Seeking a simpler portfolio

Jeff Hudson is a DIY investor who wants easier to monitor holdings

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by

From the December 2016 issue of the magazine.

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diversified portfolio

Jeff Hudson, 41, Kelowna, B.C. (Photo by Darren Hull)

The problem

The 47-year-old business owner from Kelowna, B.C., is a busy man. He’s a DIY investor who manages RRSPs and TFSAs for himself and his wife Debbie, 52, but he doesn’t always have the time to carefully review their portfolio. “I stick to the couch potato for half our RRSPs, but get impulsive and stock pick the rest of the time for all the accounts,” says Jeff. The result? A portfolio that’s hard to manage, is seldom rebalanced and whose performance is difficult to assess. With no company pensions, Jeff wants their money to grow tax-efficiently for retirement. He considered hiring an investment advisor, but decided he wasn’t comfortable paying a 2% fee. At some point he says he’ll likely need help, but for now wants a simple DIY strategy.

The fix

John DeGoey, portfolio manager with iA Securities in Toronto, says the biggest problem with Jeff’s portfolio is that it’s too exposed to Canada. “Home country bias is a common problem with investors,” says DeGoey, who recommends Jeff lower his Canadian equity holdings to 18% from 41%. Sector risk is another concern, says DeGoey. In Jeff’s case he is overexposed to energy and pipeline stocks. On the flip side, he has little exposure to emerging markets, which provide diversification with strong growth. DeGoey believes Jeff should double his holding in this area to 18%. With a growing portfolio it makes sense to consider independent financial advice, which may not be as pricey as Jeff believes. The typical cost to manage portfolios of several hundred thousand would be about 1%. There are other benefits, too. For non-registered accounts, investment counseling fees are tax deductible. But for now, as a DIY investor, DeGoey says Jeff should consider using lower-cost ETFs instead of the mutual funds he currently holds. 

7 comments on “Seeking a simpler portfolio

  1. Your pie chart is nothing but blue. Please put more defining colors in please

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    • No need. They are all 18% with the exception of fixed income at 10%. You just have to follow the same direction of the previous chart.Start at the top and go clockwise.

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  2. Only 10% fixed income? Isn’t that quite aggressive?

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    • Way too much bonds ! This will kill this portfolio on long term!

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  3. I think that Jeff is typical of the DIY investor in that he may learn the hard way. There always exceptions to the rule. When we hear of this exceptional person(s) we think it is easy. First of all it says Jeff is a busy man – that is strike one. I assume Jeff went through 2008 – did he buy, sell or freeze? If he did not go through 2008, then what would he do? He has very little in cash/short term bonds in order to buy in a down market. It has been almost ten years since the major market in the US has had a big down turn – the longer it does not happen – the worse it may be. If the US goes down, rest will also follow as they are the only bright light out there. The portfolio looks all to be a market cap weighted index portfolio which has been beating value index funds over the past four or five years. Maybe if he only wants to keep 10% in fixed income, do a 50-50 split re value vs market cap type of indices. This may be more prudent at this late stage in the game. As Mr Buffet says investing is simple .. but not easy.

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  4. What about putting your eggs in one balanced basket, such as Mawer’s?

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  5. This “fix” doesn’t address the ongoing self-management of the portfolio. Only advice is offering to pay someone else to manage it for you.

    Reply

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