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