December 5, 2019

2 min read

X-Mas Edition: Santa’s investment lessons
Santa Claus is comin' to town… merry Christmas!
Nicholas Flaherty Image

Nicholas Flaherty - Investment Strategist - FWU Invest S.A.

Christmas is nearing and we are all looking forward to spending the holiday season with our families and loved ones. One man, though, will be working flat out; traveling all around the world, working around the clock, even during the night, having to endure tight chimneys, guard dogs and heavy bags. We are, of course, talking about good old Father Christmas – Santa Claus!

Many people may not be aware of this, but Santa is actually really good with his money. In fact, the Christmas period is the only time he works, and he manages to fund his lavish lifestyle for the entire year, which is astounding – one night’s work for the entire year! So, how does he do it? The answer is that he’s a good investor – he makes that money work for him, so he doesn’t have to.

Let’s have a look at two key investment lessons we can draw from Santa:
1. Santa does not spend all his money after Christmas

In his younger days, Santa used to run into trouble around Easter time, as the money he made during December ran out. The nightlife in Lapland, while full of excitement, is also expensive – especially if you are a local celebrity such as Santa. Over the years, however, Santa managed to put a large chunk of his money aside. But he didn’t just keep it in an account at the Bank of Lapland; crucially, he also began investing it in the stock and bond markets and saw it bloom into a very large nest-egg, which he has used to buy himself a large penthouse and to fund his lifestyle throughout the year. The lesson here for us is simple: we should stay disciplined, by consistently, ideally every month, setting money aside that we then put to work in the financial markets. Even if it’s a small amount to start with, over the years it will become a large pot, helping us in our retirement.

2. Santa is not scared of taking risk

Although Santa has mellowed over the years, there’s a reason he chose his hazardous profession – he likes a bit of danger. This, in turn, is also reflected in his investment portfolio – he loves the stock market! While not all of us have the same risk appetite as Santa, this is an important lesson, nonetheless. Interest rates across Europe are at rock bottom and we are likely going to have to even pay for our cash soon, as many banks start passing on negative rates to their customers. We are thereby left with a situation where we can no longer make a return by leaving money in an account – we need to put in the markets, where we can make a return. This doesn’t mean we should immediately put all our money into the stock market; for those more risk averse than Santa, the bond market is also an option. But the point is that we need to learn how to embrace a few risks, otherwise inflation will just eat away our money.

No doubt, Santa has managed to secure himself a great life, in large part due his personality and present-delivering skill, but crucially also because he handles his money wisely. He’s disciplined, as after every Christmas he allocates a sizeable amount to his ‘savings budget’ and does not spend it all at once. Moreover, he’s able to handle risk and has invested in the stock market every year for the last 50 years, achieving an almost 10% per annum return. Santa not only knows how to spread holiday cheer, but also has a few ideas on what we should do with our money – be sure to ask him more when you see him in a few weeks!

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