Real Advice Doesn’t Come From a Magazine

I was looking through an old magazine from 2010 the other day and I came across an article that prescribed seven specific stocks to buy. What a load of malarkey.

I’m not saying these stock picks were bad investments. I actually have no idea what their past performance has been.

What I’m saying is that you can’t get true advice from a magazine. Not personalized advice that is specific to your situation anyway. There is a very simple reason for that. The author doesn’t know you, and he isn’t writing with you specifically in mind.

Here’s what I mean. Let’s say that you are feeling a little run down lately, so you start looking through some medical journals for some answers. You have a fever, you are feeling weak. Your body hurts, and so are just so darn tired. So what’s wrong?         

Well, depending on what article you are reading you might convince yourself that you are suffering from anything from the flu to a snake bite. Clearly the appropriate medical treatment will differ significantly depending on the correct diagnosis, but you can’t get diagnosis from a magazine.

Were those seven stock picks appropriate? Only if the reader had the appropriate objectives, risk tolerance, account size, and financial knowledge. In other words, the picks might be fine for some readers, but they might be quite inappropriate for others, and the article doesn’t distinguish between the two groups.

Real advice will be specific to your own situation. For example, recently I had the pleasure of meeting a young lady in her twenties. I have worked with her grandparents from some time, and they suggested that she come in to see me.

She’s highly educated, with an excellent, well-paying career. She has no debt, and she has a little extra money to put away towards something each month. She is in a high tax bracket, and is concerned that her retirement savings through her employer will be inadequate. So what should she do with her money?

Well, there are a ton of articles out there that would instruct this person to invest for growth because of her age and objectives, and make the investment inside her RRSP for the tax savings. I have written many of these types of articles myself. Getting an early start is just such a huge mathematical advantage. Its compound growth in a tax friendly environment, baby. The more time you have, the more money you end up with.

The only problem with this boilerplate type advice is that the person needs to be in the exact situation that the author is writing about for the advice to be appropriate.

An article that proclaims that people in their 20’s and in a high tax bracket should simply invest for growth using the RRSP would be more useful if it included the disclaimer that it is only applicable as long as there aren’t any exceptions that trump the original advice. Exceptions could be: You are drowning in debt that you need to deal with first. You don’t have the necessary RRSP contribution room to execute the strategy. Your risk tolerance approaches paranoia and you can’t cope with daily, fractional volatility. Your health is compromised. Your job is not stable. Etc.

But a magazine article can’t really include all the potential exceptions. It’s just not feasible. And in this particular case, there is an exception in play. You see, on further examination, this lady also wants to buy her first house.

So we are going to use the RRSP, alright. But we aren’t investing for growth. We are investing for liquidity, with the intention of removing the funds from her RRSP tax-free under the Home Buyer’s Plan.

Magazines are great for discussing ideas. They can be a source of some good information. But for specific advice, talk to a professional.

This article was posted in All Columns, Investment Management.
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