John Robertson - The Value of Simple

Praise for The Value of Simple

No more excuses, Canadians. With The Value of Simple, John explains not only the theory behind the best way for you to invest, but also provides easy-to-understand step-by-step guides to show precisely how simple it is to implement these investing strategies. The book gives everyday Canadians easy-to-implement ways to invest that will take you from procrastinating neophyte investor to confident portfolio manager in an afternoon or two of straightforward reading. If my high school students can immediately understand these Canadian-specific ways to invest, so can you!

Kyle Prevost, Co-author of More Money for Beer and Textbooks, and Freelance Personal Finance Writer

Outstanding. There is nothing wrong with this book
and lots and lots of things right with it.

Sandi Martin, Financial Planner
Spring Personal Finance (www.springpersonalfinance.com),
Co-host of Because Money (becausemoney.ca)

The best part is that I feel much more confident and knowledgeable in my investments than I ever did with the bank-recommended mutual funds that I held onto before. This book is a must-read for anyone wanting to take control of their financial future!

Jill Bressmer, Small Business Owner

THE VALUE OF SIMPLE

A Practical Guide to Taking
the Complexity Out of Investing

John Robertson, PhD

Copyright 2014 by John Robertson. All rights reserved.

Blessed by the Potato Publishing

Toronto, Ontario, Canada

http://www.holypotato.net

ISBN 978-0-9878189-2-8

Errata: For information and corrections released after the publication of this book, please see http://ValueofSimple.ca and look for errata. For convenience, links referenced in the text have also been collected on the site. This version incorporates errata to March 2016.

Disclaimer: This book discusses investment strategies and products in a general sense as an educational resource. Investing involves various risks: you may lose money. Past results do not guarantee future performance. Readers will hold the author free from any responsibility, and adapt the general suggestions to their specific situation as required.

This book is not intended as individualized investment advice, nor as a solicitation or recommendation to buy or sell any securities or investment product. You may need to seek the services of a professional before making any investment decisions.

This work incorporates screenshots from several providers; the content of these screenshots may contain trademarks and logos of Tangerine, TD Canada Trust, or Questrade. Trademarks and logos belong to their respective owners.

Library and Archives Canada Cataloguing in Publication

Robertson, John, 1979-, author

The value of simple : a practical guide to taking the complexity out of investing / John Robertson, PhD.

Includes bibliographical references.

Issued in print and electronic formats.

ISBN 978-0-9878189-1-1 (pbk.).--ISBN 978-0-9878189-2-8 (epub)

1. Investments. 2. Finance, Personal. I. Title.

HG179.R63 2014 332.024 C2014-906699-6

C2014-906700-3

Table of Contents

Prologue

Hello there, Im glad you decided to give this book a read. I hope youll find it welcoming, understandable, and above all, useful. If youre excited and eager to start learning about do-it-yourself investing, then I might suggest you skip the rest of this and go straight to the table of contents. If you need to summon up your courage a bit more, keep reading.

Investing can be a scary thing. There are entire TV stations dedicated to the topic, yet for many it's completely unfamiliar. It can be technical with its own language, and requires a long-term perspective unlike the rest of everyday life. It also looks suspiciously like math in places. But it doesn't have to be scary and technical; you can be quite successful at investing while letting it stay largely unfamiliar. You can set up a simple, easy-to-follow plan in just a few hours, and then get on with the rest of your life and walking you through that is exactly what this book is about. Taking the first step and making the decision to invest on your own is likely going to be the hardest part. Thats why I started this book with this friendly little page: the casual tone should be a clear sign that you wont be overwhelmed by technical details here.

Theres no one right answer when it comes to managing your money, just as theres no one right answer for the other aspects of how you live your life. However, research shows that when faced with too many options, some people may become paralyzed by the choice and rather than pick something thats at least good enough and move on, they will instead dither and end up with nothing. So in many places Im going to limit the number of options I present by using my judgement to narrow things down to the few that I think are most likely to help you, recognizing the value of simple; anything that adds complexity has to be worth that extra effort.

Investing really can be easy, and I mean actually easy, not like dieting where they say its easy just eat less but hard to actually pull off in practice.

There is inevitably some math involved with money, but you dont need anything more complex than what you learned in grade school, and even then well get spreadsheet programs to do the hard work for us.

You can do this. And just in case, Im going to borrow from Douglas Adams here and put a big, friendly message on the next page. Turn back to read it again whenever you need to.

Dont Panic

Introduction

Choosing to keep things as simple as possible will help maximize your chances of success. Complexity leads to indecision, an increased chance of making mistakes, and a loss of confidence. There is value in simple. This is as true for investing as it is for any other aspect of your life.

Learning any complex physical skill is difficult at first, with lots of conscious thought required to make anything happen, and you will make lots of errors. But it gets easier and more accurate with practice, because as you work at it processes in your cerebellum and spinal cord take over many of the individual muscle controls you build "muscle memory." These processes and automation are an important evolutionary feature for managing complexity the skills and movements of your body are just as complex, but the processing burden on your brain is reduced by breaking the movement down into simple, automatic components.

In investing, we do not have the luxury of taking multiple attempts at it and suffering repeated failures to build internal skill. Fortunately, we can use processes to help automate some parts of investing, and incorporate the lessons learned by the past. Much of the complexity can be ignored in favour of focusing on just the few factors that truly matter and can be controlled.

Good processes are critical. Investing is something you will be doing for the rest of your life, but it shouldn't become your life. Once set up, your processes will help you stay on track without a lot of ongoing effort.

Your car has thousands of moving parts, yet you get where you want to go by focusing on just three simple controls. Many of the parts and fluids wear out and need to be maintained or replaced before they fail. Each has its own individual expected lifetime, but the engineers have simplified maintenance procedures into just a handful of options on a menu at regular mileage intervals that are good enough for most cars in the fleet. Complexity can be effectively managed by non-experts with the right tools and processes and to extend the metaphor, with the occasional expert check-up.