A question of money.  updates:  first Ap 23 last  May 03, 2013

I have been asked on a number of occasions recently, "What should I do with my (RSP)/investments?"
These questions come from friends and family.
They result from a frustration with their existing arrangements, the lack of response and perceived transparency by those managing their accounts, and the very poor return experienced over time.

I am asked because I now manage my own account, and have invested considerable time learning about how to do that over the last 2 years.

I am not an expert. I can not tell you what to do. I can tell you where to go to get answers to your questions.  I have no vested interest.

Most questioners listen attentively to my rambling answers and depart very confused, frustrated, and nearly always say "I do not have the time for that."

Therefore this document is to provide a structured,  response  moving from the simple to the more complex.

Most folks have an Account Manager who they "throw money at" and walk away. Those accounts contain, by enlarge, "Mutual funds". We can spend a great deal of time telling horror stories, but that is a waste of time.. Been there, done that.

Three things you need to know/do:
Mutual fund cost is usually 2 % or more(MER)annually, inflation is 3% approx. . thus your adviser needs to earn for you 5% plus annually, just to break even.

"The average management expense ratio for the 12 largest widely available global equity mutual funds is 2.3 per cent, but several in the group have MERs in the 2.5 to 2.8 per cent range. By contrast, you can buy U.S. equity ETFs with MERs of less than 0.25 per cent and international ETFs with fees in the 0.5 per cent range." ROB CARRICK The Globe and mail published Friday, Apr. 26 2013, 7:52 PM EDT
see also  New rules on investment fees, returns may be too vague to be useful  AMELIA YOUNG Special to The Globe and MailPublished Thursday, May. 02 2013, 5:00 AM EDT

What do you pay your adviser on top of this?
If you get a comprehensive straight answer, including account fee, management fees and trading fees, consider yourself lucky.
Every $100,000 so invested.....cost you at least $2000 and may be closer to $4000 annually..... I say again  annually. That is 2-4%
ETF's cost .3 to .5% generally.

  most large pension funds use ETF's extensively.

Don't believe me? see Mutual fund fee calculator

1) Look at your $ spent.
2) Look at what you are paying your adviser on an hourly basis.  Consider paying yourself instead.
3) Reduce your cost.

Max your RSP and TSFA after the mortgage is paid off.

A) very easy
Open an RSP /TSFA ING account .
(see - - -on the right hand side of the (above linked) page half way down) 

  Tools &
Mutual Fund Comparison Tool
for more
Take the time to read how the fund operates.
Invest in one of 3 Streetwise funds. I suggest the Streetwise Balanced Growth.
For More  - -- Look up (Google) comments on the internet.  see below

It is all in one and all you need. It is functionally, a slightly managed and continually rebalanced,  ETF.
All funds are invested.
Cost (MER) is 1.07%
--   Because is balanced , it modifies the market swings.
Seldom beaten, in my experience, by more than a .5% point in any given month and never goes down as much on a bad month.. tested  over 1 year by me.
    (We keep some funds in each of the 3 Streetwise funds, we compare them over time (more than 1 year) and  use them as a benchmark  to our other efforts)
Leave and forget.

Difficult to move quickly in a declining market   - - company discourages rapid movement.... not flexible. You buy from them.

Want more?  To get more you have to do more.
see 1)  ING Direct Streetwise Funds Vs. TD Index e-Series Funds
see 2)  How to Buy ETFs From iShares.
see 3)   How To Setup and Re balance TD e-Series Funds
and there are lots more of these on the internet.
see    model portfolios this is good stuff  from the Couch Potatoe

Hungry?? Here is your next step..

As # 2 above says you have to get a broker.  SO
Get an on line discount broker, so you can buy and sell stock at a cost of <$10.00  per trade.
That is:-   Each buy costs 9.95,  each sell costs 9.95.  Buy 10 shares - - -cost 9.95  - -buy " 1000" cost 9.95.    

I use Q trade.
The application forms and the actual operation of buying and selling are no more complex that opening operating an on line bank account.

Apply for a Margin account, a TSFA account, an RSP account,
a US dollar version of each above if you can.  (include your partner... if able.)

NOTE:  Not all brokers offer US versions of RSP and TSFA (Q trade does) and going all in  first time  saves future hassles/applications.

All the large Canadian banks have on line discount brokers,  and there are independents.

see - -  -- - How to choose an online broker.   from the Globe and Mail.

NOTE: If you are serious you should  buy a subscription to the Globe and Mail, it includes full access to their on line assets. Forget the rest. Hook up to Twitter.

Scared of all the big terms, don't know what they mean?  Google the term in question.... There are countless sites that define the terms   see Wikapedia. for one.

Even so, all the broker sites have tutorials.

NOTE: Do not Market buy/sell   Limit buy/sell.

So now you have a Broker

While you are waiting for the paperwork to go through ( +/-   1 week)

Go to Google finance and set up one or more  paper/practice portfolio(s).
Check out  investopedia  and informedtrades  their video courses
Go and read all the articles on the Strategy lab file on the Globe web site.  30 min. required...
Then see this  Passive investing the evidence from Sensible TV in the UK  video ..moving pictures..;-))
SO you fund your accounts starting with the RSP and the TSFA. Remember no tax  on these accounts....but no tax-loss recovery is available..

The next easiest means of investing    is. .. 

Option 1

Buy a small variety of ETF's,   your choice, and walk away.
Generally that grouping will be
1 Canadian stock  ETF,
1 Us stock  et 
1 Europe and Asia  ETF's
1 Emerging markets.  ETF's  and
1 bond  (I call that the Banker).  etf

I like the selection of Mr. Hallem of Strategy lab. I have used the Uber potato from model portfolios and the selection from Squawkfox  using. TD Index e-Series Funds is good..

Option 2

There is one sure fire Canadian alternative to this ETF portfolio that is equally (maybe more)  simple..(no good for Americans ;-))

Buy a (that is one only) Canadian Bank - - - Royal bank is good  TSX:RY  Mother did it and it worked for her..and I suspect you may be able to buy direct without going through a broker - -get the advantage of DRIP

Safe solid and pays a good dividend.. To quote #1 son  "why buy anything else...Can't go wrong...any dummy can do it " (Typical #1 son comment).

If you want "diversification"  buy more Banks.
Want to do a little better?? see clipping from Globe  below or see this (pretty much the same thing said differently)
globe and Mail ..Strategy for picking bank stocks.

Option 3)
 The 2 minute portfolio.
"the Two-Minute Portfolio, an ongoing experiment in quick, super-simple stock picking for conservative investors. If you combine both share price changes and dividends into a total return, the S&P/TSX composite index fell 8.7 per cent last year and the Two-Minute Portfolio gained 1.2 per cent."

Effectively it is an EFT that you set up and control.

If you have decided on the ETF route ..  you have a series of choices.

How much goes into each  ETF
These questions involve diversification.. you should not have all your eggs in one basket ....especially if you are going to "walk away"

Generally, the balance for an ETF portfolio set for a  yearly( annual) review,  is -  20% to each of the 5 ETF choices noted above.

You will have also seen  that in the discussion in the three links above????
Note:  Mr. Hallem of Strategy lab. uses a 35/30/20/10/5 ratio for canada/bonds/us/eur& asia/emerging

That is the simple way....

The more active you are with your file, the quicker you can respond, the more you can reduce this need to "diversify" 

The prevailing view is that the older you are the higher the % should be in Bonds  40 +age = 40 +.%..

Given the current state of the Canadian market to the US market that  (50/50) split proposed in ( See Option1)    is hogwash  90us /10cdn   is better.

see "Another great rotation: four reasons to cut back on Canadian stocks."ROB CARRICKThe Globe and MailPublished Friday, Apr. 05 2013, 7:30 PM EDT

Given the current state of Bonds the 40 % + is also hogwash.
European  EFT's  - - SUCK big time, these days. thus 0 % is better. . .however...

In time this will surely change.....

NOTE: an ETF is already the most diversified you can be.

result so far.... and the info presented above you have decided on a group of ETF's, made the purchases,  and are ready to walk off in the sunset....thinking....

It is all in   and all you'll ever need.
Most  funds are invested 
Cost (MER) is (depending)  .4% - - much reduced.
It is balanced and modifies the market swings. ....sort of  and sort of "replicates the market"
Leave and forget.
Easy to move and shift in a declining market   -very flexible.

It is a not managed if you don't)   and not re balanced.
Market sinks & so do you.

The problem
Always- - the market sinks & so do you.

This issue brings us to the

next level

You need to periodically review your portfolio...
and again
The more active you are with your file, the quicker you can respond, the more you can reduce this need to "diversify"and the better you can do..

# 2 nephew has ETF religion: He provided the video above and  he says:
 "There’s two kinds of people in the investment world: those who know nothing, and those who don’t know they know nothing… don’t listen to any of them."
;-)))  now of course nephew #2 is correct  as always  ...but not completely..

In response please See: ---- tweet from 
Downtown Josh Brown (@ReformedBroker)2013-05-02 9:03 PM

From 1957-1997, the S&P 500 was up 8,500%. But only 12 of the 74 stocks in the S&P the entire time beat the index itself. $SPY

see also
Passive Investing in Stock Indices Involves Substantial Risks or see  (copy on local file)

To review:
In it Mike Harris says, (no it is not THE Mike Harris)  in his Price Action Lab blog:

"I present data here that strongly suggest that passive investing in stock indices should be actually treated as an alternative
investment that involves substantial risks, or a solution of last resort for those that do not have the time or
cannot do the research necessary for managing their investments a few times a year or even once every a few
years based on signals they receive from trivial models."....

He illustrates with the SPY and  goes on to say:
The consecutive drawdowns of -42% and -55% are an empirical proof that passive investing is a very risk
strategy and any claims of recovery and eventual profit are based on hindsight.

What he is saying here is   - if you  need the money - there are times (lots on times) when you will take a large loss if you sell ..

The solution

He then says  (and this is the important part)
On the other hand, a trivial, long only, 50-200 simple moving average crossover system during the same period
would have resulted in a (Compound  Annual Return) CAR equal to 9.63% and a max drawdown of -19.37% as shown on the equity graph......

This is a non-optimized, plain vanilla, MA crossover system based on the two popular averages for short-term
and longer-term timeframes. The difference from the passive investment are staggering.
In simple terms  when the market SPY declines he stops the loss by selling out...on the 50 -200 moving average crossover signal (200 above the 50)
buys  back into the market when the 50-200 moving average goes positive (200 below the 50).
and by doing this
the difference is staggering(LY POSITIVE)..

And there is More

Please see

How To Beat The Market By 45% With Lower Risk   Apr 8 2013, 06:25 by: Martin Vlcek (MV) (copy on  local file)
In this article Martin uses a Natural Hedging process, applied to the Sell in May effect by balancing SPY and TLT.

See also Why stocks wilt in the Summer Heat    GEORGE ATHANASSAKOS  The Globe and Mail Published Monday, Jul. 30 2012, 8:27 PM EDT

I am suggesting that you use a combination to these articles..

You buy SPY (Mike Harris (MH) approach) when the market is doing well.  
Then at the prescribed time ( as per Martin Vlcek  (MV) you sell out.

I suggest you then Buy/ substitute  TLT (as per MV).

When the market reverses as per (MH) you reverse the process.

In other words "scale in and scale out"... see The Spring Correction Is Upon Us by Kevin Flynn May 2 2013,  on Seeking Alpha  particularrly see last para..
"Don't frustrate yourself. Scale in and out of your positions, rather than going for broke with one all-or-nothing move.
 And get started now, instead of trying to time the very last uptick. Bulls make money, bears make money, but pigs get slaughtered."

My view is that the May/  Oct. change over is crude. The 50 /200 flip is less crude and  that we can do better than that.

I am currently using a Bolinger band , with  MACD crossover signal backed up by the 10/50 day simple moving average,   on an end of week basis  to trigger  a change over.
Thus I scale in and out of SPY as the trending indicates.    I am sure we can refine this by timing, level of scaling, and signal identification.

Below is a copy of Q trade's SPY chart/interactive/ technical/1 year Bolinger band (20, 2%)   MACD (12, 26) Signal 100.
All is the  default except the Signal that is increased to the 100.

press on this page to be linked to a full size PDF version
below are enlargements of pertinent sections

As a result of this chart showing the SPY as going negative, we therefore reduced our holding by 15% (100 units) with a coresponding increase in the TLT stock held.

The reader should note that other authors also comments on the inverse co-relation between SPT and TLT
---"Typically, intense corrections are marked by selling stock and moving into safe assets such as Treasuries."Apr 22 2013, 06:51 seeking Alpha by: Jaimini Desa
see also from MH
The Probability of a Market Correction Has Increased  see amplification of  50-200 SMA cross..es
ETF Correlations as of the Close of Friday, April 12, 2013 see (2) The anti-correlation between SPY and TLT increased slightly from -0.62 to -0.66.

Trend Anticipation Strategy: What We Are Buying And Holding Now  May 12 2013, 04:34  Joseph L Shaefer|  includes: QABA, RDS.A, SLB, STO, TNDQ, TRND
 "they use a trend-following strategy to provide exposure to buy the S&P 500 Total Return Index when the indicator they use says to be invested, and when the indicator says "Danger, Will Robinson, Danger!" to invest in an index that instead mirrors 3-month U.S. Treasury bills."...
Like TRND, TNDQ invests in either the NASDAQ 100 Total Return Index or the yield on a notional investment in three-month U.S. Treasury bills. The difference is, since this index tends to be more volatile, RBS buys the NASDAQ 100 Index when it is at or above its 100-day simple moving average for 5 days and goes to cash when the index closes below its 100-day simple moving average for 5 consecutive sessions. We now own both."

Just remember

"Anyone who claims to have a program that can create automatically final systems that guarantee profitability under actual trading conditions and sells it to the public is in the best case economically non-rational (if not a crook)."
Posted on May 11, 2013 by Michael Harris

more to come..
Just as not all eggs should be in one basket, not all eggs should be in the US basket. see Europe Asia  emerging markets and Canada etc.

Going directly to stocks

us vs tsx
using cramer
ben graham
nasdac guru analysis
using better investing

How 'Old Money' Can Build Wealth For The Average Person May 12 2013, 04:19 Jacinth.   CSX, CVX, DD, NSC, XOM
"When building our wealth we are looking for longevity. We want to invest our money in companies that have stood the test of time. After all, we want them and our money to be around in our retirement. One way to do this is look at "Old Money".....
Looking at companies that have been staples in American capitalism is a great start to find staples for any portfolio. Buying into these companies at a young age and reinvesting the dividends over a lifetime can create wealth and allow you to sleep at night. These companies have been around and evolved for over one hundred years and it does not look like they will be going anywhere anytime soon.  
This is about as close as you can get to invest and walk away???

Potential New Dividend Winning Stocks For The Next 20 Years  May 9 2013, 06:03  Regarded solutions  AAPL, CSCO, CSX, F, GE, INTC, MSFT, WFC
"I wrote this article that took a look into the past. From an historical perspective, the article showed how some simple investments turned $65k into $400k in 19 years, with a dividend income stream of nearly $12k annually.
This gentleman writes a number of articles ..including two related to portfolios  the "Team Alpha portfolio"and the "Young And Restless Portfolio.

George Soros's long term picks
"By Meena Krishnamsetty and Matt Doiron  May 10, 2013, 11:16 a.m. EDT
We maintain a database of quarterly 13F filings from hedge funds and other notable investors such as billionaire George Soros. This information can be used to develop investing strategies (we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year, and we think that other techniques are also possible) as well as to track individual managers' interest in individual stocks over time.
on an identical note from the same folks
Canadian Firm Is Looking At These Small-Caps: Here's What You Should Know

"You Can, and Experienced Traders Do, Make TONS of Money When the Market Crashes"
Pro Traders Never Mention These Secrets  May 12 2013, 05:11  Quoth the Raven     CVOL, DOG, DXD, GLD, QID, SLV, SPY, UVXY, VXX
"This article is not for you, Mr. Moderately-Informed-to-Somewhat-Savvy trader. This article is for people who are getting started on investing and are looking to learn a couple things that they don't necessarily teach you when you first start investing. Two little things that everyone eventually learns, presented here with as little conjecture and as simply as possible."