March 09

LET’S START WITH DINNER: A Red Riding Hood Approach to Getting Acquainted with Wolf of Wall Street Investing

By Tristan John-Jangles, Joshna Joseph, Sara Kadam, Bilal Siddiqui, Tamara Turchetta

The GameStop spike could be described as a complex lottery of big winners, and big losers. To some, the unforeseeable yet recurring turn of events was empowering. However, for most the stock market became even more daunting and seemingly unpredictable. Though some rejoice when the topic of investing eases its way into conversation, many more shrivel with agony as the term finds another way to seep into a list of worries. Conversations about investing are often uncomfortable and can feel like know-it-all challenges in a game where you didn’t get the directions.

As students who are constantly tasked with learning about different fields, we thought it was interesting to note that Coding as a subject…equally difficult and obtuse with certainly as many or more facets as finance…with probably fewer applications to real life than finance… does not elicit the same resistance. People of all levels of knowledge and interest flock to learn basics or learn more about coding, join random hackathons, and seem to regard whatever they learn or get from however they involve themselves as a fun win/win. Why is there such a large disconnect with finance, and how can it be made more accessible and inviting? We decided to investigate these disconnects and misunderstandings and offer some ways to bridge the gap between wanting to invest and feeling comfortable doing it. 

To that end, we held an open conversation with multi-portfolio professional finance experts, who shared the surprising realities of what investing looks like, and the true weight that context and time, even more than specific investments, hold on meeting our expectations for high financial returns. 

When talking about investment, one of the first hurdles to clear is the misplaced notion that saving money is simply “safer” risk-free investing. Although these terms are frequently used interchangeably, investment and savings are as different as chalk and cheese. And before even jumping onto the pits and pearls of investment v. saving, it’s important to add in and become more familiar with the term “inflation”– a word that is thrown around a lot in casual conversation, with little clear understanding of how it impacts our personal saving strategies for future financial security.   Here’s a quick question:

$5 million right now or $1 million each year over the next 5 years ?

If you chose the latter, chances are that you’re among the large portion of people who’ve left out the role of inflation. According to the Oxford dictionary, inflation is simply “a general increase in prices and fall in the purchasing value of money.” Using the previous example, this means that the value of $1 million dollars is likely to depreciate 5 to 10 years down the line. Given that, the right choice is $5 million right now. Let’s take an example with a smaller amount, say you’ve kept aside $200 from your salary/gifts, and instead of investing you save it (keep it to yourself). Next year, if there’s an inflation of 5% you’re likely to be at a loss because the value of $200 has now reduced. In contrast, if you invest your money at a yield of 10% you’re likely to make a profit of $10 in the same scenario. That’s what people mean when they say “Money has time value” — and according to one of our invited experts, it is THE most important financial takeaway for any student.

In order to stay ahead of the curve, your savings and income have to grow faster than inflation, or else you’re likely to incur a loss in the long run. Hence it is important to invest in places that can beat inflation. This can be done through multiple methods:

In reality, beating inflation can be as simple as you’d like it to be. If saving suits your “comfortability”, then maybe just setting aside an additional 2.00% (which is about the current inflation rate in Canada) of the amount you had planned to save, will do the trick. If having to do this is daunting, but still worth acting  on–there are even more options. Roth IRA’s (Individual Retirement Account), and the Canadian equivalent, TFSAs (Tax Free Savings Account), were two, very low risk entry points into investing recommended to us by our  financial expert guests. Both of these options are popular due to their intrinsically stable structure, favorable tax treatment, and myriad of investment options to best suit individual savings goals and risk tolerance. For everyone’s sake, that’s as far as we will go with specifics: however, it does not hurt to know that these accounts are the professionals’ choice as solid long-term options. 

From our discussion, we also learned that although there are two obvious giant options for investing: investing yourself, or having professionals (brokers) invest for you, there are actually all different shades and levels within these two options and they are entirely possible for you to understand and compare. 

Let’s consider a familiar scenario to shed some light on your capability. Consider you’re having some friends over for dinner and need to buy food for the occasion. Depending on when you invited them/ how much time you have, how much interest you have in selecting and preparing the menu items (all things that you thoughtfully or casually exercised some preference in choosing), you will have options that can serve those choices.

Without some serious expertise or interest or preference in spending your time researching, you may not select buying “every” item individually from wherever they come from originally, but instead may rely on the items in/ selected by one or more grocery stores.

Loosely, the different scenarios that you consider every day for grocery shopping can be used to illustrate various automated investing or “Robo-Investing” options (which is not actually investing done by robots–though, yes, that initially crossed our minds). For instance, say you choose to use an online delivery service for the groceries for dinner. In this scenario, you set out a list of what you want generally (dinner), but you are not allowed to specify the exact items, the brands, or the quality; just what kind of dinner party (maybe level of formality) you are generally looking to have for x-amount of dollars. As you expect, and are clear aboutyou will know whether there are any costs associated with the service and the delivery or whether it’s free, so in this scenario you can specify what you generally want (dinner) and how much you are looking to spend, but you have no specific input over what will arrive. 

You can also opt to change the scenario slightly and specifically request things for your dinner like chicken, fish, beef, or vegan chili. We can equate this to various “securities” (the overarching category for “stuff” you can invest in and trade) being your dinner choice. A preference for chicken can resemble a preference for stocks/bonds (the value or debt of specific companies). A preference for fish can be likened to a preference for Index Funds (generally highly regarded basket of stocks). A preference for beef can reflect a preference for an ETF (Exchange Traded Funds–a bit of a new and improved version of an Index Fund). And a preference for a vegan option can represent a preference for SRI (Socially Responsible Investing)….and, yes, that’s an actual thing.

Like the chicken, fish, beef, or vegan chili between brands at one grocery store or between the same brands at different grocery stores, prices and quality will vary. Just as with this selection of foods, people’s preferences and reasons for selecting investing in a group of stocks /bonds v. an Index Fund v. Exchange Traded Fund v. SRI will be different as well. Though these may seem like unnecessarily complicated terminology and glib acronyms tied to confusing concepts that you feel you will never remember, there are numbers of perfectly accessible ways for anyone to functionally understand them. 

If we continue the shopping-for-your-dinner-with-friends grocery analogy, let’s say you’d prefer your friendly knowledgeable butcher to pick out the best meat and best cut. As you might expect, that might come with a small surcharge. And what about cutting/preparing your beef in a special way, a little more cost, right? Well this is like having an advisor, and in most places that comes with a fee, though also in some places at some level, this service could be free.

Say you’ve learned a bit about meat recently and have been looking into how to select and cut it properly so you want to give it a go. Cross your fingers; doing it alone, could certainly be a better than average experience given all of your prep: but there is the chance of “butchering” the job or your fingers, which would be a bit of a downer.

We understand and totally empathize with the fact that even when you know that it’s probably better to invest your money, and even when you have some idea that there are alternatives available to you and that you will likely be able to grasp them , there can still be some big things that get in the way. Investing intrinsically has a Risk/ Reward structure, meaning over time, taking higher risks can be expected to generate higher returns, but may also lead to greater losses. This is where things can start to run amok, since sometimes we only seem to hear/ focus on either  “may lead to greater losses” (which means high-tailing it right out of this conversation!) or “can be expected to generate higher returns” (yes! time to join WallStreetBets and open a Robin Hood account!), instead of considering both together. Risk and Reward exist together, as part of the same scenario, and so, always need to be considered together. This “considering together” is determining your “risk tolerance” which can then be used to inform a comfortable personal financial plan.

But assessing and feeling comfortable with your risk tolerance is definitely one of those things that “gets in the way”. Quite frankly, just the phrase “risk tolerance” itself is scary and distancing. The scariness is then compounded by (the perception of) the fact that the most reassuring path to better understanding your personal financial risk tolerance will involve speaking to an investment professional. Yikes! The prospect of speaking with overly solicitous or overtly disinterested, fast talking, or slow-talking experts using unfamiliar acronyms, terminology and concepts, and drawing attention to how little money you have with how little you know, is about as inviting as scheduling a root canal. Just to reference quickly back to coding: there is no scary, required assessment of tolerance for strange symbolic math language, and  the small degree of enlightenment you need for your very basic understanding at any time can usually be found in seconds in very plain and relatable language from your friend, or your friend’s friend messaging while taking a break from gaming in their basement.

Our expert guests guided us over this hump by recommending some financial sites and platforms highly regarded for smooth and easy entry into the intimidating world of investing: Wealthfront and Betterment were their recommended standouts. We checked them out as well (for friendliness!) and came across some others (WealthSimple and SoFi) … along with some comparison articles from NerdWallet! Of Course, there can be other platforms, and of course you might have your own thoughts on this already, but providing clear and simple alternatives for understandable information while identifying comfortable next steps is our goal. 

And speaking of goals for understandable information, here’s our plain-speak snapshot of some of the more broadly applicable lingo and acronyms we discussed, on the chance it’s helpful (or at least to know that we didn’t know either!):

Securities are all of the varying things people trade; it includes all of the things mentioned here plus an interminably long list of stuff not mentioned here like real estate, bitcoin, gold, commodities… you get the point.

Stocks and Bonds are terms frequently used together so it sometimes seems like they’re the same thing, when they’re more like the yin and yang of the same “thing” or company. The company’s total value (how much someone would buy the company for) minus any debt it has is the company’s net value or EQUITY. Buying a portion (SHARE) of a company’s equity is STOCK and buying a portion of a company’s debt is BONDS. Already, it’s easy to see that personally buying shares of either STOCKS or BONDS individually (similar to the dinner ingredients) will require some time, research, and knowledge.

Mutual Funds/Index Funds/ETFs (Exchange Traded Funds) are all just different terms for bundles of companies assembled by professionals. Mutual Funds are bundles of different securities that can be individually assembled and reassembled and traded by a financial expert personally, and so are considered ACTIVE.

Index Funds and ETF’s (Exchange Traded Funds) are similar to mutual funds (bundles of securities), but they are NOT actively managed by individuals, and so they are considered PASSIVE funds. Securities (the varying things people trade) in these funds are all from one particular INDEX (i.e. DOW JONES, S&P 500, S&P/TSX, NASDAQ, etc.); they are assembled according to different goals and strategies by financial investment companies, and they rise or sink in value as a group according to what is happening with the index they are part of. Consider cars (or companies) on a highway (or in an INDEX) losing time as a group (because time is value) when the highway is jammed up, or all the cars gaining time when the highway is clear/doing well.  ETFs simply have more flexible leeway around when they can be traded. 

SRI (Socially Responsible Investing) and ESG (Environmental, Social and Governance Data) are securities initiatives that fall into “designated parameters” (this is the messy part because they are sort of arbitrarily designated parameters) that meet social or environmental good. They can be individual securities in individual companies or the can be groups of securities bundled together in any of the above mentioned structures.We include it because its existence may be surprising (it was to us!), and it can impact people’s comfort with investigating investing. 

At the end of the day, these were our big, general, useful takeaways: Investing can be comfortable. There are levels of preference you can input. It can be lower risk or higher risk. Don’t be afraid to just look around. Like trying to figure out where to get a credit card or deciding what phone plan to buy, platforms and jargon can be complicated and off-putting, but there are always understandable ways to evaluate your options. The more you understand about the inner-workings of the plan, the more bang for your buck. As our experts stressed, money has time value. Similarly, there is value in investing your time in exploring some very navigable options for investing, so that your foray into these unfamiliar waters can be on your terms– gingerly dipping in a toe,  gently wading into the water, or quite confidently taking the plunge. 

Huge Thanks to our Special Guests for this Discussion

Jennifer Turchetta  … Risk Management…Morgan Stanley

Andy Weng… Financial Educator…How Money Works/ Wealth Wave

Peter Baldwin… Fractional CFO/ Financial Strategist and Coach

Todd Turchetta… Portfolio Manager/General Partner… TGT Capital Management Inc

Daniel Melander… Investment Advisor… Transamerica Financial Advisors


O’Shea, A. (January 13, 2021). What Is Socially Responsible Investing (SRI) and How to Get Started. NerdWallet.

Voigt, K. (October 28, 2020). How Betterment, Wealthfront and Wealthsimple Compare. NerdWallet.

Voigt, K. (March 5, 2021). SoFi Automated Investing Review 2021: Pros, Cons and How It Compares. NerdWallet.