Monday, February 27, 2012

enough about me... let's now talk about me!

So why am I here blogging to the world (ok ok, about 14 different people who read this occasionally to never) about my trials and tribulations about money and my apparent lack thereof?   Well surprise surprise, It's not all about me.  It's all about YOU in the hopes that you might be able to avoid some of the mistakes I made during the long agonizing period of time it took me to realize that financial advisers aren't in it for you.

I've heard stories from friends (not friends of friends of some guy named fast-eddie... directly from the mouths of my friends) about their limited successes, stagnation and abysmal failures with their stock market holdings thanks to their lack of direct interest and involvement, and of course releasing their mostly small accounts to full control of the adviser.

I remember having phone/e-mail conversations with one of my previous advisers how I would make a specific request for something I wanted and then listen to him/her talk me out of it because my account was too small yada yada yada, so lets do this instead. "This" was almost always (for myself and my friends) a mutual fund with a 3-4% MER.  (Management Expense Ratio)

Since I was young and naive I thought the adviser knew what he was talking about so lets just roll along with his/her recommendations.

Bad move folks...  Even if your mutual fund manages to get you a 3-4% return on your money that profit gets eroded by the management fees.  So if it does manage 3-4% (which is more than double current interest rates and not a terrible yield) your money goes NOWHERE.  They have to do +5% or better year after year after year for you to make any money.

Mutual funds are almost always horrible contraptions with far too many holdings.  (Each holding needs to be bought/sold/researched/discussed at committee all for billable hours of the fund staff which gets rolled into the MER).  There are only a select few funds which I'll discuss in a later post which I would buy ONLY if I were just starting out at say 21 years old, no assets, no consistent job, and without my hopes and dreams crushed by the relentless ongoing reality of cripplingly large monthly payments required to sustain adult life.  (Family... not going out boozing it up every night)

The lesson from all of this?  Once you have more than even a few thousand dollars you should start picking stocks.  YES... Individual, dividend paying companies.  Or a few Exchange Traded Funds (ETFs) which aren't nearly has horrible as Mutual Funds.  If you have an adviser they will no doubt try to talk you out of it because the commissions are too high.  And he/she is right ONLY if they do it for you.  If you open a discount brokerage then commissions are no higher than $20 ish per trade.  $9.99 if you have more than $50k of assets or if you make 30 trades per quarter.  AND some discount brokerages are offering FREE trading on select ETFs.  Which is absolutely fantastic for small accounts or small amounts of money you haven't decided what to do with yet OR haven't accumulated enough of something to buy 100 shares of a company you like.

Do it yourself my friends.  It will save you thousands (or even millions) if you start NOW and invest for 30, 40, 50, 60 years.  (Yes, start at age 18 and invest your whole life... 70+ years)  Or if you're lucky (like my baby boy) the RESP will let me invest on his behalf for his future.  Which will of course be used for school, but with a 20 year timeframe we may have more money in this account than he'll need for his studies which he'll be able to re-invest in his own accounts as he sees fit.  This means he'll have a 70+ year time-frame for investing.  (Hopefully he won't blow it all on booze and sushi like I did with my money)

Full disclosure:
I own Stocks, and ETFs.  These ETFs contain contain stocks, corporate bonds, and some futures/derivatives.  Why?  I don't have enough money of my own to do bonds or futures/derivatives directly.  but I DO have enough money to own stocks.


  1. Your experience sounds familiar. I started buying mutual funds when I was 21. But then switched to individual stocks the very next year after realizing what you wrote. Never looked back since. Nobody cares more about my money than me.

  2. Hey, booze and sushi is way better than cocaine and McDonalds. Just saying.

    1. You're totally right Daisy. But I'm thinking I'm not such a horrible parent already as it seems his tastes are already better than picking Micky D's. He's a good eater if I roast something fresh. (Rack of lamb, roast of beef, braised duck, crown pork roast, or turkey) But left-overs he not so eager. He even points out ducks swimming around in the harbour and says, "YUM!" Or points at fish in aquariums and says "Tastes good!"

      As for the drug of choice... we all have to pick our own poison. I'm hoping he'll pick the bottle like his old man. (And his grand-dad) It will give us something to share together!