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I want out of investing - options


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I find it increasingly difficult / impossible to run my portfolio.  It is simply too time consuming to research individual stocks given how diversified I like to be.  I am looking for options.  I am a Canadian investor.

 

I know i should buy ETFs but I just don't like how popular they are.  I feel that mutual funds are my best option.  I am hoping someone can provide some good suggestions.  Mawer and Beutel Goodman look interesting.  Are there any other names people like?

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At first I thought this was another muscleman thread.

 

Just buy BRK and GOOG. Average in over time. If you really want ETFs or mutual funds, don’t be afraid of fees. People these days make way too much of an issue of paying for anything. But a good manager is worth every penny. Although it’s easy to see why, after a decade of easy returns, everyone thinks otherwise. Ironically, the number of people who have ACTUALLY realized/achieved easy money returns seems to be dwarfed by the number of people who are in the easy money, don’t pay for anything, buy the index fan club.

 

 

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I had a number of Mawer funds in a DC pension plan at my former employer. The performance was strong in both up and down markets, and the stock selection seemed rational and well done whenever I reviewed their holdings and quarterly buy/sells. I would recommend them.

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At first I thought this was another muscleman thread.

 

Just buy BRK and GOOG. Average in over time. If you really want ETFs or mutual funds, don’t be afraid of fees. People these days make way too much of an issue of paying for anything. But a good manager is worth every penny. Although it’s easy to see why, after a decade of easy returns, everyone thinks otherwise. Ironically, the number of people who have ACTUALLY realized/achieved easy money returns seems to be dwarfed by the number of people who are in the easy money, don’t pay for anything, buy the index fan club.

 

Hi Gregmal, is your comment from a US perspective.  Key factor is that OP is in Canada.  Many Canadian mutual funds have expenses of 2.5% and higher.  High fees like that on a diversified portfolio of funds WILL have an outsized, negative impact on returns over long periods of time. 

 

 

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At first I thought this was another muscleman thread.

 

Just buy BRK and GOOG. Average in over time. If you really want ETFs or mutual funds, don’t be afraid of fees. People these days make way too much of an issue of paying for anything. But a good manager is worth every penny. Although it’s easy to see why, after a decade of easy returns, everyone thinks otherwise. Ironically, the number of people who have ACTUALLY realized/achieved easy money returns seems to be dwarfed by the number of people who are in the easy money, don’t pay for anything, buy the index fan club.

 

Hi Gregmal, is your comment from a US perspective.  Key factor is that OP is in Canada.  Many Canadian mutual funds have expenses of 2.5% and higher.  High fees like that on a diversified portfolio of funds WILL have an outsized, negative impact on returns over long periods of time.

 

Yes I should have clarified that.

 

Here in the US it’s common to hear people and media pundits(who are themselves promoting index fund products) whining about expense ratios of .5-1% annually which is a joke.

 

The name of the game is making money in a sensible, risk adjusted way. Not chasing some stupid, man made, basket called an index. Which ironically enough is heavily weighted in a select few companies, who’s pass through expenses ratios far exceed a few basis points. Which is why now many are gaming the system, and just buying the FANGs.

 

 

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I've been thinking the same recently, I've been overweight energy for the past couple of years... OPS! Been running a concentrated portfolio and i'm obviously my own worst enemy.

 

Thinking about doing a bit of a greenblatt and putting the bulk of my money in an index and then investing in the one or two ideas I have. (got to find some way to under perform  ;)).

 

 

 

 

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If you don't want to think about it, just get low-cost ETF indexes. It's the most sensible thing to do.

 

Expenses of 1% or 2% are a big deal if you expect the market to return 6-9% a year. That's a huge chunk of your return that you're paying in fees. You can take out your compound interest calculator to see how much the delta widens over 20-30-40 years.

 

Most mutual funds and hedge funds don't beat the indexes. Would you pay them 10-20-30% of your "profits" each year for trying, money that wont be compounding for decades to come?

 

Maybe you're really good a picking managers that outperform, in which case, go for it, but since you're asking for recommendations, I'm guessing that picking money managers isn't your specialty, so don't expect to outperform that easily there too. If if was that easy to do prospectively (not in hindsight), everybody would do it.

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I find it increasingly difficult / impossible to run my portfolio.  It is simply too time consuming to research individual stocks given how diversified I like to be.  I am looking for options.  I am a Canadian investor.

 

I know i should buy ETFs but I just don't like how popular they are.  I feel that mutual funds are my best option.  I am hoping someone can provide some good suggestions.  Mawer and Beutel Goodman look interesting.  Are there any other names people like?

 

You could switch to a technical analysis based approach like I did, and that saved me a ton of time. You can still invest long term, if you use weekly and monthly charts. I find it far more effective to read the charts to find out what others think of the stock, instead of trying to evaluate myself. I am not that good at doing the fundamental analysis anyway, so why bother wasting that time?

 

Or you can create your own quant model, back test it, and use that to auto pilot your trades.

 

Or you can invest in index funds and forget about it, if you really don't want to spend any time, and have no interest in beating the market.

 

However, one thing I have to point out is that no matter what strategy you pick, it takes years to get good at it, and there will still be periods when the strategy doesn't work well. If you keep switching strategies because of your recent lackluster performance, you'll never get good at anything. I switched to technical analysis only because I spent 9 years getting better at fundamentals, read over 100 books, spent countless hours per week on it, and eventually decided that it is not suitable for me. If you only tried it for 1-2 years, maybe you should not give up this easily.

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The vast, vast majority of managers fail to beat the index, at least in US markets. And US managers have significantly lower expense ratios than Canadians it seems.

 

Some are skilled but not many. The skillful ones are very much worth their fee. However, trying to determine skill from luck is very, very difficult.

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The mutual fund / etf debate comes down to my belief that most of the market is in a bubble and that value investing isn't dead.  I know from my own investing experience that are still stocks that are ballpark reasonable, that is what I want to own.  I don't want to own everything.  I am hoping to find mutual funds that have similar style to myself.

 

I have already seen a large divergence in small cap canadian stocks.  There is an ishares etf xcs.to which has basically gone nowhere for a decade while many small cap funds are up 50-100%.  I also have a small investment in one of the funds and had the same experience so I am not really cherry picking.  It just makes sense when you look at the garbage in the etf vs what the funds are holding.

 

The other way to look at it is risk reduction.  We are financially far enough along that I don't need to swing for the fences, I can get by with singles.  If I can find a fund that can use a garp or qarp strategy, I can see how that might have a tighter range of outcomes.  I really don't care if I get 7% when the market gets 10% over the next decade, I just don't want to get a -2%.

 

The other way to look at it, if we don't believe that a fund can out-perform then why are we on this site?  Obviously we still believe there is alpha out there.

 

It is not so much that I can't do the type of investing we do on this site or don't think that it will work.  Like Lakesider I will continue to do some investing on individual high conviction names.  For entertainment if nothing else.  I just simply do not have time for a full portfolio.  A small position is still like a years worth of saving so even small positions take me 4,5,6 hours and then there are dozens of positions that i research and drop.  Just too much work.

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If it's literally the time that you spend that's bothering you, you could potentially change your process to take less time.

 

For instance, as I've gotten older, I've cared much less about details and much more about competitive advantage. I'd guess that transition has reduced my time by two-thirds or something. If you immediately eliminate all businesses that don't have an obvious long term competitive advantage--irrespective of all other criteria--you dramatically reduce both the number of businesses you need to look at and the amount of time required to analyse each business.  Then, once you've discovered a business with competitive advantage, you just need to decide if the price is fair or cheap, and that's pretty quick to do as well.

 

What's more, if you've bought a business with a sustainable competitive advantage, you probably don't have to think about selling it for a long time which reduces the amount of time you have to spend as well. (Particularly since a business with a sustainable competitive advantage has to get quite overvalued before it's worthwhile selling and triggering taxes on the capital gains.)

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They key is to use a little bit of brain power and then just throw a net. Cyber security to me is such a no brainer. I bought CIBR years ago and don’t even look at it. Like ever. It just prints money. Im sure there are others out there like that. With such specific theme based ETFs it really shouldn’t be too hard to find stuff with satisfactory returns.

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What I'm about to say is probably useless to you given that you like broad diversification, but here goes:

 

In recent years I've been owning fewer and fewer stocks to the point where I now will usually own only three or four. I made a conscious decision to focus only on "no-brainer" ideas. The kind of idea that I might find only once every three or four years. By "no-brainer" I mean a stock that is a great company or very solid infrastructure like asset that is selling for one-third or less of my estimate of intrinsic value. Waiting for no-brainers means letting a bunch of good ideas go by. When I find the no-brainer idea I will put 30% or more into it. The fact that the undervaluation is so extreme means I can hold it for many years and make high returns the whole way. I usually think in terms of making 10x in 10 years. A single idea like that can replace 10 or 15 more typical value ideas because I'm putting maybe 3x more money into and holding it 5x longer. So I've found it to be a huge time saver on research. It's also more fun in my opinion to focus on only your best ideas and hold them long term. So far, it's working very well.

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I switched my RRSP strategy this year to buy a single ETF (VOO). It feels incredibly liberating -- more time for my family and hobbies and fewer distractions at work. As much as I liked learning about investing and businesses, I have learned that there are other things in life I enjoy more.

 

FYI, I came to this conclusion after about 5 years of stock picking and my performance closely matching the returns of 90% S&P + 10% bonds. I knew I wasn't good enough and it wasn't worth the risk/time/effort.

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For a low maintenance portfolio, I would probably put my money into index funds, some US, some world Index fund like VTWSX (or equivalent). If you want a value component, one could think about and equal weight cap fund for mid or small cap exposure  and maybe some BRK. I also second GOOG if exposure to tech is considered, but I would keep it smaller than BRK, which is diversified by itself.

 

Canada is a strange stock market since there is so much exposure to commodities and banks. If OP wants exposure to this, he could just buy a few individual Canadian banks stocks with an equal weight. if I wanted exposure to energy, I would just buy an oil major like RDS or CVX or a bit SU. Then rebalance this once a year.

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What I'm about to say is probably useless to you given that you like broad diversification, but here goes:

 

In recent years I've been owning fewer and fewer stocks to the point where I now will usually own only three or four. I made a conscious decision to focus only on "no-brainer" ideas. The kind of idea that I might find only once every three or four years. By "no-brainer" I mean a stock that is a great company or very solid infrastructure like asset that is selling for one-third or less of my estimate of intrinsic value. Waiting for no-brainers means letting a bunch of good ideas go by. When I find the no-brainer idea I will put 30% or more into it. The fact that the undervaluation is so extreme means I can hold it for many years and make high returns the whole way. I usually think in terms of making 10x in 10 years. A single idea like that can replace 10 or 15 more typical value ideas because I'm putting maybe 3x more money into and holding it 5x longer. So I've found it to be a huge time saver on research. It's also more fun in my opinion to focus on only your best ideas and hold them long term. So far, it's working very well.

 

What's your performance been like?

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What I'm about to say is probably useless to you given that you like broad diversification, but here goes:

 

In recent years I've been owning fewer and fewer stocks to the point where I now will usually own only three or four. I made a conscious decision to focus only on "no-brainer" ideas. The kind of idea that I might find only once every three or four years. By "no-brainer" I mean a stock that is a great company or very solid infrastructure like asset that is selling for one-third or less of my estimate of intrinsic value. Waiting for no-brainers means letting a bunch of good ideas go by. When I find the no-brainer idea I will put 30% or more into it. The fact that the undervaluation is so extreme means I can hold it for many years and make high returns the whole way. I usually think in terms of making 10x in 10 years. A single idea like that can replace 10 or 15 more typical value ideas because I'm putting maybe 3x more money into and holding it 5x longer. So I've found it to be a huge time saver on research. It's also more fun in my opinion to focus on only your best ideas and hold them long term. So far, it's working very well.

 

Out of curiosity, what ideas have fallen into this net since you switched? How long has it been? No need to give current ideas if you don’t want to share them, older ones are fine.

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What I'm about to say is probably useless to you given that you like broad diversification, but here goes:

 

In recent years I've been owning fewer and fewer stocks to the point where I now will usually own only three or four. I made a conscious decision to focus only on "no-brainer" ideas. The kind of idea that I might find only once every three or four years. By "no-brainer" I mean a stock that is a great company or very solid infrastructure like asset that is selling for one-third or less of my estimate of intrinsic value. Waiting for no-brainers means letting a bunch of good ideas go by. When I find the no-brainer idea I will put 30% or more into it. The fact that the undervaluation is so extreme means I can hold it for many years and make high returns the whole way. I usually think in terms of making 10x in 10 years. A single idea like that can replace 10 or 15 more typical value ideas because I'm putting maybe 3x more money into and holding it 5x longer. So I've found it to be a huge time saver on research. It's also more fun in my opinion to focus on only your best ideas and hold them long term. So far, it's working very well.

 

Out of curiosity, what ideas have fallen into this net since you switched? How long has it been? No need to give current ideas if you don’t want to share them, older ones are fine.

 

I think the questions you are asking are not even that relevant for people owning 3-4 stocks long term. The results can vary drastically among this kind of concentrated portfolios, and people who outperform spectacularly come out to talk and people who underperform keep silent.

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For my Canadian investments I actually want just about anything but the banks and O&G.  Those Canadian banks are going to get wiped out like what happened in Europe. They really don't have a lot of equity relative to assets.  Somehow we managed to avoid a RE crash but if we ever have one they are in big trouble.

 

There are a lot of good quality small and midcaps that you have never heard of.  Industrials, tech, consumer Staples, the railways, that sort of thing.  That's what I want to own. I am going to find a fund that holds a bunch of those, throw some money in and walk away. 

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What I'm about to say is probably useless to you given that you like broad diversification, but here goes:

 

In recent years I've been owning fewer and fewer stocks to the point where I now will usually own only three or four. I made a conscious decision to focus only on "no-brainer" ideas. The kind of idea that I might find only once every three or four years. By "no-brainer" I mean a stock that is a great company or very solid infrastructure like asset that is selling for one-third or less of my estimate of intrinsic value. Waiting for no-brainers means letting a bunch of good ideas go by. When I find the no-brainer idea I will put 30% or more into it. The fact that the undervaluation is so extreme means I can hold it for many years and make high returns the whole way. I usually think in terms of making 10x in 10 years. A single idea like that can replace 10 or 15 more typical value ideas because I'm putting maybe 3x more money into and holding it 5x longer. So I've found it to be a huge time saver on research. It's also more fun in my opinion to focus on only your best ideas and hold them long term. So far, it's working very well.

 

Out of curiosity, what ideas have fallen into this net since you switched? How long has it been? No need to give current ideas if you don’t want to share them, older ones are fine.

 

I think the questions you are asking are not even that relevant for people owning 3-4 stocks long term. The results can vary drastically among this kind of concentrated portfolios, and people who outperform spectacularly come out to talk and people who underperform keep silent.

 

I’m not looking to copy his strategy. Thanks.

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What I'm about to say is probably useless to you given that you like broad diversification, but here goes:

 

In recent years I've been owning fewer and fewer stocks to the point where I now will usually own only three or four. I made a conscious decision to focus only on "no-brainer" ideas. The kind of idea that I might find only once every three or four years. By "no-brainer" I mean a stock that is a great company or very solid infrastructure like asset that is selling for one-third or less of my estimate of intrinsic value. Waiting for no-brainers means letting a bunch of good ideas go by. When I find the no-brainer idea I will put 30% or more into it. The fact that the undervaluation is so extreme means I can hold it for many years and make high returns the whole way. I usually think in terms of making 10x in 10 years. A single idea like that can replace 10 or 15 more typical value ideas because I'm putting maybe 3x more money into and holding it 5x longer. So I've found it to be a huge time saver on research. It's also more fun in my opinion to focus on only your best ideas and hold them long term. So far, it's working very well.

 

Out of curiosity, what ideas have fallen into this net since you switched? How long has it been? No need to give current ideas if you don’t want to share them, older ones are fine.

 

I've been investing in stocks for 25 years, usually owning 5 to 7 at any one time. This level of concentration was not by design, but by having a pretty high bar for what I would invest in, usually 1 or 2 simple ideas per year would pass the hurdle. I focused almost entirely on small and obscure Canadian stocks, often special situations. My performance during that time was at or close to 25% per year, with a success rate of about 85% on the ideas I bet on. I can't remember if that ridiculous performance number includes leverage because I did leverage up after the two crashes in 2000 and 2008. Most of the time I was debt free. I don't pretend to be as good as those numbers suggest. I just think the area I was prospecting in--small and obscure Canadian stocks--has been able to offer up just enough really easy deals over the time I've been looking that I could get a good one once or twice a year if I searched enough.

 

I'm sure I could have just kept doing that, but about 3 years ago I decided to reduce the amount of time I was devoting to stock research. It struck me that over the 25 years I've been doing it, I have identified about 7 or 8 "no-brainer" ideas (one every 3 or 4 years) that I would put 20% into. All of them put up excellent 10 year+ records after that, whether I kept them that long or not, often I did keep them. More "average" ideas I would put in 10 or 15%. I realized that if I had simply stuck to those 7 or 8 "no-brainers" ignoring everything else, and put maybe 30% into them when I found them and held on, I would have done about as well or better than I did investing in the much larger number of "average" ideas I got into. So, in the interest of reducing time spent I've been experimenting with high-grading my ideas to invest in only the no-brainer ones over the last 3 years. Performance during this three year period has been about 25% per year.

 

My biggest holding by far right now is Dream Unlimited (DRM-T), a diversified real estate company. I bought it at various prices starting around 3 years ago. I think it's worth more than $20, currently trades close to $12, was $7 earlier this year. My average price is about $8. I expect to hold this one for at least another 7 years to make my total holding time 10 years or more. This one big, long term investment will probably replace 10 or 15 more average deals I could have done, so that is where the big time savings will come from.

 

 

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