Planning Tales: It’s Okay To Invest Your Own Way

“Planning Tales” is an occasional feature where we look at real-life client circumstances that I have encountered over the years, and what those clients have to teach us about financial management. Names and some details are altered to protect privacy.

When we look at the world of personal-finance writers, I have noticed somewhat of a tendency for each writer to want to be “right,” especially when it comes to investing. For instance, I was involved in a discussion on Twitter recently regarding gold. One individual in particular held the opinion that gold is useless as an investment and should never be held by anyone, ever. That was followed up by another individual, a few days later, arguing that it is, essentially, ridiculous to focus on dividend yield when investing in stocks, as dividends don’t mean a darn thing.

What I find interesting about these discussions, is that the proponents of these ideas often go at them with an almost evangelical zeal. There is simply no room for them to be wrong. Anyone who disagrees is simply not smart enough to see the brilliance of their point of view.

And yet, I can produce a raft of opinion pieces, both scholarly and otherwise, that would argue the exact opposite of those two positions. And those articles would, in many cases, be just as adamant and just as unyielding in their opinion as the originals.

If you’re an average investor, and you are trying to navigate your way among this seeming sea of contradictory investment information, how do you possibly decide which way to go?

To try and help, let me tell you a totally true story.



The Mystery of The Modest Millionaire

In one small town I worked in, I met a man named Tony who was in his mid-to-late seventies. He had already been retired for 15 years or so, and was in to see me about investing some of the money in his savings account. As I always did with a new client, I started asking him about his life, and what he really wanted out of the money he had saved.

I quickly learned that Tony and his wife had moved from Italy to Canada in the 1950s. He had arrived in the small town where I met him and started working in the local paper mill almost right away. Within a short while, he was able to buy a home, the same one that he still lived in, and he spent the rest of his working life at that mill. He eventually retired as a millwright.

What intrigued me about Tony was that, even though he had been retired for some time, he still had well over $800,000 invested at the bank where I was working. He also owned his home outright, and had no debt. Further, the entire amount of money he had at the bank was invested solely in savings accounts and Guaranteed Investment Certificates (GICs, also known as term deposits).

During the course of my discussion I learned that Tony:

  • Had never owned any properties other than his house;
  • Had never received an inheritance;
  • Had never held a senior position at the mill;
  • Had never received a severance package, lottery winnings or other windfall;
  • Had never banked at any other bank in Canada outside of the one I was working at; and
  • Had never invested in anything other than GICs and savings accounts. Not even once.

Needless to say, this confounded me. I couldn’t figure out how it was remotely possible that, under these circumstances, a man his age could have a net worth of well over a million dollars. 

After thinking about it, I leaned in and asked, almost suspiciously: “Tell me. How is it that you came to have this amount of money?”

My client leaned in, as well. With a twinkle in his eye, and a faint smile on his lips, the truth spilled out in a still-strong Italian accent: “Let me tell you something. First, I have never in my life borrowed money. If there was something I wanted, I saved my money and paid for it in cash.

“Second, every single paycheque I ever got from that mill, I took a part of the money and put it into savings. Every. Single. One.

“And that is how I came to have this money.”

How Can Something So Wrong, End Up So Right?

By now, there are probably a number of financial ‘experts’ who are apoplectic. Why, Tony is an idiot! He broke all the rules! He never:

  • Had rental properties;
  • Sweated over his dividends;
  • Formulated a tactical (or even strategic) asset allocation plan;
  • Accounted for geographic and sector diversification;
  • Worked a “side hustle”; or
  • Followed any of the generally-accepted “rules” of investing.

And yet, well advanced in years, he ended up in a place most of us would be very happy to be. 

In reality, Tony had three things going for him, and used those three things to his advantage:

  • He knew what he wanted. He was comfortable only with guaranteed investments, so that’s what he stuck to.
  • He had a plan. He knew that saving a portion of his paycheque and avoiding debt would provide the financial security that he desired, and he monitored his progress over time.
  • He was disciplined. He stuck with his savings strategy and avoided debt, for his entire life.

Don’t Be Afraid To Strike Out On Your Own

Investing your way.

What Tony’s example teaches us is that there isn’t just one correct way to invest. There are many paths an investor can take to achieve their goals.

The generally-accepted wisdom when it comes to investing is to build a portfolio that is diversified by asset class (such as stocks, bonds and real estate), by geography (holding assets domiciled in your own country as well as internationally), by sector (such as energy, manufacturing, and health care), and one that is widely diversified in its holdings.

I do not at all disagree with that approach. I use it myself, and I accept that it is the methodology that gives investors the best chance at reasonable risk-adjusted returns, while minimizing unnecessary risks. And it is an excellent starting point for all investors.

However, don’t let anyone tell you that it’s WRONG to try a different approach. Maybe you want to add a small holding of something that’s different. Maybe, like Tony, that approach just isn’t comfortable for you and you want to go in a different direction entirely.

It’s all okay. Financial security has been achieved by millions of people in many different ways. There isn’t a “one-size fits all” approach that you absolutely have to follow.

However, you DO have to put in your time and due diligence. Be sure you are fully aware of the risks of any approach, as well as the potential rewards. Continually monitor your progress to be sure you are on track to meet your goals. Be aware of the difference between investing and speculating, and respect it. Talk to trusted professionals to ensure you aren’t missing pertinent information that would have a material impact on your decision making. 

And remember, it’s your money. You can do what you want with it. However, you will also be responsible for the outcomes. So choose wisely.

And try to tune out narrow-minded financial evangelists.


Important Disclaimer: The information above is for general informational purposes only and does not in any way constitute an offer for the purchase or sale of any security and is not intended to be considered comprehensive or personalized financial or investment advice. themoneygeek.info assumes no responsibility for the use or application of this information. Always consult a tax, investment, or other appropriate professional before adopting any new financial strategies.

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3 thoughts on “Planning Tales: It’s Okay To Invest Your Own Way”

  1. Great post Graeme, thanks. I saw so many Tangerine clients who also had considerable sums and did not want to invest a penny. I saw so many with very modest means and who were living very well in retirement. The key was no debt and modest spending plans.

    And yes no one should arrogantly tell us what style is better. Those who write in such a way are simply ignorant on both sides of the word. To each his or her own.

    Dale

    • Thanks for your comment, Dale. And of course, I totally agree.

      The most important things a writer or advisor can be is supportive, as well as informative.

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