Controversy is Always Uncomfortable.
First. Individuals can learn from some of the things that Institutions do. Period.
Second. Controversy is always uncomfortable … by definition. Whenever we wade in to controversy … we always step on someones toes … there will be opposition. In fact, opposing views are why we have markets in the first place. Buyers and sellers. Debate is healthy. In this business, Value investing is always controversial and uncomfortable.
Third. ‘Some’ individual investors ‘might’ be able to pick stocks. Some commenter’s feel they can. If you have had success picking stocks, good for you. ‘Fill your boots’, as they say. But ‘some’ does not necessarily mean ‘you’. It’s not about ‘you’. The ‘Me-and-My-Money’ article is written for a ‘national’ newspaper. It’s intended to be ‘general’ in nature. Of course, there are and will be exceptions. But ‘most’ (the vast majority) cannot and should not pick stocks. 7 out of every 10 investors should be in a balanced fund of sorts. (#8 is a gambler. #9 is a GIC-only type. And #10 is beyond help). See my comments on balanced funds.
Fourth. My personal portfolio is posted here. It is as close to a typical pension fund that one can get. It owns a piece of over 6,000 securities and costs less than 0.25%. (1/10th of the average mutual fund MER). It’s worked through past market dust-ups, I believe it will work again through the next one. Patience.
Fifth. The Investment Managers and Pension Plan colleagues that read the Globe and Mail, Me-and-My-Money profile were unanimously in favour of the idea that ‘most’ individual investors should not pick stocks and that the idea of mimicking a pension plan is a good one.
Sixth. There is a well documented basis for the active management of passive investments. Passive investments provide the desired beta exposures to financial markets, while active management (timing) of beta exposures provides the alpha. See: Business Models for Asset Management (Digest Summary), Mark Anson, Journal of Investing, Vol. 15, No. 2: (Summer 2006)12-18.
Finally, buying TD Bank in 1982, and holding it since then … was, what we call in this business … dumb luck.
Oh, yeah, back to valuations.
Doug Cronk CFA is Manager, Investments for a Canadian Pension Plan