Investing

How my wife and I followed bad investing advice from family blindly and it blew up in our faces - starting over...

  • Last Updated:
  • Sep 15th, 2021 11:38 pm
[OP]
Newbie
May 10, 2011
85 posts
21 upvotes
GRIMSBY

How my wife and I followed bad investing advice from family blindly and it blew up in our faces - starting over...

Long post warning

Prologue:

I went to school for accounting/business in the mid to late 2000s and became a CPA, CA after. While I took finance classes in university, the idea of investing didn’t really dawn on me (which is stupid considering that I have a financial background. As I finished my schooling in the early 2010s in my early 20s, I was buying and selling Bell (BCE) on advice of my father because it had a great dividend and it was a safe company that a lot of everyone use in their day to day life but sometime around 2010-2013 ish (don’t remember the specifics), he said don’t buy anything because it’s really overpriced and the market will come crashing down at any moment. He said he had lost a lot of money on Black Monday in '87 and he didn’t want me to lose all my money. So I didn’t invest it and put it into a money market fund, waiting for the right time to buy. Every time I asked, he would say “it’s way too high”. Little did we know that from 2008 would be the one of the biggest bull markets in history.

Eventually, I realized that he is the type of guy who thinks things should always cost $20 but really they cost $50 these days or simply put, he’s stuck in the 1980s/1990s. It was the same thing when my wife and I bought our first house a few years ago. He said don’t offer anything above asking price (out of the corner of my eye, I saw our real estate agent smirking because she knew the market), we eventually went about 7% over asking but we are happy with our house. My dad has been a general dentist for 40 years, so he is wealthy (not obnoxiously so but more than enough) so I think he doesn’t realize what’s it’s like to be starting out or how cautious he can be because of his wealth.

So right now, I have not invested my money in anything for 8-10 years and boy I have been kicking myself for it. I am not going to abuse hindsight to say I would have bought all the Bitcoins or Tesla I could have but even just buying and holding/reinvesting in Bell would have done okay than nothing. I’m just angry because I just expected better of myself considering I am a CPA, CA. I also want to tell my dad how wrong he was - but that wouldn’t solve anything. I guess I didn’t lose anything - only to inflation. I did try to argue with him a few years ago about how I need to invest to get income but he wouldn’t have any of it.

My wife’s story is much simpler but just as frustrating (married 3 years ago for context). She was not interested in investing at all or really financially illiterate so her father did all the investing and all she did was pick which interest rate she wanted. Unfortunately, he only put her money in GICs because it was drilled into him by his parents that if you invest in the stock market, you will lose everything. So he faithfully followed that advice. It was backed up by his mother-in-law (my wife’s grandmother) who invested in FactorCorp and lost some money (not sure how much).

My-in laws are farmers who plead poverty but are not poverish. Back 20+ years ago, GICs were okay but now GICs are worth nothing. They do have a small bit in mutual funds but they found that mutual funds are scams (big shock I know). They could have put their money into safe dividend securities and doubled or tripled their money at least. It just pains me to see what fear and general ignorance does to people (including myself). But to be honest, my father-in-law would probably check the stocks all day and see that they are going down and panic sell. It’s not too late for them to invest but I don’t think I can change their mindset. My father in law is the type of guy who opens up 20 different bank/savings accounts basically every time a bank offered a new promotional interest rate, he would open up a new one.

My wife used to be like her parents when we first got married. “We could lose everything!” was her usual comment about investing to which my first response would be “if all of the stock market goes to zero, we have a lot bigger problems” and then my 2nd response would be “where do you think your job pension comes from?” but now she’s stating to understand why it’s important and how it’s safer then it appears, plus she doesn’t want to do real estate investing to become a landlord.

The interesting thing is that both of our fathers weren’t wrong, it’s just they weren’t right in their assessment/methodology (with some hindsight of course). Warren Buffett made a great point once of living in “uncertain times”, he said that September 10, 2001 was an uncertain time, you just didn’t know it yet. Also, the biggest lesson is “Time in the market is better than timing the market” and now we are looking at invest when everything is at an all time high.

Current - How I Stopped Worrying and Started to look at Index Funds (plus commentary on today):

I started my proper investing journey by reading The Intelligent Investor and I found some of it to be useful (the bits about buying bonds and cigar buds, not so much). I have also watched and read from Warren Buffett/Peter Lynch/Jack Bogle and all of them say “for the average person, just do an index fund”. These are some of the most successful people giving our free advice. Buffett went so far as to post the results of a bet of his where he put the S&P Index against a group of hedge funds and in the end, S&P kicked ass compared to what the hedge funds did. The more I researched, the more it makes sense because our lives are so busy and there’s too many rabbit holes out there to be sucked into or just meme stocks in general. Plus we don’t really need dividends right now, only growth. The index fund should work for my wife because even though she’s a risk adverse person, the “set it and forget it” should appeal to her.

It amazes me how many people don’t follow the index advice, maybe it’s because it’s too boring for them. “Know what you own” is the one of the biggest pieces of advice that I got from reading/watching and I don’t know if a lot of people actually do - aka this DOGECOIN bs. To me, right now, the stock market is filled with degenerate gamblers (TO THE MOON!!!).

The hardest part of the index strategy is FOMO, and it’s real. Not necessarily from GME/etc but other things in general. The index fund method is meant for average people and not meant to get rich quick or even get rich from being a smart investor (Mark Cuban once said that diversification is for idiots and concentration is how you build wealth (at least initially)). There could be undervalued stocks out there but in the age of information and technology that we live in, I think a lot of those sorts of secrets aren’t staying secrets for long.

In the end, we went with 100% VGRO where it’s 80% equities and 20% bonds, starting with a lump sum and then lump sum in chunks as we are able to afford it. It’s a little uncomfortable that we are investing when everything is at all time highs but we have 30 more years to go so in theory, coupled with consistent lump sums, it shouldn’t matter. I might allow myself maybe 5-10% of the portfolio as “play money” but nothing more than that.

Basically this is a tale where ignorance/complacency ruled supreme and trust was misplaced. Timing the market never works, even Michael Burry was 2 years off his big short and not trusting the market also never works because there’s no better alternative unless you want to real estate invest.

Thank you for reading and I would love to hear people’s thoughts.
78 replies
Deal Addict
Jul 23, 2007
4474 posts
3051 upvotes
Nice read. Like your dad, I went through the 1987 crash as well. Over a few days, Black Monday being the worst, the market went down something like 30% altogether. From what I read in the newspapers at the time, it was a lot worse for investors who were margined. I just held on to the individual stocks I owned already, until the financial storm had passed. Survived and continued my apprenticeship in the stock market over the next few decades. Not much for market timing. Risk averse. Basically buy and hold, and mostly add to whatever I already own along with a few new additions along the way.

I own BCE and other individual Canadian dividend stocks along with a balanced global index ETF. That's about my comfort zone in any type of market. Just keeping it simple.
Deal Addict
User avatar
Aug 30, 2020
1070 posts
1671 upvotes
YEG/YYZ
Boomers were born in the age where the average savings account gave 4% and a GIC probably gave 10%. Their advice is as relevant as "walk in and hand in your resume". Jobs were plentiful, high paying, and low skill. Cost of living low. Their advice is not relevant anymore, even though they think it is, because they've already reaped the financial benefits of the past.
Deal Expert
User avatar
Feb 8, 2014
21984 posts
8442 upvotes
Socially Distanced
I'm not a fan of investing all at once because of market fluctuations but if you wait for eternity you gain virtually nothing. Spreading it out over a few months to a year can make sense, introducing some dollar cost averaging. However if the bull market continues then you are giving up some upside.

What you can do if you are worried is set up alerts so you get notified if an investment drops to a predetermined level. Or a percentage, say 10% less than the 52 week high.

Manged funds often have a kind of advantage that they will sell off quickly if the market is in freefall, i know more than a few people whose investments didn't go down at the market rate back in March 2020, instead of being down 25-30% many were down 10-15%. Then those funds bought back in when the market was lower so actually ended up ahead. That said in general managed funds under perform and the MER is like a voluntary tax and cuts your upside by up to a third at times.
In fact in Rand McNally they wear hats on their feet and hamburgers eat people
Newbie
Mar 26, 2018
22 posts
21 upvotes
CanadianConsumerYEG wrote: Boomers were born in the age where the average savings account gave 4% and a GIC probably gave 10%. Their advice is as relevant as "walk in and hand in your resume". Jobs were plentiful, high paying, and low skill. Cost of living low. Their advice is not relevant anymore, even though they think it is, because they've already reaped the financial benefits of the past.
The parents/in-laws were giving advice based on their own risk tolerance. OP, it wasn't bad advice, it's just wasn't suited for you.

Also, it didn't "blow up in your face"... you safely put away savings. At very low return; because that is the cost of security. What if you had bought at the peak of 2020, before the steep COVID decline? What if it hadn't rebounded? You'd be in a much worse position than you are now.

The good news is now you seem better informed to make decisions based on your circumstances.
Deal Addict
Dec 4, 2011
1864 posts
1472 upvotes
Montréal
One of the reasons I do not give investment advice to anyone is that risk tolerance is such a personal thing.

However, going through 1987, 00s dotcom bust, 2008 and now 2020 the one universal truth it showed me is that a well-diversified portfolio composed of stellar companies will always rebound, often inside a year or two. Will this go on for ever, who knows, but sitting on the sidelines as you have seen is worse.

I usually invest all at once (huge debate between installment and lump sum investing with no conclusive answers) but I have to say that I have been going gradually in the past year due to the levels of the market. I did go all in at once in may 2020 with new money on banks and REITs because I saw it as a generational opportunity at that time.

Investing regularly throughout the remainder of your active life is the one best thing you are doing. Stay disciplined and you will be OK. But get ready to see a few 30-50% drops in your portfolio every decade or two.
Sr. Member
Dec 8, 2020
565 posts
579 upvotes
Toronto
OP other than the long post about families & bad investing advice, what are you asking of RFD'ers, what input or suggestions if any are you specifically looking for?

if you've started the new/revived investing journey in ETF's, if so, is it working for you?

are you considering alternative approaches, what if any are you looking at?

any suggestions (AKA: sometimes aptly taken as advice) is worth what you take from it. Only you & you alone are responsible for the fortuitous misgivings. Blame no-one but yourself & never give investment advice to anyone.

good luck to you & your wife on your future 40+ year investing journey, invest wisely, sleep well at night.

disclaimer: As a 74 year old retired senior having seen most all of the 'craziness of the last 52 years' since I bought my first stock in 1969, I invest to expect the unexpected.

.
Last edited by Janus2faced on Aug 4th, 2021 11:47 am, edited 2 times in total.
.
Deal Addict
Sep 6, 2017
3905 posts
2487 upvotes
Its your money and you can do what you want. Don't blame people and I think you should jump on ARK ETFs like some rfders if you missed the boat.
Deal Addict
Mar 3, 2018
2230 posts
2278 upvotes
GTA
It is sad to see adult children blame their boomer parents for their investment decisions. I guess the days of taking personal responsibility for ones own decisions no longer applies. Actually disappointing considering the OP being a CPA should have been informed and capable. Likely the OP was always just as risk adverse as the parents as even now being conservative by only investing in VGRO.
Member
Nov 10, 2019
333 posts
251 upvotes
My family's mindset is very similar to yours. I guess it's the fact they lived through all those crashes, been badly affected and care about me to tell me to stay away from it.

I understand and don't fully blame them. Long story short, I was able to invest again in 2020 and recently got my first house despite them constantly reminding me of house price crash in 87'. Told me not to go too over asking... I went 50k over bc of FOMO.

I hope you don't be too hard on your parents, it's all really the risks and decisions we take to blame for. Having good discussions over the years with friends and colleagues about finances has helped me well too.
Sr. Member
May 24, 2018
524 posts
330 upvotes
Ontario
It is long. But what really blew up in your face(s) ? Did you lose money or time (~10yr) ?
If you did not have a goal/plan yourselves in the beginning, then you should not say you followed bad investing advice.
So if now you do, seek the advice today to reach your goal, then you'll find out if it's good or bad in another 10 yrs :-)
Deal Expert
User avatar
Dec 12, 2009
21215 posts
9615 upvotes
Toronto
Great life story OP. In many ways my investment journey was similar in that it was full of non ideal mishaps along the way. It is all part of life's experiences. My parent were not investors and so I can neither credit them or blame them, not that I would anyway as anything I obtained over the years on investing including from professionals is merely advice and I alone sit in my c-suite making the executive decisions. I own the failures and successes.

That said, I would suggest not dwelling too much on the negative aspects which your story seems to focus on, but be totally mindful of the lessons learned so that the bad parts of history do not repeat at least not for the same circumstances of the past. I would say in spite of the slow start, you are well positioned to do well for yourself as you appeared to have equipped yourself with the 20% knowledge and 30% humility necessary to be a successful investor. Now you just need to make sure you are able to tame the 50% temperament.

I would argue that you have way more than 30 years of investment timeframe ahead of you. Even in retirement, you remain an investor, but you will have an additional ball to juggle - decumulation. I fully agree with index investing as the way to go, let the market do the heavy lifting and be satisfied with market returns less fees. As for timing the market which is what your individual lump sum investments entail, it is hit and miss and you only find out whether it was a good idea after the fact. Most often it is not. If you dwell on buying into a market peak, it suggests don't believe that there may be another market peak tomorrow and the day after. Investing is fraught with optimism and as you have already learned an investment costing $20 yesterday and reaches $50 today may never ever be go back to $20 again. Do what you need to do to manage the temperament so that it does not derail the investment plan. Good luck and hopefully we will all share nothing but success stories in the future.
̶K̶o̶o̶d̶o̶ ̶$̶4̶0̶/̶6̶G̶B̶
Public Mobile 2016 fall promo, $23/1GB, $38/5GB
Fido $0.00/4GB+tablet
Tangerine Bank, EQ Bank, Simplii
Deal Guru
Dec 5, 2006
10643 posts
5652 upvotes
Markham
Have to say your parents and in laws did those investments for you two's best interest based on what they knew and believe. GIC is better than sitting in the chequing account.

If you or your wife didn't know how to invest and others tried to help you, be grateful. Otherwise, no one wants to help you in the future. Because if your portfolio grows, they get nothing, if your portfolio dropped, they get blamed

Just appreciate their help and take over and move on
Deal Addict
User avatar
Aug 4, 2014
3554 posts
3896 upvotes
Toronto, ON
Just keep in mind that it would’ve been a completely different story if you posted this in early 2020, with all your parents shaking heads, “We told you so!” shortly after and wife never wanting to hear about investing in the stock markets ever again. Wishing you luck surviving the next correction and crash while invested, as you won’t know your real personal risk tolerance until you do :)
Deal Addict
Jan 3, 2013
2387 posts
656 upvotes
Sidney
From the title of your thread I thought it was going to read something like "a brother-in-law conned us to invest all our savings in a ponzi scheme and we lost everything and double mortgaged the house". I wouldn't say it "blew up in your face". You missed some gains. Time IN the market, not timing the market. Lesson learned, now go deploy.
Deal Addict
User avatar
May 11, 2014
4768 posts
5807 upvotes
Iqaluit, NU
Your parents were actually financially prudent. Sure they may have not made the best investment decisions, but perhaps they didn't need to.

There is lessons and wise advice coming from their actions. Being frugal and having the cash you need is not a bad thing. Your inlaws having only GICs is coming from ensuring cash is at hand and no volatility. If they save more money than they spend, and have enough during retirement, there is technically nothing wrong with that. Your father buying BCE stock and only this, although I question the safety of doing this longer term, technically he is correct in sticking with a safe, blue chip play (although I would say spread it to different companies because even large scale blue chips can go down).

Assuming the investment is relatively reasonable, there is really no right or wrong way to do things. What matters is whether the way to do it is right for you. I don't hold much index funds as all, in fact the ETFs I hold are not index for the most part. Most of my plays are pure stock. My parents place everything in a savings account except for some investments in mutual funds. I am doing well and honestly, my parents are doing well too, They are more than comfortable. Could they earn more money on their investments, absolutely. Could they buy ETFs for themselves, with enough training I am sure. But in the end, it's their money and after paying 2% fees and earning sub 1% interest, guess where they are? Comfortably retired with extra money to boot despite being fairly low-medium income their entire careers.

While there are definitely bad investments (and I agree the current mania is scaring me), ultimately so long as the tenants of finance prudency are met and money is put away, it can still more or less get you to where you need to go. So no, I wouldn't dismiss your parent's and your inlaw's advice. Take their opinion and reasoning, understand where it is coming from, and take whatever lesson you can from this. Just like index investing. I have significant reservations about some of the beliefs with index investing such as the fact that it is "impossible" or "difficult" to beat index returns and fees should be the main focus. But that being said, it's simplicity in allowing someone to invest and easy concept to practice is something I highly value and so while I would never follow it myself, is something I would recommend for most.

I
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Deal Addict
User avatar
Oct 14, 2015
1389 posts
1287 upvotes
This video could be posted anywhere because Daniela and Dave discuss everything; bonds, inflation, politics, energy, precious metals, bitcoin, climate change ...

But am posting here because it brought to mind the rhetorical question: What investing advice would you give someone if you had been invested in equities from 1967 to 1981 and adjusted for inflation, lost 80% ?

Listen for just three minutes starting at 10:05

Sr. Member
User avatar
Jan 23, 2011
736 posts
570 upvotes
Here's my advice to OP, from a stranger to a stranger:

1.Never be greedy
2.Always have patience
3.Keep it simple
4.Keep your eyes open
5.Keep impeccable records
6.Study past mistakes, but always look forward
Newbie
Mar 2, 2021
39 posts
43 upvotes
While we all like to feel we are investing geniuses, remember, the US Federal Reserve policy is the principal reason why stock markets worldwide have done so well since 2008. The growth in the GDP in the developed world pales in comparison the the growth rate of the broader US stock market.

So your parent's cannot really be blamed for giving you the wrong advise. Even many of the best money managers and economists did not have the foresight to realize that the Fed would be able to keep interest rates so low for so long, without inflation forcing them to reverse course. It took a long time for market participants to realize the Fed has their backs. You cannot fight the Fed. History has shown, you will lose every time.

So until the Fed starts raising rates, you should be safe.
Jr. Member
Jul 22, 2018
142 posts
116 upvotes
I mean hindsight is 20/20.

stocks arent a guaranteed thing.

if you are making steady cash flow and dont want to invest its ok. cant tell other ppl what to do with their money.

bad investment advice would be like buying some shit company.

Top

Thread Information

There are currently 2 users viewing this thread. (0 members and 2 guests)