The Three C’s Of Canadian Investors

What are the biggest mistakes people regularly make when trying to reach their financial goals?  Canadian investors are often guilty of being too cautious, too conservative and too cheap.

Related: Avoid These 4 Investing Mistakes


While no one would advocate taking imprudent risks, being too cautious with long-term investments and sacrificing long-term return for short-term “safety” makes it harder to meet retirement objectives.

Being too cautious gives rise to procrastination.  It’s a big decision.  When people don’t know what to do, they don’t do anything because they’re afraid of making a mistake.

When stocks have fallen they’re too scared to buy into the market.  When stocks are high they fear the market is too expensive and that a downturn is imminent.

Related: Stock Market Corrections – Do You Buy, Sell or Ignore?

On the other hand, some beginning investors become overly aggressive and chase returns following short-term industry performance ratings and are not prepared for any downside.

They sell their assets when they fall in value, thereby ensuring they take a loss.  After being burned they become overly cautious and swear they’ll never invest in equities again.

For many retirement plan investors this is their life savings, no matter how large (or small) the account, and they don’t have any other monies to fall back on.

Many of these investors are cautious because they can’t afford to lose anything.  The first sign of a drop in the market causes them to go into protection mode and try to salvage what’s left.  This leads to the high probability of not recouping their losses.

Related: Can You Succeed With An All-GIC Portfolio?


Failure to understand your own personal objectives, risk-tolerance level and time horizon makes you unable to make the right investment decisions for yourself.

Some people fear risk unduly when it comes to investing, so too many save instead of investing for the long term – putting billions of dollars into low interest savings accounts, term deposits, money market products and GICs.

As we approach and enter retirement our ability to take financial risks decreases so it’s logical to lower our equity allocations.

However, one of the biggest mistakes people make is being too conservative.  It might seem smart to be very conservative with your money, but it might not grow enough to support you in retirement.

After inflation and taxes, the return on these is next to nothing leaving you with loss of purchasing power in the future.  For most people, investing in this manner just won’t get the job done.  The real risk they face is running out of money, not losing it.

Related: Are Bonds A Good Investment Today?


“Why am I paying my advisor for something I could easily do myself?”

“I took his advice and ended up losing money!”

“Financial planners are a waste of money.”

“These investment fees are way too high!”

We’ve all heard some version of these outraged comments.

People are cheap.  If they don’t see any value from the fees they pay, they bail.  They open a low cost discount brokerage account and begin on-line trading.

For every proficient do-it-yourself investor, there are probably at least 10 who have no clue how to choose and research an investment purchase.  They make decisions based on their emotions and get tips from their co-workers.

They choose investments with the lowest MERs regardless of relative performance.  They attempt to time the market.  They don’t have a plan.

Related: Why Index Funds Outperform Equity Mutual Funds

They try to do their financial planning by themselves without seeking outside advice.  They think a financial planner is going to cost them money when they can often save them money.

Final thoughts

It’s never too late to improve your financial health.

  • Work with an advisor.
  • Pick an asset allocation and stick with it.
  • Educate yourself.  The more you improve your investing knowledge, the more comfortable you will feel.
  • Don’t look at short-term media reports.
  • Invest in great companies and, apart from monitoring their performance from time to time, forget about them.

There’s a good chance that you are in better shape than you realize.  

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  1. Joe on May 22, 2013 at 7:17 am

    Great article, except I kind of disagree with “They choose investments with the lowest MERs regardless of relative performance. They attempt to time the market. They don’t have a plan.”

    In lieu of hard statistics, I don’t think people who are aware of the deleterious effects of high MERs and who take action should be categorized as cheap. In fact, these folks are probably some of the more intelligent investors out there.

    • Boomer on May 22, 2013 at 7:50 am

      @Joe: I think you misunderstand me. Canadian MERs are some of the highest in the world and, yes, will chomp away at any earnings. But, some people just look for the lowest fees, period, which may otherwise be a poor investment choice. Intelligent investors look for overall performance, continued growth prospects – and low fees.

  2. Bet Crooks on May 22, 2013 at 10:21 am

    I suspect we’re going to see more of the “sell when the market falls; never invest in equities again” bunch in the next couple of years. I keep overhearing younger-than-me people talking about buying shares in RIM, APPL, etc etc and not about buying shares in defensive companies like utilities, transportation, pipelines etc. They seem to be after the capital gains rather than the long term combination of capital gains and dividends. It would be nice (for all of us) if the markets could go up forever, but it seems unlikely. Still, I never thought interest rates could stay so low so long either, so I guess my forecasting abilities are pretty poor!

    • Boomer on May 23, 2013 at 2:41 pm

      @Bet Crooks: I agree with you that long term investors need to build a strong core portfolio as you suggest. There’s nothing wrong with buying growth companies as long as you set a clear exit point in order to lock in the growth.

      Some (especially new) investors are preoccupied with accumulating a collection of last year’s fad investments and acting on hot tips.

      When I set up my TFSA the bank clerk recommended buying RIM shares. This was just before they had reached a peak and started to plummet in price. I learned long ago that when people who had no business in giving stock picking advice were making recommendations, it was time to run.

      • Bet Crooks on May 23, 2013 at 6:45 pm

        Too true!
        I’m glad you didn’t buy RIM just before. I know people who bought Nortel just a few days too late….

  3. Dan on May 22, 2013 at 12:16 pm

    I am a DIY investor and I guess I could be considered ‘cheap’ as well. I had money in some TD mutual funds and found the fees ate up any returns made. I’ve made healthy returns since I got into the markets myself but tend to invest in dividend stocks. Some people are scared of getting into the markets themselves (I sure was) but it’s not difficult or complex. My favorite saying: no one cares about your money more than you.

    • Boomer on May 23, 2013 at 1:35 pm

      @Dan: I don’t think you’re cheap just because you decided to do your own investing. I have been a DIY investor for many years – I’ve been through, I think, 4 market crashes. You need knowledge and be willing to learn. I’ve made some mistakes, but not that many, and I’m overall satisfied with my portfolio.

      Consider this example: I would have no problem paying to have my car tuned up. I don’t say “Those people charge too much – I can do it myself!” and then proceed to do nothing, or even worse, start tinkering under the hood without knowing what I’m doing. Yet this is exactly what some people do with their finances. That’s what I consider being cheap.

  4. Bryan Jaskolka on May 22, 2013 at 5:26 pm

    I love these three “C’s” that are all huge mistakes when investing! Coincendentally, check out this post we wrote about the RIGHT three C’s when investing.

  5. Shafi on May 22, 2013 at 10:48 pm

    Moderation is the key in any one’s financial life. Dollar cost averaging and diversification will give you a good return in the long run.

  6. Robert on May 23, 2013 at 10:42 am

    Interesting to see all the talk here about GIC’s and mutual funds. If you just buy the stocks your mutual fund is planning on your behalf the MER is near 0% ($10 for commission). GIC’s are great for short term of a year or 2 where you want safety of principle only and you don’t mind the outrageous taxation on them. Rather useless beyond that. Bonds are currently a terrible bet with interest rates having no other direction possible than flat or up. One responder mentions a bond due in 2037. It sounds safe if you know the rate of inflation for 25 years. If we get 10% inflation for 10 years you are wiped out.

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