All posts by Jonathan Chevreau

The MoneySense ETF All Stars 2021

Posted By |

 

MoneySense has just published the 9th edition of the ETF All Stars, 2021 edition. As you can read in the  overview, this amounts to the Pandemic Recovery edition. The full package is available online here. Below we summarize the main picks by category: click on the highlighted headline [in red] for each category to go to the full MoneySense commentary as well as the accompanying charts showing ETF names, ticker symbols, fees and general description.

We again had eight panelists: the same as last year, except that regular Hub contributor Mark Seed of My Own Advisor replaced departing Dave Nugent. The format consists of the eight experts “voting” on which funds to retain and which to replace, with five out of eight votes carrying the day. (I get involved only if there is a 4-4 tie.)

Since our philosophy is to retain as many earlier picks as possible — provided they still meet our criteria of broad diversification and low cost — we ended up with 52 picks this year, just two more than in 2020: 44 selections were agreed-upon winners, plus there were 8 Desert Island picks (see below).

However, there were more new additions than that might suggest, since we also dropped a few ETFs from last year, notably in the ESG and Low Volatility categories.

Canadian Equities

All five Canadian equity ETFs return: VCN, XIC, HXT, ZCN and ZLB (see the chart at MoneySense for full ETF names). However, no new funds were added: We considered adding five new names but none attracted the five-vote majority necessary.

Remember that Canadian stocks are also amply represented in the One-Decision Asset Allocation ETFs discussed below.

US equities

The panel opted to retain all seven of our 2020 U.S.-equity ETF picks, while (finally!) adding two technology ETFs and a Vanguard all-cap total market fund (VUN), for a total of ten. That makes for a crowded category but after all the US is the biggest single geographic market in the world and investors have certainly been rewarded for being there in recent years: especially in 2020.

Returning picks are XUU, iShares’ US Total Market ETF; and three low-cost plays on the S&P500 index: VFV and VSP from Vanguard, and BMO’s ZSP. There was also the returning Desert Island pick from PWL’s Cameron Passmore: Avantis US Small Cap Value ETF [AVUV.]

International and Global equities

The panel retained six of the eight international or global ETF All-stars from 2020: two from iShares (XAW and XEF), three from Vanguard (VXC, VEE and VIU) and BMO’s low-volatility pick ZLI. Two other new picks introduced in the 2020 edition didn’t make the cut this time: iShares Edge MSCI Min Vol Global Index ETF (XMW, 0.48%), and CI First Asset MSCI World Low Risk Weighted ETF (Unhedged, ticker: RWW/B).  There was also a new international Desert Island pick from PWL’s Ben Felix: Avantis International Small Cap Index Fund (AVDV).

Fixed Income

While our panel as a whole continues to take a “stay with the program” approach to its fixed-income All-Star picks, we did cut back slightly on the number of Bond ETFs this year.  Only six of the eight previous fixed-income All-star picks returned: ZAG, VAB, VSB, ZDB, XSB and VGAB. One added last year, TLT, did not return, and long-time pick BXF also did not make the cut in 2021. Continue Reading…

A discussion about Value and Small-cap Factors with Avantis Investors’ CIO Dr. Eduardo Repetto

Posted By |
Avantis Investors’ CIO Dr. Eduardo Repetto (Link to YouTube clip is in text below)

Over the years, I’ve encountered several financial advisors who liked to use the mutual funds of Dimensional Fund Advisors or DFA, which was founded by alumni of the University of Chicago and based on research on the long-term return premiums offered by small-cap and Value stocks around the world. Even today I own a DFA International Equity fund that was a legacy of my time with a fee-only advisor: that’s generally the requirement for accessing DFA funds.

So I was intrigued when certified financial planner Mike Bayer [CFP, CIM, FCSI) asked me to help him interview two senior executives of Avantis Investors (a unit of American Century Investments) which for the past 18 months has been marketing Avantis ETFs, which take a similar approach with small-cap and value factors and are more accessible to do-it-yourself investors who can buy the ETFs at discount brokerages, just like any other ETF.

Regular readers of the MoneySense ETF All-Stars may recognize the name Avantis. As you can see here, the Avantis US Small Cap ETF [AVUV] was a Desert Island pick of PWL Capital’s Ben Felix and Cameron Passmore. We are about to publish the 2021 edition and as mentioned in the video interview also linked below, that pick is back along with another Avantis selection, which you can learn by watching the video.  In addition, Felix has just released a 15-minute video covering Avantis: https://youtu.be/jKWbW7Wgm0w

In the end, possibly influenced by the arrival of Avantis, DFA itself brought out three of its own ETFs: https://us.dimensional.com/etfs

Bios

Dr. Eduardo Repetto is Chief Investment Officer of Avantis Investors. Previously he was Co-Chief Executive Officer and Co-Chief Investment Officer of Dimensional Fund Advisors. He earned a Ph.D. degree in Aeronautics from the California Institute of Technology, an MSc degree in Engineering from Brown University, and a Diploma de Honor in Civil Engineering from the Universidad de Buenos Aires.

Phil McInnis is also a DFA alumnus, where he was Head of Portfolio Solutions. Today he is director of investments at Avantis Investors®, responsible for marketing content development surrounding Avantis’ investment approach.

Mike Bayer, CFP, CIM, FCSI, is a Toronto-based financial planner with Strategic Analysis Capital Management and blogger at Free Speech Media.

Highlights from the transcript

So without further ado, here is a link to the full interview, which runs almost an hour. However, you can click on a “transcript” link within YouTube, for those who prefer reading and skimming. Below are some highlights:

Continue Reading…

Review: The Disciplined Trader

Posted By |

81o4jz+QTgLI am not and never will be a “trader,” in the sense of a full-time stock-picker/market-timer.

However, on the suggestion of my financial advisor, I recently ordered and read a copy of a classic trading book called The Disciplined Trader, by Mark Douglas (New York Institute of Finance, 1990).

Personally, my main interest in the topic involves hedging downside risk:  taking actions that limit some downside, at the expense of some potential upside. What surprised me about this book — which bears the subtitle Developing Winning Attitudes — is how much space was allocated to psychology and mental attitudes. In fact, fully all of the third of the four major sections is devoted to what I would call “softer” topics like understanding the nature of the mental environment, how memories, associations and beliefs manage environmental information, managing mental energy and similar topics. Continue Reading…

Retired Money: “Exploring” with baskets of individual stocks once the indexed core is taken care of

Posted By |
Image via MoneySense.ca: Chris Montgomery on Unsplash

My latest MoneySense Retired Money column looks at how retirees can use a hybrid  “core and explore” approach to portfolios. Click on the highlighted headline for full column: How to master Core-and-Explore Investing.

For the average investor at or near Retirement age, I believe the “core” – the 80 to 90% of so-called “Serious Money” – can be held in balanced funds or low-fee indexed solutions like Asset Allocation ETFs from BMO, Horizons, iShares,  and Vanguard: a single such fund holds thousands of stocks and bonds spread around the world.

If your risk tolerance is high enough, that leaves 10 to 20% for a more adventurous “Explore” allocation that could go into more speculative alternatives to the mostly stocks and bonds held in the core. This could include new tech IPOs or cryptocurrencies like Bitcoin or Ethereum, or investment funds that track them, as Dale Roberts and I surveyed in twoMoneySense articles recently. Sadly, volatile cryptos and crypto funds can also generate comparable losses just as quickly so keep these to no more than 1 or 2% of a total portfolio and be quick to take partial profits in registered accounts.

If booking gains without tax considerations, you could put the proceeds into less volatile speculations. One surprize from 2020 and so far in 2021 is the glut of new stock offerings, IPOs, including the mania over SPACs, which I only touch on in the column.

The one rule for speculative single issues is not to bet your whole speculative budget on a single name. Older folk may choose “baskets” of four or five stocks in several sectors.

I’m normally wary of IPOs: some joke IPO stands for It’s Probably Overpriced. However, for the first time I recently bought an IPO on its day of issue: online vacation rental firm Airbnb Inc. [ABNB/Nasdaq], recommended by more than one investment newsletter to which I subscribe. That was the first time I bought an IPO the day it started trading, though I regret NOT having jumped on Google’s IPO back in 2004.

Recent IPOs

I prefer to wait a few months for new issues to settle: that approach worked with Facebook after it fell within a few months of its initially botched IPO. And recently I’ve taken post-launch “starter” positions in plant-based meat substitute maker Beyond Meat [BYND/Nasdaq], cloud data warehousing firm Snowflake Inc./[SNOW/NYSE, and the now ubiquitous Zoom Video Communications [ZM/Nasdaq.] Continue Reading…

“Findependence or Bust” — my interview with Pat Bolland on his new podcast

Posted By |
Pat Bolland, host of The Just Word podcast.

Veteran broadcaster Pat Bolland interviews me on his new podcast: The Just Word with Pat Bolland.

You can find the full interview — which dropped early Tuesday — here.  The episode is titled “Findependence or Bust.” Scroll down a tad if you can’t see it immediately on your screen. It’s audio-only (at least this particular segment) and if it appears to pause on a mobile device, simply press the Play button again and it will resume where it left off.

You can find the podcast on the usual distribution outlets, including Spotify, Apple, Google and others.

I’ve followed Pat’s career in broadcasting and investing for decades and for a time we worked as editor (me) and columnist (Pat) during my stint at MoneySense magazine. Pat was my go-to-source for Fixed Income, although of course he’s extremely knowledgeable about all asset classes.

The interview is a wide-ranging one over Zoom, spanning about 25 minutes, with a particular focus on this website: The Financial Independence Hub. Pat probes me about why and how the site got started, about its demographics and audience and we discuss the difference between traditional Retirement and the concept of Financial Independence (aka Findependence) and the idea of the Financial Life Cycle.

As the title of the segment suggests, he fully fleshes out the word Findependence, including my self-appointed title of CFO, standing uniquely for Chief Findependence Officer.

We address the difference between Wealth Accumulation and so-called “Decumulation,”  and discuss a few Canadian authors of books that focus on the topic, or Retirement in general.

Our respective forays into Cryptocurrencies

Of course, we also covered a lot of ground about investing in general, ranging from cryptocurrencies and Bitcoin and gold/precious metals to robo-advisors and investing in a post-Covid world where vaccines are becoming common enough that investors can start to think about so-called “Recovery” plays.

We chat about what seems to have been the shortest bear market in history (March 2020) and the subsequent volatile markets. I was surprised to discover Pat was an early adopter of Bitcoin, albeit a tiny amount several years ago, which he ultimately bought a set of golf clubs with.

We then moved on to zero-commission trading, young investors trading on Robinhood, and the recent phenomenon of the short squeeze on GameStop and other popular meme stocks promoted on Reddit’s WallStreetBets forum.

Housing, investment real estate and REITs

We also discuss interest rates and housing, debt and financial repression, life expectancy and longevity, and what aging baby boomers like ourselves can expect in Semi-Retirement and (one day!) Full Retirement. We walk about Toronto housing prices and my long-term philosophy that the foundation of Findependence is a paid-for home (articulated in my financial novel, Findependence Day.)

We also address investment real estate and — for those who don’t wish to be a landlord — REITs (Real Estate Investment Trusts) or REIT ETFs.

What I’d tell my 35-year old self

Watch near the end for Pat’s question to me about what I’d tell my 35-year-old self if I could go back in time and do it all over again.

Hint: Pat thought my answer was “facetious!”