Back in the go-go era of Cathie Wood—she of the ARK (Active Research Knowledge) funds—and her imitators, while these newsletter tech darlings were surging ever upwards, it seemed frustrating to have to take profits in taxable accounts and share the proceeds with the Canada Revenue Agency (CRA). If these sure-fire investments only go up, I must have reasoned, may as well put them in the TFSA (or worse, RRSP) and rebalance without paying capital gains taxes.
Losses in registered accounts triply sting: apart from the loss of capital, I’ve also destroyed precious contribution room, all without the compensation of tax-loss selling.
Why take more risk than is necessary for a retiree?
While some believe that 5% or 10% of a portfolio can be held in a speculative fun or “mad money” account, that game should be reserved for younger investors with longer time horizons and higher risk tolerances. They have time to recoup any losses and make wiser investments as they age. Having turned 70 earlier this year, I realized it’s time to stop taking any risk that is unnecessary.
For me and others in the “retirement risk zone”—in the five years before or after retirement, a time when vicious stock losses can torpedo a retirement—“job one” is to stop opening those emails. You’ll recognize them immediately, with their subject lines that read along the lines of “The top 5 AI stocks you absolutely must buy now.” The real cost of these newsletters is not the token subscription price. It’s the dubious ideas (many of them SPACs or crypto plays) they encourage you to buy. In my case, I recognize that I felt somewhat obligated to act on the occasional idea, if only to justify the subscription price and earn back the fee.
Stop biting on the initial email pitches, then stop renewing
Most of these newsletters have to be renewed after a year, so so I’ve started letting those subscriptions lapse. Beware, however, of the auto-renewal. Check your credit card statements. If you didn’t get a renewal notice, contact customer service. You’ll probably have to try more than once, as these newsletters tend to rely on auto-renewals and hope subscribers don’t notice. Not all of them advise you in advance that a subscription is coming up for renewal.
While these newsletters often convey useful insights into macroeconomics and the general investing climate, their actual recommendations tend to be relatively obscure speculative names. I guess they can’t build a media reputation for stock-picking genius by recommending the obvious blue-chip names, such as Procter & Gamble, or tech giants, like Apple or Microsoft. Ditto for S&P 500 ETFs or all-in-one asset allocation ETFs.
For those click-bait newsletters, investments like Vanguard’s VBAL or obvious blue-chip individual stocks just aren’t hot enough, so inevitably they gravitate to intriguing names or sectors around which they can craft enticing stories. These may include sector or regional ETFs, which can also inflict nasty losses. (Do not ask me about the Russia ETF I put in my RRSP weeks before Russia invaded Ukraine! That was a boneheaded move that cannot be blamed on a newsletter.)
A few exceptions: Investing newsletters worth a retiree’s time
I don’t want to throw the baby out with the bathwater, and it’s only fair to say there may be a newsletter that’s the odd exception, particularly here in “conservative” Canada. I have long been on the record for reading and sometimes acting on the recommendations of Patrick McKeough in his The Successful Investor and stable of newsletters like Wall Street Forecaster and Canadian Wealth Advisor.
Jonathan Chevreau
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