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Smith Falconer Financial Group

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Address CIBC Wood Gundy Toronto Bay Adelaide Branch 333 Bay St., Suite 2800 Toronto ON, M5H 2R2
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Smith Falconer Financial Group

April 08, 2024

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SFFG Presents Financial Literacy Cover Photo

Financial Literacy with Mimi Hijleh, CIM®

In March, Smith Falconer Financial Group was proud to host Mimi Hijleh, Partner, EdgePoint Wealth Management, for a session focused on financial literacy.

 

Her presentation highlighted our commitment to delivering information that is relevant to our valued clients of all generations. We strongly believe that these topics are just as applicable to the veteran investor as they are to the novice investor.

 

Mimi discussed inflation, the power of compounding, understanding volatility in the stock market and the importance of having a long-term outlook.

 

Similar to Morgan Housel’s style of writing in The Psychology of Money, a book we routinely recommend to clients, Mimi explains concepts through the use of relevant, effective examples. We wanted to share a couple of them today.

 

Inflation

 

Inflation is defined as the overall rise of prices of goods and services in the economy. In 2000, the average price of a Big Mac was $2.85, today it is $7.47. This equates to a 4% annual inflation rate over the past 23 years.

 

 

We often discuss the importance of bringing inflation down to 2% and this graph emphasizes just how significant that is. In comparing 2% inflation (green bar) to 8% inflation (yellow bar), it is illustrated just how dramatically the price of the Big Mac could rise if inflation were to stay high over the long-term.

 

This is why investing is so important, to maintain and increase purchasing power, despite inflation. Keeping money in your hypothetical “piggy bank” simply erodes it’s value over time.

 

The power of compounding

 

A powerful example of the power of compounding, is the question – would you rather receive $32,258.06 a day for the next 31 days, or a penny that doubles every day for the next 31 days?

 

Chose the penny? You would end up with over 10x the amount in 31 days. However, the real benefit is not seen until day 28, when the compounding effect on the penny, surpasses the option of taking the $32,258.06 a day.

 

Mimi explains that this is the difference between exponential and linear growth. This goes hand in hand with having a long-term outlook. With time, you not only experience a return on your original investment, but also a return on your investment return. Time is the greatest advantage for compounding growth.

 

Mimi referenced a quote from The Psychology of Money multiple times throughout the presentation, reinforced by each of her examples.

 

“If you understand the math behind compounding, you realize the most important question is not, “How can I earn the highest returns?”. It’s, “What are the best returns I can sustain for the longest period of time?”

 

Volatility and emotions in the stock market

 

“If making money was anything but brutally difficult, we would all be rich. Volatility and emotions often get in the way of great investment returns”.

 

Mimi considered the mentality of “buying low and selling high”. The below graph’s black line depicts the return of the global equity market over the past 23 years. The green area shows when investors have bought, and the red area shows when investors have sold.

 

 

 

The conclusion is that investors are buying when markets are up, and selling when markets are down.

 

When markets are up, investors have a fear of missing out. When markets are down, fear of losing capital permanently kicks in.

 

In conclusion

 

Mimi’s presentation re-enforces that patience and time are the most important attributes in investing. With confidence, experience, and a long-term strategy, investors are best positioned to achieve their long-term goals.

 

This is why her presentation is of importance to all generations. The earlier an investor understands these concepts, the greater the benefit derived from years of compounded growth.

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<p><span arial="" style="font-family:">&ldquo;CIBC Private Wealth&rdquo; consists of services provided by CIBC and certain of its subsidiaries, through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (&ldquo;CAM&rdquo;); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (&ldquo;WMI&rdquo;). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (&ldquo;ISI&rdquo;), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. The CIBC logo and &ldquo;CIBC Private Wealth&rdquo; are trademarks of CIBC, used under license. &ldquo;Wood Gundy&rdquo; is a registered trademark of CIBC World Markets Inc.</span></p> <p>&nbsp;</p> <p><span arial="" style="font-family:">Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc</span></p> <p>&nbsp;</p> <p><span arial="" style="font-family:">These calculations and projections are for demonstration purposes only. They are based on several assumptions and consequently actual results may differ possibly to a material degree.</span></p> <p class="Source">&nbsp;</p> <p>If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.</p> <p>&nbsp;</p> <p><span arial="" style="font-family:">Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.</span></p>
 

“CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries, through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.

 

Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc

 

These calculations and projections are for demonstration purposes only. They are based on several assumptions and consequently actual results may differ possibly to a material degree.

 

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

 

Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

 
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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


CIBC Private Wealth services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license.