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Investment Ideas The painful reality is that investor education does not work. Plus, top REIT picks

I’ve often compared financial literacy instruction to diet books in that both are very popular and extremely ineffective.

A weight loss-oriented cookbook Pinch of Nom released earlier in 2019 sold more than 200,000 copies in three days – the highest sales of a non-fiction book since at least 2001, according to The Guardian – yet the obesity crisis rages on. And as Ritholtz Wealth Management founder Barry Ritholtz wrote in an April 30 column for Bloomberg, only about a third of Americans qualify as highly financially literate despite the popularity of financial planning advice on television and Amazon’s book store.

“The painful reality is that investor education does not work,” argues Mr. Ritholtz, “Academic research has confirmed this. One research paper looked at more than 200 studies, and reached the conclusion that the lessons of financial education are fleeting, and degrade quickly without frequent use.”

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The author offers three potential solutions to financial literacy’s lack of stickiness in the human mind. The first is hands-on experience in the form of student-run businesses on campuses and internship programs from an early age offering direct financial experience.

The second solution is repetition – financial professionals reiterating the rules of financial planning regularly and often as part of their service to clients. The third plank of Mr. Ritholtz’s financial literacy instruction plan is a bit ambiguous – “How to think.”

“The idea of giving students a list of facts to memorize and then testing them has been shown to be of limited use in real-life problem solving. This … is the educational equivalent of fast food. A complement to the real-life experiences… is a more Socratic method of instruction. Rather than mere lecturing, instructors should lead students on a guided hunt for information. Let the students figure out the ideas for themselves, with the instructor as the pilot.”

The second point, repetition, reminded me of a radio call-in show from so long ago the names are lost to memory, but made me laugh out loud at the time. The expert guest was a doctor touting the benefits of regular exercise. A guest called in and asked, because he was short of time during the week, whether it was effective to work out extremely hard once on Sunday.

The doctor’s response was hilariously facetious, “I don’t know, is it better to brush your teeth every day or just wait until Sunday and brush really hard?”

Financial planning, like nutrition and exercise, is a largely a matter of consistency and habit. It doesn’t matter if someone is frugal six days a week if they buy a $1,200 pair of shoes on the other day.

I don’t, in the end, think people forget the lessons of financial literacy – that spending more than we earn is a bad idea or that every dollar saved, thanks to compound interest, could turn in to a lot more money at a later date. It’s just that occasionally, faced with the stress of a long work week, we want to forget them temporarily. The problem, as usual, is human nature, and minimizing its worst tendencies is the path to financial success.

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-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

goeasy Ltd. (GSY-T). This stock appears on the positive breakouts list (stocks with positive price momentum) as its share price has rallied 36 per cent year-to-date. Analysts believe the share price will rise to a new record high over the next 12 months with an additional 27-per-cent gain expected in the year ahead. This growth stock is expected to grow its earnings by over 50 per cent in 2019. Management’s return on equity (ROE) targets are 24 per cent or higher in 2019 and 26 per cent or more in 2020. Meanwhile, the stock is trading at a price-to-earnings multiple of less than 10 times, a discount to its historical average. The stock has a unanimous buy recommendation. Ontario-based goeasy operates two core business segments, easyhome and easyfinancial. Jennifer Dowty reports (for subscribers).

Beyond Meat Inc. The California-based maker of plant-based alternatives to traditional hamburgers and sausages, encapsulates two important trends: consumers’ growing appetite for vegetarian food, and Wall Street’s equally voracious appetite for money-losing companies. The company is expected to start trading on the Nasdaq exchange on Thursday, without any profits but with a great deal of interest in its potential ability to tap an important shift in people’s eating habits. Ian McGugan takes a look at the company’s prospects (for subscribers).

Choice Properties REIT (CHP-UN-T). Investors typically buy real estate investment trusts for their steady cash flows and above-average yields. Capital growth, while nice, isn’t usually the primary goal. But with interest rates tumbling recently, some REITs have delivered growth-stock-like gains. Case in point: Choice Properties REIT (CHP.UN). Through April 29, Choice posted a year-to-date total return – including distributions – of 21.2 per cent, easily topping the 17-per-cent total return of the S&P/TSX Composite Index. John Heinzl takes a look at the REIT (for subscribers). See also: Yield Hog: John Heinzl’s model dividend growth portfolio as of April 30, 2019

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The Rundown

Why this Sun Life portfolio manager is trimming her equity position and embracing higher quality bonds

The markets have rebounded strongly so far in 2019, after a sharp correction in the fourth quarter of 2018, which has some investors feeling confident. At Sun Life Global Investments, portfolio manager Kathrin Forrest is more cautious. Brenda Bouw interviews Ms. Forrest about her outlook (for subscribers).

In the stock market, bad news travels fast

There is no better chance to observe how the stock market absorbs new information than during earnings season. Companies that fail to measure up to expectations risk incurring the wrath of the market, which tends to handle bad news poorly, according to new research. A report from Richardson GMP shows that investors generally overreact to disappointments such as earnings misses. Tim Shufelt reports (for subscribers).

It’s time to take advantage of the benefits of REITs. Here are two to jump on

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We invest in real estate investment trusts for steady, predictable income. We don’t expect much in the way of capital gains as well – that’s just not how the system works. But this year is an exception. The decisions by the Bank of Canada and the Federal Reserve Board to put interest rate increases on hold have boosted the fortunes of all interest-sensitive securities – and that includes REITs. Gordon Pape takes a look at two of them (for subscribers).

What do market indicators say about the possibility of a recession?

Are we at the dawn of this business cycle’s last inning? The pundit consensus is for a slowdown but not a recession. The U.S. Fed seems to agree. However, the Bank of Canada’s recently released quarterly business outlook survey shows that Canada’s business sentiment has taken a sharp downward turn with the outlook looking cooler than economists anticipate. Who is right? Rather than drawing conclusions based on standard economic statistics, George Athanassakos focuses on two market-related and more forward looking metrics.

3% GICs are fading away - here’s where you can still find them

The Bank of Canada’s latest comments on interest rates offers no hope to conservative investors and savers about better returns in the near term. The opportunity to lock in money at rates of 3 per cent and higher has mostly, but not completely, slipped away. Rob Carrick takes a look at where you can still find the highest rates. (For subscribers).

Others (for subscribers)

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5 reasons Apple will trade higher

The credit cycle has turned. Long-term risks are going up, not down

Apple results beat sets eyes back on $1-trillion

Poll: Global funds favour bonds, but say most assets expensive

Low-volatility, high-yield Canadian dividend stocks for the income investor

Wednesday’s Insider Report: CEO pockets over $2-million with the sale of this surging dividend stock

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Wednesday’s analyst upgrades and downgrades

Wednesday’s small-cap stocks to watch

Tuesday’s Insider Report: Billionaire businessman tops up his investment in this penny stock

Tuesday’s analyst upgrades and downgrades

Others (for everyone)

Pilgrimage to see Warren Buffett out of step with populist mood

Climate change has U.S. fund managers adjusting agriculture investments

Bridgewater’s Ray Dalio tops the list of hedge fund manager compensation

For investors, bloom is off Europe amid Brexit, yellow vest worries

Globe Advisor

‘Sell in May and go away’ strategy has much merit

Looking for dividends? High-yield ETF picks are back in the spotlight

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Question: I’m considering the Vanguard Balanced ETF Portfolio (VBAL), which is one of Vanguard’s all-in-one exchange-traded fund products. Question: Do I pay two management fees – one on VBAL and another on the seven underlying exchange-traded funds it owns?

Answer: No. With ETFs that hold other ETFs, you pay only one management fee. VBAL’s management fee is 0.22 per cent. Including tax, the management expense ratio is 0.25 per cent.

--John Heinzl

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What’s up in the days ahead

Canadian mutual fund managers had another rough year in trying to beat the index. Tim Shufelt will explain.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Gillian Livingston

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