Investing at its most basic is a tangible act of hope that the future will be good. The difficulty in seeing it that way, of course, lies in the different, personal definitions we all have of what “future” and “good” mean.

For some, “future” and “good” mean only having enough money for their lifetime and possibly the lifetimes of their children. That’s understandable - in our culture of scarcity the first thing we’re trained to do when we’re scared (and who wouldn’t be scared right now?) is to huddle with people like ourselves around the resources we worked tremendously hard to gather. Investing for these people sometimes feels like an act of desperation, not of hope.

For you, the meanings of “future” and “good” might cast a wider net: good for entire communities, good for the earth and all its inhabitants, good for future generations. With such broad definitions, you might even have a broader understanding of investing, which could mean the creation of wealth that’s not limited to dollars, but encompasses the wealth of participating in a healthy community with thriving ecosystems and sustainable relationships. To invest this way, and to keep investing this way even when it feels like things are only getting worse, requires that you are deeply connected to your WHY.

Easy, Bad Answers and Harder, Less Bad Answers

More than any other tool in the financial planning kit, investing is the home of easy, one-size-fits-all answers, and it’s not necessarily because there’s a whole industry designed to lull you into buying their products by making them seem perfect for everyone (even though there is).

In part, investing is home to easy answers because the hard answers are...hard.

Your values are personal. They’re complex, and they’re unique. And so are the companies and causes you want to invest in. Matching your values fingerprint with someone else’s is hard work, especially if you haven’t actually examined your own fingerprint that closely.

Off-the-rack solutions, like relying on ETFs and mutual funds with ESG ( environmental, social, and governance criteria screens) branding aren’t all horrible. But just ask my friend and colleague Darryl Brown, CFA, about what you might find when you look closely at the companies you end up owning. He’s got plenty of examples of people wanting to invest in companies that advance social justice, diverse representation, and fair employment standards and finding out they now own Amazon, Google, and Tesla instead.

Bespoke solutions, just like suits, are more expensive, but are typically worth the cost. Working with a professional to articulate what you want (and don’t want) and tailor a portfolio around your unique values is a good way to avoid the easy, bad answers. It’s hard, because you still have to rely on someone else’s understanding of your values, and imperfect, because you will be relying on proxy characteristics (like board representation, or the CEO’s personality) to screen for a good match...and it won’t always work.

This leads to another hard truth: investing with more than just the growth of your own personal net worth in mind is harder to measure, and not because values-based investing generates lower returns (it doesn’t). Rather, it’s because a definition of success that includes the health of the entire planet, for example, requires more than the simple math of financial statements to measure. Not only do you have to examine and articulate your personal values, you have to design your own personal scorecard.

Trying to build a good future using only traditional investing tools is like trying to buy a tomato in The Good Place: there is simultaneously too much and too little information to make a perfect decision about the impact your dollars will have, and no tangible evidence that all that hard work to make the best decision had the impact you wanted anyway. But it’s worth doing anyway.

Hard Answers, and How to Live With Them

Yes, investing your time, labour, and money in creating a good future is hard work, just like most worthwhile pursuits. The sheer amount of work might feel daunting, so here’s how to get from wanting to invest according to your values to actually doing it:

Start With Why

As my friend Bonnie Foley-Wong writes in her book Integrated Investing:

The first thing people ask me when they are thinking about investing is, “What should I invest in?” But the first question they should be asking is, “Why am I investing?”

Articulate the kind of future you want. Discuss it with your family and the people you work with in your community, and be as specific as possible about what you mean by “good”, and what you mean by “future”. Describe the change you want to see in the world: is it a problem you’re participating in? Is it a solution you’re not participating in? (You may find that the Design Thinking framework is a helpful tool to use for this.)

And here’s a potential bonus: involving future generations in your investing decisions and teaching them how to carry on after you may also line up neatly with your values around education and family!

Practice Explaining Yourself

Imagine you’re explaining your values to someone who doesn’t know you from Adam but who will be responsible for executing your vision. You might know what you mean by “I’m against consumerism” but they probably don’t - so tell them: what companies or attitudes do you want to withhold your resources from? What endeavours would you feel comfortable supporting?

If you think a particular CEO is power-hungry and represents everything wrong with the world, would trying to band together with other shareholders to force them out be a good use of your resources? Or would avoiding them and everything they touch be a better use of your time? Be as clear as possible: what is the outcome you want to achieve, and how will you measure it?

Perfect is the Enemy of Good

No matter how bad it seems like things are getting, remember that nothing is inevitable (no, not even Thanos). The top five companies in the seventies are not the top five companies now. Corporate decision-makers who don’t believe a word of their own greenwashing campaigns are scared of the reputational fall-out from not at least appearing to care.

The old paradigms of “investing is only about money” and “corporations only exist to maximize shareholder values” are actually shifting. Not fast, mind you, and it will take hard, sustained work to create long-term, meaningful change...but part of that change is the belief that it can be done. People like you, who engage with their wealth of resources as a source of future good can make it happen, and the first step is simply believing it can be done and acting accordingly.

(This article is reposted with the permission of the author. It was originally published here Boomer & Echo.)

I doubt very much you’re asking your financial advisor enough questions, and are worse off because of it. I think I’ve got a handle on why – let me see if any of this rings a bell:

You don’t have enough time: It’s tough to commit time to an appointment when there are so many other things crying out for your attention, let alone committing to another appointment if you don’t feel right about the first one. You’re also deeply polite and don’t want to take up too much of the advisor’s time.

You don’t have enough confidence: Heck, this is why you’ve got an advisor in the first place, because that person across the desk from you has more experience and is probably smarter than you, right? If you ask questions, they’re going to think you’re an idiot.

You aren’t rude enough: Asking a financial advisor why he’s recommending a particular fund or portfolio feels kind of aggressive. Pressing him for answers to your actual questions until you get them isn’t the way you were raised.

You don’t know enough: How will you evaluate the truth or accuracy of what you’re told if the whole reason you’re asking questions is because you don’t know the answers?

Am I right? At least in part? It’s really, really difficult to head into a meeting with a financial salesperson, knowing that you don’t know very much about investing, knowing that what happens to your savings is important, knowing that time is limited, and feeling as though your only two options are to ask questions about things you don’t understand until you understand them or to nod politely and buy whatever you’re sold.

That person across the desk from you might be the perfect financial advisor for you, but you can’t know that until you start asking questions, and I’ll warn you: a terrible advisor might sound an awful lot like a good advisor to someone too intimidated to ask.

Over the years as both a financial advisor at the bank and now as an advice-only planner, I’ve devised a very simple test to separate the wheat from the chaff: The best way to tell the difference between a good financial advisor and a bad financial advisor is to literally test their patience by scrutinizing fund documents right there in front of them while they wait.

You are paying – indirectly, often, but still paying – for this advice. Bad advisors forget that all the time, and start believing that you’re paying for their expertise rather than their assistance. If you get any sense that you’re wasting their time with your careful questions and document scrutiny, you’re getting a pretty good signal that you’re just a money delivery system and should probably run to your nearest T2033. 

So this is what I want you to do:

1. Ask about any term that you don’t understand: this includes MER, risk premium, value, forward P/E ratio, trailing returns, interest-rate risk, Andex chart…anything. Bring the conversation to a screeching halt anytime you hear something you don’t understand.

2. Ask to see the Fund Fact Sheet for every single investment you already own and every single investment that’s being recommended for you. Actually read each one of them, right there in the office, spread out beside each other. Look at the Management Expense Ratio and Total Expense Ratio, and figure out how much you’ll pay annually for the amount of money you have (or will have) invested. Look at the top ten holdings, the asset allocation, and the management style. Ask any question that occurs to you.

3. Zero in on the performance in the last ten years. If there isn’t a benchmark listed on the Fund Fact documents, ask your advisor to show you how the funds performed compared to other funds with similar holdings or strategies on Morningstar.ca.

4. Ask what job each fund is meant to do in your total investment portfolio and why each one, in particular, is there instead of any number of other funds that could be in its place.

I can’t promise that this one set of questions will result in an immediately deeper investment knowledge or a magically better portfolio, but I dearly hope that it will prompt you to start asking your own questions, to evaluate the quality of the advisor by their willingness to have open dialogue, to grow in confidence until you get answers (or research your own), and to commit to an investment strategy, fund, or portfolio with your eyes open and your critical thinking skills engaged.

“How should I think about investing?” is a question I wish a lot more people would ask. Why? Because there is so much more to investing - investing well - than what you should put in your portfolio and who you should get to manage it for you.

Oh great, I can hear you say, Sandi wants me to navel gaze or “design think” or whatever about something else …first cash flow, then retirement and taxes, now investing? In the end, everyone has the same goal, right? To get out more money than you put in and not get ripped off while doing it?

Fair point. But the universal goal of “growing your savings” can be approached in so many ways (Low-vol! Smart beta! Passive! Liquid Alts!) that a solution-focused, action-oriented, preferred-future creation system - a.k.a. design thinking - is the best way I know to equip you to make the right choice...for you.

That’s what I mean by “investing well,” by the way, not just “making the most money possible,” but feeling good while you’re doing it. You believe in your process, have confidence that you’re doing what you can to reach your goals, know exactly what your job is, and are spending your time reading books, walking your dog or getting a tattoo instead of worrying about your portfolio.

Here’s a quick refresher on the steps involved in applying a design thinking to any situation::

1. Empathize: Gain an empathetic understanding of the problem you’re trying to solve – typically, through research. Empathy is crucial to a human-centered design process because it allows you to set aside your own assumptions about the world and gain real insight into alternative perspectives.
   

2. Define: Accumulate the information you created and gathered in step 1. Analyze your observations and synthesize them to define the core problems you have identified so far.
   

3. Ideate: Generate some ideas. The solid background of knowledge gained in the first two phases allows you to start to think “outside the box,” looking for alternative ways to view the problem and identify innovative solutions to the definition you created in step 2.
   

4. Prototype: This is an experimental phase, with the aim of identifying the best possible solution for each of the problems identified in the first three phases. Produce a number of possible solutions to investigate.
   

5. Test: Now that you’ve got a few solutions, it’s time to test them out to see if any of them gain traction and/or actually get you where you’re going. While this is the final phase of the process, the results could bring you all the way back to step 2, with new, or more robust, definitions of the issues you are solving, which allows you to come up with new, robust ideas, prototypes, and tests.

Investing: Empathy

You have fEeLiNgS about your investments, whether you’ve got a single penny or many pennies invested. I know you do - because everyone does. Maybe it’s a deep suspicion of the whole capitalist system, maybe it’s a family history of wealth, maybe it’s the pride of making a great call at the bottom of the last market correction, or maybe you’re just downright terrified, but you’ve got (valid) feelings about investing. Take them out of your pockets, spread them out on the floor in front of you, and really examine them.

This is important, hence its position at the top. Unexamined feelings are what cause so, so many people to make terrible, no good, very bad, horrible decisions with their investments (professionals included). It’s also kind of difficult and sort of squishy, so here are some prompts to help you get started:

• What does “risk” mean to you? Is it something to avoid, something to take advantage of, or something else?

• What’s the worst thing that could happen to your portfolio in the next five, ten, or twenty years? The best?

• Is there anything you would never invest in? Anything you’d always invest in?

• What has your past experience been with investing - what have you lived through, and how did you feel about it while it was happening? How do you feel about it now?

Empathizing is also about researching alternative perspectives. This will help you start anchoring your feelings and unique history to the experience, history, and evidence of others. The caveat here is that every opinion possible is yelling at you, so how can you possibly know what to pay attention to? Here are some good places to start:

• Read: The Value of Simple by John Robertson

• Read: The Laws of Wealth by Dr. Daniel Crosby

Engage your critical thinking skills, soak up a bunch of knowledge, and start to get a sense of how investing has worked over time, how it may work in the future, and where you and your feelings fit. (This is a lifelong process, by the way. Forewarned is forearmed.)

Investing: Define

In this step, you need to write yourself an Investment Policy Statement that pulls together what you’ve discovered about yourself and the world of investing in Step One and seats it firmly in the context of what your investments actually have to do for you.

This statement doesn’t necessarily have to be fancy or professional. John Robertson’s book has a great example of a policy statement written in plain language about real life, and is a perfect template for how you’ll capture these thoughts for yourself.

If you’re working with a financial planner, doing this defining work should be part of the engagement. Policy items might include things like:

• What are your investments for? Are there separate investments for separate goals? (A classic example of this would be saving for your kids education with one set of investments and saving for your retirement with another set.)

• What minimum average rate of return do you need to earn over the amount of time you have available to meet your goals?

• What kind of risks are you not willing to endure? What’s the absolute worst-case scenario that you would be able to tolerate?

• How much are you able to contribute to your investments on a regular basis?

• How involved do you want to be in the regular management of your investments?

• If you hire someone to manage your investments, what is non-negotiable for a relationship to be worth the cost? How much would you be willing to pay for this over your lifetime?

Investing: Ideate

Again, this step may be something you work with your friendly neighbourhood financial planner on, but at its most basic, investing ideation involves creating a set of livable options that you think fulfill your investment policy.

For my clients, this ideation step may take the form of an investment manager search, and a shortlist of portfolio management options that could include companies and people we’ve worked with in the past who seem to fit what you’ve defined. (It bears repeating that we do not accept referral fees, fancy vacations, or anything else beyond a nice thank you note from anyone we put on a shortlist.)

For others, this step may look like finding a few investment philosophies that have really resonated in the empathizing step and seeing how they might fit with the results of the defining step, like so:

• Given how involved you want/don’t want to be, is one of the Canadian Couch Potato do-it-yourself model portfolios a good fit?

• For the relatively high cost, is the convenience of dealing with your local bank branch worth it?

• If you absolutely cannot tolerate seeing the value of your investment drop by more than 20% over a couple of short months under any circumstances, is that 5% average annual rate of return you need to earn over the next 15 years even possible?

Investing: Prototype

This step is a little difficult when it comes to investing real money, since the only true test of any investment policy is over a complete market cycle (think: in good times and in bad) and with real money (to see if that 100% equity portfolio you think you can stomach gives you an ulcer or not. Fake money does not, historically, give ulcers).

Past market history can give us some clues about the probability that a given idea will live up to your investment policy, although the danger here is that some of the really clever investment policies out there are actually just gigantic, risky bets that future market performance will be exactly like past market performance. Tread carefully here, and think seriously about talking to someone with what Tom Bradley at Steadyhand calls “accumulated regret,” or many years of market participation and the wisdom that comes with seeing clever theories fail miserably in real life.

You definitely want to talk to the people who will be putting your portfolio ideas into practice if you’ve decided to consider hiring a professional manager. Talk to everyone, and consider the ideas they offer to fulfill your unique investment policy against the ‘Seven Ps’.

Investing: Test

If you thought prototyping was hard, I’m sorry to say that testing is harder. The thing about investing - unlike cash flow or taxes, but just like retirement - is that feedback comes in slow motion. A very good financial planner or portfolio manager is going to make sure you’re prepared for some almost random combination of good years, bad years, and sideways years…all adding up over the long-term to that average rate of return you needed to reach your goals…hopefully.

While I hope we’ve convinced you to take your time and avoid throwing your money at the first five-star fund your banker sells you, I’d encourage you to set yourself a deadline for getting invested. The best weapon you have against all the random bullshit the market can throw at you is time...many, many years of cheerful company growth, happily compounding interest, and sweetly re-invested dividends. At a certain point in investing - as in most things - the perfect can become the enemy of the good.

Knowing when to make a change in the way you invest is a really tough call, and the last thing you want to do is skip between investment policies without a very good reason (which you’ll come to by going through this design thinking process). If you change your investment policy because you didn’t earn 5% per year, every year, or because your neighbour’s investment guy made a killing in [insert latest fad thing here] then you’re going to pay a very high price over your investing lifetime, guaranteed.

No one (that we know about and/or have access to) can control market performance. At best, we can control emotions, expectations, cost, process, and the people we hire to help us. Design thinking can help you make well-reasoned investment decisions that are right for your situation, whether you’re just starting out or thinking about making a major change.

I sent my kids to school on the day after Labour Day with a feeling that it hadn’t been a great summer. We hadn’t gone swimming or canoeing enough. I worked too much. Woe, etc.

This isn’t a new feeling. Friends will testify that I become a mopey sad-sack in the last week of every August because summer is over and I wasted it, ergo I’m a terrible person…

If it truly hasn’t been a bad summer (and it never, ever has been), friends with little patience for Emo Sandi snap me out of my not-quite-end-of-summer funk by enumerating all of the things this particular summer held:

Swam with the kids every evening the weather let us? Check. Bought an old beater canoe and paddled happily around Gull Lake almost every weekend? Check. Slept with the windows open? Hung the bedsheets on the line to dry? Worked on the front porch nearly every day? Check, check, check.

I frequently hear similar angsting expressed by people despairing over their investment returns: it feels like I have the same amount of money I started with, I should switch advisors, investing is a scam....

The stakes are higher, but these people are making the same mistake that I do every September: letting feelings rule the roost without making the effort to substantiate those feelings with fact.

If you’ve ever said any variation of one of the phrases above, you might be right. Maybe your investments really are flaming hot garbage. But maybe - just maybe - you don’t have all the facts, and even if you can check all of the other boxes you couldn’t say for certain what your portfolio has done for you lately.

Coherent investment policy? Check. Disciplined execution? Reasonable cost? Check. Rate of return?

Rate of return?

Bueller?

While ignoring your investments is probably better than monkeying around with them every day, especially if you’ve ticked all those other boxes above, staying up to date on the amount of money they gain or lose over time (otherwise known as your rate of return) is necessary, and an important item to check off your regular money maintenance list.

Why is your rate of return so important? Glad you asked:

Your rate of return can tell you where your bad feelings about investing are coming from

Your feelings about your investments might not come from the investments themselves. You might be paying too much attention to people with a vested interest in making you feel uneasy and out of your comfort zone: think people who earn money every time you switch between funds, hop into and out of the market, or pay a premium to buy investments that have some kind of insurance built into them, whether that’s appropriate for you or not. Knowing what you’re actually earning is a good antidote to the insidious worry that this kind of parasite feeds on.

If you know that you need to earn 4% per year on average to fund your retirement because you worked it out as part of your financial plan (whether you did it yourself or involved a professional), and you’ve been earning 4%, that’s good news.

If your rate of return is 4%, and you know that other investors, with the same asset allocation, virtually identical holdings, and similar investment policies are earning 7%, and you never made a conscious choice to sacrifice some of your returns in exchange for management or advice of some kind...that’s not such good news.

It’s very, very unlikely that you’ll earn 4% year in and year out (impossible, in fact), and while what stocks did from January 1 to December 31, 2016 won’t tell you a whole lot about how much you’ll be able to spend in retirement, it’s a useful way to compare your returns to what they should be, but there’s more to it than that.

The compound rate of return for your portfolio matters; the rate of return for your account does not.

If you’ve been fortunate enough to have money to invest for the future, you could pull out your statements right now and look at the rate of return for each account, or log into your dashboard and it will tell you how much your account(s) have grown (or not) over almost any time period you care to name.

Of course, if you have money stashed away in a TFSA, an RRSP, an old pension that you transferred to a LIRA, and your Group RRSP, and especially if you have a partner with the same laundry list of accounts, the rate of return for each account will only matter when you combine it with all the other money you’ve earmarked for the same goal, irrespective of what account those savings are held in.

Calculating your portfolio rate of return

If you want to answer the question “Is my portfolio right for me or should I change something about it?” using all the facts at your disposal, and you don’t know your rate of return, you can do one of two things: ask your advisor or calculate it yourself.

Asking your advisor can be a pretty great litmus test for whether you have a good one or not; most institutions only calculate your rate of return for individual accounts, so if your advisor A) recognizes the importance of portfolio-level reporting, and B) is either willing to do it for you or already does it as a matter of course, chances are you’ve got an advisor you should keep.

If, on the other hand, your advisor doesn’t return your calls, is cagey about portfolio-level returns or returns in general, or if you’re managing your own portfolio, you’ll need to do the work yourself. You’ll need your monthly statements, and one of the following tools:

• Justin Bender’s Rate of Return Calculator(you’ll have to hack it a little by adding up balances to get a portfolio-level calculation, and stringing together calendar year returns to get more than just a single year’s return)

• Morningstar’s portfolio feature (you’ll have to sign up for an account to have access to this), or

• Four Eyes Financial’s soon to be released portfolio tracking tool.

Snap Out of Your Investment Funk

If I start making plans for Summer 2018 based my feelings (or, more accurately, my fEeLiNgS) about Summer 2017, I’m going to exhaust myself and my children chasing an imaginary summer.

If you start buying different stocks or switching advisors based on your fEeLiNgS instead of all the available facts (including your investment policy and its execution, cost to invest, and rate of return), you’re not only going to exhaust yourself chasing an imaginary portfolio, you’ll be burning money while you do it.

NOTE: The calculator has outgrown its old Google sheet and is now at autoinvest.ca. 

NOTE 2: I sold Autoinvest.ca many years ago, so whatever’s on there now has nothing to do with me

Welcome to the investment fee calculator, built to compare the cost of investing across Canada with online portfolio management companies like Nest Wealth, Justwealth, WealthBar, Steadyhand, Wealthsimple, BMO SmartFolio, Invisor, ModernAdvisor, and Portfolio IQ. (For more about why on earth you'd do so, read this.)

The intention of this calculator is not to declare "a winner" based on cost alone, so please avoid the temptation of signing up with the cheapest company and calling it a day. No calculator can replace the informed, critical thinking that only you can apply to the various offers, so carefully consider each company's business model, care for consumers, dedication to low costs, and transparency in portfolio construction and investment philosophy. The updated calculator also lets you compare the cost of investing over time as well, assuming a constant gross rate of return. Be sure to scroll down to the graph and see not just a snapshot of your fees today, but their effect on your portfolio balance after ten years.

DISCLOSURE: Some of these companies pay a fee or offer a discount on account fees when you sign up through another client's referral link. None of the links from this site are referral links, and I do not receive compensation of any kind if you decide to open an account.

Click here to go to the calculator

I have to thank John Roberston, author of The Value of Simple for his invaluable assistance with the vagaries of conditional formatting and "=if" formulas, as well as Randy Cass of NestWealth, Andrew Kirkland and James Gauthier of Justwealth, Tea Nicola of WealthBar, Michael Katchen of Wealthsimple, Bruce Seago of ShareOwner, Pramod Udiaver of Invisor, Navid Boostani of ModernAdvisor, and David Toyne of Steadyhand for their remarkably candid responses to my very wordy emails and many, many questions.

I want to hear your feedback if you are a client of these companies (or eventually decided against it). Please share your experience in the survey form below.

What are other users saying about these companies after using the investment fee calculator as part of the process?

The process to get everything set up was relatively simple but there were many steps to go through. The wait for the transfer from my previous online account to Wealth Simple was about 3 weeks.I do find that I check the iPhone App pretty regularly, it is simple and gives the information that I want to see. I don't really do anything with that information since the plan is the plan and my intent is to stick with it but I check it none the less!

Randy Cass from Nest Wealth has been very professional and very responsive. It took quite a while to complete the transfers but that was really a function of the banks and not Nest Wealth. I liked the way they designed the customized portfolio and the web site is simple and functional.

I don't think any of them provided any meaningful value to me over choosing a DIY model and possible advice from a fee based advisor.I'd rather have control over my decisions and all the robo advisors seem to have overly complicated model portfolio's. I like the Canadian couch potato recommended ETF portfolio better.

The things that attracted me to Steadyhand were their clear reporting (including total costs, comparison to benchmarks etc), the experience of the direct interaction with their staff (honest, helpful and encouraging), costs (not the lowest, but close), and approach to investment (patient, focused, and active, but low turnover). I also like the fact that the only way to make trades in through phoning and talking to someone as it really forces conversations on what is best and prevents emotional decisions. I think their fee structure makes a lot of sense and am even looking forward to soon having a further reduction based on the time I have invested with them.The only thing that [some] other companies can provide that Steadyhand doesn't is financial planning. They will discuss whatever your circumstance is and give some advice, but they do not create a full financial plan.