Investments

Are You Living Too Frugally?

/ Jesse Ogloff
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Many people assume that financial security is purely about numbers—having a stable income, a well-funded retirement plan, and an emergency cushion. But in reality, financial well-being is just as much about mindset as it is about money.

There are plenty of people who are in a strong financial position but still feel uneasy about spending, constantly worrying that they don’t have enough. They deny themselves experiences, avoid making financial moves that could improve their lives, and operate under an unnecessary sense of scarcity.

If this sounds familiar, the question you need to ask isn’t “Do I have enough?” but rather “Why do I feel like I don’t?”

The Scarcity Mentality: A Barrier to True Financial Freedom

A scarcity mentality is the persistent belief that your resources are limited, even when the numbers suggest otherwise. It creates an underlying fear of financial instability, making it hard to enjoy the money you’ve worked so hard to earn.

This way of thinking can manifest in different ways:

• Over-saving at the expense of enjoying life – Hesitating to take trips, make upgrades, or spend on meaningful experiences, even when it’s affordable.

• Paralysis in financial decisions – Avoiding investment opportunities or wealth-building strategies due to fear of loss.

• Chasing financial trends out of fear of missing out – Feeling pressure to jump into the latest stock, cryptocurrency, or investment trend to “keep up.”

The problem isn’t necessarily financial—it’s psychological. When people get stuck in a scarcity mindset, they often make decisions from a place of fear rather than logic, which can limit their potential and negatively impact their overall well-being.

Where Does This Fear Come From?

A scarcity mentality is often shaped by personal history and environment. Some common influences include:

• Growing up in a household where money was tight – Early financial stress can stick with people for life, even when they’re in a much better situation as adults.

• Life events that created financial uncertainty – Job loss, divorce, economic downturns, or unexpected setbacks can lead to long-term financial anxiety.

• The influence of social comparison – Constant exposure to other people’s wealth (or the illusion of it) can make individuals feel like they’re always behind, even if they’re in a great position.

• Cognitive biases that exaggerate financial risk – The human brain is wired to focus more on potential losses than potential gains, making it easy to fear worst-case scenarios that may never happen.

If left unaddressed, these factors can cause people to hold onto unnecessary financial fear, even when their financial reality is stable and secure.

Breaking Free from an Unnecessary Scarcity Mindset

The first step in shifting out of a scarcity mindset is recognizing it. Ask yourself:

• Are my financial fears based on facts or just feelings?

• Am I holding back from things I can afford due to irrational concerns?

• Have I let past experiences dictate my current financial choices?

If you notice a pattern of fear-driven decision-making, it may be time to challenge those thoughts and make a conscious effort to change your approach.

1. Reframe Your Financial Perspective

Whenever an anxious financial thought arises, step back and ask:

• Is this worry based on real numbers, or just fear?

• If the worst-case scenario did happen, would I truly be unprepared?

• Am I focusing too much on what could go wrong instead of what is likely?

2. Stop Letting Fear Control Your Financial Choices

If your financial plan is solid, give yourself permission to enjoy what you’ve built. Money is a resource meant to provide security and enhance your quality of life—not something to be stockpiled out of fear.

3. Get an Objective Financial Perspective

One of the best ways to combat financial anxiety is to work with a fiduciary professional, like a Certified Financial Planner, who can provide an objective view of your situation. A trusted CFP can help you see where you truly stand, ensuring your decisions align with logic rather than unnecessary fear.

Make Sure You’re Living the Life You Can Actually Afford

If you have the means to enjoy life but are holding yourself back, it may be time to adjust your financial mindset. A good financial plan isn’t just about making sure you’ll never run out of money—it’s also about making sure you use your money wisely to build a fulfilling life.

There’s a difference between responsible planning and living in fear. Make sure you’re not letting an outdated mindset rob you of the life and retirement you can genuinely afford.

For personalized guidance, contact me at info@financerx.ca.

Uncertainty Around Proposed Capital Gains Tax Changes in Canada

/ Jesse Ogloff
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Earlier in 2024, the Liberal government proposed significant changes to Canada’s capital gains tax rules. The plan aimed to increase the capital gains inclusion rate from 50% to 66.67% for corporations and trusts and introduce a higher inclusion rate for individuals on annual capital gains exceeding $250,000. The changes were set to take effect starting June 25, 2024.

However, the resignation of Prime Minister Justin Trudeau and the prorogation of Parliament have stalled the legislative process required to implement these changes. As of now, the proposed adjustments have not become law. This legislative pause has created uncertainty for taxpayers, especially those preparing for year-end financial planning.

Initially, the Canada Revenue Agency (CRA) signaled that it would apply the proposed rates to capital gains realized after June 25, 2024. With Parliament effectively reset, any motions related to the tax changes would need to be reintroduced when the House of Commons resumes. In the meantime, tax professionals advise individuals and corporations to prepare for the possibility of increased capital gains taxes, with the potential for refunds should the legislation fail to pass.

Until the government provides further clarification, taxpayers are encouraged to consult their financial advisors to ensure their investment and tax strategies align with both current rules and potential changes.

For personalized guidance on navigating uncertain times, contact me at info@financerx.ca.

Riding Market Waves : A Surfer’s Guide to Investing

/ Jesse Ogloff
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Investing is like surfing. You don’t control the waves, but you can position yourself to catch them. Patience, preparation, and staying calm in turbulent waters are essential. It’s also about understanding that waves come in cycles, and missing one doesn’t mean you’ve missed your chance entirely. The key is to stay in the water and ride the wave when the opportunity arises.

What characteristic does a surfer need more than anything else? If you said adaptability, you’d be right. Surfing is about responding to the environment—reading the waves, positioning yourself, and timing your movements. Investing is remarkably similar.

When you paddle out into the ocean, you’re placing yourself in a vast, unpredictable environment. There will be periods of calm where nothing seems to happen, times of turbulence when waves crash relentlessly, and moments of exhilaration when you finally catch the perfect wave. Successful surfers don’t leave the water just because conditions aren’t ideal—they wait, they prepare, and they adapt. The same principles apply to investing.

Preparation: Choosing the Right Spot and Equipment

Before a surfer ever catches a wave, there’s preparation: selecting the right beach, the right board, and understanding the tide and weather conditions. Similarly, before you invest, you need to know your goals, assess your risk tolerance, and choose the right financial tools. Are you aiming for steady, small gains (the equivalent of riding gentle waves on a longboard), or are you comfortable chasing bigger, riskier opportunities (the bigger, thrilling waves that require a shortboard)?

Just as every beach and wave is different, every investor’s journey is unique. This is where a financial advisor acts as a guide—helping you identify the “surf spot” that matches your financial aspirations. An advisor ensures you have the right tools and strategies in place before you paddle out into the financial waters.

The Waiting Game: Patience is Key

The ocean doesn’t deliver perfect waves on demand, and the market doesn’t deliver constant returns. Surfers spend a lot of time floating, watching, and waiting for the right wave to come along. It requires patience and trust in the process.

Investors, too, must resist the urge to act impulsively. It’s tempting to chase every market trend or head to the beach when the conditions aren’t working. However, those who wait patiently and stick to their plan are better positioned to catch the next big wave of opportunity.

Timing: Don’t Chase the Wave—Position Yourself for It

Catching a wave requires positioning, timing, and confidence. Paddle too early, and you’ll tire yourself out. Paddle too late, and the wave will pass you by. The same goes for investing. Trying to “time the market” perfectly is nearly impossible. Instead, focus on positioning yourself with a long-term strategy so you’re ready to benefit from the market’s natural momentum.

One of the biggest mistakes surfers make is paddling frantically toward every wave they see. The same goes for investors who try to chase every hot stock or trend. It’s exhausting and rarely effective. Instead, surfers watch and anticipate, recognizing that the ocean will always offer another wave. Likewise, investors must understand that markets move in cycles, and missing one opportunity doesn’t mean they’ve missed their chance entirely.

Staying Calm in the Swell: Navigating Market Volatility

When you’re out in the ocean, not every wave is rideable. Some are too big, too small, or don’t have the right form. Surfers learn to navigate the swell, staying calm even when waves crash over them. Investing also has its share of volatility. Markets rise and fall, sometimes dramatically. The key is to stay calm, keep your eyes on the horizon, and avoid rash decisions.

For example, when a wave crashes unexpectedly, an inexperienced surfer might panic and paddle back to shore. Similarly, investors often sell their holdings during a market downturn, locking in losses and missing out on the recovery. Experienced surfers know that poor waves—like negative markets—are temporary. The best approach is to stay in the water and focus on the next opportunity.

The Big Picture: Riding the Wave to Success

When a surfer catches the perfect wave, it’s the result of preparation, patience, and resilience. It’s not just about the ride; it’s about all the effort that went into being in the right place at the right time. Investing is no different. Long-term success comes from sticking to a well-thought-out plan, staying disciplined during turbulent periods, and positioning yourself to take advantage of the market’s natural upward momentum.

The Bottom Line

Surfing and investing share a fundamental truth: you can’t control the waves, but you can control how you respond to them. With patience, preparation, and a steady hand, you’ll be ready to ride the wave when the opportunity arises. So, stay in the water, trust your plan, and keep your eyes on the horizon—the next big wave might be closer than you think.

Email me at info@financerx.ca.

Don’t Believe the [Negative] Hype

/ Jesse Ogloff
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As humans, we have ancient mental traits that helped us survive a millennia ago but now these same traits often just get in the way. Imagine yourself living in a cave, as one of your ancient ancestors, and you’re preparing to go on a hunt but something seems off. You are hearing noises outside that deter you from wanting to leave the comfort of your “home.” You have two choices: Leave the safety of your cave and risk death; or skip the hunt, go hungry, and wait for the potential danger to pass. The majority of people would rather stay home to live another day.

The next day, the cognitive rollercoaster isn’t over yet as, most people would have an increased sense of nervousness when they attempt to leave the cave. But now there will also be another negative thought that combats the nervousness, they will have an added fear of failure that will start to seep into their mind. When that fear of failure overtakes the fear of the outside then they will leave the comfort of their home and venture into the unknown, albeit on edge and with heightened senses.

Humans have evolved over hundreds of millions of years to pay extra attention to negative experiences (especially life and death situations) by reacting to them intensely, remembering them well, and over time becoming even more sensitive to them.

What does this have to do with you, today? We can think of a similar situation albeit more modern. Imagine you’re driving on the highway and someone cuts you off and narrowly misses you. You slam on your brakes and feel a tense feeling of anger rise up within you. This sort of feeling is one that can stay with you and can eventually ruin your whole day. You might be less productive or distracted, which only compounds the problem. This experience might stay with you for awhile and effect your driving habits for a period of time after the actual event.

Why does one negative experience ruin an otherwise great day?

Why does this experience have such a powerful effect on us?

Why is it that this experience of short-term unhappiness is invested into long-term unhappiness?

Research has proven that our brains have evolved to react much more strongly to negative experiences than positive ones. This negativity bias can influence how we feel, think, and act, and can have some undesirable effects on our psychological state.

We can think about this in the context of investing and investment news. A downturn in the markets creates the same fear response as the examples above. This response might have saved the life of your ancestors but the market isn’t influenced by your behavior and a bear market isn’t a life-threatening situation. Don’t get me wrong, this year it has been very difficult to be an investor with the S&P500 currently sitting at a loss of 24% year-to-date, but I bet that you don’t remember that this same market has provided investors with returns of 27%, 16%, and 29% over the course of 2019, 2020, and 2021, respectively. People tend to forget that the average annual return of the S&P500 in USD over the course of the last 100 years, but also the last 40 years, equates to around 10% per year and this accounts for every bear and bull market that we have experienced along the way.

Modern news agencies spend thousands of dollars on studies to examine what keeps your eyes on the screen and they know how to tap into our primal negative bias instincts. You’ll watch more if the market pundits talk about how the sky is falling or today’s Armageddon-du-jour. You watch more because you believe that they are going to present you with a secret that no one else knows but this is simply useless noise. The headlines are not actionable and is far from being personalized to your own specific situation. A bear market to someone accumulating assets is very different than to someone who is decumulating assets. The news agencies know just as much as the rest of us, no more about the future than you or I. It’s a lot easier if you simply come to terms with the fact that the market is uncertain, but without uncertainty then there would be no opportunity. There are factors that you can control like your level of tolerance to investment losses, such as the percentage of equities in your portfolio and your level of diversification.

Another way to get through these periods of time is by creating a financial plan to achieve your goals. People have a hard time planning though because, just like the market, the future is also uncertain. Think about all of the unexpected turns your life has taken and the possibilities that those turns have opened up. While you couldn’t have predicted the outcomes of the decisions you have made, you know how to gauge your feelings about the risks and opportunities being presented to you. The same goes for planning; you are making the best guess at present for the future and the longer the time horizon that you are trying to plan for will increase the potential variance of the outcome. You have to deal with factors that are out of your control, such as the return of the markets, interest rates, exchange rates, and other worldly factors but also personal factors like moving, changing careers, or births and deaths in your family. The longer the time that you are trying to plan for then the increasing probability that your outcome will be incorrect. This is the reason that plans are useless but the repeated planning process is invaluable. It allows you to set a course, which will be correct for a period of time, but then will require regular course corrections to account for broad market changes, personal life changes, and changes to your goals.

If you’ve done the best you can then go easy on yourself. It’s not the decisions you make, but how you make decisions. Investing, like life, is a process. If you have a plan and follow that plan then you’ve put yourself in the best position to achieve success. Try to do your best not to fall prey to your primal instincts of being negatively biased. Don’t dwell but learn from your disappointments and celebrate your successes.

Email me at info@financerx.ca.

An Experienced Captain is the Best Way to Weather Economic Storms

/ Jesse Ogloff
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For the 2021 Calendar Year

Canadian Inflation was 4.8% in December 2021

S&P U.S. Aggregate Bond Index returned -1.4%

S&P Canada Aggregate Bond Index returned -2.48%

S&P500 returned 28.71%

S&PTSX60 returned 28.05%

FTSE Developed All Cap ex North America returned 9.1%

As of July 27, 2022…

Canadian Inflation rose to 8.1% in June 2022

S&P U.S. Aggregate Bond Index is down -8.38% YTD

S&P Canada Aggregate Bond Index is down -8.94% YTD

S&P500 is down -15.58% YTD

S&PTSX60 is down -9.44% YTD

FTSE Developed All Cap ex North America is down -17.90% YTD

Imagine you are relaxing in a boat and it is a very calm day on the water, barely a ripple. You are really enjoying your time, soaking in the sunshine, and can’t fathom how your situation could change. Now, imagine one or two waves start to hit the side of the boat. Even though these waves are still quite small, you are accustomed to mirror-flat water so even small waves can feel huge. These waves continue to grow and grow into storm-sized waves and a lack of experience captaining a boat during severe storms can put you in a dangerous situation. During these times, the best thing that you can do is batten down the hatches, remain calm, and whatever happens do not abandon your ship.

This is a great metaphor to help explain the vastly different results from 2021 and 2022 YTD. Everyone was quite happy at the end of 2021 after high-return, low market-volatility year and most financial firm analysts were predicting greater volatility but nothing out of the ordinary and continued positive returns. This is the main reason that I don’t let any market outlooks weigh into my decision-making as a wealth advisor. Analysts can make educated guesses but, in the end, it is still a guess and anything can happen. I write about this in a previous article from December 22, 2021 titled “Forecasts & Fortune Tellers.” So, back to the example, what were believed to be seemingly small issues, that were thought to be transitory, at the end of 2021 acted as the beginning ripples that led us to the storm waves that we have so-far experienced in 2022.   

2022 has been the result of multiple global events to get us into this situation; China’s zero-Covid policy, Russia’s invasion of Ukraine, and a pandemic legacy of over-monetary and fiscal stimulus has led to supply-chain disruptions, commodity shortages, and excess demand igniting inflationary pressures not seen since the 1970s. A diversified portfolio is (usually) one way to minimize negative markets. Markets normally work in a way that if one asset falls then another usually rises, which acts to stabilize the portfolio. However, diversification has its limits. When everything goes down together, there is little that can be done to protect the portfolio. Even hiding out in cash is a guaranteed losing bet when inflation is running in the high single digits. I’d rather give myself a chance to beat inflation by investing my long-term money in the great companies of today at sale prices rather than guaranteeing an after-inflation loss by hiding out in cash.

This is one of the most difficult ideas to grasp as an investor. It can seem like the world is coming down all around you and, as a long term investor, these are the times that you should be trying to deploy excess cash into the market because the potential upside return is higher when markets are down than when they are continually achieving new all-time highs.

It’s also completely okay if you don’t have extra funds to invest when markets are down but, as long as you are invested in a globally-diversified portfolio, you should stay the course at this point. Major changes to your investment portfolio should have been done when the market was still achieving all-time highs. Remember earlier when we thought of ourselves relaxing in the boat? Now is where you should have already battened down the hatches and are remaining calm. Your boat is your only savior during the storm, your boat has experienced lots of storms like this in the past and it was continue to experience lots more storms like this in the future. Whatever you do, do not abandon ship.

If you ever feel like you need some help at the helm of your boat (portfolio) then do not hesitate to reach out below. I’ve experienced many storms, just like this one, in the past and I’ve made sure that none of my clients have ever abandoned ship at the wrong time.

Email me at info@financerx.ca.