THE BEST GIFT MY DAD GAVE ME – AN EASY CHOICE

by Paul Cormier, President, Cormier Strategy Advisors Inc.

June 2014

As Father’s Day approaches I was thinking about the best gift my dad ever gave me.  It was my 16^th birthday and he said to me, “I will give you two options – you can have $100 cash or $1,000 to start a brokerage account.”  Being no fool, I took the $1,000 for the brokerage account.

So as a 16-year old not knowing the difference between a stock and bond and never having thought much about how to grow my money, I set out to downtown Vancouver on the bus and met with my dad’s stock broker.  I sat in the offices of McLeod Young Weir (back when brokerages were brokerages and banks were banks) as the broker opened me an account, showed me the stock market floor (back when trading actually took place on the market floor), suggested some possible stocks for me to buy and gave me some research to take home and read.  My first two stocks were Husky Oil (now Husky Energy) and Loblaw Companies.

I got bigger gifts from my dad when I graduated university and when I got married so what was so special about this gift?  This gift taught me lifelong lessons.  Tell me how many of you can remember what specific items you bought at 16 years old?  This gift instilled in me understanding that:

1. It was my option to grow my wealth. It was in my control. Instant gratification has a long-term cost!
2. Taking responsibility for my own finances was important. That’s why he sent me to meet with the broker on my own. I chose the stocks. It was my responsibility.
3. It is important to pay attention to your investments. Back then I did not know a balance sheet from a balance beam. But I quickly learned carrying too much debt made a company vulnerable and companies that could produce good return on equity generally had stock prices that rose.
4. Saving money early in life is important. At an annual 8% average return, investments double every 9 years. Many don’t start saving until their 30s or even 40s. At an 8% annual return, a dollar saved at age 16 is worth $43 at age 65; a dollar saved at age 35 is worth $10 at age 65.
5. Everyone will make investment mistakes. It is better to learn your lessons early in life when the amounts one has to lose are lower.
6. Taxes are important. You need to track gains, losses and dividends and if you can grow savings tax free, do it!

It wasn’t just that first $1,000 that caused my investment account to grow to a figure with more 0s on the end, it was the lessons the gift taught me.  Now I manage my parents’ money for them so they can be comfortable in retirement.  So get your kids (grandkids, nieces, nephews) interested in investing at an early age – maybe give them a choice like my dad did.  It might be the greatest gift you can give them and if they get really good at it, it might just be the gift that keeps on giving!

Paul Cormier is President of Cormier Strategy Advisors Inc., a firm which provides clients with strategic consulting, project management and short-term management services.