Late October has arrived, and while most people have ghostbusting on the mind, PWL Capital is all about some old mythbustin’ of the financial variety. We’ll look at some of these monstrosities and bury them for good. This piece was inspired by Ben Felix’s YouTube video and Episode #423 of the Rational Reminder. As PWL’s Dan Bortolotti noted in that episode, myths often start with a single kernel of truth that gets stretched into an absolute rule. Here’s the list:
Grab a few mini chocolates that you’re stashing for the big night (or some you’ve been hiding from your kids since last year), and let’s bust some myths. This article’s a real treat.
Here’s one of the most persistent finance myths—and one constantly thrown around in Canada in the 2010s, when house prices kept going up and up. Back then, buyers looked like geniuses; renters, less so.
In this case, the kernel of truth is that rent builds no equity. A mortgage payment goes towards something. However, owning a home saddles you with hefty, unrecoverable costs: property taxes, maintenance and depreciation, and the cost of capital, or opportunity cost. In this case, it’s the mortgage interest plus the return your down payment could have earned if you’d kept it invested.
Add them up, and the unrecoverable cost of owning comes out roughly equal to rent. Ben Felix’s 5% rule is a handy back-of-the-envelope check: take about 5% of a home’s value, divide by 12, and you get the monthly rent that’s financially equivalent to owning it.
There’s a catch, though. As Dan points out, renting only comes out ahead if you invest the difference. Rent and spend the difference, and owners usually come out ahead because a mortgage is forced savings. This myth is pernicious and unlikely to stay buried for long.
Bottom line: If renters throw money away, so do owners.
Every time inflation flares up, someone unwraps this myth and drags it out of the tomb. And the kernel of truth is ancient: gold has held its value over centuries. The popular story goes that a Roman centurion’s pay, measured in gold, was about the same as a U.S. Army captain’s today.
Here’s the problem: over the average investor’s 10- to 30-year horizon, gold’s price swings far more than inflation, overshooting or undershooting it by wide margins. In other words, gold is a lousy hedge for anyone with a normal human lifespan.
Gold is also a non-productive asset: it doesn’t pay dividends, earn profits, or grow. Consequently, its expected real return is close to zero. The gold standard was short-lived: the international version lasted about four decades before the First World War, and the U.S. dollar’s last formal link to gold ended in 1971.
Bottom line: Nobody invests over 2,000 years. Except maybe biohacker Bryan Johnson.
This ubiquitous one looks harmless—and that’s what makes it dangerous. These seemingly safe investments might help you sleep at night, but over decades they can prove costly.
The kernel of truth: bonds and cash are less volatile than stocks. On a bad day, you check your investments and the balances barely budge. That stability feels safe. You pat yourself on the back.
But volatility is only one kind of risk. Think of risk as a balloon: squeeze one side, and the air moves to the other. Load up on bonds and cash, and you squeeze out market risk—only to push the air into inflation risk and shortfall risk—running out of money before you run out of retirement.
Bonds and cash can be heroes. But also villains.
Bottom line: “Safe” depends on what you’re protecting yourself against. If Hollywood ever needs a Halloween-themed 007 flick, we’ve got the title: Bond: Shortfall.
Who is Frankenstein? If you said the monster, you’re not alone—and you’re wrong. In Mary Shelley’s novel, Frankenstein is the scientist; the creature never gets a name. This myth is also a case of mistaken identity.
The kernel of truth is real enough. Over long periods, dividends have accounted for a large share of the stock market’s total return—figures around 40% get quoted often. Dividend fans use that to argue that dividends are what drive returns.
But that gets cause and effect backwards. A dividend comes out of the company, so its share price drops by roughly the amount paid. A $100 share that pays $2 leaves a shareholder with a $98 share plus $2 in cash. Same $100, before tax. The return hasn’t grown; it’s just changed from capital to income.
What really drives returns is the underlying business: How it’s priced. How profitable it is. How conservatively it reinvests. Companies that return cash through share buybacks look a lot like dividend payers on those fundamentals, pay lower dividends—and have outperformed them. In a taxable account, (1) capital gains are often more tax-efficient and (2) dividends are also taxed whether you need the cash or not.
Bottom line: Classic mix-up. Dividends describe how returns are paid out—not what creates them.
This myth comes veiled in costume. Pull off the word “average” and you’ll find something else entirely.
The kernel of truth: index funds hold the whole market, so you can see how their returns could be quantified as “average”. That sounds like settling, and it makes investors think they could, and should, do better.
But average turns out to be a pretty high bar. Most active funds can’t clear it, for two reasons:
Skewed stock returns. A small minority of stocks generate almost all of the market’s long-term gains. A concentrated portfolio is more likely to miss them than catch them; an index fund owns them all.
Fees. Index funds cost a fraction of what most active funds charge, and the difference comes straight out of returns every year.
The Canadian numbers are stark. Over the 10 years ending 2025, 98.8% of actively managed Canadian equity funds trailed the S&P/TSX Composite Index. As Dan explains on the pod, an index fund is never the top performer in any given year. It just keeps landing near the top, and over 40 years that’s “certainly not average.”
Bottom line: Who said average was bad?
It seems intuitive: gross domestic product (GDP) is expanding, so corporate earnings will rise and take stock prices with them.
Not so fast. The stock market isn’t the economy. Stock prices reflect investors’ expectations about future profits, so by the time a growth story makes the news, the price has likely already baked it in. Historically, the countries with the fastest economic growth have tended to deliver slightly lower stock returns.
Bottom line: A growing economy doesn’t necessarily equate with stellar stock returns.
Everyone’s got full-moon fever. When valuations climb, the market commentators start howling that a crash is imminent.
The kernel of truth: the Shiller cyclically adjusted price-to-earnings (CAPE) ratio, which compares stock prices with 10 years of inflation-adjusted earnings, does contain useful information. Higher readings have generally been followed by lower returns. And in the U.S., the CAPE has breached 40 only around the dot-com bubble and in recent years.
The issue is the certainty. U.S. history offers very few high-CAPE periods to learn from. Across other developed markets, high starting valuations did lead to lower returns on average, but some periods with readings near 40 still went on to strong returns.
Bottom line: Valuations aren’t a useful signal for market timing. Sorry, no silver bullet here.
The element of truth: Warren Buffett beat the market over his career as a professional investor, largely thanks to extraordinary early results. Everyone from armchair investing experts to professional fund managers uses his quotable wisdom to justify stock picking.
But the mere mortals mesmerized by the man, the myth, the legend miss the real magic: time. It’s an often overlooked element of Buffett’s staggering success. As Morgan Housel points out in The Psychology of Money, Buffett started investing as a child and kept going into his 90s, and most of his fortune came after he turned 65. Likewise, Buffett didn’t beat a low-cost U.S. stock index fund for more than 20 years leading up to his retirement as CEO of Berkshire Hathaway in January 2026.
Buffett himself has been telling ordinary investors to buy index funds for decades. In his 2016 letter to shareholders, he said he’d identified only about ten professionals he expected to beat the market over the long run. He concluded that “both large and small investors should stick with low-cost index funds.”
Bottom line: You can’t emulate Buffett’s stock picking, but you can copy his time horizon.
This one sounds like a blessing, and your Aunt Bethany probably talked your ear off about it every Thanksgiving: save hard, invest early, and let compounding work its magic. And there’s some truth to it: the longer your money is invested, the more it can grow.
Unfortunately, implementing this practice is easier said than done. Most people earn the least early in their careers and see their income rise over time. An extra $5,000 at 25 might mean a safer neighbourhood, a better education, a less crappy car or an unforgettable trip. Spent at 45, the same money—even after 20 years of growth—does far less for your quality of life. Saving to the bone when you’re young takes from your lower-earning self to give to your higher-earning future self.
Economists call the alternative consumption smoothing, a core idea of the life-cycle model: aim for a steady standard of living over your lifetime. In practice, that means saving what you reasonably can early on, then raising your savings rate as your income grows.
The curse can follow you into retirement, too. Dan sees it regularly: clients whose retirements are 150% funded and who still can’t bring themselves to spend. Even PWL co-founder James Parkyn, a dedicated saver in his youth, admits he wishes he’d travelled more in his twenties.
Bottom line: Money isn’t the only thing that compounds. Skills, health, experiences—those do too.
Some fears keep you safe. This one spreads to far” to “Don’t fear the reaper. Fear the credit card bill.
The kernel of truth: debt can be dangerous, and being debt-free feels great. Paying off credit cards or the ever-growing HELOC that keeps fueling your hedonic treadmill is almost always good advice.
But not all debt is created equal. A student loan that boosts your earning power is an investment in your human capital, while a manageable mortgage on a family home can be a great financial decision. In fact, owning a home outright is the lowest-risk way to pay for housing, but also the most expensive, because the equity locked up in your house could be earning a return elsewhere.
But if forced to pick an extreme, Ben and Dan would both choose “all debt is bad.” As Dan says, “I have never worked with anyone who has regretted paying off their mortgage and not re-borrowing. Never.” Or, in Ben’s words, “The myth might end up being better advice than the actual optimal thing.”
Bottom line: Not everything under the bed is a monster.
Each of these myths starts with a grain of truth. Rent does leave your account every month. Gold has held its value over centuries. Bonds are less volatile than stocks. The Oracle of Omaha really did beat the market. Debt can be dangerous. The myth comes from stretching that truth into a rule.
To keep these monsters at bay, step back and look at the whole picture: what each choice costs, what it protects you from, and how it fits your own situation.
Want to dig deeper? Watch Ben Felix’s video on the biggest myths in personal finance, or listen to Ben and Dan’s discussion in Episode #423 of the Rational Reminder. If any of these myths have been haunting your finances or dreams, start with a conversation with a PWL advisor.
