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Controversy is Always Uncomfortable.

Readers of the ‘comments posted in response to my Globe and Mail, Me and My Money profile, will have noted that some were, well, less than flattering.

Some thoughts.

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.

Next time?

Oh, yeah, back to valuations.

Doug Cronk CFA is Manager, Investments for a Canadian Pension Plan

4 Comments Post a comment
  1. diversifyme #

    Hi Doug,

    Just looking at your portfolio and wondering if you have any thoughts on the extent to which an indivudal investor should be exposed to ETFs denominated in foreign currencies?

    Mainly I’m wondering whether buying US $ denominated ETFs is wise (for example, Vanguard ETFs like those in your portfolio, which carry much cheaper management fees than their CDN equivalents) or whether there is a case to be made for only buying ETF products hedged in CDN dollars. Some argue that being exposed to other currencies is simply another form of diversification and that the extra cost associated with hedging isn’t worth the extra expense over the long term. That said, US dollar exposure makes me a little nervous.

    Appreciate your thoughts.

    Sean G.


    May 10, 2011
    • Sean,
      As you say, I argue that being exposed to a number of currencies is a form of diversification. At one time i was looking brilliant with all my foreign exposure. Right now, not so much. the cost of hedging bothers me. There are many studies that indicate that the right currency exposue is ‘the one with least regret’ … I think you will find that many, many pension funds stand firmly on the fence with a 50/50 split between unhedged and hedged.
      Regarding US exposure ‘making you nervous’ … everything makes me nervous … that’s why i diversify far and wide, broad and deep.


      May 10, 2011
  2. Gordan Knezic #


    Hi Doug,

    I read your article in Globe and Mail last week. Your down to earth approach admittedly peaked my interest. Your approach is painfully simple and easy to understand .Perhaps since  it doesn’t  cause great deal of hype we don’t read much about it.

    What is 5 year and 10 year average return on your portfolio investments, if that is not too much to ask?

    What would be your advise on portfolio management of multiple registered and non registered accounts, for example RRSP, TFSA, RESP etc.? Would you consider  each accounts pool of investments as individual portfolio with asset allocation proportionally distributed to fit the size of that particular account and than repeat the same with all other  accounts or would you  employ strategy  of allocating investment classes  depending on type of account? For example RRSP account might end up holding only bond potion  of total portfolio investments (all accounts together)  while say non register accounts would contain strictly equity ETF’s.

    Keep doing good work it is quite refreshing to hear from somebody with approach that is interesting, easy to understand and applicable to most of us in investment community as oppose to hyped prevailing main stream casino approach.




    May 7, 2011
    • Gordan,
      My returns are a bit above average for a balanced fund. I was lucky in 2001 & 2006 to have an significant overweight in short bonds. I’m doing the same today … and will rebalance after a correction.
      I did, once have my Lira as ‘aggressive’ and my RRSP as ‘bedrock’ conservative. now I consider them ‘as one’. My TFSA is 100% short bonds … i live in Vancouver and with a pending townhome purchase will need liquidity … every damn penny.


      May 9, 2011

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