Why jump in and out of stocks at the wrong time and lose money? Whether you are making investment decisions based on your own analysis or using the expertise of others to guide and direct your investments, it's important to examine your past performance to see if your style and plan are actually working. Many financial "advisors" suggest buying and selling various managed funds, while other "experts" tout the snatch and sell on the run method. A common complaint in messages boards and blogs across the net is that of "missing out" on a trend, catching it on the wrong side of a peak or valley, or simply always being one step behind the action--playing the bench instead of enjoying the profits of a trend. Do it yourself investing can be a frustrating path to financial gain if your purchases are disjointed, incoherent or irrational.
Consider An Automated Plan
You've heard this before: set your goals, make a plan, stick to the plan, reassess the plan, rebalance. That's all fine--but it still requires you to do the research, analysis, make the selections and execute them. Financial advisors can do this for you. Fund managers are supposed to this for investors. And there are several online services that provide similar input into your investing activities to take the guesswork out of what to buy, sell, and when.
Single Instrument Investing
There are thousands of mutual funds--either passively managed using indexes, or more actively managed with specific equity allocations--which allow you to invest in a diverse collection of stocks and/or bonds and let your money sit and grow. The problem with many mutual funds is that over 80% of them don't tend to beat the various indexes in which they invest, and often come with significant management fees (MERs) that can chew up 2 to 3% or more of your annual profits. Other companies have designed pure index funds requiring low maintenance and thus lower MERs. ING Direct Canada, for example, offers a selection of Streetwise Funds which aim to replicate Canadian indexes in various proportions of bonds and stocks depending on your investment needs. The company suggests we "invest early, invest often and stay invested", using cost averaging to spread out the cost per unit of the fund and spread the risk of investing over the entire market with low management fees of around 1%.
A variety of exchange traded funds are also available with broad market diversity which serve to expose investors to various markets, various sectors and with optional amounts of bonds and equities, all which can be traded directly on the market like a stock. Some examples of these ETF's which can be purchased individually to replace a diversified mutual fund include these two iShares funds:
XCR: Conservative Core Portfolio Builder seeks to provide a combination of income with the potential for long-term capital growth.
XGR: Growth Core Portfolio Builder seeks to provide long-term capital growth by investing primarily in equity securities and to one or more alternative asset classes, with the balance invested in those that provide exposure to fixed income securities.
Claymore, Horizons and BMO offer similarly diversified ETF's.
Sleepy Portfolio Options
The original Couch Potato Portfolio was designed for investors who want to expend the least amount of energy into their investments by choosing a collection of index mutual or exchange traded funds and rebalancing them from time to time, but at least annually. Find the couch potato portfolio options here.
Memberships in Managed Automated Portfolios
Folio Investing is an American company that offers a portfolio of stocks, ETF's and mutual funds which can be traded in a single transaction. They offer multiple investment strategies based on collections of instruments and even allow you to customize within an strategy if you chose to exclude certain sectors or companies for personal or political reasons. For example, you can elect to delete any companies from a certain group of equities that might be involved in alcohol, tobacco, gambling, weapons, genocide or nuclear power. I really dig their website for its simplicity and attractiveness and functionality. They have a cool questionnaire tool that helps you determine what portfolio to buy based on risk, investment objective, time to retirement and sector interests. Check it out here.
Membership in Self-Directed Do It Yourself Investing Groups
One of my absolute favorite finds of the last few weeks has been doityourselfinvesting.com. The monthly membership service costs $10 at the writing of this blog which gives you a newsletter, regular portfolio updates and any alert notices that you'll need to take action on should urgent buy or sell signals present for equities or ETF's in the core portfolios suggested. They offer 4 portfolios currently: an equities portfolio for the US and one for Canada, and 2 similar ETF portfolios for the Canada and US. They publish their stats, previous holdings, performance and some back issues of newletters which are quite interesting and educational. I was most impressed with their performance during the last flash-crash which far outweighed that of any index fund, most mutual funds and the majority of single ETF's or equities. I highly recommend taking a look here.
Happy Investing!
Disclosure: the author owns shares in ING Streetwise Mutual Funds, is a new member of Do It Yourself Investing, invests in a couch potato portfolio using TD e-series funds, owns shares in XCS - S&P/TSX SmallCap Index Fund and does not own shares of XCR or XGR.
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