Now About Those Green Bananas…

Like the subscribers at Canadian MoneySaver, those at our investment letter generally skew older, with the vast majority over age 50. Many are over 80 years old and naturally, they are the ones most likely to fall off our list. Sometimes it is simply because the decision is that a change in investing systems would best suit their interests. Others decide to move on knowing that our methodology preaches “patience”. Some people do not feel that they have the time for that. As one long-time adherent to our methodology stated, “I don’t even buy green bananas now”.

Oh yeah, and some do die. Hey, reality does bite.

When I wrote the book, The Canadian Small Business Survival Guide, which became a best-seller, I talked about the “Stages of Life”. The sub-divisions were, “Singles”, “Newly Married Couples”, “Full Nest I”, “Full Nest II”, “Full Nest III”, “Empty Nest I”, “Empty Nest II”, and “Solitary Survivors.” There is not enough space to go into each of these categories, but it is important to recognize that as life progresses, the manner of investing can change somewhat. Critical to this is keeping one’s focus on risk.

It is fair to say that when younger, you can assume more risk when investing. If the big “FAIL” light comes on, there is more time to regain your footsteps. But it is folly to take odds that are so long that you are almost certain to set the monetary clock back a distance. “Invest” big time in lottery tickets? That is a voucher for the poorhouse, so to speak.

Finding the right balance between risk and reward is not a “simple” tango. It is important to have that money for old age, when income via a job is normally reduced if not eliminated. But from this contrarian vantage point too many planners now scare people into outlining a grand plan that defies reality. For example, more groundwork and tables are being laid as if people live to 100+. Certainly, more folks are doing this, but the reality is that in Canada, about 22 out of 100,000 breathe into this rarified age. If historical statistics are a guide, the number reaching that extended time zone will be much less than health care professionals and statisticians predict. They have been way high when providing estimates in the past, perhaps wishing to remain optimistic in the life versus death reality.

Alternatively, with the younger set, an issue for insurers and funeral homes has been people living longer than expected, not less. Health care keeps warning about lower life expectancy due to environmental issues and obesity, but it hasn’t happened yet. And all those people who have quit smoking or avoid it altogether, gosh darn they just seem to keep living longer and longer. One could become convinced that there is indeed a link between smoking and cancer. What’s next, fighting in hockey and chronic traumatic encephalopathy? Being Canadian, thought that I should slip that in Gary Bettman.

Inflation is an area that many financial planners use to scare people and I perceive it as somewhat of a red herring. While very tame now, they point out that if investments do not keep up, your investments are effectively falling behind. While this is true, people must be wary of chasing this bogeyman and thereby negotiating too many hazards with their hard-earned funds. Typically, if inflation increases, so will financial returns on “boring” stuff like GICs and preferred shares. It is important to be wary of the risk associated with playing with the nest egg as you move up the potential return curve.

Not for a second am I also saying that the work of financial planners is not valuable. It can be very worthwhile to be sure, invaluable for some people. Quite simply, it would be horrible to run out of money. But people must balance putting stock in a future that might not come, as compared to living in a present that is a certainty.

When planning ahead, you have also to consider enjoying the here and now. Effectively, this is a play on that old mantra, “A bird in the hand is worth two in the bush.” If you are always planning for a tomorrow that might not arrive and forgoes enjoyment today, some of the precious nature of life will be lost.

My wise father-in-law Pierre Fortier would say, “I don’t want to be the richest man in the graveyard.” With that as a mantra, he would spend money, while also being wise enough to live within his means. Yes, this is indeed a balancing act and not a straightforward one.

As an aside, to those of you who are 100 and reading this, congratulations. And if without glasses, YOUZER! But if you are planning for your 110th birthday, think again. Only one of 1,000 centenarians reach the rarified level of supercentenarian. Like, really low odds, man. Women too.

Anyhow, time for me to go and check out the bananas that I bought yesterday. My best bet is that they are still green, being the optimistic realist that I am.

Benj Gallander, MBA, Co-editor of "Contra the Heard", Toronto, Ontario. Email gall@pathcom.com, www.contratheheard.com