Investing

Over the years investing went from a thing that was protected by the elites who could afford to do it - using very large sums of money as a gatekeeper to get in - to something you can do right now with ten minutes, ten dollars, and a website or app.

It is easy now.

And it's sort of fun? I like it. The part of my brain that likes spreadsheets and playing strategy games. And it's practical, since this is the stuff that will literally keep me alive for the rest of my life.

Waxing Philosophical

I don't mind if you want to skip ahead to the juicy parts below, but I wanted to be a little poetic here and talk about the high-level reasons surrounding this stuff because I think it's easy to get mired in the boring paperwork aspects and forget the emotional, aspirational parts as weird as that might be for an activity we do solely for the aspiration of it.

Investing is the process of dream quantification.

I stole this line from Josh Brown: Tell me what you want for your future and let’s figure out how to invest accordingly. Let’s put some numbers on those dreams and talk about how much risk will be necessary in order to see them become reality.

"It’s a great business, because people are more often surprised than not at how doable their dreams are once we’ve quantified what it will take in investment returns, ongoing contributions and pain tolerance in order to make them happen. We’ve had people tell us that the planning conversations we’ve led them through have been life-changing moments of clarity. I live for feedback like this."

Which for me comes back to the whole "you can have anything you want but not everything you want" type concepts: investing is a process where you want something else more than you want cash right now.

Right? That's really the only way we can convince ourselves to not just spend it immediately. If saving feels like a chore, or 'robbing' you of your own money, it's because you don't have a better reason for that money to go towards yet. You're still feeling like it's better spent right here and now.

And maybe it is! If you don't have that other thing, then certainly literally anything in the present is better than that, and of course it feels hard to justify and choose those modes of prioritization; they're fake.

This is a will-power judo thing.

So back to Josh Brown: having dreams and then quantifying them opens up comparative aspect where putting a dollar into an account genuinely feels better than that same dollar spent on chocolate or a TV or whatever.

I am, personally, innately very good at this for two reasons:

• I don't actually want or like very much in the moment. My life and overhead is pretty cheap.

• I am mildly terrified of the future and my response to this is to shovel as much as I possibly can towards it as a way of trying to appease my existential dread.

Is this healthy? Probably not. Certainly not recommendable. But if everyone has a vice, I guess mine is saving and that seems... at least somewhat productive.

I don't really have any dreams other than my continued freedom and autonomy, and having money is my method to achieve that. I can do whatever I want because I prioritized that more than objects.

But while retirement seems vague, it doesn't have to be that - do you a want a Lamborghini? You can have that dream and then quantify it and figure out what you need to save (read: give up) in order to get it. That's totally valid! Maybe you want a Lamborghini more than anything else in the world; do it.

Some people are filmmakers and buy camera gear. Some people just want to hang out on the beach all day. Some people want to cozy up and read for the rest of their lives. It doesn't really matter what the dream is, just that it exists and can be pointed at and eventually logistically figured out.

What Investing Actually Is

Fundamentally, when you borrow money you pay interest as a 'thank you' for having the money lent to you, and to give the lender a reason to take the risk in the first place.

When you lend money, you earn interest in return for the same reasons.

So if you have money sitting around, you can lend it to people or governments (called bonds) and they'll give you some extra back for the trouble. This is how the rich get richer, but it's actually how anyone can get richer because there's really no lower limit for this anymore: if you have anything, you can invest it (but make sure the other steps are done first)

Or, you can do other things with it: if you buy a stock in a company you intangibly but literally own a tiny slice of that company itself. You are part owner of Apple, say, or Netflix, or Joe's Silver Mining Corp. Then, if that company does well selling iPhones or bad Adam Sandler movies or digging up more silver from the ground, since you're part owner, "your" company goes up in value. If you then sell your now-more-valuable company slice (called a share) you can earn net money for the difference.

It's a bizarre abstract thing, but you can make money by allowing other random strangers across the world to build things and make value and earn money for you. They do this because selling stocks also raises money for the company itself. If Joe's Silver Mining Corp needs to open a new mine and they don't have enough cash on hand, they sell people slips of paper and promise that the new mine will be filled with silver and then they'll be making more money than they are currently so they'll be worth more in the future.

They sell a bunch of these slips, raise cash, buy a second mine, and get to work.

It's sort of a loan. It's sort of a gamble. But it's a fundraising method on one side and a profit-seeking method on the other, which works out great for both parties. Everyone walks away happy generally.

Except sometimes there's no silver in that mine and the stock actually goes down. You're part owner of a company who made a mistake and spent all this money on a dumb idea. Uh oh!

Or, you know, everything is always shifting: iPods sold like hot cakes - they were genuinely the best - until phones started to replace mp3 players and the sales started dying off through no fault of anyone's but progress. So, these shifts over time make markets and markets are big busy places dealing with millions of these little interactions happening every day. That's just business as it goes.

But in general this progress is upward: we make more things, cooler things, better things every year and every year afterwards and on the whole these stocks (or bonds, if you lend your money to governments) go up over time.

Over time we want our savings that are just money laying around in a bank account to do more for us, we lend them and get more in return and then lend out those returns and so on until it grows and grows in a compounding arc.

So the more money you save, the more money you can lend and the more you get in returns and so on.

Eventually the curve is enough - or your age is enough - and you retire with the money you've made over a lifetime of working and lending.

The biggest strength young people have is time. That curve works best on long terms: every additional year in the tail end of growth there goes up leaps and bounds compared to the beginning. So having 40 years to sit on money is amazing for the math of retirement. Starting to save just when you're getting ready to retire is already too late.

So we invest for two reasons:

• make money disconnected from our own work. "while you sleep" and all that

• make money that can compound over as long as possible to become as big as possible by itself

The Simple Easy Method

If you just want to straight up do the best possible thing, there's one very clear highway to follow: low-fee ETFs, trade it yourself to save money, put it in a tax-free account (whatever your particular government offers) and then wait 40 years. Add a bit to it every two weeks with your paycheque no matter if the market is up, down or sideways.

Then keep doing that until you retire.

That's it. Just do that.

Low Fee ETFs

In really simplistic terms, an ETF is a fund of everything. Instead of buying specific stocks in, say, Apple and then hoping that Apple specifically does well, it buys a little bit of everyone and then you go up and down with the entire market at once, because you basically own everyone.

This puts you ahead of most active investor day trader Gordon Gecko types who are constantly trying to buy Apple and then sell Apple and then buy Amazon and so on. They actually don't beat the market average very often and then charge high fees for the 'service' of underperforming.

We have a second advantage now: because the funds themselves are passive and algorithmically rebalanced ("robo investors") and we can buy them through a website instead of a human, we can save even more on fees. We'll get into specifics in a sec, but paying 0.25% to a fund sure beats paying 2.5% to a bank or financial service:

A difference of 1% in fees over 40 years can cost us $500,000. So you can see how important it is to not only get good returns, but to then keep them. I had an account, my first one with Empire Life, that was 2.5% and switching very realistically saved me over a million dollars for my retirement. Crazy, eh.

Tax Free Savings Accounts

These are any account with incentives to save. The governments really like you to save because social security is actually a huge burden on country finances, so they invent little ways to encourage people to do it by giving them breaks on taxes in a few different formats. They're often capped such that they're not unlimited free benefits, but they're better than nothing and can be 'filled' to their limit in a specific ideal order.

In Canada ours is literally called that: a TFSA, or Tax Free Savings Account. We also have RRSPs and a few others. The general wisdom is to fill the TFSA first and then move on: RRSPs are limited to age when you can take out money penalty-free whereas you can withdraw from a TFSA at any time which is great if you want to use that money to buy a car or something instead of waiting until you're 71. If you have kids there's also RESPs for education funds that are tax-sheltered.

In America these correlate to Roth IRA and 401k plans. I'm not American, so I can't really comment on the specific effects and implications of these, but there are plenty of great blogs and resources for understanding them and what order is ideal for filling them.

Trade Yourself to Save Money

I use Questrade, which has basically zero commission on ETFs (they make their money from stock trading and other places, which do have fees per purchase).

Not that I'm here to shill things, this is genuinely the thing I happen to use and like, but they have a referral program where we both get money, so if you were thinking of joining anyway and would like to get free money, here's my code: 685920083428730

Since the platform doesn't have fees, what you're left with is the fund fee for whatever you're buying.

I buy exclusively VGRO. It's a Vanguard fund and rates as one of, if not the best available right now.

There's three main Vanguard funds with varying aggressiveness, but the common wisdom for young people is to go as aggressive as possible: over 40 years the bumps smooth out but the long term average means more gains. If you can deal with the emotions of seeing more swings and can ride it out without panicking, this is the general recommendation until you get closer to retirement itself and can ease into safer, conservative funds that won't gain as much but also won't drop out on you when you need them.

If you want an even easier system, I do also have a Wealthsimple, which is where I started in this whole business. Their interface and sign up process, in my opinion, is much much easier and they auto-choose the ETFs for you, so the benefit is ease and simplicity. The downside is lack of choice (you can't simply choose to buy VGRO in this case, say) and they have a platform fee, which puts you at ~0.75% or so total.

I don't think they're bad at all, I just switched over eventually because I wanted a little more control and understand the extra 0.5% they charge is worth real money over time as described above.

Again, if you were going to sign up anyway, I have a referral link but it's not a very exciting benefit.

Consistency is Key

The real thing, no matter how you invest it, is that you're putting in money and you're doing it often.

You can go down a huge rabbit hole if you want to learn about Dollar Cost Averaging, but the long and short of it is: timing the market is very hard and mostly useless compared to simply plugging money in as often as possible.

When the market is up, you're buying anyway. When the market is down, you're getting things on sale. Over time the long assumption is that the market continues to go net up and so the highs of this year will be lower than the highs of a year in 5 or 10 or 40 from now and so you'll always have won out in the end unless some cataclysmic event happens and levels us all for decades at a time. The Great Depression was less than ten years, so something even worse probably means that investing is the least of your concerns: the real fight will be for food and guns and to fight off the roving swarms of mutant mantises.

As it turns out, this is perfect anyway: people tend to get paycheques with common frequency and so having some sort of auto-deposit system in place means you can do this stuff automagically. This is one advantage of Wealthsimple: any dollar that gets deposited to them gets allocated automatically. You can auto-deposit into Questrade but then also need to log in and buy your VGRO manually (to my knowledge).

So investing is easy, the hard part is keeping emotions out of it and staying the course through thick and thin. Things will go up and down, that's the whole point and is required for the markets to work in the first place. Our job is to have clear strategies, know the field and then basically ignore everything else in order to deposit money no matter what consistently.

The Advanced More Fun Method

Ironically, this is how we get into trouble: investing is too easy and we want to feel like we're playing some game and 'winning' and checking the news and following the drama.

Humans are idiots, haha.

The smart method, as outlined above, requires basically no work and no news-checking and no drama worrying. You just go to work and let the financial systems churn in the background and you make money when the entire world around you invents things and generates value and makes cool stuff.

But it also lacks a certain... flair?

Welcome to gambling-- I mean, uh, stock trading.

My Story

Every investor at some point thinks they can make more money than the market. We think we're great even though graphs and graphs again prove that the average investor does not. Oh-ho! but we're not average, of course, and we can beat the market with our particularly good thoughts about things.

I've beaten the market, and am currently up quite a bit.

But also, I am fully aware that it has been 100% luck and accidents and good timing and not anything I can claim credit for or should try to replicate recklessly. In fact, I've slowly been moving those winnings into VGRO so they've become less risky over time.

The first was Bitcoin, which I bought in at $150 CAD each and sold at the december peak of $20k ish, although painfully not even the full amount I originally bought, since I had been trying to spend it before it was worth anything on computer parts like RAM (which, given RAM prices, maybe I did okay). It worked out to be only a few thousand, and honestly I didn't even anticipate a crash or anything, it just felt like it was time to cash out my fake useless money that no stores in Canada even accepted anymore (Newegg, a year after buying my RAM, stopped accepting BTC).

Now we're in the middle of weed and related stocks, which have been fluctuating a lot lately but have sort of ridden the whole gamut of -30% to +30%. This has been fun, but they feel a lot like a crapshoot.

I do think speculating is fun. I do like the gamble and the guess and poring over news and investor meetings and such. If you like that stuff, awesome. I don't know if I can recommend it for any other reason: the money itself isn't even that great. A few hundred here and there, and then minus your losses and paying $5 to buy and $5 to sell every time means that any gains get eaten up pretty quick anyway at the scales I'm playing with things (a few hundred or maybe thousand at a time, as opposed to a $5 fee on a $50,000 trade say, as a percentage is more negligible to the net average).

But again, it's fun and I don't really have any other hobbies with skin in the game. Maybe I should start a friendly poker night or something. I'm really not the type of personality to enjoy random gambling - we played slots in Vegas and that is easily the least amount of fun I could design for myself. But markets feel at least like you're predicting the future and betting on it. Will China grow? Will weed be successful? Will legislation change to my benefit? Does Disney's new streaming service feel like it'll supplant Netflix? We can put money on those things and find out in a few months.

So, I dunno. That's my position on day trading. It's a hobby that really isn't investing in any pragmatic way, it just happens to live in Questrade next to your other stuff and gets tracked in the same spreadsheets.