Boring but useful investment advice from an idiot

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Full disclosure: I am invested in nothing. I have no debt and few assets. Hopefully my well-vested public-sector pension will meet my relatively modest retirement ambitions.

With that said, I had a conversation recently. It was with a smart person who had a comfortably middle-class amount of money to invest. Never mind about time horizons, risk profiles, or whatever, here's the world's most boring and generic investment advice.


Do you have a guess about currency movement? Do you think you can pick stocks? Are you listening to people who claim either of those abilities? There are two important classes of investment advisors in the world: the first group has a personal net worth, on average, of some billions. The second group, on average, are charlatans.

With few exceptions, forex speculation is garbage. The right guess for future currency movement is "a random walk from the present price" for almost every case. The demonstration of this is simple: entities that can reliably predict forex movements can make billions of dollars through currency trading. There are numerous organizations that desperately and continuously seek this kind of talent at any price, and have the means to exploit it. So if someone tells you they can predict currency exchange movements, ask if they are worth billions of dollars.

The same goes for most other investments. Stock pickers who are able to outperform the S&P500 are also worth billions (a common shenanigan here is for a picker to tell you how they made 10% last year, which is impressive until you find out the S&P went up 12%).

Boring Advice

Unless you need your money in under a decade, put most of it in a big, boring index fund with very low management costs. The rest is details.

These days, the hot setup seems to be Exchange Traded Funds (ETFs). This is more or less a mutual fund that gets traded on the stock exchange, but who cares. What matters is they tend to have the lowest management fees. If you buy an ETF that tracks the S&P 500, you're good.

For Canadians, there's a possible argument you should look at a fund that trades against the TSX, or perhaps more likely, an ETF like the Vanguard 500 CAD-hedged. The argument here is you have to pay your bills in CAD, so a fund that tries to hedge Canadian dollar fluctuations (or is inherently tied to the CAD, like the TSX) is reasonable.

I'd argue those are details. Yes, at any given time, the question of whether you're hedged against the CAD or not may amount to a large pile of money, but in which direction? So in the short term you probably can't bet on currency fluctuations accurately, so you shouldn't worry about them.

If you need your money in this decade, you need to wait for a market moment you can live with, sooner rather than later, and move most of your money to something even more boring, like Canada Savings Bonds or GICs.

Ideally, you will follow this strategy and then forget you are invested in the market, because odds are, a potato (in this case, represented by buying the S&P 500 index, and then doing nothing) can out-invest you handily.

Real Estate

Man, Vancouverites...

You need to live somewhere, it's true. For that reason, buying a home makes a modicum of sense, as a purchase of an asset that has intrinsic value. As a business (i.e. an active rental property manager) it may make sense, but as an investment, be wary. For every hot realty market in North America, there's several that got to star in a movie called "The Big Short," about how people thought house prices weren't going down. (Spoiler: it ends badly.)

Even given that, renting may make some sense. I don't feel qualified to speculate on whether Vancouver's real estate will continue on its stratospheric trajectory. I think you have to treat this as a speculative investment.

Wild Speculation

If you must, allow yourself a small amount of your portfolio (10%, less if you can) that you can actively trade. Buy gold, short-sell Apple, purchase Venezuelan bonds, go long on Powerball. Whatever. If you need to feel like you're involved in managing your money, give yourself a very small fun-fund, and treat it as such. Better yet: track your results against the S&P 500, and remember to track them for long enough that you find out whether your investing habits simply have higher variance than the market (one investment foible is to stumble upon a strategy that runs ahead of bull markets and falls behind bear markets, which means you make extra money in the good years and lose extra money in bad years).

Final Thoughts

Be boring.