I hope you’ve had a chance to check out the Canadian Financial Summit this week. This online personal finance and investing conference features more than 35 prominent experts in Canadian money matters, with a wide range of topics from investing, retiring early, travel, and much more.
In my session I spoke with co-host Kyle Prevost about how to curb your investing FOMO (fear of missing out). Investing FOMO has been rampant since the beginning of the pandemic. We’ve had the rise of meme stocks like GameStop and AMC. We’ve seen historic gains (and declines) in cryptocurrencies like bitcoin, ethereum, and dogecoin. Tech stocks have boomed. And we’ve seen massive gains in Canadian real estate.
New investors have gravitated towards commission-free trading apps like Wealthsimple Trade here in Canada and Robinhood in the U.S., making it easy for investors to trade on their FOMO.
Prior to 2020, I considered myself a fairly risky investor with my 100% equity portfolio. Now I feel like my portfolio is down right vanilla, as if I park my money in GICs.
Sure, my all equity portfolio (VEQT) is up 70% since the March 2020 lows. But that’s child’s play in a market where some individual stocks, cryptocurrencies, and non-fungible tokens are generating triple and quadruple digit returns.
What’s an investor to do?
I often say that I’m an emotionless robot when it comes to investing. There’s no core and explore, or play money in my portfolio. I stay 100% invested in 100% global equities, and have for many years.
But you’re most likely not an emotionless robot. You’re a regular human driven by fear, greed, and temptation. You may be drawn to lottery-like stocks or asset classes with the potential for huge gains.
But rather than letting your emotions wrestle complete control over your portfolio, I suggest you design some rules to help curb your investing enthusiasm.
- Stick to a low cost, globally diversified, and risk appropriate portfolio inside your registered accounts (RRSP, TFSA). Gambling with risky individual stocks or crypto ETFs inside these accounts is dangerous for two reasons. One, you don’t get to claim a capital loss if your investment loses money. Two, in the event of a loss you lose that contribution room forever.
- No more than 5% of your portfolio gets allocated to risky assets. This is the equivalent of only bringing $100 cash to the casino instead of bringing your debit card to the party.
- Know your buy and sell rules and stick to them. For example, if a speculative play doubles, you trim it back to its original allocation and plough the profits into your core portfolio. Conversely, if your bet falls by 50% you cut your losses and sell.
If you haven’t had a chance to watch my session at the Canadian Financial Summit there is still time to grab a ticket and watch all of the presentations from this past week.
This Week’s Recap:
I explained how DIY investors can convert their RRSP to a RRIF on the Questrade platform.
I went under the hood to look at BMO’s suite of asset allocation ETFs.
Over on Young & Thrifty I explained why it’s more supply, not incentives, that’s going to help solve Canada’s housing crisis.
Promo of the Week:
We shop online more often than not these days. One money saving tip I’m constantly trying to remember is to first visit a cash back website like GreatCanadianRebates.ca before making a purchase.
GCR is a portal to hundreds of online retailers who pay a percentage of cash back on your purchase. GCR passes some of the cash back to you, so you can earn money not just from the rewards credit card you use, but also from the GCR website itself. Talk about a no-brainer!
It’s really easy to use. Register using this link to get started. Then shop as you currently do and your rebates will be automatically credited to your Cash Back Rebate account. GreatCanadianRebates.ca also offers coupons, free shipping specials, and sales directly from the stores.
I visit regularly to look for additional sign up bonuses for credit card offers. For example, they’re offering a cash back rebate of $120 for the American Express Cobalt Card – that’s in addition to the 50,000 in rewards points you could earn for using one of the best credit cards in Canada.
Speaking of credit cards, our friends at Credit Card Genius have a doozy of a promotion on right now – they’re giving away a brand new Tesla!
A great piece by A Wealth of Common Sense blogger Ben Carlson on the psychology of betting big and losing it all.
Globe and Mail reporter Tim Kiladze looks at the death of profit – why investing feels broken and markets no longer make sense (<–subscribers).
David Booth, executive chairman and founder of Dimensional, shares 10 obstacles to investing and how to overcome them:
“It’s natural to feel regret about decisions you’re unsure about. But it’s never too late to invest. Every day, we expect the stock market to go up. Otherwise, investors would find other things to do with their money.”
Of Dollars and Data blogger Nick Maggiulli explains why buying the dip is a terrible investing strategy.
Michael James on Money debunks a bogus stock market prediction that shows stocks will lose about 8% over the next 10 years.
Ben Felix is back with another Common Sense Investing video. This one looks at day trading and whether free trading apps has made this popular pastime more profitable:
Ark CEO Cathie Wood faces off against Research Affiliates’ Rob Arnott about whether stocks are in a bubble.
Always the creative writer, Millionaire Teacher Andrew Hallam explains a time when index investors would have been eaten alive.
Hallam also looks at The Big Con: promising stock market returns without market risk.
The Blunt Bean Counter Mark Goodfield with a great explanation of the basics and uses of term and permanent life insurance.
Are you ready to retire? Jim Wang of Wallet Hacks says probably not.
Jason Heath explains how to avoid OAS clawbacks when you’ve had a temporary increase in income.
The Irrelevant Investor Michael Batnick says there is one thing that trumps everything else when it comes to how you feel about money – it’s how you grew up around money.
Alexandra Macqueen expertly shares a guide that will help you understand what inflation is, how it’s calculated, and what it means for your personal finances.
I’ve been thinking about this too when it comes to inflation – what if the persistent inflation will be felt in time and inconvenience?
Travel expert Barry Choi looks at how a Canadian can apply for a US credit card. US rewards cards are known for being much more lucrative than Canadian cards.
Finally, the Prince of Travel blog explains the new challenges of international travel with kids. Ugh.
Have a great weekend, everyone!