Introducing: A Way to “Hedge” Your Life Expenses
I’ve got a special treat for you today!
It’s an idea I came up with over the Fourth of July weekend when I was on a run with another professional investor.
The two of us got to talking about stocks and other investment ideas, and we came up with a great way to pay for your own personal life expenses.
It all started by the two of us talking about our families and where we spent most of our money.
Take a look at the idea we came up with below!
Seasons Change, but Spending Money Lasts Forever…
“I can’t wait till my toddlers are potty trained and I don’t have to pay for diapers anymore!”
Tom and I were barreling down the backside of Kennesaw Mountain on Saturday morning, trying to get our run finished before the Atlanta heat picked up.
I enjoy my running conversations with Tom because we’ve got so much in common.
We both run at about the same pace. We’re both dads and love our kids deeply. And we both have a passion for investing and helping others protect and build their wealth.
Tom currently works for a large institutional investment firm and puts together customized portfolios for key clients. I love to pick his brain about what investments he is making for his affluent customers.
But on Saturday we were talking about our families. And in particular, how we were managing our family budgets.
“Yep, I remember the day we threw out our last diaper,” I told Tom. “But man, it doesn’t get any easier. These days, I swear I’m spending more for my kids’ school supplies than we ever spent on diapers!”
As the miles passed by, we talked about the areas where both of our families spend money.
Ironically, most of the places where Tom and I spent the most money wound up being publicly traded companies with stocks that have been doing quite well!
A few standouts from my family’s budget include Costco Wholesale Corp. (COST), McDonalds (MCD) and Ulta Beauty (ULTA). Keep in mind, I have three teenage daughters and two pre-teen girls. So our family buys makeup by the pound!
Tom’s family spends a big portion of their budget on Delta Airline (DAL) tickets to visit the grandparents, on Under Armour (UAA) apparel for both parents and kids, and even Coca Cola Co. (KO) because Tom prefers Coke’s “PowerAid” brand over Gatorade and his wife loves VitaminWater, also owned by Coca Cola.
“You know, with all of the portfolios I put together for my clients, I’ve never thought about putting together a ‘family life hedge’ portfolio.”
The more we talked, the more I realized that this was a GREAT idea for us to talk about here at The Daily Edge.
Assembling The Readers Life Hedge Portfolio
What’s the purpose of building your family’s wealth?
If you’re like me, the money you save and grow is much more than just dollars. Your wealth represents your opportunity to live a rich and fulfilled life.
With the wealth you’ve worked so hard to grow, you can cover your day-to-day expenses without worrying how you will make it. You can buy gifts for the people you love and care about.
Your wealth allows you to enjoy experiences with those who are closest to you. And those experiences can be as simple as weekly coffee with a friend, or as elaborate as taking your family to Paris to see the sights!
You can even use your wealth to donate to the causes and concerns that are nearest to your heart.
I love thinking about what I can do with the income I generate from my family’s investments. And it’s wonderful to look back on special memories of when we’ve spent that wealth on things that our family has truly enjoyed.
I’m always paying attention to where our family spends money, and you should be too!
Not just because we want to be wise stewards of the wealth we’ve worked hard to grow. But also because paying attention to where we spend our cash can give us some great ideas for where to invest. Done right, this approach can actually replenish the wealth that you spend, acting as a “life hedge” to put your money back into your account.
For instance, it would make a lot of sense for my family to invest in Costco, McDonalds and Ulta Beauty.
Not necessarily because my family’s spending will make a big dent in these company’s profits.
But because many other families are making similar decisions, and spending money at the same place our family shops. Remember, about 70% of our U.S. economy is driven by consumer spending. So as we all collectively spend our wealth, it helps to grow our economy and drive key stock prices higher!
That’s why shares of COST, KO and ULTA have performed so well over the last few years. Because families like yours and mine have been spending money and growing profits for these stocks.
So here’s a question…
What does the Readers budget look like? Where do you spend your money?
Chances are, a large portion of your spending goes to companies that are generating profits and benefiting from the strong and growing economy.
Why not use your literal shopping list as an investment shopping list?
Of course, you need to do a bit more research to figure out which companies are truly profitable and growing. But where you spend your money is a great place to start when figuring out which companies to invest in.
Before long, your investment account could be “hedging” your life expenses, helping your wealth to go farther and give you more opportunities to do the things most important to you!
Here’s to growing and protecting your wealth!