For many who wade into the waters of DIY investing, those first few steps begin in shallow waters. With no lifeguard on duty and countless warnings of sharks and other dangers, those first steps can be nerve wracking. And yet, despite the nerves, and the warnings, the promise of fortunes and financial freedom continue to […]
For many who wade into the waters of DIY investing, those first few steps begin in shallow waters. With no lifeguard on duty and countless warnings of sharks and other dangers, those first steps can be nerve wracking. And yet, despite the nerves, and the warnings, the promise of fortunes and financial freedom continue to lure investors into the deep waters of DIY investing.
While safety is never an outright guarantee, there are pockets of helpful and well-intentioned investors online. Where these pockets are, at least for Canadian investors, is less of a mystery than who might be participating in them.
In this piece we take a look at an increasingly popular source of personal finance information – Reddit, and walk behind the curtain with the ‘subreddit’ moderator of the personal finance Canada subreddit. (In reddit fashion, for those who wish to skip to the ‘TL;DR’ summary, click here)
The online DIY investor journey often begins behind a keyboard with the first stop being a search engine. After typing in their best guess into the search box, the search engine tosses back it’s best guess of what that visitor wants to know about. For beginner investors, and for anyone really, it’s hard to know what you don’t know. So, a back and forth game of search pong ensues and eventually (or hopefully) an investor finds something useful.
So, just what does a novice investor get back by casting their net with the term ‘online investing?’ The image below is pretty typical.
Lots of advertising. Lots of financial service providers and very little, if any, support. There’s a reason why Google has generated more than $42.7 billion in advertising revenue year to date.
DIY’ers are a special breed, however. They are a persistent lot. They endure trawling through questionable search results until they find something that can get them closer to answer.
Of course, being able to ask a question to someone (or many people) more knowledgeable would be a much more efficient search strategy. And, for many who seek answers online, the place they can generally find them is in an online forum.
The tribe of DIY investors that frequent and contribute to forums all understand what it’s like to wade into the water for the first time or even what it’s like to get tossed around by the market waves. That empathy, especially in the world of DIY finance, goes a long way and is a stark contrast to the unwieldy search engine results, excess marketing, and a generally confusing subject matter.
As a result, online investing forums provide respite and a sense of community in an otherwise lonely journey.
When it comes to forums, the Canadian DIY investor has a several solid choices. Despite its status as the new kid on the block, Reddit’s Personal Finance Canada thread has quickly become a touch point of choice for many.
As a product, Reddit is a fascinating phenomenon. It’s as Spartan as it comes and although it proclaims to be the ‘front page of the internet’ it looks and feels like the frontier of the internet. In one of the many corners or ‘subreddits’ of Reddit, is a place called PersonalFinanceCanada (PFC) where all things personal finance get discussed.
So, why would individuals seek out financial advice, let alone trust it, from the same website where cat videos, photogenic goats and quirky .gifs abound?
It’s difficult to say for sure, however the strength of the community and an overall ethos of self-regulation helps to keep the system remarkably functional.
Perhaps the convenience of being able to access the diversity of information on Reddit keeps users coming back. Readers of this particular subreddit, and of Reddit in general, seem to be ok with accepting who is behind the keyboard and voting features help serve as an information filter on what will or won’t fly with the community of users.
As with all sources on the internet, especially large and amorphous communities, however, it is still crucial to ask questions about the motives and credentials behind the answers offered.
The stats on the Reddit Personal Finance Canada subreddit are impressive and definitely lend credence to its usage.
From its inception in January of 2012 to its most recent milestone of over 11,000 readers, the explosive growth in readership speaks to the curiosity Redditors have about managing their financial well being. (source: redditmetrics.com)
That elusive yet increasingly important demographic of “millennials” is on Reddit. There they are actively looking for information and contributing their thoughts on personal finance, for many at a time of important life transitions.
Like all thriving communities, some degree of order is required. Tasked with helping to ensure guidelines are adhered to are the subreddit’s moderators.
SparxTrading.com reached out to and conducted an interview with one of the three Reddit.com PFC moderators; a person by the handle Palestrina.
According to the Reddit stats, as of this writing Palestrina has accrued 51 link karma and 4612 comment karma and has helped keep the servers on at Reddit thanks to donations on Palestrina’s behalf. In plain english: Palestrina is an active contributor whose opinions are valued.
Now, anonymity is an integral of forum exchanges and will be respected here as well. What we can tell you is that Palestrina is an author and has a background in and a passion for finance.
Here is our unfiltered Q and A session with Palestrina.
Q: Sparxtrading.com: I have to start with the handle. Palestrina, reads like the number 4 on the menu at Gigi’s. Please enlighten this poor, uninformed soul; where did it come from and why?
A: Palestrina: So many other names were taken. I love, love, love the music of Palestrina – so it was a name that popped into my mind. 🙂
Q: Sparxtrading.com: Why are you an active member on Reddit?
A: Palestrina: Reddit is an amazing amalgam of pop culture, high culture and low culture. I can get specific actuarial math questions answered, discuss plot points on my favourite tv shows, discover new music, and debate with others — all from the convenience of my little laptop screen and one sign-in.
Q: Sparxtrading.com: What qualifications do you have and what frustrates you the most about the DIY investor and financial sector?
A: Palestrina: I have worked in various roles in the financial services sector and don’t fit neatly in any one box. The lack of fit was probably the main thing. (I’m sorry if that sounds overly vague. This reddit comment summarizes the issues well 🙂
“I worked in the industry for several years. It has the possibility of high rewards but the turnover is huge,” Wrote hurleyburleyundone. “Maybe it’s better out west but in Toronto, it’s damn difficult to last a year in the job. Something like 8/10 people won’t make it into year 2. Many people here are presented with those prospects and still want to do it, expecting they can be that 2/10, but few ever do make it. That leads me to ask my question, why would you want to do a job like this?
The only conceivable reason should be you (the OP) like sales, a lot, and it’s what you’re good at. Otherwise this is not the job for you. After graduating everyone wanted to get into high finance, and some ended up in advisor roles because they couldn’t get anything better. Personally the job wasn’t intellectually stimulating, and the products are a conflict of interest. There is a lot of moral ambiguity in these roles.” Quote link.
Q: Sparxtrading.com: What motivates you to want to help?
A: Palestrina: A relatively large fraction of the financial advice and information in the Canadian Personal Finance subreddit is outright wrong, slightly off, or misguided in some other way. I built my knowledge of personal finance over many years and I can…uh, type really fast so my impulse to jump in and say, “no – the CRA circular you want is this one” is apparently unstoppable.
Q: Sparxtrading.com Was there a zero moment of truth that pushed or pulled you in to moderating? A specific event or a culmination of things?
A: Palestrina: The PFC moderators posted that they were looking for another moderator and someone nominated me, and that nomination post got a lot of upvotes, so it seemed as though I had a swell of approval!
Q: Sparxtrading.com: Kindly describe a day in the life of a moderator; as it relates to Reddit.
A: Palestrina: Much less exciting than it might sound. I can approve posts caught in the spam filter and delete posts that have been reported as spam or as off-topic. I might spend 5 minutes per day on this, if that.
Q: Sparxtrading.com: Where do you find the time? How many hours a day do you spend on the forum?
A: Palestrina: I quit my full-time day job in May. I’m unemployed! Hence lots of time. I’m writing a book (almost done!) and have needed/wanted lots of distractions over the past few months. I’m probably on reddit two hours per day.
Q: Sparxtrading.com: What are some of the common thread characteristics, people are posting about?
A: Palestrina: Based on the common or frequent posts on reddit, most people are (a) starting out in life and (b) feeling uncertain about what is the best decision for them. “Should I buy a house/condo, or continue to rent? Help me understand the pension options at my job. Should I stop investing with my parents’ financial advisor and start an index fund portfolio?” etc.
Q: Sparxtrading.com: Describe the challenges in taking the lead of moderating PFC and how you are meeting them, if at all?
A: Palestrina: There really are no challenges. PFC is well-behaved. I don’t feel as though I have to “put my mod hat on” in the PFC community really ever.
Q: Sparxtrading.com: What are the great “payoffs?” I don’t mean fiscal rewards, but personal rewards.
A: Palestrina: Well, there are absolutely no fiscal payoffs, so all rewards must be personal. For me, the payoffs would be:
I get to see what people are really interested in / concerned about w/r/t their finances. It would be difficult to find people willing to be so frank in a non-anonymous context.
I, too, get to be frank because I also benefit from the anonymity. That is, I can take positions that I might not necessarily want to be associated with publicly. (Nothing nefarious; mostly I feel like it is OK for me to be bitchy, to swear, and to think about what is the financially optimal choice vs. trying to market some ($%$%^%$^) stupid financial product <– reason why I quit my last job).
I get to chat about things I am interested in, and learn more about things I am interested in.
Q: Sparxtrading.com: Are you at all concerned that people are turning to the dark and anonymous corners of the internet for financial advice? How does this reflect on Canadian financial institutions and their ability, or lack thereof, to communicate? Or is this a bandwidth issue for many Canadians?
A: Palestrina: I’m not. I don’t think anonymity is a big problem; I think it can actually help people feel more free to share more about their situations and thus get more relevant / useful advice. I also like how reddit is available 24/7, versus a bank rep (for example). Reddit provides a kind of “self-serve” financial advice format that is appealing to me – more like a sharing economy, less like a sales economy.
Q: Sparxtrading.com: What would you suggest institutions do differently or people in general? Should, investing and personal finance be required curriculum for high school and post-secondary students? If so, why?
A: Palestrina: I’m a huge proponent of increased financial literacy, but it is really hard to get people to care about things they don’t see a reason to care about. Financial literacy in high school is a bit problematic because it is all pretty much theoretical at that point. I do bemoan the loss of “home economics” classes (which were kind of a joke even when I was taking them in the 1970s), as personal finance is generally speaking a “home economics” issue.
SparxTrading.com would like to extend a special thanks to Palestrina for taking the time to share their story.
Special thanks to journalist, husband, baseball enthusiast and SparxTrading.com team member, Derek Marinos for conducting this interview. We’ve chosen to have Derek chronicle his learning journey through the financial forums, including the subreddit(s) related to personal finance and investing under the aptly named series: Today I Learned.
TL;DR: Being a DIY investor means spending a lot time researching information online. This article looks at one of the more popular forums, Personal Finance Canada on Reddit, and interviews one of the moderators as to why they participate in this forum. We learn that opportunity, training, freedom of speech and desire to get the facts straight are some of the drivers to continue contributing.