After a well deserved holiday hiatus, MGL is back and more optimistic than ever. From an investment perspective few would disagree that 2008 was a very rough year for most people, but I’m hopeful that 2009 is going to prove much better. No, I haven’t been overindulging in the holiday eggnog, nor have I been poisoned by questionable sparkling wine on new Years’ Eve, but 2009 has a lot going for it. Here’s why this is year to be a great one:
- There’s Value to be Found - We’ve heard many “experts” talk about stocks being “on sale” right now. Lower prices don’t necessarily mean that certain companies are a good value right now- it’s as likely that the July prices were overvalued as it is that the current prices are undervalued. However, there is good value to be found if you’re willing to search it out and keep conservative investment principles in mind. We will likely see further declines in 2009, but for long term value investors, 2009 could be the year that makes you a lot of money in the future.
- Enter the TFSA - Our American brethren have enjoyed a tax-free savings vehicle for some time through Roth IRAs. As of January 1, 2009, those of us up here in the frozen wilderness of Canada can also avail of a tax free way to watch our money grow through the Tax Free Savings Account, or TFSA. You can contribute up to $5,000 per year to this account and use it to earn interest, dividends, or realize capital gains on securities. While contributions aren’t tax deductible (that’s what your RRSP is for), you don’t get taxed on the money you earn within your TFSA, and as a result your earning potential on your investments has increased by up to 50% as of January 1st. Million Dollar Journey has an excellent primer on TFSAs for those looking for more information.
- Stuff is Cheap - Deflation is a bad word for most economists (and many business owners), but for consumers it can be a welcome side-effect to our current economic malaise. Many products, from lumber to food to gasoline, are coming down in price, meaning that your dollar goes a little further. If you’re in the market for real estate, buying opportunities abound as prices continue to plummet.
- Labour is Cheaper - If you’ve been trying to hire someone to do a bit of work in the past few years, you know the frustrations that this can involve. With the economy as soft as margarine left out on the kitchen table there are more people competing for fewer jobs, giving you better choice and better prices. If you’ve been considering remodeling your home or starting a troupe of traveling acrobats, 2009 might be a great year to do it.
- You Survived 2008 - When I was about 13, I had a spectacular crash on my bike that left me with visible scars to this day. While picking gravel out of wounds for weeks on end hurt it also taught me some valuable lessons, like always wear a helmet, and know that bikes don’t stop or turn well on loose gravel. For many of us, 2008 was a bit like a bike accident and we saw our collective asses fly over the market handlebars. Yes it hurts, but I’d like to think that we’ve learned more than a little from the experience. Lessons about the importance of strategic asset allocation, of buying based on value and not what’s “hot”, and of understanding the risks inherent in investing will stick with us for years to come. With chins bloodied and pride in tatters, our investment decisions in 2009 will be better informed and more strategic than ever before, at least until the next “hot stock” comes along.
Admittedly, these things may not make you rich, or at least not in the short term. But they do offer hope for 2009 following the doom and gloom that plagued the latter part of 2008. Here’s to a happy and prosperous new year!
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I don’t think that things can be much worse than last year, so ANYTHING is an improvement! Maybe this is the year to hire some guys to do some landscaping…
Thanks for the mention MGL! I hope you and your family have a happy and prosperous 2009!
Thank you for a humourous and informative article. More Canadian’s need to learn about the TFSA if they want to take control of their financial future.
Great way to look at the positive! Thank you for the reminders so we can make 2009 great (or at least better than 2008) financially.