Risk and Complexity of Securities and Funds – a Promising Proposal + MORE Jan 2nd

No need to be alarmed over a rise of financial technology companies – they’re simply picking up the slack in underserved markets

How does one know how risky an investment is, whether it’s a stock or bond, a mutual fund or an ETF? How complicated and hard is it to understand or predict what the investment’s return might depend on? For the retail investor, the basic answer is that you’re on your own, having to wade through the security’s Prospectus, which for Canadian securities can be found in SEDAR. Trying to compare several alternative possibilities that way is such a nightmarishly time-consuming task that most people likely don’t even bother. It’s one reason that as my investing years have accumulated, I am more and more oriented to the simplest possible investment structure.The provincial regulatory authorities under the umbrella of the Canadian Securities Administrators have tried – ineffectually – to help by mandating fund risk rating, the latest revision and supposed improvement exercise of which is currently underway (see Ontario Securities Commission website here). But it relies only on one risk dimension – price volatility – which isn’t nearly broad enough to capture real investment risk as I wrote in my last post referring to Howard Marks’ fantastic discussion of risk…