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You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.

ROMA: You want to be smart with your money and invest. But have you seen what the stock market has done during the pandemic? Scary ups and downs, but it’s okay, you got this. All you need is a plan. That’s what we’re going over today.

ROB: Welcome to Stress Test, a Globe and Mail podcast where we look at how the rules of personal finance have changed in the pandemic for Gen Z and millennials. I'm Rob Carrick, personal finance columnist at the Globe and Mail.

ROMA: And I’m Roma Luciw, personal finance editor at the Globe. Rob, we’re at episode five today, and we are jumping between “personal fin-nance” and “personal FI-nance.” What’s up with that?

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ROB:It’s unconscious. I have no idea why I’m doing one or the other. They just both come out. Actually, you know what, in my mind, I think I’m saying “personal FI-nance”. Anyway, it just goes to show you that it’s a wide world and all kinds of ways to approach this and we should just let it be.

ROMA: So Rob, we've talked about the gig economy, debt, housing. Investing is a topic that young people are really interested in. It made sense to both of us to put it here, in this order, midway through our podcast initial lineup. Today, our topic is investing. And that's something that COVID has put to the forefront. Investing is not a get rich scheme. It's about putting your money away for the long term, building wealth slowly over time. You need to be comfortable with that idea to put your money away and leave it there. The longer the better because if you're in it for the short haul, you can get badly burned. So it's important to deglamorize investing. Rob, how do you go about doing that?

ROB: I find that a lot of millennials really take to the glamour idea. They're reading the news. They see ideas and companies and themes that they think, I can parlay this into a big score on the stock market. And I understand why they do that, millennials are stressed financially in any number of different ways and many of them feel, I need a quick hit, some juice, I need to make money quickly. We've had some really good years for stocks. But I think that gives you the wrong mindset. As you said investing is a long-term thing. It is slow, steady, gradual wealth-building. And I think everybody is going to be an investor at some point, you're going to be investing for your retirement, for your children's education, you're not going to be trying to get rich, you're going to be trying, bit by bit, to get wealthier. Let's put it that way.

ROMA: There's another group of listeners that probably are thinking, I don't know about the stock market. I don't understand it. I'm afraid of it. And why wouldn't you be? Who has ever taught you this? It's not like you come out of school, knowing what that is and how it works. But I think the message for young people listening to this or any people is that you need to invest and the reason you need to invest is because you will need to save for your own retirement. If you're employed in the gig economy, you will not have a pension. And even if you have a full-time permanent, staff-type job, pensions are disappearing, which means that you need to start investing as early as you can, you know, for as long as you can, but retirement is certainly something that's on the forefront. Rob, have we not found that in our conversations and dealings, there's a huge amount of interest in retirement savings, among young Canadians?

ROB: I think millennials have really well absorbed the lesson that they need to save for their retirement. But I don't want millennials to go around thinking that it's all about retirement. They're living different lives than Gen Xers and Boomers. They're taking time out for travel to upgrade their education. They're taking sabbatical years and you'll be saving and investing for that too. As a general rule, investing is for things you're going to be doing in 10 years or more. So if you want to take a sabbatical, you see yourself getting a master's to develop your career, something like that.

ROMA: What about the idea of paying someone to do the investing for you?

ROB: Not a big fan of that for millennials, I don't think they have enough to invest that makes it worthwhile to hire an advisor and get financial advice in planning. A lot of times millennials will go to the professional investment advice industry and they'll get sold products. There isn't much financial planning or advice to be provided at their stage and they're not getting enough value to offset the fees they're paying. I much prefer to see lower cost solutions like robo advisors or opening an account at an online brokerage and buying some low-cost ETFs. I think that's a much better approach and then as your life becomes more complex, then you can seek out various kinds of financial and investment advice.

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ROMA:In every episode of Stress Test, we talked to real people and experts to see how the basic rules of personal finance have been stress tested by COVID-19. Today we're talking about how to invest. That's up next.

COMMERCIAL:

This podcast is brought to you by CPP Investments. Take comfort knowing the Canada Pension Plan Fund will be there for you. We invest to help ensure the CPP Fund remains resilient over the long-term, sustainable and secure for millions of Canadians. Learn more at CPPinvestments.com.

ROMA:

We wanted to talk to a young person starting out on their investing journey. We found John in Montreal. He's 26.

JOHN:

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My name is John. I'm a technical coordinator for a maritime shipping company based in Montreal. And shipping I've learned is, it's a big money industry. You know, small mistakes and delays in time can be pretty costly. I mean, for a vessel, the number one thing is time is money.

ROMA:

John's job is to run the technical needs of large ships. It's a pretty cool job that he landed right out of university, five years ago. And his salary is pretty good too.

JOHN: From when I began, I started at about $65,000. And now I'm in between $70 and 75.

Yeah, I was really fortunate. I mean, I got a great job coming out of school. I'm fairly comfortable between you know, being able to pay for my you know, essentials car house, and then even you know, recreation and stuff. I'm certainly not pressing, I'm able to save.

ROMA: All this means John has money to invest.

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JOHN: I started investing maybe about a year after I started working, so probably in 2016. I wanted to use my money or make my money kind of work for me, in trying to make the most I could out of my savings.

ROMA: So how does John make decisions when it comes to investing in the stock market?

JOHN : Definitely one of the things that I feel is that current events are a huge driver of what's happening in the market. And if you have a sense of, you know, what's going to happen in the future, that there can be opportunities. You know, for instance, actually, one of my first investing experiences was with Blackberry, when I was in university, when Blackberry came out, and Blackberry had been getting hammered. And I really felt that, you know, when they released their new phone, it was gonna be their new touchscreen phone, I felt that when that phone would come out that the market would react well to it, and, you know, there would be some capital gains available. That's what happened. I think on that one, I put in maybe about $500 and bought it at about maybe $8 a share. And I sold it for like, $19. So I probably had 40 shares made about $10. So I would have made maybe $400, $500?

ROMA: And does John have an overall investing strategy?

JOHN: Not in particular, I believe in the diversity of assets. You know, I think one of the things that I have on my side is time. I'm not particularly concerned about what I invest in, as long as I think it's a good quality firm. So my strategy is, you know, really, I try and hold a diversity of assets, some growth, some value. And really just, you know, I think by exposing myself to as many different things as possible, I'm covered. And I should still be earning more than I would be if I was just, you know, earning interest from the bank.

ROMA: This conversation was recorded one month into the COVID pandemic. Where was John in his investing journey at that point?

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JOHN: So I had about $27,000 in January, and now we're sitting in the middle of April, and I'm done about 14%. So it equated to about a $4,000 loss.

ROMA: What does it feel like to lose $4,000 even if it's just on paper?

JOHN: At first, it was painful. You know, I know some of my friends who have done well in the market and have only lost 10% rather than 20%. So, I mean, we've all lost and I think that was one of the biggest things and I have a lot of friends who asked me about advice. And I think one of the big things is just getting used to winning and losing. So I've had my wins. But I've also, you know, I've lost a lot of money. I mean, I've held Bombardier, you know, I have money in some cannabis stocks as well. So I've been on that ride. And I think that it's kind of part of the territory. You know, although, yeah, $4,000 I mean, it's a lot of money, certainly, but I'm optimistic that by the time I really need to access it that I should recover.

ROMA: Does John get advice? Or is he doing it solo?

JOHN: So right now, I'm doing it on my own. I think part of that is I get some personal enjoyment out of it. So even though it might not be totally optimized, I think there's some value in you know, enjoying what you're doing.

ROMA: And what kind of risk is he taking with his mix of investments?

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JOHN:

Probably a fairly conservative amount, I would say, of all the cash or liquid assets I have on hand about 50% is in the stock market. So yeah, in general, I mean, I think it's good to be exposed to the market now because you can weather losses. That being said, you know, I'm looking to buy a home so that's something that I have to take into consideration, You know, I'm going to need cash at that point. I mean, in the near future for me investment goals involve buying a house in my mid to late 20s. I have a long-term girlfriend looking to start a family and taking that next step. So certainly a home. And then part of that too will probably be you know, wedding at some point, I'm sure my girlfriend would like sooner than later.

ROMA: When it comes to that wedding. And to house any idea of the dollar amount he'll need?

JOHN: In terms of wedding I don't know, but from what I've heard, the average wedding in Canada costs about $30,000. So and then for a house between my girlfriend and I were probably looking at another, let's say maybe $60 or $75 [thousand]. So I mean, between the two of us, you know, it would be nice to be kind of in that, say between $75 [thousand] and

$100,000.

ROMA: $100,000 is what John wants to have to accomplish these goals in the next couple of years. Does he have questions about how to get there?

JOHN:I mean, I think the big crossroad for me is looking at, Do I want to put more in? Like I said, you know, only half of everything that I have is in equity. So I'm wondering, you know, am I being a little bit too conservative? And should I put more money in the market? Is this a good buying opportunity? Is there more that I should get involved in? Or, you know, should I just sit back and not be greedy and, you know, make sure I don't lose more than I already have? So that's the big thing on my mind.

ROMA:

We're grateful to John for talking to us about his situation, because we've met lots of young people like him. They see the stock market is a way to hit a financial home run. But Rob and I always want to stress the long-term when it comes to investing. So where did this hunger for stock market homeruns come from? How did we get here?

ROB: Millennials are under pressure, financially, in all kinds of different ways. Mainly the gig economy, which we discussed in episode one. I think they feel that they need to make money, they feel more pressure than other generations did to get into the stock market, to make a quick score, to have some extra cash maybe to supplement their income, or to achieve goals like travel or buying a house. And that leads them to take chances in the stock market. And that is the wrong approach for investing. Basically what they're doing is gambling.

ROMA: For younger millennials and Gen Z, this pandemic is the first real market rout that they've lived through. There's a whole cohort of them who've never experienced real declines. Those declines are nerve racking and scary. But there's another older cohort that has gone through this. Rob, talk to us about the financial crisis of 2008-2009.

ROB: The global financial crisis frankly, it scared the hell out of millennials and they became strikingly conservative in their investing habits. I had a lot of experience with investing people marvel at how conservative millennials were, basically that means a lot of their portfolio was in bonds and not as much as they could have been was in stocks. And I think that hurts them. It basically it will limit their investing returns over a 40 or 30-year time horizon.

ROMA: And now we have a younger generation of investors who are going through this for the first time.

ROB: Stocks have been rebounding from crashes since stocks were invented, any number of years ago. One of the striking things about the pandemic is how the stock market rebounded so quickly after the crash in March. But I don't want millennials to get the wrong lesson here. You don't always get a quick slingshot rebound when the stock market crashes, it could take two, three years. And the rebound that happened after the pandemic, it could melt away, there could be a second lag down, we don't really know. So when a stock market crashes, and you get back in, you have to think, I am buying stocks that may take one, two, three, four, even five years to rise in price enough to make this worthwhile. But it will be worthwhile if you take the long-term perspective.

ROMA:That's our take on how we got here with our generational attitudes towards investing. We're about to speak to an investment advisor for more insight. That's up next.

COMMERCIAL: This podcast is brought to you by CPP Investments. At CPP Investments. We never lose sight of the long-term. We invest the Canada Pension Plan Fund to help provide financial security for generations of Canadians. We diversify the CPP Fund across geographies and asset classes to access the best investment opportunities and generate sustainable long-term returns. The fund is now more than $400 billion. To learn more about our investment performance for Canadians visit CPPinvestments.com.

ROB: Our next guest is Ben Felix. He's an investment advisor with PWL Capital in Ottawa and I won't lie, one of the reasons why I asked him on the show is because he's an expert and he's 33. So he's got a millennial perspective on life. This is our conversation in our homes, still in lockdown in May of 2020.

I want our listeners to know that they’re talking to a millennial investment advisor because in the financial industry, there’s such a tilt towards older, more experienced people, I’m being euphemistic there. But there aren’t very many younger voices, you are one, to tell us a bit about yourself starting with how old you are.

BEN: I'm 33 years old, and I've been working as an investment advisor, well now a portfolio manager, starting out as an investment advisor, for a little over eight years now.

ROB:

Cool. I want to start off with some basic foundational personal finance-slash-investing, and that is the difference between saving and investing. Because I think a lot of people think they're synonymous. They're not. Please help us sort through what these two terms mean.

BEN: Yeah, well, I think the act of saving is maybe separate from the concept of savings as a vehicle. So I think it's more of a separation of what are short-term savings and what are long-term investments. Short-term savings are an emergency fund, for example, cash that you're putting away that you need while in an emergency. Long-term savings, that's when you're starting to think about things like retirement very, very long term, 10 or more years at least. And when you're talking about long-term savings, that's when you're investing in some investment vehicles, or what are called securities, that might have a little bit more risk -- risk, meaning that their value can change, by potentially large amounts, in the short-term.

ROB: Help us understand the difference between saving and investing, in terms of risk. How much risk do you want to take on for your savings?

BEN: Your savings should be guaranteed. When you know that you're going to need money in the short term, the short term being for sure, within five years, even a little bit longer than that I'd still call short term, you really don't want to be taking any risk. Because you know, you're gonna need that money soon. And over the course of a few years, more aggressive investments like stocks, the value can change by, you know, 50% or more over the course of a year.

ROB: So Ben, what would you say to someone who asks, What timeline do I need to be an investor?

I think ten years makes a lot of sense. As a general guideline, if you're thinking about putting money away, and you know that you're not going to need it for ten years or longer, you can be taking a fair amount of risk.

ROB:Ben, I want to ask you about investing home down payment money in the stock market. Let's look at John, he's a fairly confident young man very well set up doing well in life. He's invested some of his house down payment money in the stock market. What are the ins and outs of doing that?

BEN: As a general rule of thumb, I think that investing money that you need in the short term in stocks is really risky. I mean, stocks have positive expected long-term returns. And even in the short term, most of the time, most of the time being maybe 60% of the time. I mean, statistically, it’s still a positive expected outcome, I guess, but a 40% chance of losing money on the amount that you know need to purchase a home, in the near-term, that might not feel so good. Now, again, in general, I don’t think that people should be investing their short-term savings. But if someone’s done this, and they’ve lived through this experience, and they’ve realized that didn’t feel very good, that might be a good reason to change course. Which could mean, and some people aren’t gonna like to hear this, but it could mean taking the house down payment money out of stocks, even though stocks are down. Imagine the money that was invested in stocks with a house down payment, imagine that were in cash. The current dollar amount after the stock market decline. If you had that much in cash, and you know that you want to buy a house with it in the next six months or a year or whatever the short-term time horizon is, would you invest that amount in stocks today? Knowing what you know now about how you’re going to feel when a stock market declines. And if the answer is no, I would not invest that money in stocks. Selling might be the rational thing to do.

ROB: Let's prepare people's minds properly for getting into the stock market. I'd like to create sort of a bit of a checklist. If you have achieved these thresholds. If you have met these criteria, then you're probably ready to start thinking about investing in the stock market. If a young client comes to you and they say, Ben, I would like to invest in stocks, what questions would you ask them to make sure they're actually ready?

BEN: So from a financial-planning perspective, I think that the boxes that you should check before investing in stocks, number one is having an emergency fund. So that's three to six months of living expenses, monthly living costs, in cash, in some guaranteed high interest savings account-type vehicle. The next one is short- and mid-term savings. So again, it ties back to the house example. If there are big expenses that you know you have coming up that you know you need savings for, that money should be set aside and not be invested in stocks. So at the most basic level, those are the two boxes that I would be checking, emergency savings, short- and mid-term savings. Once those are done, I think it's reasonable to start thinking about longer term investments.

ROB:The question the newbie investor always has is, What should I invest in? What do you say when people ask you that?

BEN:I think if we look at the evidence on what makes sense for most people, most of the time, the answer is always going to lead us to index funds. Index funds are funds, I guess, as the name would suggest, that invest in an index. An index is a broad grouping of stocks that's been designed to represent a market. Investing in index funds gives you very low-cost access to whole entire stock markets. Over the long-term, investing in broad market indexes, you've got a pretty good shot at capturing the stock markets returns. That's not so true if you're paying high fees to own an actively-managed mutual fund. And it's also not true if you're picking individual stocks. A small number of stocks in the market tend to drive most of the market's returns, and your chances of picking those stocks are pretty low. So if you're all the stocks in the market through an index fund, your chances of getting stock market returns are quite good.

ROB: Ben, I'm sure you've heard this and I know I have, young investors love the idea of picking stocks because they think I'm going to hit a homerun -- I'm going to find a theme, I'm going to find a sector, I'm going to find a stock that's going to take off like a rocket, I'm going to double and triple my money, and that's a lot better than anything the index is going to do. What is your response when someone tells you that?

BEN:

Well, again, when we look at the data on individual stocks, so much of the return of the market is concentrated in so few stocks. Finding those stocks before they have their exceptional performance is very hard to do. Perhaps the best evidence of that is looking at actively-managed mutual funds. And they try to identify the best, the best investments, the best stocks that are going to have the best returns, in an effort to do better than the stock market indexes that we just talked about. The data on actively-managed mutual funds is appalling, might be one way to describe it. The vast majority of actively-managed mutual funds fail to outperform the market index. So if individuals think that they can do better than the market over the long term by picking stocks, that's probably the best data set to look to. How does the professional money managers do when they try to do the same thing that you're talking about?

ROB: Ben, what are some of the crazy misconceptions that young people have brought to you as their financial advisor,

BEN: Crazy misconceptions? When we think about stocks, and people talk about risk and investing in stocks, I think people are usually talking about volatility. And so this is the big misconception. Losing money investing in stocks, over the long term, is actually really hard to do. And the reason is stock markets tend to increase in value over the very long term. And we have data from around the world, going back hundreds of years showing this. Now, that's only true if you're a diversified investor. So if someone comes and says they want to pick stocks, there's actually a pretty good chance of losing your money permanently. But when we're talking about index funds, volatility in the short term can feel like risk because you can lose your money, as we've just seen. But over the long term, volatility is not a great measure for risk. So if you're a long-term investor, if you're a 20, 30, 40 year-old investor with a very long time horizon before you need to touch this money, is investing in stocks actually risky? It's not as risky as many people think. On the other side of that coin, not investing in stocks, when you have a very long time horizon, is arguably riskier, just in terms of your money losing its value over the long term.

ROB: I'm glad you brought up the topic of risk because it's occurring to me now, as we sit in the spring of 2020, that in the last 10 - 12 years, millennial investors, the older millennial cohort, have seen two massive stock market crashes. We knew after the last one, that millennials were tending to skew more conservative in their investments, even though they were the youngest and they could take on the most risk. They were actually surprisingly conservative, and then wham, they got smacked down again, in early 2020. What do you tell these people who are reeling? They think the stock market is just a wealth destroyer.

BEN: We’ve lived through, and then those people that you just described, have lived through a couple of big market declines. Now, they were also spaced out a lot more than market declines are usually spaced out. From ’08 until now, roughly 12 years. Historically, on average, bear markets have happened much more frequently, bear markets being declines of 20% or more in the stock market, have happened much more frequently, say every five years or so, historically in the US, going back to 1900. So we’ve lived through a long period where markets were very stable and delivered very positive returns for an extended period of time. It was actually when you look at the data, it’s fascinating for US stocks, specifically, the decade from 2010 to 2020, was unprecedented in terms of how strongly positive the returns were, and how stable, how low the volatility was over that time period. The idea that we’re going to see periods like that again, may not be realistic when you look at the historical data. Market volatility and market declines are normal things. So if someone’s reeling from these two experiences, maybe they’ve learned something about their own ability to take on risk. But there may also be an education piece in there where it’s important for people to understand that this is part of investing in stocks, it should be expected this is normal.

ROB: What do you think about John's situation? He was early on to Blackberry, he made some good money in that situation. A case of sort of sizing up an opportunity in the market and thinking, I can make some money off this, and then successfully doing so. Is that a model?

BEN: No. There's a quote, a famous quote that I'm gonna completely butcher, but it's something along the lines of, One of the worst things that can happen to a young investor is success in picking stocks, because it makes you think that you can do it. And you can't. The data prove so consistently that people cannot pick stocks to the extent that they're going to get themselves returns that are better than the market, over the long term. And in many cases, we end up hearing about the people who have had success in picking stocks because they're more willing to tell their stories. I guess you could call that survivorship bias. Even famous investors like Warren Buffett, Buffett's had an amazing long-term track record at picking stocks, but for the last 12 or so years, not so much. I think if someone's had success in picking stocks, if I were them, I'd be taking the win and moving on to something with a more reliable outcome.

ROB: That sounds like a “quit while your ahead” recommendation.

BEN: That's exactly what I'd be saying. Yeah.

ROB:John, our real person, is 26 years old. Generally speaking, what mix of stocks and bonds would you suggest for someone in that cohort?

BEN: Oh, geez, it's so dependent on their ability and their willingness to take on risk. If John's got all the short-term savings covered, and he's got a very stable job, his ability to take on risk is high. But the other piece is the willingness to take on risk. And that comes down to your psychological profile. How do you feel when your investments drop in value? And how do you think you're going to react when that happens? We haven't had a major market decline since 2008. Until now, there's a whole cohort of people that had no data on how they would actually feel when their long-term investments dropped in value by a significant amount. People have that data point now, which I think is really important. If someone is willing to take on equity risk, the volatility of stocks, I think that it is sensible for them to be as aggressive as they possibly can be. I have no problem with young investors, a 26-year-old investor, I have no problem with them being 100 per cent in stocks.

ROB:One hundred percent stocks sounds super risky, given what happened to the stock market in March. Over 10, 20, 30 years, are you going to significantly outperform someone who has bonds in the mix as well?

BEN: Yeah, depending on the amount of bonds they have, if somebody has 50 per cent in stocks and 50 per cent in bonds, the performance can be substantial and the historical data, it has been substantial. And especially when we're compounding over 30 years or longer. For a 26-year-old investor, it could be even longer than that. The compounding effect of even a few points of a percent, even if it's half a percent a year, that difference that can be substantial over the long term.

ROB:

Interesting. You brought up compounding period. John's 26, in the kind of financial planning that you do, how many years in the workforce does he have left until retirement?

BEN: Oh, it's gonna depend so heavily on his individual circumstances and goals. I mean, there's this thing that I know you and I have talked about in the past, Rob, the FIRE movement, Financial Independence Retire Early movement. In a case like that, he could be trying to deplete his human capital as soon as possible and convert everything into financial assets.

ROB: I think it's important though, to help Millennials understand that their retirement horizon might even be longer than their parents. I mean, you know, my generation, I'm 57 years old, there was Freedom 55, it was a marketing campaign for an insurance company, very effective, but it really did bring the idea of early retirement out in front and everybody sort of strove for it and it's -- Help a millennial today understand the parameters, help a millennial today understand how long will they be in the workforce, how long till I need my retirement savings? How many years might someone who's 26 spend in the workforce?

BEN:I think that the idea of having a stable job until you're 60 or 65, that's changed a lot. The Financial Independence Retire Early movement that I mentioned, speaks to this a little bit where a lot of people are calling themselves financially independent or retired, but they're not really. They're saving very aggressively in the short term and then finding some other streams of income, some other relatively low-paying job that they enjoy doing, with the intention of doing that for a very, very long period of time. Now, when someone retires, it doesn't mean that they're spending their whole entire portfolio. So when people talk about their time horizon being from now until retirement, I don't think that's always accurate. Because once you retire, you're going to spend small amounts of your portfolio for the rest of your life. And depending on when you retire, that could be longer than you spent saving and working. It could be shorter, depending on a lot of different variables. But in terms of how long is the time horizon that I should be thinking about as a 26-year-old investor? I mean, I'm probably thinking about it from now until death, not from now until retirement. So that means a 26-year-old investor could have 65, 70 years to plan for. And that's the kind of timeframe that I'm thinking about when we're talking about how much risk you should be taking now.

ROB: And people always want to know, “How much am I going to make?” when they invest. Somebody who invests for 20, 30, 40 years, what would you think is a reasonable expectation for an average annual return for a balanced portfolio tilted towards stocks but with substantial bonds? Annually, what will I make?

BEN: Tilted toward stocks but with some bonds in there, a little less than 6 per cent? Maybe around 6 per cent. For a 100 per cent equity portfolio right now, for financial planning purposes, we’re using expected return a little bit over 6 per cent. So as soon as you start adding in bonds, that gets a little bit lower. You’ll probably never see the return that you expect in a given year, even over a given period of time. You’re going to see returns way above and way below. And that’s just the nature of stock investing. Stock returns are volatile. Over the long term, it’s probably reasonable to expect 6 per cent, plus or minus depending on how much stock and how much bond.

ROB: We also have to consider fees. Explain how fees impact those returns you just talked about.

BEN: When we were talking about the stock bond mix, we mentioned how important 0.5 per cent can be or even less, and that's just as true with fees. Fees are a guaranteed cost. So anytime that you're paying fees, obviously it's reducing the after-fee return on your investments. Index funds are one of the best ways to get access to investments for a really, really low fee. They also only give you access to the stock market. I think it's also important to keep fees in context. If you're getting some value out of the fee that you're paying. If you're paying 2 per cent or 2.5 per cent to own an actively-managed mutual fund, and you're not getting fantastic financial planning advice alongside that? That's probably a pretty good signal that you should be looking for a lower cost option.

ROB: Ben, the robo-advisor seems to answer a lot of questions for me. They do charge a modest fee, but they do let you invest in low-cost ETFs. You don't need to know anything about investing. They handle all the work for you. And it strikes me as an excellent way for someone who is not confident about their abilities as an investor, but knows they need to get into investing now, to make it happen. What do you think about robo-advisors?

BEN:Yeah, I totally agree. And I mentioned earlier that, while they're charging a fee. That fee is tiny compared to the alternative of not investing in stocks at all.

ROB: How important do you think it is to invest automatically on a regular basis?

BEN: It's exceptionally important. From a human behavior perspective, automating anything is important. It reduces mental load and makes it a lot easier for a plan that you've put in place to actually be executed. So yeah, I think automation is huge, and it's one of the most important things that young investors should be thinking about, automate as much as you possibly can.

ROB: I think we could end it there. Ben, I thank you very much for your time this morning.

BEN: All right. Thanks a lot, Rob.

ROB: Thanks to Ben for helping us out today. You know, a couple years ago, I was looking for fresh voices on investing. I didn’t want to hear from advisors who were my age, 55 plus, and I found Ben and I thought, here’s a smart guy who has that young perspective.

ROMA: Ben’s also helped us out by writing for our Young Money site at The Globe and Mail. He’s helped us answer reader questions, providing insight on all kinds of things, including investing.

ROB: At the end of every episode, we like to offer three takeaways. Here are mine for investing.

One: Don't invest in the stock market unless you have ten or more years until you need that money.

Two: Stock market crashes are part of life and can't be avoided. Expect one every eight to 12 years and prepare for it by having a good mix of stocks and bonds in your portfolio.

Three: A robo-advisor is an ideal option for somebody who wants to get started investing in a cost-effective way.

Thank you for listening to Stress Test.

This show was produced by Hannah Sung.

Editing and mixing by TK Matunda.

Our executive producer is Kiran Rana.

ROMA: Thank you to John, our investor in Montreal, and Ben Felix of PWL Capital in Ottawa.

ROB: So far, this podcasting thing seems to be going pretty well.

ROMA: And we want to know if you have any questions for us, send us a voice memo and we might feature you in an upcoming show. Some upcoming episodes are on things like what it costs to live downtown, the cost of kids, or the savings you might realize by moving back in with your parents. This is how you send a voice memo: Record your voice on your phone in the voice recording app, and ask your question. Email the voice memo to me, Roma Luciw, at rluciw@globeandmail.com

ROB: I’m passionate about making sure this age group gets the unbiased information it deserves on money matters. If you feel the same way, tell the world. Leave us a rating and review at Apple Podcasts. And if you know someone who is just starting out on their investing journey, send them this show. Tell them to subscribe to Stress Test at Apple Podcasts, Google Play, Spotify or their favourite podcast app. You can find us at the globeandmail.com where we cover all things financial. Thanks for listening.

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