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Investing in stocks within a TFSA
December 28, 2020
7:06 pm
AltaRed
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Loonie said
Just to connect the dots, Justin Bender is the founder (or a founder) of WealthSimple, which I mentioned earlier.
Although I don't deal with them (or any such company), I do follow what he says and have found him to be honest and forthcoming. If I were to deal with such a company, this is the one I would choose, FWIW.  

I believe you are thinking of Michael Katchen as a co-founder of WealthSimple. Justin Bender is an advisor at PWL Capital. He, along with Benjamin Felix and Dan Bortolotti of PWL Capital have been instrumental in their support and education of the retail investor.

I am no longer as enamoured with WealthSimple with Power Corp now holding a very large majority stake in the company.

December 28, 2020
11:55 pm
Loonie
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Thanks for that, AltaRed. I must have had my wires crossed. I still have the idea in my head that Bender was associated with WealthSimple. I may be quite wrong, but did WS precede PWL in time? Was Bender associated with WS earlier perhaps?

In any event, it's Justin Bender that I feel positively about. And Bortolotti is pretty good too. They really do try to get a fair shake for consumers from what I can see. At one point they tried to offer a service where they would give people personal coaching, walking them through the investment process step by step, but it proved unworkable as people did not catch on very easily and it was just too time-consuming. I think this says a lot about newbies' potential to DIY and get it done right.

Didn't know WS had been bought by Power Corp. Eew! sf-surprised I'll have to see if I can expunge it from my brain. If you catch me mentioning it again, you'd better tell me off!

December 29, 2020
8:03 am
AltaRed
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Loonie said
Didn't know WS had been bought by Power Corp. Eew! sf-surprised I'll have to see if I can expunge it from my brain. If you catch me mentioning it again, you'd better tell me off!  

Don't think we should say Power Corp bought WS. They made a massive equity injection for a majority stake for, I imagine, control. A subtle difference but effect may be the same.

December 29, 2020
10:28 am
Norman1
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At one point, Power Corporation owned as much as 88.6% of Wealthsimple:

BetaKit (May 15, 2019): Power Financial now claims 89% stake in Wealthsimple…

Their ownership is down to around 61.7% after another round of financing in October: Wealthsimple announces $114 million investment led by TCV

December 29, 2020
1:01 pm
Norman1
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Loonie said

Buffett didn't, at least in this quote, say anything about "know nothing" investors. He recommends an ETF for "the great majority of investors".

Those were his exact words in his 1993 letter to Berkshire Hathaway shareholders:

Another situation requiring wide diversification occurs when an investor who does not understand the economics of specific businesses nevertheless believes it in his interest to be a long-term owner of American industry. That investor should both own a large number of equities and space out his purchases. By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals. Paradoxically, when "dumb" money acknowledges its limitations, it ceases to be dumb.

When you combine this with the fact that even investment professionals with actively managed portfolios have a very hard time outperforming index funds and even throwing darts has sometimes been shown to be about equally likely to succeed, the conclusion seems obvious to me: don't kid yourself that you are going to be the one person who is so much wiser than the rest.…

Lots of of active managers do outperform the index and index funds. Don't believe those garbage stats from index fund companies. Being also in the fund management business, the index fund companies know the dirty secret about investment managers who claim to do, and charge for, active management but are really "closet indexers". Once the closet indexers are filtered out, over 50% of active managers do outperform.

One does not need to be wiser than the rest. Just need to be smarter than the index. It is not easy but actually not that hard. It wasn't that hard to see the folly of having a weighting of over 25% in the TSX 300 for Nortel that was trading for over 100X earnings. I lowered the tech weighting in my portfolio to under 1% and handsomely outperformed the TSX 300 in the subsequent meltdown.

It is really unfortunate for those fund managers who ran technology mutual funds with a written investment policy of 100% weighting in tech stocks.

…. A few will, of course, whether by luck or diligence, but there is no guarantee and it involves an awful lot of work for an uncertain reward…

That's confusing uncertainty and risk. They are not the same. I'm actually uncertain about which of my stocks will turn out to be duds in the next ten years. I know that one-in-five to one-in-four won't work out. There is 100% chance there will be duds.

That's different from the risk of losing money on the portfolio because the gains from the remaining winners don't overcome the losses from the duds. For Canadian equity funds, I saw a figure of 4% for funds that lose money over a ten year period. For me, I don't think I've ever had a losing ten-year period.

So, the risk is minimal.

As for Mrs Buffett, I wouldn't write her off because she is or was a waitress. I know nothing about her except that she managed to marry one of the richest people in the world. What I know about her husband is that he knows how challenging it is to be successful in investing. He could have set her up with hand-picked portfolio managers to run her account or told her to keep it all in Berkshire-Hathaway, but he didn't; he said to put it in an ETF.

She had been seeing Warren Buffet since the late 1970's, before I started investing in stocks. The subsequent decades have been more than enough time for her become a very proficient investor, if she was interested, especially with Warren Buffet as her partner.

Berkshire-Hathaway is an insurance company and not an investment fund. A portfolio of one insurance company that also does not pay dividends is not a good idea.

Some second-rate investment manager to take care of his wife's money after he's gone? I don't think so. He is street smart and knows the investment business is not kind to those who are not wise to its ways. I'm sure he knows that old stockbroker saying about "know-nothing" widows of deceased clients: "Churn the old ladies to get that Mercedes".

January 4, 2021
2:16 am
RetirEd
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AltaRed: Thanks - I've gleaned most of that, but you added a good bit more. I do understand that the main advantage of index ETFs is the much lower rate of charges and fees, due mostly to the elimination of commissioned parasites.

I understand that I should have a good idea of what funds I want before I pick a broker, but picking them is dang hard! (That's life in the market...)

I did manage to download a table of brokerage fees and features (I had to use screen captures because the large table scrolled both ways, wouldn't be readable if shrunk to fit the screen, and didn't have titles that locked while scrolling):
http://www.moneysense.ca/canad.....omparison/

In particular, the time to get a reply for service was telling: many were in the multi-day response time category.

Norman1: Of course not all fund managers are losers, but there's no reliable way to pick winners and as we all know "past returns are no indicators of future performance." Nobody seems to be able to consistently avoid losses over the long term. And you'll rarely see a fund with a bad history; the ones that rise get pushed, the ones that don't get wound up or renamed with a new manager, so they have no track record.
RetirEd

January 4, 2021
5:07 am
Loonie
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RetirEd said
AltaRed: Thanks - I've gleaned most of that, but you added a good bit more. I do understand that the main advantage of index ETFs is the much lower rate of charges and fees, due mostly to the elimination of commissioned parasites.

I understand that I should have a good idea of what funds I want before I pick a broker, but picking them is dang hard! (That's life in the market...)

I did manage to download a table of brokerage fees and features (I had to use screen captures because the large table scrolled both ways, wouldn't be readable if shrunk to fit the screen, and didn't have titles that locked while scrolling):
http://www.moneysense.ca/canad.....omparison/

In particular, the time to get a reply for service was telling: many were in the multi-day response time category.

Norman1: Of course not all fund managers are losers, but there's no reliable way to pick winners and as we all know "past returns are no indicators of future performance." Nobody seems to be able to consistently avoid losses over the long term. And you'll rarely see a fund with a bad history; the ones that rise get pushed, the ones that don't get wound up or renamed with a new manager, so they have no track record.
RetirEd  

Your comments about the difficulty finding managers who are any good is exactly right.
Some years ago, when I was trying harder to convince myself that I should invest in the stock market, I spent a fair bit of time looking at mutual funds. This was before ETFs were invented or popular.
I read several books on the subject, which I actually purchased, marked the ones that seemed most promising, etc etc. When I tried to chase them down, I found exactly what you have described. I never found one with a long track record (the kind everyone advises we should look towards) with the same manager, the same investment mandate and the same ownership of the fund and longer term success. Results were normally only given for the past 10 years, and invariably there had been some kind of economic upset during those ten years which skewed results anyway. The fund companies buy each other up. Managers move or get moved so that the one you thought was going to be great when you bought is gone the following year, funds get amalgamated and renamed (not necessarily because they are doing poorly, but who would really know after it has happened?), and for some reason the funds that were highly recommended by experts one year are often the dogs of subsequent years. Although ETFs were not really an option, or perhaps they didn't yet have a track record, I concluded that there was really no way to justify the MERs since it was really pot luck as to what you would get in terms of "management". You'd probably be safest getting a balanced fund from a fund company that appeared to at least have a decent reputation (but who really knows?) like, in those days, Templeton, or PH&N for bond funds, etc. and hope that company survived with its reputation intact, and assume your fund would ride the waves of the market. I actually followed this for a few years before deciding that a managed fund was not a reliable strategy.

As far as brokerages are concerned, I don't have enough background to make a suggestion, but this has been discussed in previous threads. Perhaps you can find something useful there.

January 4, 2021
6:42 am
Bill
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If you're investing in the markets it's a given that you might lose money. So you can do all the paralysis-by-analysis stuff you want, but if you aren't willing to accept the original premise, i.e. you can lose money, your risk cannot be eliminated, well then you might as well not even waste your time.

I think there's some data out there that funds/sectors/etc that have had a good streak tend to underperform going forward compared to their underperforming (thus off everybody's radar) peers. Much analysis zeroes in on exactly the best performers of the past instead of the future. I know some people, when they buy the big-bank stocks, just buy the one that's got the highest dividend yield at the moment as they see that as an indicator it's underpriced compared to its peers, better chance of capital gain. I did it sometimes too, when I couldn't decide, worked out ok over the years as far as I could tell.

I have to say, all the recent talk on this site by savers about stocks, investing, etc, makes me kind of nervous about the markets. Wouldn't that be a major bearish indicator?!

January 4, 2021
3:22 pm
AltaRed
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Too much talk about 'actively managed' mutual funds with substantial MERs, or the minefield of hundreds of index ETFs of various flavours.

Consider buying the world with ONE asset allocation ETF with the equity/fixed income mix that suits one's risk profile. Take a look at either the Vanguard or Blackrock iShares offerings in Step 2 of https://www.canadianportfoliomanagerblog.com/model-etf-portfolios/

Each of Blackrock and Vanguard offer 5 discrete offerings while BMO offers 3 competing ones. MERs range from 20-25bp. It is an absolute 'no brainer' option to have one or two of these cover virtually all of one's portfolio needs. Anyone in my circle who asks for my opinion will get this short answer.

P.S. This doesn't substitute for having a separate 'cash reserve' consisting of HISA or GICs. I keep funds at both EQ Bank and LBC Digital, including some money now and then in their short term GICs.

January 4, 2021
4:03 pm
Norman1
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RetirEd said

Norman1: Of course not all fund managers are losers, but there's no reliable way to pick winners and as we all know "past returns are no indicators of future performance." Nobody seems to be able to consistently avoid losses over the long term. And you'll rarely see a fund with a bad history; the ones that rise get pushed, the ones that don't get wound up or renamed with a new manager, so they have no track record.
RetirEd

False that there are no reliable ways to pick winners. False and irrelevant that past returns are no indication of future performance. False that no-one seems to be ahead over long term. False that there are no funds with bad history.

No sure where all that comes from. My substantial personal positive rate of return in stocks over many years is strong evidence that all those are wrong. If I can do it, so can someone who is formally trained in portfolio management and can make it his/her day job.

As well, the performance of a broad index like the S&P 500 easily rebuts all that. It is not easy to invest in stocks successfully. At the same time, it is also not that hard either.

January 4, 2021
9:13 pm
Norman1
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Bill said

I have to say, all the recent talk on this site by savers about stocks, investing, etc, makes me kind of nervous about the markets. Wouldn't that be a major bearish indicator?!

It is bearish for the stocks and investments that the "great unwashed" are chasing. Like those dot-com stocks around year 2000. But, that was an excellent time to buy the other stocks that were being dumped to raise money to buy the overpriced dot-com ones.

January 4, 2021
11:02 pm
Loonie
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I would agree with AltaRed that this kind of investment doesn't have to be complicated. But I think RetirEd's current question is which broker to deal with.

January 5, 2021
6:00 am
Bill
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To me the big bank discount brokers are much the same as far as the big stuff is concerned (i.e. I don't care if I save or lose a couple of bucks on commissions, etc), though I've only direct experience with 3 of them, so I'd start with opening an account with the broker attached to my big bank, easily done and most convenient. One sign in and you've got access to your banking and brokerage accounts.

Totally agree with Norman1 post #50. It's pretty basic stuff, human commerce, but what wrecks the whole thing is that greed and fear are very powerful and are usually not always kept subservient to reason, that's what makes it appear to be complicated.

January 5, 2021
1:36 pm
Norman1
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Keep in mind that one is aiming to achieve 2X the return on GIC's over a ten+ year period.

One is not trying to beat an index each year to earn the performance-based part of one's pay for the year.

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