Short Takes: When a DIY Investor Passes on and more

Here are my posts for this week:

Flash Boys

A Deeper Look at My Portfolio

Here are some short takes and some weekend reading:

Dan Hallett looks at the options for how a surviving spouse should manage a portfolio after a DIY-investor dies. My strategy has been to have my wife do all the trading in her own accounts. Slowly but surely she is learning the details of our fairly straightforward portfolio strategy.

Preet Banerjee reports on a study showing that professional fund managers in Sweden don’t manage their personal portfolios any better than non-experts in the same socio-economic class. I hope the study’s authors split people into classes by their wealth before the time period of study and not after. Otherwise, the results are biased. Wealthier classes always have some people who were in a lower class but got lucky taking big investment risks.

 Tom Bradley at Steadyhand takes some shots at index-linked GICs offered by Canada’s big banks. I’ve never seen one of these GICs that I thought was good for investors.

Big Cajun Man gives us his take of advice to borrow to invest: “Blow it out your ear.”

Sean Cooper at Million Dollar Journey updates his net worth. He is known for living very frugally but has decided to live a little and has quit his part-time job.

My Own Advisor discusses his strategy for short-term savings.

Comments

  1. Alan W.November 7, 2014 at 7:20 AM

    Was I too subtle with my message? Thanks for the inclusion, enjoy the cold and wet of November in Ottawa

    ReplyDelete
  2. AnonymousNovember 7, 2014 at 8:32 PM

    I don't think people's risk tolerances change... I think it's just that effectively asking "So.. what's your risk tolerance?" leads to inaccurate responses, much like asking "Do you feel well today?" may not be the best way to predict someone's health in a few years. The very basic and simplistic questions many advisors use to determine someone's risk tolerance is the problem.

    Asking people their risk tolerance in different market conditions is also not going to be effective, because it could take many years to get that picture, during which time their portfolio could have an inappropriate amount of risk.

    ReplyDelete
    Replies
    1. Michael JamesNovember 8, 2014 at 9:25 AM

      @Anonymous: I think we're caught in semantics here. If we define "risk tolerance" as how comfortable a person feels with his money in the stock market, then it definitely changes over time. If we define "risk tolerance" as the biggest stock market drop a person can handle without losing his resolve to hang on, then perhaps it doesn't change much over time (or at least doesn't change quickly).

      I agree that a simplistic questionnaire doesn't get the answer we need, but taking such questionnaires multiple times in different market conditions might give a better picture. The problem with this, of course, is that it would take an impractically long time.

      Delete
  3. My Own AdvisorNovember 10, 2014 at 8:58 AM

    Thanks for the mention Michael, very much appreciated!

    Hope you had a good weekend, ours was busy!
    Mark

    ReplyDelete

Post a Comment

Popular posts from this blog

Short Takes: InvestorLine’s HISAs, 24-Hour Trading, and more

I recently moved some cash into BMO InvestorLine’s high-interest savings accounts (HISAs) that are structured as mutual funds.  Their designations are BMT104, BMT109, and BMT114, and they purportedly pay 4.35% annual interest (which they can change whenever they like).  However, the way they report the monthly interest payments is so baffling that I wasn’t able to sort it out in my first 15 minutes of trying.  A further complication is the following text in the HISA description: “The Bank may pay, monthly or quarterly, compensation to your Dealer at an annual rate of up to 0.25% of the daily closing balance in the BMO HISA.”  I couldn’t find any evidence of such a charge, but I haven’t been invested for a full quarter, and I can’t yet say that such a charge isn’t buried somehow in the confusing reporting.  I have more digging to do before I can recommend these HISAs. Here are some short takes and some weekend reading: Preet Banerjee explains the dangers of Robi...
Read more

My Asset Allocation

I’ve resisted discussing my asset allocation for some time, but now is finally the time to describe it and the reasons behind it. I’m not holding it out as a model portfolio; I believe it’s suitable for me and not necessarily anyone else. With that warning, enjoy the discussion and feel free to ask questions or take some pot-shots. The main reason why I haven’t discussed my asset allocation in detail before now is that I don’t want readers to treat it like a model portfolio and follow it blindly. Everyone’s situation is different. The need for variation in asset allocation from one investor to the next usually isn’t huge, but there is no one-size-fits-all portfolio. A secondary reason for keeping my asset allocation to myself is that I can’t be sure I’ll never change it. For example, I recently made the minor change of switching from an ETF of small-cap stocks to an ETF of small-cap value stocks . I don’t have any plans to change my current allocation, but I may think differe...
Read more

Updated Currency Exchange Method at BMO InvestorLine

There is now a more recent update of the method I use for exchanging currency at BMO OnvestorLine . I recently changed the procedure I use to convert large sums between Canadian and U.S. dollars at BMO InvestorLine. The method I use saves a lot of money compared to using the InvestorLine foreign exchange system. The latest change I made eliminated an annoying interest charge that I had to ask to be reversed. Most people don’t realize how expensive it can be to exchange currency. The extra charge banks and brokerages add gets hidden in the exchange rate. To see this extra charge, start by taking a sum in Canadian dollars, say C$10,000, and finding out how many U.S. dollars you can get. Then see what this U.S. amount would get going back to Canadian dollars. Many people might guess they’d get their original C$10,000 back, but they’d be wrong. In a recent test I did at BMO InvestorLine, I’d get back C$9754, for a loss of C$246 in two currency exchanges. That’s $123 per excha...
Read more

Archive

Show more