“I’ve always prided myself in leading by example….in this case, I didn’t”
Make sure to watch up until at least 2:45 in the video to find out how Michael Lee-Chin corrected one of his biggest investing mistakes.
The Honourable Michael Lee-Chin is a true Canadian investment success story. He has been one of Canada’s most successful financial advisors and investors over the past few decades. Canadian Business estimates his net worth to be over $2 Billion. When Michael speaks, the investment world listens and takes notes.
My personal familiarity with Mr. Lee-Chin goes back to the late 1990’s. As a mutual funds advisor, I recommended his AIC funds to clients. Investors were extremely relieved to discover that their AIC funds did not participate in the dot com crash of the early 2000’s. In this regard, Michael taught everyone a lesson about not chasing asset bubbles, or following the greed of the crowd. I truly respect the man, not only for his personal success but his investing acumen.
Public Vs. Private Investing- Which Protects Your Portfolio Better in a Crisis?
I highly encourage you to watch the video at the beginning of this blog featuring one of my investing heroes, Michael Lee-Chin. At the beginning of the video, Michael describes the effects the 2008 financial crisis had on him, causing him to “take stock” in his overall investment philosophy. Looking back, he realized that the main reason he was able to “come out less bruised” than most is due to his private investments, not his public ones (for a retail Canadian investor, such as you and me, private investing would include the exempt market).
Upon the realization that his personal fortune weathered the storm quite nicely due to his private businesses, Michael realized that, like almost every other financial advisor in Canada, he had been recommending public investments only to his clients.
“I felt awful, because all of my clients, whom I had been advising since 1977, their portfolio was 100% public”
Michael decided that he could either continue to be like everyone else, and do nothing, or lead by example, and do something about it. Priding himself on being a leader, he chose to do something about it, and offer private exempt market opportunities to clients.
Learn more about preventing costly investing mistakes here.
My Personal Exempt Market Epiphany
Although my investment career has not come close to approaching the $2 Billion+ net worth of Mr. Lee-Chin, starting in 1993 I have had a successful career in the financial industry. Until 2011, I too was involved in the “100% public investments for everyone” philosophy. Also thinking there had to be a better way than stocks and bonds only, I discovered private market investing through the exempt market. Three years later, I am even more positive about the exempt markets and how they can help Canadian investors. Results witnessed so far:
- Increased confidence in an overall investment plan
- Comfort in not riding the stock market rollercoaster to the same extent as before
- Confidence to weather another financial storm when it comes
However, Be Forewarned
There is a certain element of high risk that accompanies any individual exempt market product. I highly recommend that, as an individual investor, find out everything you can about these products, not only their benefits but limitations. These risks include lack of liquidity, business, economic, key person, specific project, geographic, etc. There are also fees and commissions to factor in also.
In no way are the exempt markets the “magic bullet”, the panacea that magically makes you rich (or richer). Some of the exempt market marketing out there is misleading. There are salespeople who will tell you how much better their products are than public stocks and bonds, or that you can achieve such greater returns. These are the all-too-common practices that I am absolutely against. The problem is that it is never a balanced approach. They seem to tell you all the good stuff, and conveniently leave out the risks and limitations. Discovering the exempt markets is definitely a worthwhile journey, but make sure you find out both sides of the coin.
I have found that, by rolling up my sleeves and investigating as many products as possible, as thoroughly as possible, great rewards can result. The best way to describe it is like panning for gold. You sift, and eliminate the subpar stuff. Sift, and eliminate some more. Sometimes this process requires a great deal of patience, but by being diligent, eventually you can be left with the metaphorical handful of gold.
A great example of successful exempt market investing can be found here.
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