Great, eh? You spend a few decades on a subject and land on the conclusion that you don’t need to know anything about said subject. Of course the subject in question is investing and building wealth.
So did I waste my 10,000 hours? Absolutely not.
While The Comedy Network offered the lovely tag line of ‘Time Well Wasted’ I know that my time spent investing and studying investing and watching investors and talking to investors as an advisor and as a writer and ‘helper’ is all time well spent. It’s a wonderful and useful conclusion that if nobody knows nothing about investing, you don’t need to be an investment genius in order to be a very successful investor. And to be fair, it’s not that you don’t ‘need to know nothing’, it’s that you don’t need to know much at all. You just need to understand the very basic truths.
The investment community wants to complicate things.
For many in the investment world it’s their mission to let you know how complicated things are and how you really need them. The more they complicate things the more you feel that you need them. And of course all of their expertise comes at a price, a steep price. In fact have a read of Larry Bates’ Beat The Bank and then check out the T-Rex tool on Larry’s site that will show that you would likely fork over half of your investment wealth over time.
The truth is, investing is dead simple.
Investment professionals can’t beat the simple benchmarks for the stock markets in Canada and around the world. Yes, a monkey throwing darts at a list of the biggest and most successful companies will beat those investment professionals more often than not. That monkey just has to throw enough darts. There are those studies from SPIVA that clearly show year over year and decade over decade that active fund managers simply cannot beat the market.
There is no talent when it comes to stock picking. Well at least it’s so rare, it’s mathematically zero.
All you have to do is buy the entire market. That means you’ll own many of the most successful businesses that drive an economy. To help clients understand the difference between expensive active management (guess work) and the lower cost passive approach at Tangerine Investments we would often put it this way.
We don’t try and beat the market, we just buy the market.
When you take out the guesswork, you can take out a majority of the fees.
Nobody knows where the bond markets are going.
For years and years we heard from the experts that we were going to enter a period of rising rates and that the bond bull market was over. Bonds were going to get crushed. As you may or may not know, when rates and yields increase bond prices go down. Well, it took ‘forever’ for the bond markets to react as predicted (the experts were off by many years). And now the government agencies are in a rate hold mode. There is now talk of rate cuts in the near future.
The guesswork and expertise was not ‘investable’. Nobody knows where the bond market is going.
Here’s what my stinky bonds have done over the last year in price terms. This chart is for my broad based bond fund (yes you can just buy the broader bond market as well) courtesy of TD Waterhouse.
In fact, those who reacted to the bond market noise would have generally made adjustments, lessened their bond yield and also the the ability of those bonds to work as portfolio shock absorbers. Please have a read of Stocks are the unruly kids. Bonds are the adult in the room.
The economic indicators and predictors are a joke.
Yes we’re back to time well wasted. You can take that recent bond market experience and apply that no-need-to-know basis against the endless market, economic and political topics du jour. You don’t need to know or worry about Brexit or trade wars or Donald Trump or the US Department of Justice investigations into Apple and Google. See my Seeking Alpha article for a longer list of things we can ignore.
You don’t need to know this stuff. Don’t pay someone to guess about this stuff.
Focus on what you can control.
You can’t control the bond markets or Donald Trump or Brexit negotiations. But you can control …
- your asset allocation (the stocks and bonds and other assets that you own)
- your fees
- how much you invest
- your tax implications
- your financial future
From there you simply have to get out of your own way. You don’t have to look. You don’t have to watch. You don’t have ‘to know’.
Most investors do want some coaching, advice and help. And there are options on that front. The Canadian Robo Advisors mostly embrace passive investing and keep the fees very reasonable.
You might self-direct your own ETF Portfolio or hold a mix of ETFs and individual stocks. The key will again be to ignore all of the noise and stick to your simple plan. I hold a mix of ETFs and stocks. I read up on my stocks for entertainment purposes, I don’t react. I read and ignore.
To learn more about how to create ETF portfolios or other index-based options you might start with my review of John Robertson’s The Value of Simple. In that article you’ll also find links to a host of advice-only planners. If you have a more complicated arrangement they can help you with that asset allocation, taxation, investor behaviour and more. For many, it’s a great idea to develop that big picture financial plan. Advice-only planning means you pay for the plan. The advisors are not attached to any investment products and that means you’ll receive conflict-free financial planning. They’ll focus on the things that are important, such as you reaching your goals. There certainly can be value in advice.
If you’re in the early to mid stages of wealth creation you may not yet need a broader financial plan. You might simply need to fill up your RRSP and TFSA with sensible investments in a cost-effective manner. I am happy to help in that regard, for karma.
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Contact me, Dale @ firstname.lastname@example.org or better yet, leave a message.