TIP849: Average Returns Can Still Make You Wealthy w/ David Fagan

SPEAKER_1 (0:00)

You're listening to TIP.

Stig Brodersen (0:02)

In today's episode, I'm joined by my close friend and business partner, David Fagan. David is a Chartered Professional Accountant in Nova Scotia, Canada, and for more than two decades, he has helped business owners and families build wealth.

We start with a question David has been asking himself. Why can someone with average returns still build a meaningful net worth? His answer what he calls total wealth performance. And you can think about it like this. When someone asks how your flight was, you don't just describe the plane. You also want to make sure that you make it to the airport on time and that your luggage arrived, and many other things of course. And investing works the same way.

Total wealth performance is whether the money got invested on time and how much of the return actually made it home after taxes, fees and friction. It's the money you ultimately have at your disposal that matters.

SPEAKER_1 (1:00)

Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you.

This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investment in the securities discussed. Now for your host, Stig Brodersen.

Stig Brodersen (1:43)

Welcome to The Investor's Podcast. I'm your host, Stig Brodersen, and I'm co-hosting this episode with my friend David Fagan. David, this is your sixth episode with us, but it feels like we're just getting started, so what is on your mind today?

David Fagan (1:58)

Thank you for the invite, Stig. We've had some beautiful weather here in the Annapolis Valley of Nova Scotia, and when the weather is super nice, I sit out in my backyard and enjoy the beauty, and I've been in a very reflective mood these days, and I've been asking myself a lot of questions. Questions like, why can someone with average returns still compound and create meaningful net worth? And is net worth even a good barometer for assessing someone's financial performance? And then here's a big one. Why do some people save and others don't? I've been thinking about all this stuff this summer, and I've spent over two decades as a Chartered Professional Accountant, helping business owners and professionals and families build stronger financial futures. And the longer I do this work, the more I come back to simple things on how people can grow their net worth. And get this, it's saving, behavior, time, taxes and structure. You know, is there money compounding in a way that supports the life they're trying to build? And maybe that's where I want to start today, Stig. And before we talk about investment returns and strategy and portfolio construction, first people have to save. And I should be clear, I'm not talking about wealth preservation today. That tends to be a different ball game. I'm talking about creating wealth from near zero.

When you talk to people about creating financial independence from zero, savings is a first principle. We've talked about this.

It's what I like to call a irreducible step in wealth creation. And my business partner and I, James Allen, we were talking the other day, and we were just in topic of conversation in the lunchroom. And we were asking, why is it so hard for some people to save? It was just a simple question and it kind of spun me off in a few different directions. And then I was like, well, why do I save and why am I wired for saving? And I really wanted to get to the root of it. And so one day when I was meditating, it actually hit me and I started smiling. I came right out of my meditation that day. It was like, I was almost laughing. I mean, we talk about our lived experiences so much and how they shape us. And well, I had to go deep into the memory bank for this one and to answer a very, very simple question, why do I save? And here it is. I'm just going to share it because it shapes so much of me and who I am and what we'll talk about today.

When I was the whopping age of eight years old, back in the mid 80s, so people can do some math there, I went to the summer Mecca of PEI, the land of Anne of Green Gables.

We stayed in Cavendish and I took every penny I owned with me on that trip. I think it was around $40 at the time, which was for me at eight years old, it was an amazing sum of money.