Alison's Money Rule

Rules of thumb

Posted November 28, 2011
Originally Published June 29, 2010

Take a hard look at 'common knowledge', 'rules of thumb' and 'conventional wisdom' because they’re often flat out wrong.

The problem with using conventional wisdom to make business, investment or personal financial decisions is that it’s frequently misleading. But we’re attracted to simplistic axioms because, these days, who doesn’t want things wrapped up into nice, bite-sized info bundles?

But before you chow down, take a good look. Here are 3 “common knowledge” nuggets we hear a lot.

1. Taxes are lower in the U.S than in Canada. Doesn’t matter what your political stripe, most of us believe this implicitly. On May 13 KPMG, the giant international accounting firm and hardly a bastion of leftism, issued a report ranking the corporate tax competitiveness of numerous countries. Canada came in second and the U.S. 6th with corporations there paying 36.1% more than in our supposedly high tax country.

2. Young people don’t read books like they used to. I raised this over lunch with Kevin Hanson, President of Simon & Schuster Canada and Alison Clarke, Director of Sales Operations. They took turns pummeling me with sales figures showing that young people are reading more and buying more books than ever.

3. Newspapers are dead. This is like the wide spread assumption held during the tech boom that the Internet would soon be the death of bricks and mortar businesses like banks and retail stores. They’ll all be gone, the belief went, cyber shopping and internet banking would rule. Didn’t happen.

About a month ago Paul Godfrey, a smart businessman, led a consortium which plunked down upwards of a billion dollars for the newspaper assets of CanWest Global Communications Corp. Are newspapers dead? Or are they, like banks and stores, going to adapt to the times?

Next week I’ll bash some conventional wisdom about saving and investing.


Side Bar


Investment industry Rules of Thumb that ain’t necessarily true.

• Buy and Hold is the smartest approach for the average investor.

• If you’re young you can afford to take risks.

• You’ll never be able to retire if you don’t have money in the stock market.

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