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A dad recently got in touch with me to ask about the best way for his two young adult kids to invest a modest inheritance.

That got me thinking about sports betting and the celebration of individual expertise, a theme that extends into stock-picking. If you’re smart, the reasoning goes, you can make big money.

This dad plans to set his kids up with online brokerage accounts where they can manage their own investments. His question: What to buy, blue-chip stocks or exchange-traded funds?

Investing in blue chips and other stocks is not betting, but it does require people to make decisions that have a significant chance of going wrong. It happens that we have quite a number of widely held blue chips in the investing doghouse right now – BCE Inc. (BCE-T), Enbridge Inc. (ENB-T), Bank of Nova Scotia (BNS-T), Emera Inc. (EMA-T) and TC Energy Corp. (TRP-T) are some examples. Many investors have to be second-guessing their decision to buy and hold these stocks.

Investing in ETFs neutralizes the risk of faulty stock-picking by giving investors the benefit of diversification. All the above stocks would be in the portfolio of a broad-based Canadian equity ETF, but their share of the total portfolio would be 1 to 3 per cent each at most.

The S&P/TSX composite index has averaged 7.7 per cent annually over the 10 years to March 31, and just under 10 per cent for the past five years. These are strong returns by historical standards, but they seem kind of blah compared to the doubles and triples or better that some stocks deliver.

Even blue chips can outperform at times – Canadian Natural Resources (CNQ-T) and Imperial Oil (IMO-T) are both up solidly this year. These two stocks combined account for roughly 4 per cent of the S&P/TSX composite index, so you’re likely getting some benefit from their recent surge if you hold a Canadian equity ETF.

Sports betting is sold on the promise of making money, but also on the idea of offering extra excitement and involvement compared to just watching a sporting event. Stock-picking is similar – you feel like you’re playing at a higher level compared to investing in diversified ETFs or mutual funds.

Stock-picking works for some investors, but ETFs tracking mainstream indexes are the best approach for most investors. As for sports betting, I don’t get it. It seems a pure waste of money.


Have you recently sold your home?

For the next season of the Stress Test personal finance podcast, we are looking for someone who has made the tough decision to sell a home as a result of soaring mortgage costs. Households across the country are paying hundreds of dollars more in mortgage payments as a result of rate hikes. We want to tell the stories of the hardest hit people – the ones who chose to sell. If you’re open to talking with us, please contact Globe and Mail personal finance editor Roma Luciw at rluciw@globeandmail.com.


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Rob’s personal finance reading list

This is the average mortgage payment

Staggering numbers on how much homeowners in cities across Canada are spending monthly on their mortgages. The bargain spot is Saint John, N.B.

More houses, more investors

It’s widely expected that building more homes will help satisfy demand and limit price increases. But it turns out that a lot of the people grabbing up newly built homes are investors, not first-time buyers.

Underneath the bunker

Toronto Life on preparing for sundry catastrophes, including blackouts, extreme heat and, of course, pandemics. For gearheads, a few strategic purchases are highlighted. Now, for a disaster-prepping theme song – I nominate Underneath the Bunker, by R.E.M.

Gold is golden

A look at why gold prices have jumped, and the role gold can play in a diversified portfolio. A key point in this article is that we’re in an “everything rally” right now. All kinds of assets are rising in price.


Ask Rob

Q: Can Canadians participate in Nvidia Corp. (NVDA) and other Nasdaq shares through Canadian Depositary Receipts and exchange-traded funds?

A: CDRs are a way of investing in popular U.S. stocks in a version listed on the Cboe Canada exchange. Investors holding CDRs benefit from currency hedging and receive dividends. CDRs are affordable because they typically trade in fractions of the underlying U.S. stock. Nvidia is among the stocks available as a CDR. You can also get exposure to Nvidia and other U.S. tech stocks through ETFs tracking the S&P 500 or Nasdaq 100 indexes. Nvidia accounts for about 5 per cent of the S&P 500 these days.

Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.


Tools, explainers, guides and charts

A non-profit credit counselling agency looks at the pros and cons of debt consolidation loans and declaring bankruptcy.


The Money-Free Zone

Jazz meets art punk in a new album titled The Messthetics and James Brandon Lewis. The Messthetics include members of the hardcore band Fugazi, which means there’s a muscular aspect to this music. I really like the song Boatly – it starts slow and builds to a finale that showcases this band’s power.


Watch this

Another snapshot of life in shrinkflation nation, this one documenting a discrepancy between the published weight of a package of bacon and its actual weight on a scale.


On social media

A forum where investors discuss the various options for parking cash.


In case you missed these Globe and Mail personal finance-related stories
  • There are good ways to make life more affordable for Canadians. Cutting the carbon tax isn’t one of them
  • Mary, 46, worries that being a renter will hurt her retirement plans. How much should she be concerned?
  • My adviser is trying to move me to a fee-based account. What should I do?
  • What’s the maximum you can save for retirement?

More Rob Carrick and money coverage

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 12/04/24 4:00pm EDT.

SymbolName% changeLast
BCE-T
BCE Inc
-1.36%44.23
ENB-T
Enbridge Inc
-0.42%47.07
BNS-T
Bank of Nova Scotia
-0.85%66.41
EMA-T
Emera Incorporated
-0.7%47.07
TRP-T
TC Energy Corp
-1.07%49.73
CNQ-T
Canadian Natural Resources Ltd.
-1.73%109.04
IMO-T
Imperial Oil
-1.11%96.35
NVDA-Q
Nvidia Corp
-2.68%881.86

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