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.
Note: to CALCULATE YOUR PORTFOLIO'S RETURN
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.
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
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.
NOTE 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)
Mutual Fund Comparison Tool
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
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..;-))
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. ..
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..
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
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)
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
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
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.
Always- - the market sinks & so do you.
This issue brings us to the
You need to periodically review your portfolio...
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
Passive Investing in Stock Indices Involves Substantial Risks or see (copy on local file)
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
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
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
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.
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
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
"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
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."