In Rob Carrick’s Guide to What’s Good, Bad, and Downright Awful in Canadian Investments Today, he delivers on his promise to be opinionated rather than polite, respectful, and boring. However, Carrick doesn’t propose a single method of investing. He just points out the good and bad ways to go about many different approaches to investing.
The book is written in a style of lists related to different subjects. For example, the first two lists are “four examples of investment industry propaganda that you can’t take at face value,” and “seven dumb rookie mistakes investors make and how to avoid them.”
The most useful section to me was the one on investment advisors (as I said in an earlier post). This is mainly because I’ve never had a good answer when asked how to go about choosing a good investment advisor.
In the section on “big, fat mutual fund industry rip-offs,” Carrick is careful to say that some mutual funds are excellent but that investors should avoid almost all money market funds, most bond funds, many balanced funds, bank index funds (except for TD’s e-Series), and fund wraps. Another section points out some good mutual funds. This approach is more useful than most commentary that either whole-heartedly embraces mutual funds, or rejects them entirely.
In my opinion, Carrick is a little too accepting of high mutual fund MERs. Just because a fund is cheaper than most in its class doesn’t mean that it is reasonably-priced. I have a hard time understanding the logic of paying even 1% each year. But if an investor is going to buy mutual funds, it does make sense to focus on the cheaper ones even if they are still quite expensive.
Some Good Quotes:
“If you buy a stock at $10 and it rises to $20, then falls to $15, you haven’t lost $5.” This reminds me of people who planned their retirements when their stocks rose during the tech boom, but then felt cheated when stocks dropped. It is extremely rare to get out at the peak and investors who think this way are doomed to disappointment.
“Raise the issues of fees with companies offering wraps and you’ll get a blast of nonsense about all the inherent benefits of investing this way.”
On owning bonds: “Let’s just say it’s a mental health thing. My sense of the investing masses is that an all-stocks, no-bonds approach is a nervous breakdown waiting to happen.” I didn’t have a nervous breakdown during the recent stock market crash, but I agree that most stock investors did get very nervous.
“Not that you’d want to, but you can also buy such investment-industry refuse as principal-protected notes and wrap accounts.”
On investors nervous about being a small fry buying just a few shares: “no one from your brokerage firm is going to call you up and laugh at you.”
On being intimidated by boastful investors: “Anyone who claims to bat anything close to 1.000 as a stock picker is a liar.”
Overall, I’d say this book may not offer much to very knowledgeable investors, but it is definitely useful for novices through to those who only think they are knowledgeable.