Book Review: Wealthier - The Investing Field Guide for Canadian Millennials

For solid financial advice backed up with academic evidence, investors can look to Wealthier: The Field Investing Guide for Canadian Millennials by Mark McGrath, adapted from Daniel R. Solin’s U.S. version of this book.  Although it is aimed at millennial-aged Canadian DIY investors, there are discussions about financial advisors as well.

Outline

The book begins with excellent advice on how to invest well, followed by how you can fall off the good path into bad investing due to a “rigged system.”  By understanding the possible investing pitfalls and the ways the system is rigged, investors can stay on a good path.

I found the most interesting section to be the discussion of stoicism.  The authors discuss several elements of the stoic mindset that are useful for avoiding investing mistakes such as selling out of fear.

The book continues with DIY financial planning and how to save enough to get to “the number.”  This part of the book had an interesting discussion of the role of gratitude in helping investors to be happy with what they have rather than continuing to build wealth and take risks when it no longer makes sense.

The final parts of the book discussed insurance, buying vs. renting a home, overcoming procrastination, and financial advisors.  One thing I would have liked to have seen in the discussion of financial advisors is the difference your asset level makes.  Your experience trying to find a good financial advisor will be very different depending on whether your assets available to invest total $25,000, $250,000, or $2.5 million.

Some details

Something I didn’t know about ESG (Environmental, Social, and Governance) investing: “ESG analysis considers a company’s policies, disclosure, and performance, but doesn’t consider what product it sells.  That’s why tobacco or military companies can have a good ESG score despite the industries they’re in.”  This explains some of the crazy ESG inclusions I’ve seen.

“A 2023 MNP Consumer Debt Index shows 51% of Canadians are $200 or less away from failing to complete their financial obligations.”  I’m skeptical of these surveys.  I suspect the question many people actually answer is “Would a sudden $200 expense annoy you?”

The chapter “Don’t Look” explains that looking at your portfolio too often can bring on pain due to loss aversion.  But many of us look anyway.  I think one of the reasons we look so often is the illusion of agency.  We feel like watching our portfolios will prevent losses, just as staring out the windshield of a car from the back seat will somehow stop the driver from crashing.

There is a 3-page discussion of asset location that more or less concludes that investors shouldn’t worry about it.  However, almost all studies I’ve seen on asset location are based on maintaining a before-tax asset allocation, rather than the more sensible after-tax asset allocation.  I’ve been told that regulations force financial advisors to control before-tax risk (volatility), even though their clients would be better off with a focus on after-tax risk.

After a discussion of consumption smoothing and the problematic Life-Cycle Hypothesis, the authors come to a sensible conclusion: “A more practical approach would be to live frugally and avoid as much debt as possible while young.  Then, exercise discipline to live well below your means as your income increases, permitting higher savings rates at that time.”

Despite the benefits of budgeting, the authors recognize that many people just won’t stick to all the tracking necessary.  They suggest “reverse budgeting,” which means setting aside savings first and then spending the rest without much tracking.  My wife and I are among the people who are able to succeed by just saving whatever is left over.  This approach leaves many in debt, but we end up saving too much.

“Insurance is best used for risks with a low probability of occurring but a high impact if they do.”  This good advice guides how I make insurance decisions.  For example, I never buy extended warranties on consumer items that I can easily afford to replace.  I also take collision coverage off my cars when their write-off value gets low enough.

Conclusion

Canadian millennials can avoid a lot of investing mistakes and anxiety by reading and understanding this book.  It provides a method for investing and tools for avoiding mistakes that are backed by solid academic evidence.  The authors express these ideas clearly for non-specialist readers.