I was at an investing seminar put on by the local Credit Union this week. It as an after supper presentation so it wasn’t all that long. There were a bunch of things that struck me as I was listening to the presenters and watching the audience. But there was a couple that stood out. There were about 50 people there, and the median age was, in my estimation, about 60 years old. I am sure that there was no one in the audience under 40 that did not work for the Credit Union.
Where were the younger people who could have truly benefited from the presentation?? Using my own family as an example. My kids (all < 40) have no idea about investing, and seem to care less. (Even with a guy like me for a father) They spend more time worrying about, not having enough money, instead of worrying about how to get more. Any psychologist will tell you that you get your most dominant thought. So, if you are always thinking about not having enough money, that is what you will get! Not enough money! Getting interested in growing what money you do have (no matter how little you have) will get your world moving in the direction of having enough money. Because it gets you thinking of having more.
The way the Credit Union advertised the seminar might have been part of the problem. I found out about it, because I had gone with a former student (college course, not Wealth student) to the credit union, to help them understand the twists, turns, and language used in applying for a mortgage. The mortgage person did not tell us about the course, I saw a small poster on her wall and asked about it. Each teller should have told each customer about the seminar, and especially, the younger ones. Maybe they should have used social media, but how many people friend their Bank or Credit Union
That was one observation. The other one was, that the presenters made Finances appear too complicated for the average person and something best left to so called professionals.
The jist of the presentation was about balanced portfolios, and LONG TERM investing. That is what Mutual Fund companies, and Financial Planners are good at. They usually don’t loose much money for you but they don’t make stellar sums for you either. I will use me as an example. I used a very good professional adviser for over 15 years. He only lost me money twice. But over that same time frame, his average rate of return was only 2% a year. During that same 15 years there were some high interest years and the TSX went from 5500 to 12000. It more than doubled. Simply put, if I had of put $10,000.00 into the TSX, after 15 years it would have been roughly $22,000.00. At 2% a year (compounded) my $10,000.00 was roughly $13,458.00. Now there were at least 6 major corrections of the TSX in that 15 years. So the TSX was not without some stress. The Mutual Funds with my adviser were definitely less stressful.
My adviser definitely did much better for himself. But he also invested in the market not just mutual funds. There are also rules that Mutual Fund sales people have to follow which limit how much money you can really make. For example, my adviser told me to sell all my stocks by early 2008, because a major correction was coming. So I said why not cash out all my Mutual Funds and put that into a money market account, and when everything has dropped, we will buy back the same funds at the lower price. He was not allowed to do that. I could only change two funds at a time and only once every 6 months. At the time, I didn’t understand that rule, but I do now. It is a completely different story when you are handling other people’s money and not your own.
Over just about any 20 year span, investments have gone up. Bull markets (going Up) last way longer than Bear markets (going down). According to the seminar, Bull markets go up an average of 129% while Bear markets average only a 28% drop. That means that long term investing usually means your investments are going to go UP. That is why investing in your early years is so vitally important. This would have been a good time to get younger people involved with investing. As I said, I wonder where they were?
But what if you’re already 60, and want to retire in 5 years, you really can’t afford to wait 20 years for a return. You’re looking to have an income producing retirement account, that is able to pay out reasonable amounts of money, in 5 years. They didn’t discuss how to manage that. Because Mutual Funds, and professional managers, are not any better at managing SHORT TERM investments than experienced average people are. The closest they came to talking about short term investing in Equities (stocks) was discussing investing in shares of the Credit Union. Credit Union stocks are a great Safe investment. I hold a decent number of Credit Union shares, and they are one of the best investments I have. They are a little tough to sell, as they have to be sold only to another member. But I have a standing order for more shares and they only become available every few years. So maybe they are not that hard to sell. They did use the words Canadian Dividend paying stocks, but that was about all. They certainly did not mention opening an online trading account and doing your own trading.
A balanced portfolio is made up of Stocks/Mutual Funds (Equities), Bonds, Real Estate, and Cash. They spent most of their time on Mutual Funds and Bonds. They explained that Bonds usually go down when interest rates go up. I knew that axiom, but never knew why. The presenter did a good job of explaining why that happens. They were not recommending being in a hurry to buy bonds, since interest rates appear to be on the way up. Real Estate to them is you owning your own house. They never even mentioned income Real Estate.
I was also surprised that they did not spend more time on the TFSA (Tax Free Saving Account), and how to use it. I don’t care what age you are, if you don’t have a TFSA account, go set one up NOW and then come back to this site and read all the posts and articles on the TFSA. It is the most important investing tool that Canadians have. It is so important, that the Banks and the government don’t talk about about it, because we all might use it more. If we did that, the government would loose millions in lost Income tax. That is why there is such a low limit on contributions. Canadians would be way better off with being allowed to put $10,000,00 a year into a TFSA, rather than being able to smoke Marijuana legally. (TFSA is a good place for POT Stocks)
If you just open a TFSA this year, you can put up to $57,500.00 into it immediately. (if you were at least 19 in 2009} Then you can add up to $5,500 next year. If you bought the right investments in your TFSA, with that $57500.00, you could generate between $400.00 and $700.00 a month income TAX FREE. Now that is something to get a senor’s heart pumping.
Your probably asking why I bothered to go to the seminar at all. I love going to financial seminars. I always learn something. This time it was why Bonds go down as interest goes up. But also, because one of the conditions for Wealth accumulation is, seeking out like minded people. What better place to meet other people interested in investing, than at a seminar on investing?