Non-Obvious Investing: Personal Insights, Tips, and Mindset Shifts for New Retail Investors

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Sanjeev Arora

11 min readJul 5, 2024

Disclaimer: Opinions expressed are solely my own and do not express the views or opinions of my employer or any other institution. Any information shared on a publicly listed company or digital assets is for informational purposes only and is not a recommendation of an investment strategy or to buy or sell any security or digital asset.

No Offer or Investment Advice — see terms at the end of the article

“It’s just fun to do research, learn new stuff, and potentially have an impact on the way other people are thinking about the world “ — Kenneth French, Dimensional Director and Consultant

Why am I sharing the non-obvious concepts?

Because when I started investing in stocks (or equities) and ETFs (exchange-traded funds), no one shared these basic ideas with me — not even my so-called certified financial advisors.
Because understanding basic concepts helps us navigate cookie-cutter financial products and align them with our personal financial circumstances, time horizons, risk tolerance, and investment budgets.
Because most brokerages and active fund managers want you to trade more to earn commissions, fees, and income from payment for order flow, while experts recommend long-term investing. As Warren Buffet and other prolific investors say, “Time in the market is more important than timing the market.”
Because you will rarely find financial advisors willing to share their own investment portfolios or the percentage returns they achieve regularly.
Because the incentives behind the investment products pitched to you by advisors and financial institutions are often opaque or hard to grasp until you see your net returns.
Because since I took over my own investment approach in 2018 through direct investing and conducting my own research, I have consistently outperformed the mutual funds and guaranteed principal investment products pitched to me through passive investing in Index Funds or Exchange Traded Funds (ETFs). More on what those are and my investments later.

Image source: DALL·E 3 — New Retail Investors

An Investor Mindset: Insights I Found Valuable

Tips from David Booth, founder of Dimensional Fund Advisors

Dimensional Fund Advisors — $719B USD, in firm-wide assets under management

Investing is like navigating life and managing uncertainty:

Investing is inherently uncertain and complex.
Most people should view investing as similar to life: unpredictable. As in life, you start on a path and adjust to manage uncertainties along the way.
The best way to manage uncertainty is to plan for what can happen instead of what will happen.
Plan, don’t predict. Just like you carry an umbrella because you can’t predict the weather with certainty, you should be prepared for various market scenarios.
Focus on what you can control, such as your personal risk tolerance.
Be careful not to overstate what you know and avoid engaging in arguments without data. If you don’t have data, you’re just arguing about beliefs.
Challenge your own hypotheses and be open to changing your mind as you receive new data. This approach helps you consider counterfactuals or alternative possibilities.
Make informed choices and decisions based on trusted sources.
Define and manage your goals, because managing uncertainty requires goals. Focus on your goals, not on the short-term movements in the markets.
Balance optimism with realism as you gain experience.
Understand the advantages of compounding by planning for the long term. As Einstein said, compounding is the eighth wonder of the world. Discover the magic of compounding and why it’s important to increasing wealth.

According to David Booth, if you follow these guidelines, you will feel safer and more secure in your investment decisions. If things still go wrong, remember that you made the best choices you could at the time. Judge yourself based on the quality of your decisions, not the outcomes. It’s human nature to strive to get back on track rather than sitting back and doing nothing.

Tips from Howard Marks, co-founder of Oaktree Capital

Oaktree Capital Management, $192B USD, assets under management

When investing, it’s important to understand randomness:

Due to randomness, a good decision doesn’t always lead to success, and a bad decision doesn’t always result in failure.
You cannot judge the quality of a decision solely by its outcome, as randomness can produce almost any result.

Managing risk and understanding cycles:

Understanding the distinction between risk control and risk avoidance is essential for investors. Risk management does not mean avoiding risk; rather, it involves deploying efficient risk management tactics driven by data and an understanding of market cycles (not just forecasts). As Elroy Dimson, a professor at the London Business School, said: ‘Risk means more things can happen than will happen’. So, if you want to make money, you have to take risks; however, you shouldn’t expect to make money merely for taking risks — you need to do it skillfully, as there can always be a variety of outcomes.
For intelligent risk control, Howard Marks talks about a process called, Intelligent bearing of risk for profit, where the risk must be — risk you’re aware of, risk you can analyze, risk you can diversify, and risk you’re well paid to assume.
Many of the biggest mistakes made in the business and investment worlds have to do with cycles. People extrapolate uptrends and downtrends into eternity, whereas the truth is that trends are usually correct: rather than go well or poorly forever, most things regress to the mean. The longer a trend has gone on — making it appear more permanent — the more likely it is to reverse soon. And the longer an uptrend goes on, the more optimistic, risk-tolerant, and aggressive most people become, just as they should be turning more cautious, (actual abstract from Howard Marks memo: It’s All a Big Mistake, 20–06–2012).

Basics of investing —

Source: Ontario Securities Commission — Get smarter about money —

Types of investments — relevant to this article:

Some other investing concepts to be aware of —

Source: Investopedia

Index Fund vs. ETF
Random Walk Theory: Definition, How It’s Used, and Example
Efficient Market Hypothesis (EMH): Definition and Critique — 1970, Eugene F. Fama, Nobel Laureate, published Efficient Capital Markets: a Review of Theory and Empirical Work. Eugene defined a market to be “informationally efficient” if prices at each moment incorporate all available information about future values.
Intertemporal Capital Asset Pricing Model (ICAPM) — by Professor Robert C. Merton, who was awarded the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for his work establishing a new method to determine the value of derivatives. He also created the Intertemporal Capital Asset Pricing Model (ICAPM), a popular tool to help advisors make informed financial decisions and understand market trends.

My Approach to Investing: Active vs. Passive

Quick refresher: Understanding active vs. passive investing

Preference for Passive Investing

This investment approach might seem boring, but it is the best way to invest for the long term and benefit from the magic of compounding. Based on my own experience, education, and financial goals, I am biased towards passive investing. The majority of my funds are invested in an S&P 500 Index ETF, allowing me to own stocks in some of the world’s most successful companies at an affordable price and with extremely low management fees compared to mutual funds. This approach lets me participate in the overall market rather than focusing on the performance of an individual company. Additionally, I have allocated some funds to real estate and keep a small percentage in a high-interest savings account for instant liquidity.

Passive Investment (Peace of Mind since 2018) — ETF — XSP: iShares Core S&P 500 Index ETF (CAD Hedged) — over last 3 years, Returns: +23%

Approach to Active Trading

To add some unnecessary excitement, I started trading stocks in 2020 to learn about individual companies and test my research and hypotheses on their potential future growth. I set aside an amount for trading stocks that I was willing to lose, similar to what many people do when going to a casino, and began investing due to pure FOMO (fear of missing out).

As much as I would like to take some credit for my stock trading skills, my gains and losses have been mostly random and due to pure luck. This approach carries a high risk of losing your initial investment, so I wouldn’t recommend it to new retail investors. I find investing in the stock market intriguing, much like how many professionals and academics enjoy playing poker or other strategic board games like Go, backgammon, and chess.

Overall, my active trading approach is based on thorough research, financial analysis, and tracking emerging technologies. I focus on understanding the fundamentals of the companies I invest in and diversifying across sectors to manage risk, though this is challenging and still a work-in-progress. I have seen some gains by staying informed and being willing to change my mind when I learn new information. While I have enjoyed the active trading journey so far, the randomness of my gains and losses means I am not ready to retire on an island anytime soon 🏝️🍹.

Even though I have consistently gained positive returns by investing in the entire market through the S&P 500 Index ETF, I understand the appeal of investing directly in individual companies, as it can lead to enormous growth in a short period of time (similar to a random win in a casino or a lottery). However, I like to reiterate that it can easily result in significant losses. Some of my stock investments demonstrate this, where my well-thought-out amateur portfolio includes no-brainer valuable companies, lucky picks, and some choices influenced by random research.

Useful Tips -

Wherever possible, I tend to invest in blue-chip companies using Canadian Depositary Receipts (CDRs) as it allows me to buy fractional shares with a built-in currency hedge against the US dollar. I have covered CDRs in one of my previous articles: Canadian Depositary Receipts- CIBC’s innovative stock trading product for 🇨🇦 Canadian investors
Understanding the basics — 20 steps for a better
investing strategy (written by Stock Unlock’s analysts for easy understanding)

Insights Into My Active Investing Portfolio —

No-brainer winners — Positive Returns (as of July 2024)

CDRs: AAPL (Apple), AMZN (Amazon), COST (Costco), MSFT (Microsoft), WMT (Walmart) — Returns: +10% to +70%
CDRs: anomaly — NVDA (Nvidia)— Returns: over + 500% (sold most of them at +150% 🤑)
ARM (Arm Holdings) — American Depositary Receipts (ADR)— Returns : +200%

Random winners — Positive Returns (over last 3 years)
Stocks that I am proud of buying based on my research and selling in a timely manner:

ACHR (Archer Aviation Inc), HUMA (Humacyte Inc), NVEI (Nuvei Corp), ONON (ON shoes), PAY (Payfare Canada), — Typical Returns: +40%

Losers — Negative Returns (as of July 2024)
Stocks that I am totally confused about:

CDRs — TSLA (Tesla Inc), PANW (Palo Alto Networks) — Returns: -10% to -20%
Common stocks — MRNA (Moderna Inc), PERI (Perion), RIVN (Rivian Automotive Inc), SANA (Sana Biotechnology Inc) — Returns: -10% to -88%

Useful Resources

ETFs (Exchange-Traded Funds) and Indices worth analyzing for low-cost passive investing —

iShares Funds by BlackRock — Product: ETFs
Vanguard ETFs — e.g. VTI — Vanguard Total Stock Market ETF
Dimensional ETFs— Dimensional Crosses $100 Billion in ETF Assets under Management
Fidelity ETFs
RAFI Indices — investment solutions by Research Affiliates, LLC, is a global leader in smart beta and asset allocation.
RAFI Fundamental Index Series
Russell RAFI Index Series
FTSE RAFI™ Index Series— LSEG partners with Research Affiliates on the innovative FTSE RAFI™ Index Series

Experts we can learn from —selected books, podcasts etc.

Books —

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns, by John C. Bogle
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, by Nassim Nicholas Taleb
The Intelligent Investor Rev Ed.: The Definitive Book on Value Investing, by Benjamin Graham, Jason Zweig, Warren E. Buffett (Collaborator)
A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy Thirteenth Edition, by Burton G. Malkiel

Audio, Video —

Aswath Damodaran on Valuation (YouTube Channel) — Professor of Finance at NYU Stern School of Business
Podcast — The Rational Reminder (Canadian), Benjamin Felix and Cameron Passmore, Portfolio Managers at PWL Capital in Ottawa, Ontario.
Podcast — Barron’s Streetwise, by Barron’s columnist Jack Hough
Audio — The Psychology of Human Misjudgement — Charlie Munger Full Speech with 24 standard causes of Human Misjudgements

Some of the top financial experts behind indexing —

Eugene F. Fama, Nobel Laureate, Dimensional Director and Consultant — 2013 Nobel laureate in Economic Sciences, Eugene Fama, is the principal scholar whose groundbreaking work inspired the founding of Dimensional. Widely recognized as the “father of modern finance,” Professor Fama developed the efficient market hypothesis (source).
David G. Booth, Founder and Chairman, Dimensional Fund Advisors — A trailblazer in the financial world, David helped create one of the world’s first index funds in the 1970s and launched the first passively managed small company strategy in the early ’80s. He has spent his career applying groundbreaking financial theory and research to the practical world of asset management, working closely with renowned academics to develop innovative investment strategies that he believed could outperform index funds, pioneering what would later be called factor investing (source).
John “Mac” McQuown — worked with Dimensional cofounder David G. Booth to develop the first institutional index funds at Wells Fargo in the early 1970s, and was the first chairman of the Wells Fargo Investment Advisors (now Barclays Global Investors). He maintains close ties to investment strategies as a cofounding Dimensional Director (source). Read more about John, Bloomberg article: Meet the Man Who Started the $11 Trillion Index Revolution
Kenneth R. French, Dimensional Director and Consultant — is the Roth Family Distinguished Professor of Finance at the Tuck School of Business at Dartmouth College. He is an expert on the behavior of security prices and investment strategies. He and coauthor Eugene F. Fama are well known for their research into the value effect and the three- and five-factor models, including articles such as “The Cross-Section of Expected Stock Returns” and “Common Risk Factors in the Returns on Stocks and Bonds.” His recent research focuses on patterns in expected returns in domestic and international financial markets and tests of asset pricing models (source).
John Bogle, Vanguard Founder, Father of Indexing (source)- he built the Vanguard Group on the belief that over the long term, most investment managers cannot outperform the broad market averages. Vanguard Group, Inc. is now one of the world’s largest asset managers with approx. $8.6T in total assets under management.

No Offer or Investment Advice
The information provided is for informational purposes only. It does not constitute any form of advice or recommendation to buy or sell any financial securities or adopt any investment strategy mentioned. It is intended only to provide observations and views of the author(s) at the time of writing, both of which are subject to change at any time without prior notice. The information provided does not have regard to the specific investment objectives, financial situation or particular needs of any specific person who may read it, and investors should determine for themselves whether a particular service or product is suitable for their investment needs or should seek such professional advice for their particular situation.

Any reference to a particular company or security is not an endorsement or a recommendation by the author to purchase or sell such security. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of prior securities’ recommendations.