For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).
Via Fred Kirby’s Permanent Alert comes this morning’s piece on Marketwatch written by Tony Robbins (yes, the financial guru with the cameo spot on the movie, Shallow Hal) on how to invest like a billionaire. Fred, by the way, is one of the true fee-for-service advisers listed in our “Getting Help” section.
But back to the Robbins piece. He starts with the premise that the key to gaining financial freedom (aka Findependence?) is to control your money mistakes. The money masters share four traits:
1.) Don’t lose. (remember Warren Buffett’s two rules, the second of which is “Don’t forget Rule 1: Don’t lose money.”)
Good piece in the Globe by Ian McGugan posted Monday night. When I tweeted it out this morning, it was retweeted by some prominent Tweeters. McGugan — back to writing after years of being an editor at MoneySense and the Globe — suggests a major threat for investors is “the possibility that nothing happens … nothing as in a stagnant market, not just for a year or two, but for a decade or more to come.”
Citing the work of Boston-based Ben Inker (of GMO), McGugan says that if interest rates and bond yields remain stubbornly low, it may be hard for institutional investors (pension funds) to generate a return of inflation plus 5%. Stock investors need to be more cautious because the expected reward for taking on risk is getting muted. Long-term returns from both stocks and bonds may disappoint and investors may be lucky to get a 3.5% real return: net of inflation but before taxes and fees.
Scary indeed! But Inker doesn’t suggest parking in cash, seeing some value in the less obvious emerging markets, European value stocks and high-quality American companies.
A few days ago here at the Hub, we spoke on behalf of the new “Light Advice” startups in Canada and declared “Don’t call us Robo-Advisers.” That’s because most of them have plentiful access to real humans if clients so desire it.
I’ve updated that blog and noted that so far I’ve heard from clients of Wealth Simple, but not yet the other major players. Those willing to tell us about their experience (with or without your real name, as you wish) can email me at jonathan@findependenceday.com.
Motley Fool Canada just posted my latest blog for them, which addresses the question of whether it’s possible to combine indexing (“Core”) and high-conviction stock-picking or the judicious choice of certain sector ETFs. (“Explore.”)
As I note in the piece, this is a followup to Preet Banerjee’s feature story on this topic last year in MoneySense. It also features a nod to MoneySense stock-picking guru Norm Rothery, who also writes for the Globe and Mail, and publishes his own Stingy Investor newsletter.
Strange Bedfellows
I’ve commented before in the editor’s note at MoneySense that Norm is a strange bedfellow to indexing guru Dan Bortolotti, who runs the Canadian Couch Potato blog. It was Dan along with his colleague Justin Bender at PWL Capital who I was thinking of when in the Motley Fool post I referred to “indexing purists” who generally scoff at the notion of poisoning the purity of indexing with such an unsavoury activity as picking stocks. Another indexing purist I had in mind was Mike Bayer at Burgeonvest Bick. You can can find Dan, Justin and Mike all listed at the “Getting Help” section here at the Hub.
And yet when at MoneySense we got reader feedback to Preet’s story, it seemed that more often than not in the real world of actual investing behaviour, fairly sophisticated do-it-yourself investors often engaged in a blend of stock- or sector-ETF picking and traditional “Core” use of low-cost broadly diversified ETFs. (What Vanguard founder John Bogle recommends and no doubt the Bogleheads discussion forums.)
Foolish or foolish?
As I asked at the end of the piece for the Fool, do you think Core & Explore is a foolish practice (that’s with a lower-case f, so a bad thing) or a Foolish thing (that’s with an upper case F in FoolLand and therefore a good thing)?
Please email me at jonathan@findependenceday.com and we’ll do a followup piece on this, either here or for another media outlet, or probably both.
Lots of ink for so-called robo-advisers in the press lately. With the unveiling of several new start-ups north of the border, this is a trend that won’t be stopping any time soon. One of the first pieces on it of which I’m aware was in the June 2014 issue of MoneySense, bearing the headline “Subscription-based Couch Potato.” I should know, since I wrote both the article and the headline.
Late in August, I wrote a piece on this for the Financial Post, and tried to make the case that “light advice” might be a better term since human advisers can and often do get involved in the process. “Light” suggests a half-way point between the “no advice” model of discount broker enthusiasts choosing their own ETFs, and the “full” advice model of full-commission stock brokers or investment counsellors or wrap programs that give plenty of human oversight, but also charge for it one way or another.
Dan Bortolotti of Canadian Couch Potato and PWL Capital also devoted his Index Investor column to robo-advisers in the fall issue of MoneySense. Dan sees plenty of benefits to them, one of them being lower investment costs, but another is that he believes they’ll force investment advisers (humans, that is) to do a better job.
Rob Carrick of the Globe has also weighed in as have, no doubt, a multitude of other personal finance writers and bloggers. In this September piece, Rob wrote that robo-advisers have arrived and “may be just what your portfolio needs.”
The past weekend, David Pett of the Financial Post wrote a good piece on the topic, with full portfolios generated for younger investors and retirees by four of the major Canadian robo-adviser — sorry, I meant light advice — firms.
And finally I wrote a piece on this today (Nov. 14) for the Investor Education Fund’s Getting Smarter About Money site.
I’d like to hear from new users of this model
I’ll certainly be doing more on this topic and would like to hear from readers who have actually used them. As a relatively new service, these early adopters presumably come from one of three camps: brand new money from those starting out in investing; those migrating “down” from higher-cost full-service brokerage, mutual funds, wrap programs or investment counsellors; and those migrating “up” from no-advice rock-bottom costs of choosing their own securities at a discount brokerage.
Presumably in the latter case, the investors have concluded they have done their portfolios a disservice by picking their own stocks, ETFs or sectors: I used to joke about “self-wrecked RRSPs.” For them, moving from no advice at all to “light” advice may be a compromise whereby they’re now willing to give up 1% or so in annual costs in return for some relative peace of mind about the big-picture topics of asset allocation, geographical and sector concentration, and rebalancing.
I’d welcome hearing from investors from any of these categories, although I doubt much new money has gone into these services yet. That may happen though, as lottery winners and those selling their businesses look for a home for a sudden infusion of cash.
If and when we get our commenting capability and discussion forums rolling, that would be one place to give us feedback. In the meantime, I welcome hearing the investor perspective from all three of the camps just mentioned: just email me at jonathan@findependenceday.com or @me at Twitter.
P.S. Have heard from several clients of Wealth Simple. How about clients from some of the other firms?
Posted By 
