Investing is simple. Don't let the internet tell you otherwise.

You want to know what makes by blood boil?

Drivers who cut in front of the line waiting to get on the Gardiner Expressway, dirty dishes filled with cold water in the kitchen sink, and people touting an amazing investment opportunity.

When I hear words like “high returns”, “innovative product ” and “exclusive opportunity”, I can feel the little hairs on the back of my neck tingle. I feel the blood rushing to my leg muscles so I can run away. My heart rate rises just a bit. Investing is simple and attempts to make it complex often ends badly. “Great investment opportunities” are rare.

A question I often get from clients is “Am I missing out on investment opportunities?” They are worried that mutual funds and ETFs aren’t good enough and that there’s got to be something better. What are the rich people doing? What kind of investments do they have access to that I don’t? Those folks with the You Tube videos talking about how they make money investing – shouldn’t I be doing that too?

All of this wondering can make people freeze up. They get wrapped up in doing “the perfect thing” with their money and end up doing nothing. The internet is full of investment ideas and the more you read, the more confusing it becomes.

I get it: I have that problem too.  A few years ago I wanted to replace my SUV with a smaller car. I know nothing about cars, I am not interested in cars, I don’t know how my car works. I just want it to get me to where I need to go. So for me, spending hours on Auto Trader and Clutch was boring and stressful. The more I read about the optimal age of a used car, the gas mileage, features and brand, the more I just wanted to give up and keep my gas-guzzling SUV. It was easier. In the end, I had to just decide. I knew I wanted a hybrid, so I picked one, sent the link to my brother-in-law and he gave me his blessing on a Toyota Prius. (It’s a great car!)

So when people come to me with this question I am sympathetic. And I’m also very opinionated and straight with people: you’re not missing out by owning plain vanilla investments that are available to everyone.

Sure, people with more money have access to investments that the average Canadian doesn’t. There are two in particular that come to mind. One is a hedge fund. Hedge funds are funds that have fewer restrictions than a mutual fund. The person managing it has more latitude in their investment approach. The idea is that if you give a smart person a blank slate and few guardrails, their brilliant mind will produce outsized returns for investors. The truth is actually very far from this vision. The hedge fund world is littered with bad outcomes – funds that lost money (sometimes lots of it) because the manager took big risks that didn’t work out. The fact that the Hedge Fund Journal writes about how to avoid hedge funds that could blow up tells us something.

Private equity is another example of an investment available to wealthier folks. Private equity sounds so exclusive! Private! The “private” in private equity however simply means that the fund holds companies that are not publicly traded on the stock market. Instead, they are privately owned. Private equity fund funds buy or invest heavily in companies with the idea of improving them and then selling them later on at a higher price. Private equity funds have fewer disclosure requirements than mutual funds and so you might not know much about what’s in the fund or how it is managed. Like a hedge fund, you have to trust the people managing the it. Private equity investments sometimes have high returns, it’s true. But it’s pretty hit or miss and it can be hard to know whether you'll get a hit or a miss.

“Innovative products” also cause confusion and FOMO for investors. There are thousands of ETFs available in Canada and many thousands more in the US. Why are there so many? Most of them are not the plain vanilla ETFs. Most of them are specialty funds that have been launched by financial companies in order to try to entice you to put you money with them. These funds have to be “innovative“ in order to stand out. And so the people who create these products identify a “need” that investors have and build a sometimes quite complicated product to meet this “need”. Some of these ETFs are so complex that most average folks don’t understand how they work.  Once again, you have to trust the managers of the ETF. You have to trust that they know what they’re doing and that they’re doing the right thing for you as an investor. For this privilege you pay a higher fee and, quite often you get performance that is actually below the overall market performance.

Why would we chase after these investment products when we have easy access to everything we need to be a successful investor? I’m talking about plain vanilla ETFs or index mutual funds. When I say plain vanilla, I mean products that track the broad stock and bond market indices. For example, you can own an S&P 500 ETF for 0.03% per year and you will get an average return of somewhere in the range of 8-9% per year. This is a pretty good rate of return and is higher than what most financial plants incorporate. You can also own the S&P/TSX Composite index, which is the Canadian market, for 0.08% and you can expect to earn something like 7 % per year. Owning these two ETFs plus an international ETF  gets you a wonderfully diversified portfolio that will very likely perform better than a portfolio that is managed by a big investment firm on Bay Street.

Investing is simple. Don’t let the internet tell you otherwise.