Today, after a financial review with a friend, I drove back home to Gatineau with one example stuck in my head.
She’s about to invest for the first time. ETFs, inside her TFSA. And like almost everyone at that stage, she had one big fear: risk. What if it goes down? What if I lose money?
Good question. But after more than 20 years of buying and holding my own stocks, I’ve learned that most people are afraid of the wrong risk.
So I explained it to her with something every Canadian already knows. Facebook Marketplace.
(Quick side note: her other surprise was that her TFSA had been sitting in cash at 0.5% for years. A TFSA is just a box, and the box does nothing by itself. I wrote a full post about that: Your TFSA Is Just a Box.)
The stock market is Facebook Marketplace
Imagine you need a new cell phone. Where do you go? Marketplace.
You scroll. You compare. iPhone, Samsung, Pixel, others. You read the descriptions, look at the photos, maybe message a couple of sellers.
You choose the iPhone. Not randomly. You like it, you know how it works, and you believe the company behind it will keep doing great. You find a good one in good shape for $200. That feels like a fair price to you.
You meet the seller, you pay, you take it home. And from that day on, you use it. Every single day. Messages, photos, maps, your bank app.
That is exactly what buying a company is.
You look at businesses. You compare. You pick one you understand and believe in. You buy a piece of it at a price you like. And then the company goes to work, selling its products, earning money, growing, just like your phone goes to work for you every day.
Where the real risk lives
So what is the real risk of your iPhone?
It’s the phone itself. The battery starts dying after a few months. The screen glitches. Or one morning it slips out of your hand in the parking lot and cracks on the asphalt.
That’s real risk. Something actually happened to the thing you own.
A company works the same way. The real risk is the business. Sales fall. Production drops. A product fails. Management makes a bad decision. Debt piles up. That’s what can actually hurt your investment.
The risk the system sells you
But that’s not the risk most of us are taught to fear.
The financial system usually talks about risk as how much the price moves. Funds are labelled low, medium or high risk, largely based on how much their price swings up and down. And people walk away thinking that the swinging price is the danger.
I understand why. It’s easy to measure. It shows up in red and green on your screen.
But price swings and the risk of the business itself are not the same thing. One is what strangers are willing to pay today. The other is whether the thing you own still works.
Would you check Marketplace every day?
So I asked her.
After you buy your iPhone for $200, do you go back to Marketplace the next day to check the price of the same iPhone?
She laughed. No, of course not.
Why would you? You already bought it. You liked it at that price. Now you’re using it.
Then why do so many of us buy a stock and check its price the next morning? And at lunch? And before bed? Every day, sometimes every hour?
The $180 day and the $250 day
Let’s play it out anyway.
Day one, you buy your iPhone for $200. You’re happy.
Day two, you open Marketplace and see another seller listing the same iPhone for $180.
Your stomach drops. You lost $20. You lost 10%! You start thinking, I should have waited. I’m bad at this. Maybe I should sell before it gets worse.
Day three, someone else lists the same phone at $250.
Now you feel amazing. You’re up $50. A 25% gain in two days! You feel smart. You tell yourself you have a talent for this.
Now stop and look at the phone in your hand.
It’s the same phone. Same camera. Same battery. Same apps. It worked on day two, when you felt like a loser. It worked on day three, when you felt like a genius. Nothing about it changed.
The only thing that changed was a random stranger, on a random day, typing a random price into a listing.
Why do we let strangers decide how we feel?
This is the part that hit me on the drive home.
Nobody, in their right mind, goes back to Marketplace every day to check the price of something they already bought. It would feel silly. Obsessive.
But with stocks, we do it frantically. We refresh the app. We let a red number ruin our evening and a green number make our day. We let our happiness and our self-worth ride on what other people decided to ask for the same company we own.
That’s not investing. That’s handing your emotions to strangers.
When I buy a company, I buy it because I believe it has real value at the price I paid. After that, what I watch is the business: is it still selling, still earning, still doing what I bought it for? The daily price is somebody else’s opinion. I’ve been doing this for more than 20 years, and I still don’t expect to beat the market. I explained why in Can You Beat the Market? What 20 Years of Picking My Own Stocks Taught Me. But I’ve stopped letting random prices run my mood.
One honest caveat
There is one moment when the price really matters: when you’re forced to sell.
If your phone is worth $180 on Marketplace the same day you desperately need cash, that $20 loss becomes real. Same with stocks.
That’s why two things come before investing. First, an emergency fund, so a surprise never forces you to sell. Second, a long horizon, so you’re investing money you won’t need for years.
And if, like my friend, you buy an ETF, the same logic applies. You just own a whole basket of phones instead of one. A few will crack. Most will keep working.
Tie your risk to what you own
So here’s the whole message.
The risk you take on should be tied to the thing you buy, the company, like the phone. Is it a good business? Will it keep working? Did you pay a price you’re comfortable with?
It should not be tied to the prices strangers put on it after you bought it.
This week, try something. Delete the stock app from your home screen, or turn off the price alerts. Instead, pick one company or fund you own and ask yourself one question: is the thing I bought still working?
I’m not a licensed financial advisor. I’m just someone who has been picking and holding his own stocks for a long time and likes helping people understand their money. Talk to a qualified professional about your own situation.
