Risk in holding Cash and not Investing | Page 2 | General financial discussion | Discussion forum

If only it were so easy, clearly we'd all be rich.
But, of course, it's not.

I'm not into blaming the investor when things go awry. There are far too many other factors out there over which we have no control. When the same sorts of bad things happen to a lot of people, you know there is a bigger problem. As has often been reported, the vast majority of people do not do especially well in the stock market and would have been better off or as well off with something like GICs which they could understand fairly readily and without the headache. Yes, there are reasons for this, some good, some bad, but the pattern continues and can't be easily dismissed.

Caveat emptor is a good principle, but the vast majority of people don't have the tools to figure all this out, let alone the time, and often not the ability. Many can't do basic arithmetic and are frightened of fractions.

I read recently that teachers' colleges in Ontario now require candidates to pass a proficiency test in basic math, and one has an obligatory course. These are content courses, not teaching methodology courses, and these people are all university grads. This need developed because teachers, at the elementary level, can't be relied up on to know the subject matter well enough to teach it.

A friend of mine teaches in a post-graduate programme where a knowledge of percentages is essential, as is the ability to figure out ballpark percentages in your head. The overwhelming majority of her students are simply unable to do this. And it's the same, year after year.

Such people, the majority of Canadians, are sitting ducks for a poorly-regulated investment world. When they succeed, it's mostly by luck and due to the fact that capitalism has not yet failed. Often, too, it is due to inattentiveness - they weren't watching over their investments very closely, and eventually they came up again.

It seems a lot easier when you're looking back on what you've accomplished than it does when you're looking forward and have no idea which homework you should even do. Everybody has to start with taking someone else's advice as to how they should proceed, whether it's the nice woman at the bank, the economist-turned-TV-journalist, or their neighbour. Even knowing what to read is a challenge - if you are inclined to do so and can "do the math". Any and all can start you off on the wrong foot or the right one, but you won't know that until things do or do not work out.

Loonie, I like the fact that most people aren't paying attention, I don't discourage it, as it makes life easier for me! And, with some background in teaching in my family, I take special exception to the notion that people can't do math because too many elementary school teachers don't know how to teach it. Without going on at length, I'll just say that not failing people, pushing them to the next grade year after year when they haven't mastered or even grasped any of the steps along the way is probably a bigger reason most folks under a certain age has no clue how to make change or why post grads can't figure out percentage estimates in their heads. (Post grads! And they wonder why the real world isn't as impressed with their degrees as they expect!) There is zero incentive for the teacher or the student when there's "success for every student" (the motto of a local school board) every year no matter what.

As far as investing is concerned, without getting into details it took me a while to figure out my most successful approach is the one that uses almost zero calculations or any of the "typical" numbers-based analyses they tell you to use. As if you're going to analyze Enbridge's balance sheet and notice something that has caused everybody else to under or overvalue the stock price! Again, that goes along with my "against the crowd" theory of investing, i.e. don't do what the consensus is because, as you point out, most people end up not doing well. So I also disagree that everybody needs advice to begin with - I say avoid advice (unless it's from a self-made multi-millionaire on a beach somewhere), do your own reading and you'll figure it out if you've the motivation. To me, investing in the markets is about greed and fear (otherwise you'd be content with GICs or high interest bank accounts and just working overtime or an extra job or two to increase your net worth), it's not logic based, so that's a big clue to me as to what a successful approach is. I know most will disagree (that that's not investing, that's speculating or trading), and I don't discourage their disagreement!

Loonie, I don't want to belabor the point either and much of what you say is true but:
1) A Toronto Star (!) article using the word "some" a lot and a few anecdotal references does not convince me;
2) The article is about student teachers, not experienced teachers;
3) About the "big enough problem" for teachers colleges to address it part, well let's just say in my view public sector bureaucracies never pass up an opportunity to expand their empires and payrolls even if it means rushing off-target at the wrong or a non-existent "problem".
Easy and free fix: There are lots more qualified teachers than there are jobs available. Hire only those who can prove they know their math stuff. The word will get out quick and the best of the rest (they are adults now, right?) will quickly figure out a way to get their skills up to par, no extra bureaucracy needed.
I will say that technology has changed things. The designers of curriculum have for decades now taken the view that due to technology children no longer need to be drilled in basic calculations, what is important is that they learn how to use the technology (in this case, initially the calculator, now it's the computer and increasingly the smartphone) to do the calculations. So I do agree this is a growing reality.
And when I say do your own reading, I don't at all mean reading those who are giving financial advice or information. I mean reading or watching about the world, about history, about politics, about immigration and social movements, about technological and medical breakthroughs, etc. - i.e. check out what's going on in the world! Have your eyes open to the world at large to see the trends, what's waning and what's waxing, what's likely to come up in the next few years and decades, that's what you need to observe if you want to know where the economies, where business, where people and their money are headed to. I do virtually no "micro" anything any more, only way is to swim with the current, and then you're laughing!

Brian, I expect you can look up the answer to your question somewhere. Surely you weren't expecting to find it here.

CPP invests in all kinds of things that aren't suitable for the average person, as you know. They have a large staff to do the research on our behalf.
As the article demonstrates, at least for those who have enough math skills to do percentages, this amounts to .078% of their portfolio, well under 1%.

I am glad that CPP is making these decisions, and that I don't have to, because I would not be competent to do so and would never get any sleep.

Loonie, hiring the best teachers will not get more "complicated", just add another to the already existing list of criteria: you have to know your math. (And if post-grads or student teachers can't do fractions then, with respect, they ARE "dummies".)

And now half my family wants to get at you! And usually I'm the one they accuse of being a "teacher basher"! The "experienced" teachers have zero to do with what the curriculum mandates, they are bound to follow it. Curriculum is designed by PhDs in downtown Toronto who wouldn't know a kid if they tripped over one, often assisted by teachers who got out of the classroom as soon as they could to go to "head office" or "consultant" positions. You should acquaint yourself with the specifics of the elementary math curriculum if you really want to know why the old, basic skills have disappeared - there's no sign of what worked for you and me and for centuries. I've been told of some experienced teachers who chose to close the classroom door and hope the principal didn't come in while they stole a few moments to go "off curriculum" to use some of the traditional, time-tested techniques of learning math. The young and new teachers do no such thing as they don't know anything yet and/or are low enough on the seniority pole so are following the party line without question.

Similarly it was not the experienced teachers who brought in the concept that everybody moves on to the next grade, year after year, not just those kids who actually learned the stuff. Teachers have zero control over that. And where that leads is to the young and student-teachers who can't teach grade 5 math.

Anyway, this is way off the topic now, so I'm done.

After WWII baby boom started school, 1950s into 1960s, they were grabbing anybody they could to stick in front of the class of 40+ kids - many were just high school grads.