When a younger golf buddy sat us down to explain cryptocurrencies and fintech investing, a sort of grey mist seemed to form in our mind, and we strained at an imaginary leash to get back to golfing.

But The Canadian’s Guide to Modern Investing by Kiana Daniel and others clearly explains the pros and cons of these and other newer investments and approaches in a clear, easy to follow, mist-free way.

The book starts out by explaining that any investor, no matter what they choose to invest in, should be a saver first.

“One thing online investing can’t do is make something out of nothing,” the book explains. To invest, you must save money first, the book continues, adding “don’t get frustrated, though, because you don’t need as much to get started as you might fear. If you have a job or source of income, building up ample seed money isn’t too hard.”

The book says automatic withdrawals, workplace retirement plans, and making sure you put any left-over money “to work for you” (and not lying around) are ways to build savings.

In a section on figuring out how much risk you, as an investor, are prepared to take, the book recommends asset allocation. “Instead of tossing all sorts of ingredients into your portfolio pot and guessing what it will taste like, it’s best to know what needs to go into the pot to get what you want. In investing, this is called an asset allocation.”

Asset allocation’s advantages include the safety of diversification (not all eggs are in one basket), rebalancing (sticking with an asset mix and adjusting things when an asset gains or loses’), and discipline – sticking with your asset allocation choice, such as 70 per cent equity and 30 per cent stock, for example.

After talking about passive investing (index funds and mutual funds) versus active investing (doing research yourself and picking specific stocks, exchange-traded funds, bonds, and other investments), we learn about the importance of fees.

ETFs and index funds generally have far lower fees than mutual funds, the book states.

“In the world of index funds, the expenses are much lower…. Many of the more traditional ETFs cost no more than 0.06 per cent a year in management fees.” In the U.S. at least, the book says, some ETFs have no fees.

In a look at cryptocurrency investing, we learn that crypto is not an “everyday government-based currency” but one that relies “on a technology called blockchain, which is decentralized (meaning no single entity is in charge of it). Instead, every computer in the network confirms the transactions.”

A chief advantage crypto has, the book states, is that “with traditional money, every time you make a transfer, a middleman like your bank or a digital payment service takes a cut. With cryptocurrencies, all the network members in the blockchain are that middleman; their compensation is formulated differently from that of fit money middlemen’s and therefore, is minimal in comparison.”

The book warns that crypto can be very volatile, noting that in 2017, the value of crypto “skyrocketed above 1,000 per cent and then came crashing down.”

The book then takes a look at “fintech,” defined as “all parts of technology that help provide financial services and products to customers… individuals, companies, or government.”

Broadly speaking, the category consists of “capital markets tech,” where newer tech like artificial intelligence, machine learnings and blockchain is involved in investing; “wealthtech” which involves the use of digital tools for personal and professional wealth management and investing, “insurtech” which is insurance technology and “regtech” where regulatory challenges are addressed through automation.

While all of the new firms in these categories are definitely new and exciting, investors should use caution, the book advises.

“No matter how `new’ or `innovative’ any technology or offering (fintech or otherwise), always pay attention to the fundamentals of the company,” the book warns. “This means focusing on the company’s sales and net profits and a solid balance sheet…. If the company is profitable year after year, that’s the hallmark of a strong investment.”

A chapter on cannabis investing says that this relatively new category does offer investors the chance “to invest in a new industry.” But, the book warns, do your homework. There has been a lot of money flowing into the new industry which means that “even legitimate cannabis stocks are overvalued,” and growth in the sector could lead to the “commoditization” of cannabis, where the product “becomes indistinguishable from other similar products” and prices drop, as is the case with most agricultural crops.

The book concludes on more familiar ground, comparing “value investing,” where you buy stocks in companies that appear undervalued “and worth more than their share price indicates,” as well as growth investing (buying small companies in the hopes they grow larger), income investing (focusing on holdings that pay interest and dividends) and “investing in what you know.” There’s a chapter on ESG (environmental, social and governance) investing, where the goal is to invest in companies that respect the environment, do good for society, and are well run for their people.

Phew. There’s a lot here in this relatively tiny book!

The takeaway we had from reading it was this – there are many different things you can invest in. Some are risky, others, less so. Before you invest in anything, it is important to do your homework and know if the thing you’re buying into is well run and has a solid track record. Develop an approach and stick to it – be patient.

Alternatively, if you are investing for retirement and would rather focus on something else, perhaps golf, the Saskatchewan Pension Plan may be worth checking out. SPP’s investment professionals will grow your savings for you, with a diversified, pooled fund that is run at a very low cost. When work is in the rear-view mirror, SPP will help you convert your savings into retirement income, including the option of receiving a lifetime monthly annuity payment based on some or all of your savings.

Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.

Check out SPP today!

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