As you can imagine, in my line of work, I have plenty of conversations with prospective clients. Sometimes, I just have to shake my head. It all goes back to the real lack of financial literacy that stems from our education system. Personal finance should be a mandatory prerequisite at the secondary level, but it is not.
When I encounter an "investor" who "follows the market" and "picks stocks" and is only interested in monthly, quarterly and yearly performance but has no concept of risk, return per unit of risk taken or risk-adjusted returns, the financial literacy issue becomes clear and present.
Investing is not gambling. When I hear the term "bet" when it is used in reference to the buying and selling of assets, it sets off all sorts of flashing red lights: A "winning" or "losing" day on Wall Street or Bay Street as often announced by the media are completely misunderstood, because investing is not a game.
Investing is an educated decision to buy an asset (or a broadly diversified group of assets) that will pay you for the risk that you are taking (with a perceived future stream of income): income from interest, dividends or capital growth.
A steward of her or his family's wealth is not a gambler. They understand that growing wealth is a long-term, mapped out plan with goals that require a very specific strategy for attaining them.
Gambler's tend to chase returns, going from what might have worked in the past and transferring that cognitive bias to expect that the same will work in the future.
There is a reason that the securities regulators insist that we provide the disclaimer: "past performance is not a guarantee of future performance".
To protect these gamblers from themselves.
At High Rock we do not work with gamblers. We work with stewards.
If you are a steward of your family's wealth and would like to know a little bit more about us: http://highrockcapital.ca/private-client-division.html
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist