Happy Friday everyone!
Last weekend, Warren Buffett released his annual letter to shareholders.
If you haven’t taken note of anything I’ve written before, I hope you’ll take note of this.
Here’s what he said (and I quote):
“Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.”
In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt.
Bonds are not the place to be these days.”
Here’s what that means for you:
Government bonds, traditionally considered “safe investments for retirement” will, in fact, get you no retirement at all.
The idea that you can own a “safe asset” that earns 6% per year to retire on no longer exists.
So what do you do instead?
Well, Warren has us covered here too (I quote):
“The best results occur at companies that require minimal assets to conduct high-margin businesses – and offer goods or services that will expand their sales volume with only minor needs for additional capital.”
This asset-light model is the hallmark of technology businesses.
Remember, software businesses earn on average 25% on equity every year. Non-software businesses earn just 7% annually.
New economy > old economy.
Warren’s echoing a simple message that bears repeating: in 2021, to safeguard your money, you have to take risks.
So next time a friend tells you they own “bonds for safety in retirement” - slap them. With that, retirement is not happening.
If your financial advisor, wealth manager, or banker buys you bonds for “stability” - fire them.
And if you’re counting on a government pension plan (many of which are invested mostly in bonds) to retire - I’d urge you to start taking your retirement into your own hands.
You don’t have to listen to me - but I hope you’ll listen to uncle Warren.
Speaking of - the “next Warren Buffett" could be a woman. Here’s how to invest with her:
Her name is Cathie Wood and she has made a name for herself by returning over 40% per year for the past 10 years - and 150% in the last year alone.
Unsurprisingly, she invests in technology and innovation (see the theme here?).
She runs a company called Ark Invest and is notable for being an early, outspoken supporter of Tesla.
To be fair, she’s a total bad-ass.
You can invest in her main fund under the ticker ARKK in your brokerage account. It owns companies like Square, Tesla, Roku, Spotify, Zillow - and many more.
Go check it out if you’ve been investing in bonds and the old economy - and need to spice up your returns.
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By the way, if you’re not buying stocks today because:
- you’re waiting for the market to crash next week so you can invest
- “experts” say stocks are overvalued or
the market is at an all-time high
Then don’t just slap your friend investing in bonds - slap yourself too.
Look, the market is supposed to reach a new all-time high often. That’s how it works.
I know people who’ve been saying the market’s overvalued for half a decade - and missed out on massive gains.
Don’t fall for those who tell you to “wait to buy stocks because they’re expensive now so buy gold instead, etc.” - and all that other stuff.
Nobody can predict what’s going to happen tomorrow. So don’t try.
It won’t be the last time you hear this but - time in the market is more important than timing the market.
Invest regularly, no matter what happens on a day-to-day basis, in good times as in bad.
In the long-term, you’ll be massively rewarded.
And if you’re not going to buy stocks when they go down - like this week - then when the hell are you going to buy?
In the meantime, ignore the media, ignore the news, and ignore the naysayers.
Best article I read this week: If you want more examples of investors switching to technology & innovation, and crushing it, read this.
Best Tweet I came across this week: Read this and you’ll understand more about Bitcoin than 80% of people.
(I’ve also been completely obsessed with this album for the last week. It’s on repeat as I’m writing this.)
Anything else I think you should know:
Just look at this picture:
So is it time to sell your stocks?
I don’t care if the stock market goes down 40% next week. And you shouldn’t either.
You have to learn to live with volatility and uncertainty. They’re part of generating high returns.
As Peter Lynch, who returned 30% per year for 13 years would say - “the key to making money in stocks is not to get scared out of them.”
- Invest in companies and innovations that make our life better, cheaper, faster, more efficient, more convenient, and more creative (like Cathie does)
- Invest regularly - ignoring all the doomsday noise from the media, friends, news, bankers, reports, etc. - hell, you can even ignore me if it helps!
- Sit back, relax, turn off the news and go do something else with your life
Speaking of enjoying life, next week, I’ll share with you the best investment I ever made that I recommend to virtually everyone who asks.
I know you didn’t ask, but I’ll tell you anyway.
It has (almost) nothing to do with investing & money. But it’s changed my life and I use it daily.
And it’s just $200.