I have a friend who’s very interested in making a lot of money very quickly. No, he’s not Homer Simpson.
He’s a good guy, so I entertain his questions. Over the years he’s thought about investing in a series of hot internet stocks (way back in the 1990s), gold/silver, apps, and water, right after watching The Big Short.
His newest idea is marijuana. He enjoys a toke every now and then, as do most of his friends. He can see the potential fully legal weed has. It’s pretty much a sure thing. Naturally, he’s ready to put at least 42.0% (niiiiiiiiiice) of his portfolio into wacky tabaccy and then get a snack afterwards.
So he comes to me with a request. “Nelson” he says “tell me which marijuana stock I should invest in. Also, take a shower. You disgust me.”
That sounds like two requests, actually. And sternly worded ones at that. More of a command, really.
I took a quick look at the alternatives out there, and let me tell you guys. There isn’t much.
The big marijuana player in Canada is Canopy Growth Corp (TSX:CGC), which has just recently graduated from the TSX Venture onto the main exchange. It’s the first such stock to do so in North America.
It’s a legitimate business, generating $18 million in sales over the last year. Profits aren’t really happening as of yet, with the company posting an $8 million loss in the last twelve months. Profitability won’t happen for at least another couple of years. Management would much rather invest in new grow-ops.
Here’s a chart of Canopy over the last three months, since it leapt from the TSX Venture to the TSX.
Overall, it’s up 85% in just over three months. That’s good. The last week or so? That’s not so good. Shares are down 15% in just a few days. The only real news I can see is a couple of analysts warned shares were getting overvalued. That alone was enough to bring the company down 15%.
Canopy might be one of the most expensive stocks in the world. It trades at 36 times revenue. That compares to the following also expensive stocks:
One of those is not like the others. Also, Chipotle may not have been the best choice.
We all know why Canopy is expensive, right? Every Tom, Dick, and Harry has decided legal pot is going to be a bigger deal than Fred Durst in 1998. Thus, the valuation is completely out of whack.
This will always happen
Here’s the problem with investing in the next sure thing. You’re always going to pay a huge premium for it.
The market is filled with smart people. Some of these folks can recognize investing trends years in advance. There was some guy out there investing in the tech revolution in 1993, social media in 2004, and the upcoming legalization of pot in 2013. Usually such investments are made privately, because these industries are so tiny they’d never make it on the stock exchange.
After a number of years and an increasing amount of hype, the next big thing ends up publicly traded. A number of smart investors start paying attention to it, start getting excited, and start buying with all the gusto of yours truly at an all-you-can-eat dessert bar.
Once the stock has gone up enough, guys like you and I and my friend start hearing about it. We invest at precisely the wrong time, and you all know what happens next. I start a blog called The Stock Market is Rigged, and y’all show up just to laugh at me.
By the time the average person has heard of the next sure thing the smart money has already profited from it. Hell, you’re probably buying their shares.
So how do you tell?
How is the average investor supposed to know if a trend is played out?
Specifically, spend some time on Wall Street Bets, which is where dumb money goes to die. Wall Street Bets is the perfect sentiment gauge of retail investors. If they’re talking about something, chances are it’s peaked. It’s time to hit the sell button so hard you’ll click right through your mouse.
Even if your next investing craze hasn’t yet been mentioned on Wall Street Bets, you should still be wary. It’s one thing to be bullish on the future of an industry. That’s an important part of any investment. It’s quite another to base your entire investing decision on the fact the sector is going to explode.
In 1910 there were hundreds of car manufacturers in the United States. How was the average investor supposed to tell which one was going to succeed? There were thousands of tech companies in the 1990s. How could the average investor know which one was going to be Amazon and which one was toys.com without the benefit of hindsight? You can’t. At least, I can’t.
The ultimate lesson? Don’t even try. Stick your cash in a well-diversified portfolio of index funds and keep the speculation to your weekly lottery ticket. There’s no such thing as a sure thing in investing.
Personal finance bloggers can be pretty predictable sometimes.
We all tend to have similar thoughts on investing for retirement (great!), emergency funds (also great!), frugality (ditto!), minimalism (ZOMG!), dividends (!!!!!), side hustles (literally dies!), and so on.
There’s some logic to this, of course. More money is better than less money, and all of those things tend to lead to more money. That’s the whole point of this. We all want to end up a little richer than yesterday.
One other thing it seems most personal finance bloggers agree on is financial literacy. If only we taught personal finance in school, the refrain goes, then we’d have a generation of savers instead of spenders. Credit card debt would go down. Savings would go up. Cute puppies would be saved from an inevitable death, somehow. Yes, it would truly be a better world.
These folks all say the same thing. High school kids need to learn this. They manage to grasp calculus, creative writing, and obscure facts about World War I. There’s no reason they can’t master the basics of personal finance too.
There people are right. The average high school kid is very capable of learning the basics of personal finance. He’s just not that good at remembering them.
Newsflash: it is taught
I can actually remember the basics of personal finance being taught in my math class in the late 1990s. We touched on the debilitating impact of interest, various types of asset classes, the magic of compound interest, and so on.
I am apparently the only one who remembers this. Everyone else had their memories wiped, Men in Black style.
We also learned about it during a course called Career and Life Management (CALM), a required prerequisite for anyone in Alberta to graduate high school. The only thing I remember from CALM is the graphic pictures of various sexually transmitted diseases, to be honest.
So I did a little research (read: 14 seconds on Google), and came up with the curriculum for CALM. It hasn’t changed a bit since 2002. Guess what? Personal finance education makes up much of the lesson time.
CALM teaches the following:
- Fundamentals of getting and using money
- Basic information on income, deductions, and taxes
- Using financial plans
- Examine the negative impact of gambling, lotteries, etc.
- Identify the benefits of proactive personal financial planning
- Develop a personal budget
- Develop strategies for finding a roommate
- Describe the rights and responsibilities of a tenant
- Describe the influences on personal consumer choices
- Demonstrate informed consumer actions regarding health issues, products and services
- Identify types of financial institutions
- Develop basic banking skills, such as ETFs, ATMs, online banking,
- Analyze the use of other cheque cashing services and their benefits and limitations
- Generate strategies for using credit wisely
- Describe the continuum of saving and investing, various common investments and the pyramid of risk
- Identify and analyze a variety of types of insurance
And so on. Trust me, there’s more there. It starts on page nine and goes to page 11.
Remember, this course has been in place since 2002, and even before then, I can assure you such a course existed.
So this is great, right? If Alberta has comprehensive financial literacy education, then we must be collectively be doing pretty good, right? Go ahead internet, confirm my already held belief.
OH GOD DAMMIT.
That was a few months ago, though. Maybe things have gotten better.
Nice work, Alberta.
Even though Alberta has financial education, it clearly doesn’t work. Collectively we put very little away when times were good, leaving us with the highest per capita debt in Canada while dealing with a crummy economy. I can’t think of any better proof than that.
The problems with financial literacy education
It really grinds my gears that us personal finance folks think the only thing keeping the average person from true financial literacy is a high school course.
First, it’s a tremendous insult to our educators.Do you really think teachers haven’t already tried teaching financial literacy? Are you suggesting to me that a group of people who think education is the answer to LITERALLY EVERYTHING haven’t already tried their default solution?
When was the last time you heard a teacher recommend less education? It was never. A teacher has never said that. I guarantee you this group of people have already figured out teaching this stuff is a solution. Hell, they’re already doing it. Don’t think that Alberta is the only place trying this.
Secondly, we already teach kids many things they end up not doing as adults. We teach kids safe sex, but we all know a pregnancy or two that was a total accident. There are still lineups at McDonald’s and Wendy’s, yet kids are taught to eat well. And as anyone in the finance business knows, the average person is terrible at math. Not hard math like trigonometry, either. Easy math like fractions and percentages.
We’re all personal finance nerds, so of course we’re going to talk our book. Health nuts are probably in their corner of the internet saying the same thing we are. “If only they taught eating better and physical education in schools! Then we’d all be less fat!”
The average high school kid barely has a job. Their parents take care of all their needs; all they need to save for are wants. Is this the kind of person who is really going to absorb financial literacy? They’re just not prepared to receive the message.
The internet is filled with all you could ever want to read about personal finance. The basics are a Google search away. And since we can all agree they’re pretty simple tips, they should be easy to grasp.
The system we have works pretty well. There needs to be a certain amount of personal responsibility. We can’t just bitch and moan it’s all the government’s fault. If the information is freely available–and it most certainly is–then your lack of financial literacy can only be blamed on one person.
Personal finance blogs are uniquely positioned to benefit from this. Previous financial literacy pushes have come from the banks, mutual fund companies, and other dubious sources. If we’re truly unbiased (which is a problem since we all want to make money), there will be plenty of potential for teaching this stuff to the masses.
Personal finance bloggers should want the world to remain financially stupid. Nobody with a positive net worth Googles “how to get out of debt.”
If you’re looking to accelerate your savings so you can invest more now and build wealth faster, consider starting a side hustle. Use skills you already have and some of your free time to create a supplementary income stream using one of these ideas.
Tutoring elementary school students in reading, basic math, and study skills can provide a flexible source of income. If you are qualified to tutor high school and college students you can earn even more per hour, particularly in math and science areas. Tutoring is flexible, pays well, and lets you do something valuable for society, helping to educate others. You can work freelance and keep all the money you make or advertise your services through an online job board where you will get more jobs but have to give up a percentage of your hourly rate to the company.
If you have some time to spare after finishing up all your daily tasks, you can use your time and home keeping skills to bring in a little extra income. Helping other people take care of their household chores is a simple way to earn some cash on the side. Use your skills, whether they be in doing laundry, general housekeeping, or mowing your neighbor’s lawns. If you are good at simple plumbing, electrical, or carpentry work, those are more specialized skills that allow you to command an even higher hourly rate.
Approximately 50% of households have at least one cat or dog, creating a huge market for pet sitting and dog walking services. All you need to get into this area is a love of animals and a reference or two. Skills in administering medicine to animals, knowledge of dog training methods, and a mode of transportation are all big benefits, allowing you to take on jobs caring for sick animals while their people are out of town as well as expanding the radius of your service area.
Drive for a Ridesharing Company
A new side hustle that has become popular in the last few years is driving for a ride-sharing company. Depending on the business model of the company you contract with, you earn a certain percentage of each fare, and you may or may not be able to earn tips. As long as you own a car and carry car insurance that supports the use of your car for ride-sharing businesses, you are eligible to get in on this lucrative side job opportunity.
Teach a Class
Do you have expertise in a high-demand area like HTML or blogging? If so, you can earn some side income by developing and teaching a class. You could consider offering to teach an in-person course through your local recreation department or extension school, or you could develop an online course and market it through an online university. The benefit to developing an online course is that while you will put a considerable amount of effort into developing the course, once it is up and running it requires little time to maintain, and provides a passive income stream.
Whether you’re an animal-lover, a closet mathematician, or a competent carpenter, there is a side hustle out there appropriate for you. Now get out there and make some money.
Let’s talk a little bit about choosing a bank. What should you look for when picking the best place to park your cash?
The following factors will probably weigh into your decision making process, at least a little:
- Proximity to physical branches
- Ability to get a loan at an attractive rate
- Overall fees
- Interest paid on savings accounts
- Attractiveness of front-line employees
That last point is especially important, and I just want y’all to know my bank has SEVERELY DROPPED THE BALL ON THIS. All the attractive ladies have been promoted to office duties. The ones that remain up front are still pleasant and effective, but they’re just not hot enough.
As we all know, Canada’s banking system is dominated by the so-called “big five”, five banks we’ve all heard of. Most of you reading this will have at least one account with them, and if you’re anything like me, you’ll have a credit card with one, a bank account with another, and a former mortgage with a third. There’s no escaping these guys.
Nor should there be. Despite the thousands of stories out there how some bank ABSOLUTELY SCREWED YOU, they all give about the same caliber of service. They’re all big enough the law of large numbers comes into play. They all revert to the mean because they’re just too big. There just aren’t enough outliers out there.
How to choose the best bank?
Okay, so if bank service, products, and fees fall to the lowest common denominator, how’s a guy supposed to choose the best bank?
There’s a simple answer. You don’t.
For the sake of our discussion, let’s separate Canada’s banks into two different categories. The first is full-service, and it includes all of the traditional banks, credit unions, and hybrid government owned FREAKS like Alberta’s ATB Financial. The other category is the online-only banks, like Tangerine, PC Financial, EQ Bank, and so on.
What’s the difference between any of the full-service banks? They offer similar bank accounts charging similar fees. They offer GICs with pretty anemic interest rates and credit cards with the same kind of bonuses. It’s all pretty much the same.
It’s the same thing with online-only banks. They all offer big interest rates to people who first sign up, dropping the rate to something much less exciting after the grace period. They all offer free cheques and transfers and whatnot too.
Sure, there are subtle differences between them. They just don’t really matter all that much. In short, they’re all pretty much the same. The difference between them isn’t worth analyzing.
Nelson’s choosing a bank strategy
So if banks are all interchangeable, how do you go about choosing one?
Well, there are a few different strategies, each with their own pros and cons.
The first is to chase promotions. If a bank is giving away a free toaster (or the 21st century equivalent, an iPad), you show up and get an account long enough to get some of that free scratch, baby. As soon as it’s possible, you hit the road and find the next offer.
There are a couple of downfalls to this strategy. The first is it’s kind of annoying to get new accounts all the time. You have to re-input all of your online bills and direct deposit info and all that other stuff every time you do the switch.
The second is you’ll need to live in a big place to really take advantage of it. My small town has about six banks if you count the credit union. I’d run out of sign-up bonuses in about a year.
The second strategy is to pick an online-only bank and stick with it. You’ll enjoy a decent rate on your savings and basically no bank fees.
But even though I have an account at Tangerine, I’ll still never switch to it for all my banking. About once every couple of months I need U.S. cash or a bank draft or something like that. An online-only bank can’t do these things very well, and often time is of the essence, especially when you’re a procrastinator like me.
Or, you can choose the Nelson ultimate lazy solution.
The Nelson ultimate lazy solution
I just said that. Who edits this thing, anyway?
Oh, right. Nobody.
So here’s the deal. Despite all the guides out there that explain which Canadian bank is the best, I don’t even try to hack my bank experience. I’m still with the same credit union I’ve been for the last 20 years. I even pay bank fees, which come to an average of $4 or $5 per month.
Here’s the deal. I don’t believe I’m getting a better deal by hopping from bank to bank. I don’t like the lack of features offered by the online-only banks. And I’m sure as hell not to bother jumping over to some bank just to get an iPad. I already have an iPad I barely use.
Once you believe banks are interchangeable, only one solution remains. You just don’t bother trying to game them. You pick one that meets your needs and just go with it. And since they’re all pretty much the same, I’d recommend not putting much thought into it at all.
You might not need a branch, since you never bother with drafts or foreign currency. Cool. Pick an online-only bank and go to town.
Another person might be heavy into real estate and want a close relationship with their banker. Okay, fine. Start finding some loan officer to kiss up.
And so on. It’s not that hard.
Look, no bank is going to make you rich. Avoiding bank fees as much as possible is a good thing, but ultimately, the difference between banks isn’t going to make a lick of difference for 99% of you. Remember that the next time you’re stressing between a 1.25% and 1.4% introductory offer, or between the $5 per month plan offered by bank A and the $4.99 plan offered by bank B.
I went to put my shoes on this morning, and I discovered the worst thing imaginable. Dog poop.
At least, I’m assuming it was dog poop. It was definitely poop. The origin of said poop is still up for debate. Who knows. It could even be human poop.
The first feeling is disgust, because there’s nothing worse than unexpected poop. “I like surprises” says anyone who has experienced a life free of unexpected poop. The rest of us know better.
The next is shame. How could I be so dumb as to step in dog crap? I mean sure, people should clean up after their pets. Only a dick doesn’t. But at the same time, I need to do a better job walking. I can’t control the disposal habits of my fellow man. I can control where I put my feet. And apparently I put my foot in the wrong spot.
Finally comes the half-hearted attempt to clean said shoe. Normally I’d just hose it off, but I shut off the water to the outside of the house at least a month ago. So I was stuck smearing it on the grass, in the hopes that it would suddenly spring to life and somehow magically wipe off the bottom. This did not work.
The next step was finding a twig and using it as a DIY poop extractor. It worked pretty well, but there’s only so much a twig can do. I was still left with a sizable amount that had made its way into the cracks.
So I did what I should have done in the first place. I torched the shoes. They’re in a better place now.
Links I liked
1. Let’s start things off with The Financial Canadian, who has taken his considerable talents to the world of Seeking Alpha. He points out why y’all should be investing in Telus. I agree with him, especially when Telus was $5 per share cheaper, like it was back in January.
2. Over at Don’t Quit Your Day Job, PK asks an important question for anyone looking to retire in the next…ever. Just how exactly can you predict inflation? Well, as you’d imagine, it’s an imperfect science, But he’s got an idea of how you guess it.
3. Friend of the blog Steveonomics gave some advice to high school seniors about to head out into the real world. I’ve also been known to write a similar blog post each year; here’s the most recent one.
4. The guys at Young and Thrifty are masters of working the phones to save money on all sorts of different things. Here’s how they got 50% off a magazine subscription.
5. Oddball Stocks continues to be one of my favorite investing blogs. He weighs in on how to tell if someone has money, how to tell a company’s average salary, and more.
6. Des at Half Banked wears the same thing to the office every day. I used to think this whole craze of wearing the same thing every day was kinda silly, but then I realized I I’ve been subconsciously doing the same thing for years. Every day is the same–dress shirt (purchased at Value Village) and jeans. It’s gotten to the point where I have a Monday shirt, a Tuesday shirt, etc.
I assure you I am much less fun at parties than I sound.
7. Liquid Independence thinks there’s no such thing as good debt or bad debt. It doesn’t matter what has been financed, it somebody is stressed out about their debt, then it’s pretty easy to classify the debt as bad debt. It’s an interesting thought process.
8. Boomer and Echo points out RRSPs are still pretty valuable, even in the age of TFSAs. The article is great; the comment from Stephen Weyman might be even better.
9. About a year ago, I pointed out some pretty easy logic. You’ll end up richer if you don’t have kids. Tawcan agrees with me in theory, yet he points out some of the ways having kids has actually saved him money over the years.
10. And finally, here’s a profile of the guy who manages Nevada’s $35 billion public employees’ pension plan. It’s all invested passively. What does he do with his day? Pretty much exactly what you’d expect.
Stuff Nelson wrote
As a reminder, you can hire me to write for your blog, newspaper, or poorly-Xeroxed newsletter. Hit the ol’ contact me page to get the ball rolling.
1. Over at Lowest Rates, I wrote about how to avoid getting egged on Halloween. Step 1: don’t give apples. You’re just begging to get them thrown back at your door.
2. I wrote about how to save cash on groceries at Sustainable Personal Finance.
3. And over at Motley Fool, I spent some time with an early retiree who gave me some basic, but pretty invaluable money lessons.
Tweet of the week
Have a good week, everyone.