Podcast 14: Make Millions in Bitcoin (Not Really)

My first podcast of 2018 is now live:

This episode’s interview features Shannon Lee Simmons, a refreshing young voice in financial planning. At the age of just 25, Shannon quit her job with a large investment firm so she could work with Canadians who are underserved by the financial industry. Today, at age 32, she runs a successful fee-only planning business called the New School of Finance, where she works with clients in all income brackets and life stages, including recent grads, small business owners, and those who need a mid-life check up.

Shannon has also just authored a new book, Worry-Free Money (published by HarperCollins Canada), which  focuses on our attitudes and approach to money. It offers a lot of valuable insight for people who need to sort out some big-picture issues before they worry about small details such as which ETFs to use.

In our discussion, Shannon says she’s noticed a discouraging trend among younger investors that she calls “fee shaming.” This is when a supposedly enlightened index investor scoffs to a friend or family member, “You’re paying a 2% MER on a mutual fund? Oh my god, I’m paying 0.05% on my ETFs.” The person on the receiving end of the criticism, as you can imagine, feels like they’re being called a fool. It’s a lesson for all of us who want to share what we’ve learned about smart investing: help others in a respectful way without sounding self-righteous.

Why bitcoin doesn’t belong in your portfolio

So far I’ve done my best to avoid commenting on the bitcoin craze, because I don’t think it has any relevance to the Couch Potato strategy: you may as well ask me for my opinion on the housing market or a particular stock. But the volume of email I’ve received about bitcoin made it impossible for me to ignore. The issue isn’t helped by the several bitcoin ETFs in development, which may lead investors to start viewing it as an asset class that has a place in a diversified portfolio.

“I started investing in ETFs a year ago and put as much into them as possible,” one reader wrote, “but I’m intrigued by bitcoin and Ethereum right now as investment options.” Another chimed in: “Choosing a diversified portfolio of ETFs was very satisfying and calming. However, it has been hard to ignore the constant barrage about people who own bitcoin and are making an instant fortune.”

So in this episode’s installment of Bad Investment Advice, I try to add some historical perspective to the discussion. Many people interested in investing in bitcoin argue that cryptocurrencies will become an increasingly important part of our lives. I have little doubt that’s true. It just doesn’t follow that you should buy one of those cryptocurrencies in any meaningful amount.

More than 20 years ago, there was another new technology that was promising to change our lives: it was called the Internet. Investors at the time paid extraordinarily high prices for Internet-based companies that seemed well positioned to profit from this exciting new technology. Of course, the Internet did go on to change our lives profoundly, but the vast majority of those companies went to zero when the dot-com bubble finally burst in 2000.

As a disciplined index investor, you need to come to terms with the fact that you’ll never profit from speculative plays like bitcoin. You won’t have “success stories” that make you the life of the party. But I suspect you’ll have the last laugh, because you’re an investor, not a gambler, and over time you will fare better than the vast majority of people who think the building wealth is about finding the next big thing.

Should you use dollar-cost averaging with a lump sum?

In the Ask the Spud segment of the podcast, I answer a question we frequently hear from our clients: “If I have a large sum of cash to invest, is it better to put it into the market all at once, or invest it gradually to take advantage of dollar-cost averaging?”

I’ll share my answer in a separate blog post in a few days.

 

14 Responses to Podcast 14: Make Millions in Bitcoin (Not Really)

  1. MoneyCurious January 17, 2018 at 3:28 pm #

    Wow! 24 hours and not a single financial blogger has posted saying how great your article is an how everyone should go check out their website… they must all be pre-occupied by the bitcoin crash.

  2. Marcel January 17, 2018 at 3:56 pm #

    I really enjoyed the conversation in this podcast, but man can she talk fast!

  3. Thuan January 17, 2018 at 4:10 pm #

    Enjoyed your session regarding to DCA vs lump sum. Been doing DCA out of habit and also wonder does it even matter if I’m investing for the long term (25+ year).

    My investment strategy just got even simpler.

  4. David Dalton January 17, 2018 at 8:05 pm #

    As always Dan, an excellent podcast.

  5. Arya January 17, 2018 at 10:16 pm #

    Really enjoyed this episode and listening to Shannon’s perspective. This was my favourite podcast so far! Thanks as always for all the valuable information on this website.

  6. Pier-Luc January 17, 2018 at 10:45 pm #

    Always a good podcast to listen to.
    Particularly like the 90s Internet stocks craze to Bitcoin.

  7. Eszter January 18, 2018 at 10:04 am #

    That was very well put together Dan. Interesting, informative and fun to listen to. Thanks!
    My first time hearing about bitcoin 😉

  8. Pier-Luc January 18, 2018 at 1:06 pm #

    Enjoyed the fresh conversation with Shannon.
    An excellent podcast, as usual!

  9. Ted January 19, 2018 at 6:55 am #

    I’m sure Shannon is knowledgeable but her high speed talk made me shut down the podcast. I will consider reading her book, though.

  10. CJBob January 19, 2018 at 8:59 am #

    It’s hard to make the same information seem interesting but mission accomplished this week. Educational and enjoyable.

  11. Jungle January 19, 2018 at 2:00 pm #

    The best advice for Bitcoin inquiries is to seek gambling addiction help first. Then just go to the casino, much easier, and likely your wallet won’t be stolen. Lol

  12. Oldie January 20, 2018 at 3:31 pm #

    I pondered a little about the “fee shaming” criticism. OK, perhaps it’s true that on occasion I may have had a somewhat condescending attitude in advising my friends and associates regarding the Couch Potato wisdom. So that is clearly unhelpful, and the counter to that is to always keep respect for your conversation partner in mind — a helpful truism whether in a one-on-one encounter or in a formal lecture to an audience.

    But is it necessarily disrespectful to your listener to state that their dearly held current conviction (based on common wisdom, or blared out from headlines in the financial pages, etc.) that interest rates must “certainly rise soon” because they can’t keep on going down, or that energy stocks are poised to rebound in a gratifying fashion for everyone who lost on them 2 years ago, etc., etc., is essentially identical to similar wise predictions that have been time and again repudiated by academic studies held to rigorous statistical standards? Disrespectful or not, there is no way around the fact that if you are being asked to share Couch Potato wisdom, this uncomfortable truth must be revealed.

    And it’s important to be clear too, that one shouldn’t be completely blind to costs. On learning that your questioner has a 2% overhead cost on his/her investment strategy, it is difficult to leave that knowledge unexplored. Surely your wisdom which is being requested has something to offer regarding a 2% MER, which is difficult to justify once an investor has learned and understood that no-one or no institution can reliably and consistently predict the future with enough precision to make tactical investment strategies pay off in the long run (which is the only time-frame you should be looking at); and that armed with this knowledge and a knowledge of Index ETFs or, failing that option, Index Funds, a minimalist, safe, diversified and rational DIY investment strategy is easily achieved by the informed novice with a significantly lower MER than 2%, given a thoughtful stepwise approach. I think admitting that you yourself (his/her current advisor) once came from a similar condition of ignorance is helpful in providing the necessary degree of humility in helping to transfer that much needed knowledge. That knowledge may seem overwhelming at first, especially when one doesn’t have it, but it is important to convey the fact that it can come in discrete, bite-sized chunks, which once chewed over and digested are yours forever.

Trackbacks/Pingbacks

  1. Weekend reading: My fee is considerably smaller than yours – Frozen Pension - January 20, 2018

    […] read an interesting tidbit this week from the blogger Canadian Couch Potato. During his podcast chat with Shannon Lee Simmons, a young financial planner, he […]

  2. Weekend Reading: Bank of Canada Hikes Rates (Again) Edition - January 21, 2018

    […] the latest Canadian Couch Potato podcast, Dan Bortolotti interviews financial planner and author Shannon Lee Simmons, and also explains why […]

Leave a Reply