An Investing Observation

September 16, 2015 1:01 pm Published by

Many Canadians, particularly those without a structured pension to rely on, have necessarily turned to investing in order to provide for their needs (and hopefully wants) down the road. In the strictest financial sense of the word an investor is interested in one thing – accumulating wealth. However, as the saying goes, there is more than one way to shine a penny. So too, there are more ways than one to be an investor. Fortunately, there are experts to make sense of the options for you. Unfortunately, their interests are often conflicted. Two diametrically opposed industries come to mind.

The Globe and Mails Saturday business section carries a regular feature entitled Financial Facelift, which I have opined upon previously in this space. If you are unfamiliar with the segment, the gist is something like this: a random anonymous reader volunteers their financial circumstances to a financial planner, along with their life goals, and the financial planner dispenses advice on how Mr. or Mrs. Anonymous should proceed in order to meet those goals. Having read the segment for years, I remain amazed at how often the expert suggests to his or her erstwhile clients that they ought to be more heavily invested in real estate. Expressed as a percentage, it would be 0%. That seems like a shockingly unrealistic percentage. Surely, someone, somewhere at some time would have been well served by owning real estate?

In an equally self serving effort the Toronto Real Estate Board goes to great lengths and expense in a radio advertising campaign promoting the purchase of real estate as a great investment. While they don’t come out and say sell your stocks and buy real estate, it’s doubtful they would discourage such a redistribution of your portfolio. Ignoring for a moment the notion that purchasing a house makes me a homeowner, not an investor – it is easy to see that the messages the financial services, and real estate industry convey are self serving. Simply and bluntly put, your realtor makes no money when you invest in the stock market and your financial planner makes no money when you buy rental real estate. In and of itself that doesn’t make their advice wrong – perhaps just biased.

In a day and age when the majority of the earth’s population would be doing well to be fed, clothed and housed – what to do with the extra change in your jeans is a first world problem to be sure. Nonetheless, investing is a real concern for many Canadians, and what investment vehicle to select becomes an important decision. As someone who derives their income through people’s desire to both own and rent real estate, my views on the subject are about as fair and balanced as Fox News. I will therefore, keep my investment advice vague so as not to show a bias. I suggest you buy something with a fixed supply (they’re not making any more of it) and increasing demand (more people will want it tomorrow). Anything come to mind?

 

Thanks for reading,

 

Jeff Neumann

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