performance

and just buy based on other metrics that convince you to buy it in the first place or wait until there's a downward movement to make an entry, even 30%. You see this a lot, right? It's like you want to buy it on a dip, you hate buying it at all time highs. It's very psychological, right? Oh, it's like buying clothes, right? People love getting a deal for clothes. But you know, if it's on sale, oh, I want to buy it. And then you're paying full price, even though it's the same quality. You kind of have that and then you're paying full price even though it's the same quality you kind of have that feeling where you're getting screwed almost exactly yeah so we see this quite a bit it's mostly psychology and at the end of the day like based on your specific question

with a great business like if you're trying to buy a great business and invest in their public stock three percent in performance is not going to make a single difference in the long run. Based on the volatility I'm seeing these days, 3%, that's one day, man. It's one day of trading. I always say, if you want to own the business, just own it. It's very simple. It's not scientific. If you want to own the business, just own it. Timing entry points is impossible. Here's the best part for you, okay? If it goes lower, you should hope it goes lower, if you're going to be a long-term holder of it.

Because then you can dollar cost average into it more over time and get a lower cost basis. This is the beauty of being a long-term investor. You don't have to get your entry point right. You know, like, give me 10 reasons why being a long-term investor is great. And maybe one of the first ones I would say is you don't have to get your entry price right. Timing the market is a loser's game. I honestly refuse to play. And I've yet to be convinced. I'm curious if you have ever been convinced on this. I've yet to be convinced that any sort of technical indicator

works on market timing whatsoever although the people that use them seem to sound hella smart with their fancy tools and and get a long list of trader bros that follow them on social media but i have yet to be convinced it actually works have you ever been convinced of that i don't know enough about it to know whether it works or not i've heard anecdotal evidence fromotal evidence from well-known traders that it does work, but they're very few and far between. And you're talking about people that are institutional grade traders that have algorithms working with and they're really trading, right? I think that's important too. But whether, you know, if I know for real, if it works, I'm not sure,

but they also have a lot of tools that regular investors don't have access to. Right. So for the average investor who can, by the way, outperform those guys doing this professionally, if they have some patience, but for a regular person who's just trying to buy a stock and using, you know, technical indicators, I believe that it works just as much as I believe the cow jumped over the moon. I think most of us struggle with this kind of entry point psychology, even the most sophisticated professional investor. At the end of the day, it's kind of irrelevant.

I know buying a stock under $100 feels a lot better than when it trades like 105, for instance, like as an example, it's largely irrelevant for long term owners of great businesses. Yeah. And I think you also have to remind yourself that the market doesn't really care, you know, what's happened in the past, honestly, you know, the market really looks forward and is trying to figure out what the company is worth based on their future prospects oftentimes not that far out in the future i would say within a year to max is kind of the time frame the market will usually

price stocks at but again i think it's it's just human nature right you see a graph you'll want to look at it then you you know you definitely it's hard to buy at the peak but you have to just remember constantly repeat yourself that is that the market really doesn't care what the stock has done. It really cares of what's going to happen going forward. And it's also it's like, you know, I've played poker. I mentioned it before. You know, people try to make sense of the probabilities and they'll lose 10 coin flips in a row. Right. And that's way beyond the probabilities. It'll lose 10 coin flips in a row right and that's way beyond

the probabilities it rarely happens but it can and when you've lost 10 in a row it's still a 50 50 chance the next one so i think you have to remember that that even like in gambling you know it doesn't matter the previous outcomes it's like when you're at the roulette table and it's like tells you the what's hot numbers and i get my buddies who buy into this stuff. And it's hilarious, right? Like it's. But the stock market is the same way, right? It doesn't care what the stock did previously.

It just cares going forward. That's a good point. I know you're a good poker player. I like to think that I'm pretty decent at poker playing like growing up, but there's no chance in hell I sit down at a table with you. You will steal all of my money. So, uh, okay. Moving on to our next question. Question from Devin. Hi, Braden and Simon. You guys have been extremely helpful in my understanding of how to value companies and how to make better investing decisions. I have a question about how you store your emergency fund and any excess cash

that you would deploy in event of a market downturn. Do you keep it in your investing account? Do you keep it as cash or do you invest it in something like a GIC or a short-term bond that earns a small amount of interest? Any insight on how much money you keep as an emergency fund and how much you keep to reallocate if there is a market downturn. My thoughts are that you could keep your emergency funds in a TFSA or RSP as long as you don't have it maxed out. Once maxed out, it probably makes more sense to keep it in a bank account. Well, that's a good question, Devin. I think especially with inflation running high right now, it's definitely a question I've struggled with over the past couple of years is, of course, you want to have

some money if an emergency comes up so you're not stuck selling stocks and investments that may be in a downturn. So that gives you some flexibility there. As a general rule of thumb, I think most financial planners and advisors will recommend between three and six months of expenses to be covered in your emergency fund. So whatever you feel comfortable with that range, some people may be even more comfortable keeping a year worth of expenses. But again, the more you keep, the longer you'll have it in a vehicle that may not keep up as much with inflation if we're seeing six, seven, 8% inflation. When you go to GICs, like you mentioned, there's typically two main types

of GICs. There are some other types, but the most common are redeemable and non-redeemable. Redeemable is simply a GIC that you can cash out at any point in time. But the problem with these is they'll usually not offer much of interest. You actually will oftentimes just have more in a high interest savings account, like the one that's offered by EQ Bank, for example. I know they typically have some of the highest rates offered for all banks in Canada. So that's something to keep in mind. They are a sponsor of this podcast. When you go to non-redeemable this means that you can cash out the GIC when you want to this is the most common type of GIC so this will offer you definitely

some higher rates but you can't withdraw the GIC if you need the money so if you do there's going to typically be a penalty for early withdrawal or you may not get much interest on it. But keep in mind, you will get a much better interest rate compared to a savings account, but even a redeemable GIC. So if you want to keep it flexible over time and have access to the cash at any point in time, then I think the high interest savings account is the way to go. Like the one one offered like I mentioned by EQ Bank but another option would be to do a staggering of a GIC. So staggering your GIC is basically making sure that you invest amounts in different terms for the GIC. So you could invest one in three months, one in six months, one in nine, twelve and so on. So what happens is once a GIC comes to maturity, you have access to that

cash. You don't need it. You can roll it over to another GIC. I know, again, EQ Bank is offering some promotions right now, some really good GIC rates compared to other competitors. So that's something to think about. Short-term bonds could be an option, but it can be a bit tricky if you need the money before their maturity date. Because if you have to sell the bonds, it'll be at market value, which may be lower or higher depending on where interest rates are at. So bonds will move inversely to interest rates. This will depend, again, where we're at in interest cycles. So it can be tricky to invest that in bonds if you want it as an emergency fund for example personally I would only keep excess cash

in an RSP if I want some dry powder to buy stocks as for a TFSA versus non-registered account it depends how much room you have available to you since the interest income will be low for these option you won't have that much tax to pay if you put it in a non-registered account before i go on brayden did you have anything to add here no other than the fact that just to clarify here when you're looking for something with cash like with a very short time horizon here, you're just wanting to get some return on your money. You might hear out in the market, like some of these products, like the yield on them, it's so low or whatever, even like, or even the high interest savings accounts so low,

but you have to remember you're time constrained. So you don't have like a whole lot of options, right? Like we know the returns on them are not going to keep up with the long-term performance of stocks, but we also know that stocks are volatile. So it really, this amount of money has a purpose. Like this money you're putting away has a specific purpose and you can't kind of lose sight of that. Of course, none of this is investment advice. Do your own due diligence, do your own research. But I think that it's important for us to preface, you know, this is so time dependent on your horizon of when you need it. Yeah, yeah.

And that's actually great that you mentioned that because also everyone's situation is different, right? So I have a full time permanent job that, you know, I think I make a good salary. My wife has a really good job as well. They're stable employers. a good salary my wife has a really good job as well they're stable employers so the amount of months in terms of expenses being covered that we need may not be the same as someone who maybe a couple who they both have their own businesses and their earnings are actually very lumpy so they may need a longer emergency fund so keep in mind that everyone's situation is different here and the

last thing i wanted to mention about the keeping it in tfsa is situation is different here. And the last thing I wanted to mention about the keeping it in TFSA is you have to be careful with the TFSA because TFSA does offer you a lot of flexibility. You can essentially withdraw money anytime you want, tax free. But if you're at your contribution limit, keep in mind that if you withdraw money, you won't be able to gain that contribution room back until the following year. So you have to be careful if you withdraw money and then you recontribute in that current year, you'll be facing a penalty if you were already at your limit. And I actually, I've been experimenting a little bit with my emergency fund and full disclaimer here, this is what I've done,

but it may not be suitable for you. We can't borrow your conviction, right? No, exactly. You know where I'm going. So this, you know, it's an experiment I've been doing, and I'm more than happy to give some updates as it's going now. It's been like about a year I've been doing that. But again, I don't recommend this to anyone.

This is my personal situation. It's not investment advice. So what I've been doing is I have about two thirds of our emergency fund in a high interest savings account and the other third in a Bitcoin ETF that I have in our TFSAs because both my wife and I have a TFSA. So my reasoning is that the savings account will be able to cover essentially most emergencies that we might have if any things were to happen. And then with the Bitcoin ETF, I'm essentially trying to ensure that our emergency fund doesn't lose too much value to inflation over time. Granted, like I've mentioned before about crypto and Bitcoin, it's super volatile. So it could definitely backfire on me.

about crypto and Bitcoin, it's super volatile. So it could definitely backfire on me. But with a 60-33 split, I'm comfortable personally with that risk. And again, because my personal situation is that we both have two stable jobs, we both have very good pensions, we're in a very good financial situation, it's something that we are comfortable taking

in terms of risk. So that's what I've been doing. I'm more than happy if people want to hear an update six months, a year from now, I'll be more than happy to give it and whether it's blown up in my face or not. Ah, I love that you recognize that it's an outcome, but it's a potential outcome, but it's one that you have high conviction in obviously over time so you've been right so far i mean so i don't have any reason to believe you're not gonna be right in the future yeah it's gone well so far but again i think it's really important to understand that my situation might be different than someone else yeah like mine dude i work for a startup my startup that

doesn't pay me go check out stratosphere so i can get off food stamps folks and i'm doing a 66 33 split right i'm not putting all of it in a bitcoin etf so yes it's riskier but i'm comfortable with that like my emergency fund is just like a heisa that's it it's got to be in a heisa you can't be doing silly stuff oh i thought you were just keeping cash under your mattress oh yeah no it's i keep be in a high side. You can't be doing silly stuff. Oh, I thought you were just keeping cash under your mattress. Oh yeah. No, I keep it in the roof actually. The mattress, people found that.

I had to do the roof now. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way.

As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit Questrade.com for details. That is Questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be

a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's Airbnb. your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Let's talk about our next topic. Thanks for the questions, folks. We appreciate it. The mailbag questions are good. We try to pick ones that a lot of people are asking similar type things, and we hope that it can answer multiple questions. All right, let's talk about the investing in Warren Buffett's hedge fund. You might be thinking, tell me more.

That's right. I've looped you in. We are well aware of Buffett's freakishly good long-term performance, okay? I found this awesome blog post about what it would look like if Buff was running Berkshire as a public company, or he was running it as a hedge fund instead of running it as a public company, like allocating your capital for you for free, basically, right? So let's go through a scenario if he charged the very typical 2.2% that many fund managers do, hedge fund managers do, mutual fund managers, and the likes. These are the types of fees they charge. By the way, Canada has some of the worst mutual fund fees on the planet. S&P Global posts that data publicly.

Look it up. It's terrible. That 2.2% in the industry is known as what's called 2 in 20. So you hear that in the industry, two and 20. That's the fee structure. So this post is from 2018. So that's our sample size. Since 1965, when the buff dog, Warren Buffett, took over Berkshire, the world's most successful investor has posted a whopping 20% CAGR in that 53 yearyear period. There's a 20% compounded annual growth rate. Bro, that is stupid returns. 20% compound annual return on a 53-year stretch is true

outlier numbers. This is Wayne Gretzky outlier type stat let me go into that for a second just to really put this point across here Gretzky had 2,857 career points next up is legend Yaramir Yager at 1,921 points Gretzky has more assists than Yomir Jagr had in total points. Where I'm going with this random stat here is I want to stress the importance of how nuts Warren Buffett's track record here is before I get into the math, that he is a true outlier in his craft. One of those true outsiders in their craft off the charts performance. one of those true outsiders in their craft off the charts performance. If we do some math on the 2 and 20 and say it's paid at the start of the year and how this affects compounding over time,

thanks to my pal Jade Digital on Twitter, he made some quick maths for us. Okay, so if you invested invested 10 grand in Berkshire stock in 1965, it would be worth a whopping $109 million in 2017 because of the stretch of period we're talking about. And it's done well since then, by the way, so it's continued to compound. However, if Buffett charged this 220 fee structure, 2.2%, that $10,000 would only be worth $8.9 million, a difference of $100 million in fees. Now, if you can invest $10,000 and turn it into $8.9 million, you are an incredible investor, of course. However, let's go back to the fact that Buffett is the outlier. He's the best to ever do it, the true goat. And so that's why you're coming out with that fee structure. So when you see other firms charging those fees, is it the Wayne Gretzky of capital allocation? Maybe, probably not. And so it's important to recognize that 10 grand turned into 109 million because Buffett was allocating your capital without fees, a difference of 100 million compared to a two for 20 structure.

Isn't that crazy? Yeah, I mean, I think there's one point I think that you missed here is just the fact that Berkshire has been investing. Well, it's not obviously the whole business, but obviously a big part of it is investing in other businesses. Just the fact that they've been doing it for 53 years. Well, probably more than that. I don't know the exact number, but just the longevity. Forget about the 20%, just the longevity of them still being there and doing Berkshire things. Dude, Charlie Munger turns 100 on January 1st of 2023. New Year's Day next year, and he's still sharp. Dude, these guys are still going to work, man.

Yeah, just the staying power for me is amazing. Just forget about the 20%, even if it was 10% over that time period, just the staying power is just astonishing in itself. It's mind blowing. It's completely mind blowing. Okay, so what does this mean for you? Okay, so I want to do some quick maths again here. And just show you, of course, we're talking about the greatest to ever do it. So don't go out and extrapolate, think you're going to receive 20% annual returns, because the likelihood of doing that is you putting up 2,857 career points in the NHL. But for shits and gigs, how to make a gazillion dollars, okay? $10,000 investment, contributing to it every year with a 6,000 contribution. I picked 6,000 because that

is the current tax-free savings account contribution limit at 20% interest rate, grown for 52 years, you end up with $524 million, half a billion dollars. Now, do not extrapolate that thinking that you can receive that. The point of this segment is to talk about how important the fee structure is if you're paying for fees. Dude, $100,000 portfolio, just $100,000. Two for 20, you're paying $2,200. That makes the stratosphere subscription look hella cheap at $180, so do that. But it's just ridiculous how much compounding works if you stick to it. So even if you do this calculation with 8%, 9%, the S&P average of 10% if you're feeling good, and see the difference in fees, and it really opens your eyes to the world

of money management and the fee structure that people have been getting away with for so long. Yeah. Yeah. And just for people to understand even more the impact of fees, if you reduce that to 18%, you're looking at $332 million. So just that 2% reduction, obviously 18% return is still phenomenal. And like you mentioned, I think it's important when you project scenarios out, you know, you can always project one pretty aggressive or optimistic scenario, one probably more realistic and one more conservative. I think that's usually a good approach to those three scenarios. But you just have to make sure you're realistic. And personally, I like to project with these compound income calculator.

I like to be on the more conservative side. That way, it just reduces the potential of bad outcomes. I am going to throw this in at 9% for 52 years. I know it's a ridiculous time horizon, but it shows you like, dude, some people listening to this podcast are in their 20s and will absolutely have 52 years of compounding. I know a lot of people won't listen to this show, but that's okay. It's just for, you know, shits and gigs. We got 6,000 yearly contribution, 10,000 initial investment, compounded annually.

Time horizon is 52 years. You end up with 6.7 million that's just the tfsa bro and that's nine percent and that's just the tfsa i mean 50 years is ridiculous so okay let's go 40 2.3 mil yeah i did exactly that so i did a over 40 years i did even more conservative at eight percent and it's still 1.7 million. Okay. So yeah, we're talking about, dude, this is just your TFSA. Like I'm going to make millions off of software and my companies, but I know that if I just keep doing my TFSA, I'll end up okay. You know, everything's going to be all right. We're all going to make it baby. All right, guys, we're going to save the

segment because you got to keep listening to the podcast. If you're new here, it's Mondays and Thursdays that the show comes out. Monday, we talk about stuff like this. The big picture, listener questions, random research that we find and think are interesting. And then Thursday, earning season is about to ramp up and it's going to be important that you tune in every Thursday. Here are the companies that we care about, we think are interesting, good proxies for the economy coming out with their quarterly results. Do you have any opening sentiment? I'm seeing so much negative sentiment with interest rates and what earnings prints are going to be like. It's just so much noise in the short term, man.

Yeah, I'm probably just more interested whether, you know, I'm not one way or another. I just want to see if we're going to start seeing some of the impacts for some companies of the Russian invasion of Ukraine. So I think we'll probably start seeing some. And commentary on that. Yeah, commentary. Some companies a lot more than others. It really depends when their first quarter well obviously some companies are different financial schedule but it depends if their quarter they're reporting includes some of the russian invasion so it'll be just interesting to see what language

is coming out from those conference calls nothing that i'm worried about personally but just out of interest in seeing what comes out on earnings calls. Yeah, because you have these companies just saying, okay, we completely seized operations entirely, like in the country. It's not a huge market. We've talked about this before. The GDP of Russia is actually pretty low in the grand scheme of things compared to some of the superpowers. But they're going to talk about it. And I'm curious about what they think and what they see and if they think it's going to be a long term thing. I guess they're gonna talk about it and i'm curious about what they think and what they see and and if they think it's going to you know be a long-term thing i guess they're not making any calls on that i'm not sure yeah i'm gonna make a call that supply chain issues will still be top of mind for those calls god can we make it stop yeah you know it won't dude we need to move

it the supply chain link like the whole supply chain i don't want to call an excuse we move that all to the operator right at the top of the earnings call please notice that the statements of changes and by the way their supply chains like that needs to happen on all the calls just skip through it all yeah yeah but you know as well as i do it's gonna be pretty much on i would say the vast majority, probably 80% of conference calls is going to be mentions of supply chain issues. 100%. I'm still, you know, I'm going to stand by that. Every earnings call is just going to go, please know that all forward looking statements, you know, the operator going on and then supply chains.

And then you're just like, skip. All right. Thanks so much for listening. Today was April 6th. We are here twice a week for you. And we'll keep giving you the content you care about. Go to stratosphereinvesting.com if you want to see 10-year financial statements. The most elite analytics for free for stock investors.

I slave over this website 24-7. So the least you can do is check it out at stratosphereinvesting.com. We appreciate you guys very much. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.