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What happens in Vegas does not stay in Vegas. Not any more. Vegas is everywhere.
Gambling culture has broken free of its confines and is being aggressively marketed to the public. It’s most conspicuous in sports, where you can bet on everything from the coin toss to the outcome of single plays, and investing.
The financial industry is doing its best to turn us all into degenerate gamblers with quick-payoff, casino-style trades. Massively leveraged exchange-traded funds or ETFs meant to be held for a single day. Options contracts that can become worthless in a matter of hours. Prediction markets interwoven with trading platforms that let you put money on yes-or-no outcomes, such as whether the temperature in New York will exceed 8 C on Friday.
Feel like the AI bubble is going to burst in the next month? Polymarket, a New York-based prediction-market platform, will give you 50-to-1 odds on your money.
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Nobody is being forced to take a dumb bet. But financial markets today are teeming with excesses that are irresponsible at best, predatory at worst.
Big finance is busy churning out ingenious new products capable of wreaking havoc on the finances of the masses. Don’t be among them.
Forget that triple-leveraged inverse single-stock ETF. Here are three things regular investors ought to be putting their money on in a gambling-mad world.
Low fees
News flash, investors: the war on investment fees is over. You won. For years, fees and commissions have been steadily trending toward zero for those who choose the lowest-cost route.
An ETF tracking the TSX can be bought commission-free, carrying a management expense ratio of around 0.06 per cent. That’s $60 a year on $100,000 invested.
This past Tuesday, Vanguard Group, an investment management and advisory company, announced it was lowering the fees on its asset allocation ETFs to 0.17 per cent. These funds are all-in-one portfolios, globally diversified and automatically rebalanced.
The mutual fund route is going to cost you a lot more. The fees on F-class active funds, which strip out advice fees, are about five times higher. Commission-based mutual funds will cost 10 times more.
The gap between the two routes can be enormous – easily accumulating to hundreds of thousands of dollars sacrificed in fees over an average investor’s lifetime.
As Warren Buffett once wrote: “Performance comes, performance goes. Fees never falter.”
Financial planning
Lots of Canadians aren’t clear on what financial planners do. They equate them with financial advisers, whose job is to help clients with investment decisions.
With a bank branch-based financial adviser, you typically get someone heavily incentivized to sell you mutual funds from his or her employer’s product shelf.
Financial planners on the other hand, can help with estate planning, tax planning, insurance, even credit-card rewards.
The heart of financial planning is optimizing one’s wealth within the rules of a highly complex system. That’s why David O’Leary, the founder of Toronto-based Kind Wealth, a wealth management firm, sees financial planning as the antithesis of gambling.
“You don’t need to be faster or smarter than anyone else,” Mr. O’Leary said. “You just need the right guidance to navigate a complex system filled with tax rules, financial products and trade-offs. That’s where a planner can help you tilt the odds in your favour.”
The stock market
Once you zoom out of the average trading day, the noise and volatility of the stock market give way to an uncanny steadiness. Measured over decades, stocks tend to ascend at 9 per cent a year, almost infallibly.
That goes for U.S. and Canadian stock markets alike. And yet, investors are constantly told they shouldn’t settle for market returns. They need stock picking, they need alternative investments, they need factors, smart beta, leverage, and on and on.
Regular investments, compounded at 9 per cent a year, can be a powerful way to build wealth, because of the magic of compound interest. Benjamin Franklin summed it up thusly: “Money makes money. And the money that money makes, makes money.”
Go ahead and settle for average returns. You’ll probably end up richer for it.