Thursday, July 12


So yesterday I discussed my turkeys and today I'm eating turkey soup. It appears that nobody really likes my investing strategy... sigh.

Actually, I'm not surprised - I don't like my investing strategy either. For those of you who read this blog and think that I've got it all together, please don't think that. I have certainly managed to earn money and save money, and I've done well with a couple of real estate transactions, but as an investor I am still really green.

However, I do think I was perhaps a little bit more maligned than I should have been. Here are a few things that I think I am doing better than I was given credit for.

  • Diversification: Six months ago that entire portfolio was in Canadian Equities, so I am trying to diversify and progress toward a better asset allocation. Unfortunately, the international equities purchases have not been rewarding my good intentions.
  • Long-term view: This portfolio has also not seen a single sell order since inception (March 2005) so the comment about flipping was rather bruising. Monitoring performance is not the same as flipping and only someone with a very short-term memory could monitor long-term performance, since it stays fixed, so of course I'm looking at short-term performance.
  • Research: At least I do it. Maybe it isn't in the depth that some might like, but I'm not using a dart board and I do look at more than just last year's return. The Globefund site has a tonne of metrics on the funds.

The bottom line is that investing is complicated, and amateurs can't generally come even close to the level of detail that the pros do, unless they are exceptionally interested and dedicated. Until I reach the point when I have a massive portfolio that I can turn over to a really good manager, I am not going to waste my money on the monkeys that pass for financial advisors in most places. (And screening the monkeys for a good one would be more work than learning how to invest better myself!)

Besides, even though my investing strategy is full of holes, this approach has worked better than most I've tried. My original contribution from March 2005 is up 75%, while the TSX is only up 45% over the same period. Sometimes turkey soup doesn't taste all that bad!


matt said...

Your international equities could hardly be expected to do well with the powerhouse that is the Canadian dollar destroying the nominal gains in your foreign equities. I just hope your international equities didn't include American equities.

On the plus side, you snagger a bunch of buying power. Take a vacation in America.

FourPillars said...

Sista! You gotta grow another layer of skin!

If you're going to bare your portfolio for perusal then get ready for some comments.

You made it sound like you were ready to dump the whole portfolio which is probably where the comments came from.

However - I don't think there is any disputing that you have done very well financially and that includes your investment portfolio.

That fact that you "should" diversify outside of Can. doesn't change the reality that Canadian equity has done extremely well. For the record - the purpose of diversification is to lower the risk of the portfolio which doesn't necessarily translate into higher returns, short term or long.

One other thing - I think is a great tool for mutual funds (even if I don't really like mutual funds).


Investoid said...

Diva, don't diversify just for the sake of diversifying. As FourPillars mentioned, diversification is to reduce portfolio volatility (a bad thing), nothing else. By the way, going international equities isn't a really good diversification tool, contrary to popular belief. Check out the long term correlation between the TSX and US, Europe, Asia, etc. markets. You are already somewhat diversified due to your real estate investments, and since you have a high net worth you may want to look at other alternative investments (can you qualify as an accredited investor yet?).

Thicken My Wallet said...

Diva- don't get down on yourself. Your net worth most likely puts you in 95th percentile plus for your age bracket. It takes a long time to right a portfolio (I am in month 12 of probably 18 month plan)and you seem to do very well in real estate. Perhaps, you should refocus your energy on your successes. At the very least, enjoy the weekend and don't worry about for a few days. In the larger picture, you are doing quite well.

Re: money said...

I absolutely did not mean to diss your strategy, was just curious how you pick your funds, that's all! said...

I agree with Matt! Canada is very strong financially and is only going to continue to do well.

Look at how many of the world's resources are located here! With a seemingly infinite number of human wants and only a limited number of actual resources on this planet, Canada should continue to do well.

Promod said...

MD, I just got my investment statement today. You'll get no advice from me :)

Your post and the comments helped inspire me to write Who Can You Trust?, a topic that keeps nagging me.

tvenner said...

As one of those advisor "monkeys" and a DIY'er from way back, I think I spend more time and effort on designing my clients portfolios than on my own. My portfolio has a serious asset allocation imbalance as well, can't sell it all at once though. Eventually i'll get it right I hope :)