Bad behaviour

DOUG By Guest Blogger Doug Rowat

.

“He did that to me twenty times. Then I got smart.”

– WKRP in Cincinnati’s Herb Tarlek

I write frequently on this blog about behavioural investing, which basically means making erroneous investment decisions based on feelings instead of facts. However, I’ve never illustrated how behavioural investing mistakes play out in the real-life everyday thinking of our clients. And, unfortunately, these behavioural biases are often so deeply entrenched that the same mistakes are made repeatedly. So, in order that we learn faster than Herb Tarlek, allow me to introduce our new (hypothetical) Turner Investments client:

Anchoring
Our new client brings on-board a variety of legacy stock positions. He’s very particular about which ones he wants to sell. Mainly, however, he wants to hang on to all of his losing positions and won’t sell them until they’ve recovered and he’s earned a profit. Anchoring occurs when investors allow a specific piece of information to control all of their investment decisions. In this case, the client has become anchored to his purchase price. Purchase price is irrelevant if the company or sector outlook is poor. Why hold an energy stock, for example, if the oil market looks unfavourable? Hanging on to a position just because you can’t bear the feeling of realizing a loss is irrational (anchoring, in fact, is often closely related to loss aversion—another behavioural investing error).

Familiarity
The client has also been working for a large, publicly traded company for more than 10 years. He’s accumulated a great deal of stock, which now makes up more than 30% of his overall portfolio. He absolutely refuses to sell this position: “it’s a good, well-run company”. Well, unless he works on the board of directors or is the CEO, this is simply a false assumption. Countless employees no doubt thought Enron, Bear Stearns, Nortel or Research In Motion were well run also.

Generally speaking, participating in employee stock-purchase plans are a good idea because of the employer matching and/or strike-price discounts, but concentration risk is the problem. And risk has also been doubled: if the share price declines, not only is the client’s investment diminishing but probably his job security is as well. Familiar or “local” investments are not safer. This is one reason why we maintain broad-based global exposure in all our client portfolios.

Recency bias
We’re now ready to build our new client’s portfolio to our recommended model, but he has some hesitation regarding investing in the US market because it’s performed poorly over the past couple of days. Investors tend to believe that what’s happened recently will continue to happen. But recent events or trends shouldn’t be given disproportionate weight in investment decision making. The long-term trends and fundamentals are far more important. We can’t time markets over the short term and, historically, the odds of the S&P 500, as an example, recording an annualized positive gain over 10 years are impressively about 90%. Our objective is to get the portfolio built and then focus on the long term. Recency bias also often occurs after sensational news days (the Brexit vote or a terrorist attack, for example). While such singular events FEEL like they have enormous consequence, typically they don’t.

————-

Now, once the portfolio has been built and the client has been with us for a time we often see these two behavioural investing mistakes emerge:

Self-attribution bias
Unfortunately, we weren’t able to convince the client to reduce his exposure to that company stock and, as it happens, the stock has done well. Naturally, we’re pleased for the client; however, the danger comes when investors attribute the successful outcome solely to their own actions or insight and don’t consider the possibility that it could have been a complete stroke of luck. Perhaps the positive performance was due to a strategic takeover. Here investors have to be honest with themselves—did they actually predict that particular takeover? And, unfortunately, the positive performance has probably only further obscured the concentration risk. Also, is the client being honest regarding his OVERALL track record with stock picks? If that record has been so outstanding then why is he paying us a portfolio management fee?

Hindsight bias
At the end of the first year, the client notices that his TFSA has performed much better than his other accounts. Generally, we position TFSAs more aggressively and towards equities because the capital gains aren’t taxed. I explain that equity markets have performed well and that his TFSA has benefitted. The client then questions why all of his accounts weren’t built this way. Hindsight bias, summed up nicely by Investopedia, “leads an investor to believe after the fact that the onset of a past event was predictable and completely obvious whereas, in fact, the event could not have been reasonably predicted.” It’s the equivalent of Monday-morning quarterbacking a portfolio. Naturally, we don’t know for certain that equities will outperform in any given year hence why we also maintain safer assets such as bonds. Inclusion of these defensive assets controls risk and allows us to limit downside when our outlook is incorrect.

I don’t highlight all of the above behavioural investing mistakes to suggest that our client is being unreasonable; after all, we’re only aware of these mistakes because we’ve made them ourselves. Remember WKRP in Cincinnati? We’ve made the error of throwing turkeys to their death from a helicopter so you don’t have to.

But, as God as our witness, we thought they could fly.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.

75 comments ↓

#1 Shawn on 05.19.18 at 4:17 pm

One could make a sound argument that all of these biases affect Canadians and their decision to invest in the TSX. Owning the TSX is a recipe for long term underperformance relative to the S&P500. This is a fact – look at any Andex chart. Ultra low fee tools exist today that make owning the TSX completely unnecessary (ie Vanguard ETFs – VFV for example).

Yet Canadian retail investors, fund managers and advisors continue to hold an unusually high weighing in Canadian equities, banks and the TSX in general.

Ask yourself this? What % weight do you think the average American or any non Canadian has in the TSX?

Probably pretty close to zero.

#2 Honey Dripper on 05.19.18 at 4:20 pm

How are bonds safe? Distributions go down and ETF fees rise, Growth is sucked out. If you are retired I can think of no worse or riskier investment right now than bonds.

You want growing income in retirement and not a fixed income. Bonds are some things but safe is not one of them. The 80’s are over. My opinion

#3 Good points all on 05.19.18 at 4:22 pm

There are some things best left to the people who know what they are doing. I don’t work on my car’s brakes, I don’t self-diagnose my health, I don’t clean out my own eavestroughs (too many people said I looked like a bear on a ladder).

By leaving my investment advisor alone, accepting the advice and counsel offered, I have seen very respectable gains. I pay these people; I trust them; they do good.

#4 Lost....but not leased on 05.19.18 at 4:25 pm

WKRP?

Loni Anderson sent out a lot of subliminal messages on how to…well..you know….

#5 For those about to flop... on 05.19.18 at 4:25 pm

Weekend Rewind.

This week in howmuch articles.

After I gave them a bit of stick last week there was a good bit of variety in this weeks posts…

M43BC

Do You Make Enough to Afford a Two-Bedroom Home?

https://howmuch.net/articles/hourly-wage-needed-rent-2-bedroom-home

This Graph Shows That No Other Country Competes with the U.S. Military

https://howmuch.net/articles/worlds-spending-war

Mapping the Hidden Burden of Local and State Sales Taxes

https://howmuch.net/articles/state-local-sales-tax-rates-2018

#6 crowdedelevatorfartz on 05.19.18 at 4:28 pm

Ahhhhh WKRP……an excellent show.

The actor who played Les Nessman always wore a band-aid during every show as a “good luck” charm. Every show he wore it on a different spot.
The reason? He had cut his finger during actor tryouts for the new show and when he got the part….he wore a band-aid for every taping.

Excellent subject matter Doug.
Confirms the reasons why clients need to check their egos at the door when hiring an advisor.

#7 For those about to flop... on 05.19.18 at 4:37 pm

Pink Pollen falling in Burnaby.

Burnaby Renter set me up with this one and now I will confirm all the details.

They paid 1.91 at the peak in April 2016.

Been at it since last August by the looks of it when they were chasing 2.18 ,which was never going to get them rich.Maybe ten percent gain if all had gone alright.

Now 9 months later they appear to be in a tonne of pain.

Dead legs can hurt.

Hopefully the will be able to Walker off…

M43BC

5988 Walker Ave,Burnaby. Paid 1.91 April 2016 ass 1.92

2017-08-01 : $2,188,000
2017-09-11 : $1,998,000
2018-05-18 : $1,680,000

https://www.zolo.ca/burnaby-real-estate/5988-walker-avenue

https://www.bcassessment.ca/Property/Info/QTAwMDAzWDExQg==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#8 Pillboy on 05.19.18 at 4:45 pm

Great post. In healthcare, we practice evidence-based medicine, and we should practice evidence-based investing too.

There can be a lot of biased information out there in investing, especially when there’s real money at stake. That’s why of course it’s never a good idea to fully trust [email protected], because she’s paid to sell!

#9 For those about to flop... on 05.19.18 at 4:53 pm

CONFIRMED PINK SNOW

Here is another one BR help me report pretty much in real time and now the result has been confirmed by b.c assessment and so I will put it up and close the case.

The details…

1002 Clements Ave,North Vancouver.

Paid 2.00 June 2016

Sold 1.80 March 2018

Result:Pink Snow

And so if we do the 10% between the two numbers and throw in 5% for expenses,we get a 15 % or 300k loss.

If we try to ding them for opportunities lost the result is closer to 400k

They will suffer because no one granted them Clemency…

M43BC

1002 Clements Avenue, North Vancouver paid 2 m June 2016 asking 1.89

Oct 28:$2,099,000

Apr 6: $1,998,000
Change: – 101000.00 -5%

https://www.zolo.ca/north-vancouver-real-estate/1002-clements-avenue

https://www.bcassessment.ca/Property/Info/QTAwMDAyODYyMg==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#10 Reynolds531 on 05.19.18 at 5:10 pm

And survivorship bias, which affects many clients being sold “our active fund which has outperformed it’s benchmark for fifteen years!”

#11 For those about to flop... on 05.19.18 at 5:10 pm

CONFIRMED PINK SNOW

This one is probably one of the higher percentage losses I have recorded in a while.

This is another one that I was assisted with at the time ,I think it was Whipster that bought the help.

The details…

493 Shannon Way, Delta

Paid 1.62 March 2016

Sold 1.32 March 2018

You guys can work the numbers whatever way you want ,but no matter how far you go with them this must have been a devastating result.

After expenses we are up above 23% loss or 380k and if we tried to nail them for opportunities lost then you could easily approach 450k.

So even though they sold it for assessment they got hit hard simply because they overpaid by around 300k during Spring Fling 2016.

Dunno if they will try and recoup the loss via real estate but I hope they find a way to recover and learn a lesson.

Where there is a will,there is a Way…

M43BC

Sold on March 11 2018 for 1.32

493 Shannon Way, Delta paid 1.62 March 2016 ass 1.28 now asking 1.35

May 19:$1,750,000
Aug 10: $1,620,000
Change: – 130000.00 7%

https://www.zolo.ca/delta-real-estate/493-shannon-way

https://www.bcassessment.ca/Property/Info/QTAwMDA1Vk1BQg==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#12 Wrk.dover on 05.19.18 at 5:18 pm

“it’s a good, well-run company”. Well, unless he works on the board of directors or is the CEO, this is simply a false assumption.

—————————————–

I can’t believe you said that here.

#13 For those about to flop... on 05.19.18 at 5:35 pm

CONFIRMED PINK SNOW

This house in North Vancouver was always one of the hardest cases to report because b.c assessment had a problem with the data entry,to fully understand you need to take a quick look at the link.

As I reported at the time they recorded two sales on the same day, one for 2.4 , and another for 2.62

I was hoping they would fix the mistake when it was updated but unfortunately they did not but I was able to locate another source and they recorded one sale in March 2016 and one sale in August.

So it is quite possible that this is my first Double Pink Snow case.

I will use both sources to try and price together what happened and if a realtor wants to correct the information then so be it.

976 Leovista Ave,North Vancouver

The details…

First sale 2.62 March 2016

Second sale 2.4 August 2016 Pink Snow

Third sale 2.3 April 2018 Pink Snow x 2

The deal was done in early January and it if I recall correctly I helped Burnaby Renter win an argument with his Mother- In -Law that something wasn’t right on the North Shore.

First guys probably lost 14% or 360k if all is correct.

Second guys by the looks of it lost roughly 9% or 215k.

Flop….successfully annoying Mother- in-laws on this blog since 2015…

M43BC

976 Leovista Ave,North Vancouver. Paid 2.62/2.4 March 2016 ass 2.1 2016

Jul 24:$2,688,000
Oct 12: $2,498,000
Change: – 190000.00 -7%

https://www.zolo.ca/north-vancouver-real-estate/976-leovista-avenue

https://www.bcassessment.ca/Property/Info/QTAwMDAyODQ5UA==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#14 Arctic Gringo: Qalunaaq on 05.19.18 at 5:36 pm

Picked-up a good read on my tablet in order to occupy my time while jigging for lake trout under 5 feet of ice starting tomorrow – John Murphy’s “Technical Analysis of the Financial Markets:…”

Don’t spoil the ending for me.

#15 Disrespectful Canadian Millenial (tm) on 05.19.18 at 5:47 pm

Holy guacamole (GMO & organic). Can’t brains, I has the dumb today!
What do employee plans and Cincinnati have to do with our Poloz peso? This blog is only interested in puppies, poloz peso, Mark’s deflationary theory, Screwed Canadian Millenials, Vancouver & Toronto housing crash & conspiracy theories from Smoking Man.

#16 For those about to flop... on 05.19.18 at 5:52 pm

CONFIRMED PINK SNOW

I try to engage realtors to let them tell their side of the story and show some Green Snow and Dirty Shyster has helped me out a few times but more often then not it is someone possibly looking to buy that decides to help me bring some small amount of transparency to the Vancouver marketplace.

This is another one Burnaby Renter helped me with and in turn no doubt themselves a little bit.I try to record the names and give credit because we can do a better job by committee than one guy with half a brain at the controls flying solo.

The details…

6008 6th st ,Burnaby.

Paid 2.42 February 2017

Sold 2.20 March 2018

Who knows if they tried to do the one year primary residence thing that still seems all the rage but it didn’t matter for these guys as they recorded a loss.

After expenses could be around 14% or 340k punt in the pants…

M43BC

Sold on March 8 2018 for 2.20 B.R

6008 6th st ,Burnaby.Paid 2.42 Feb 2017 asking 2.58 now 2.38

https://www.zolo.ca/burnaby-real-estate/6008-6th-street

https://www.bcassessment.ca/Property/Info/QTAwMDAzVzlFNA==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#17 For those about to flop... on 05.19.18 at 6:03 pm

Confirmed Green Snow.

Dirty Shyster was good enough to help me show the positive result of this one and so I will put it up and return the favour.

The details…

1285 Sherman Street, Coquitlam

Paid 1.08 May 2017

Sold 1.25 March 2018

And so as you can see by the price history below, they dropped the price to chum the waters,got a fish on the hook and then reeled them to pay over original ask.

Their realtor by the looks of it did a good job for them…

M43BC

Sold on March 20 2018 for1.25 D.S

1285 Sherman Street, Coquitlam paid 1.08 May 2017 ass 1.12 asking 998

Oct 16:$1,230,000
Mar 14: $998,000
Change: – 232000.00 -19%

https://www.zolo.ca/coquitlam-real-estate/1285-sherman-street

https://www.bcassessment.ca/Property/Info/QTAwMDAzWFdRWA==

#18 A Yank in BC on 05.19.18 at 6:09 pm

#1 Shawn on 05.19.18 at 4:17 pm

“Canadian retail investors, fund managers and advisors continue to hold an unusually high weighing in Canadian equities, banks and the TSX in general.”

It’s called homer bias.. or Homerism. Usually relates to the sports world and cheering-on for your hometown losers. Gets expensive if you practice the same with your investing habits. After all.. the TSX is less than 3% of the world’s equity market, and is not well diversified at all.

#19 For those about to flop... on 05.19.18 at 6:20 pm

CONFIRMED PINK SNOW

This one is only a light dusting of Pink Snow ,but I will put the result up because I remember a couple of people writing me about this one and one person I believe went to see it when it was for sale and decided not to pull the trigger.

The details…

6438 Marine Drive, West Vancouver.

Paid 1.28 January 2017

Sold 1.30 April 2018

Result: Pink Snow

45k loss

Should they have held on?

Hard to know how they feel about this one,on on hand they got slightly more than they paid and the property was assessed at ,but they probably thought at the time they were a certainty to make money as it is pretty much on the bottom rung of the ladder ,but as I have now showed lots of times even the bottom rung of detached ladder is suffering from metal fatigue…

Sold on February 22nd 2018

6438 Marine Drive, West Vancouver paid 1.28 January 2017 ass 1.26m asking 1.38

2017-08-22 : $1,480,000
2017-09-27 : $1,380,000
2017-11-16 : $1,388,000

https://www.zolo.ca/west-vancouver-real-estate/6438-marine-drive

https://www.bcassessment.ca/Property/Info/QTAwMDAyOFpXVQ==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#20 North Burnaby on 05.19.18 at 6:30 pm

Detached home owners deserve to lose money while condo owners are getting wealthy

#21 Lost...but not leased on 05.19.18 at 6:42 pm

Was in EAST VAN yesterday….North East section…

Lotsa “FOR SALES”

…not a single “SOLD”

#22 Doug Rowat on 05.19.18 at 6:54 pm

#2 Honey Dripper on 05.19.18 at 4:20 pm

How are bonds safe? Distributions go down and ETF fees rise, Growth is sucked out. If you are retired I can think of no worse or riskier investment right now than bonds.

You want growing income in retirement and not a fixed income. Bonds are some things but safe is not one of them. The 80’s are over. My opinion

“Safer” is specifically what I said. I made the case against having an all-bond portfolio in my last post.

http://www.greaterfool.ca/2018/05/05/wishful-thinking-2/

–Doug

#23 Jay on 05.19.18 at 7:10 pm

Is this misguiding or what?
http://news.buzzbuzzhome.com/2018/05/listings-bidding-wars-starting-heres-experts-saying-gta-housing-market-week.html

#24 Tony on 05.19.18 at 7:11 pm

The U.S. stock market today is based on lies, fabricated data and bogus corporate profits. The U.S. took a page out of the Japanese playbook. The only question is when are they going to crash it.

#25 Tony on 05.19.18 at 7:17 pm

Re: #18 A Yank in BC on 05.19.18 at 6:09 pm

Shawn just like Mark fails to understand the influence the U.S. stock market has on Canadian stock market directions.

#26 Fish on 05.19.18 at 7:25 pm

money money money that’s all I ever here on this blog

When are to start dumping the cottages?

#27 Willy H on 05.19.18 at 7:55 pm

Very interesting post.

Many colleagues over the years have bragged about their “investor savvy” at the water cooler. Always hear about the outlier growth and the bargain purchases but never as much as a whisper about the losses incurred.

They bristle when I tell them I pay 1% a year of my portfolio to a professional to manage. The can’t understand why I am not trading online at low cost per transaction. I ask them “how I am supposed to have the time and expertise to make buy/sell decisions during a lunch break!!!!”.

Same goes for the folks with GIC’s and mutual funds. They look at me with a combination bewilderment and horror as I willingly give up 1% each year. The same folks don’t realize that large financial institutions, either banks or mutual fund firms can be skimming off as much as 3% of their growth in management fees and profit each year!

#28 Mark on 05.19.18 at 8:17 pm

“Owning the TSX is a recipe for long term underperformance relative to the S&P500”

In a long-term falling rate environment. In a long-term rising rate environment, there is ample historic evidence to suggest that the mix of firms that are heavily represented in the TSX outperform the S&P500 rather significantly.

The problem is, most investment advisors doing business these days have never seen a long-term rising interest rate environment, so there is a bias towards rendering advice that goes along with their personal experience, not that of history. That includes adhering to irrational hokum like “never bet against the USA”, or “the S&P500 will always outperform the TSX”.

#29 mike from mtl on 05.19.18 at 8:20 pm

#1 Shawn on 05.19.18 at 4:17 pm
One could make a sound argument that all of these biases affect Canadians and their decision to invest in the TSX.
/////////////////////////////////////////////////////////////

Home bias is also true for UK investors as well. Some ‘recommended’ portfolios I’ve seen have almost 20-50% allocation to FTSE. Again just like them there’s an element of dividend taxation and currency stability.

Not saying you are wrong, TSE is terribly not diverse and tiny. However it tends to follow both US on the way up and crash with EEM commodities. Most non-canadaian investors probably have one or two per cent allocation to TSE as a whole. Worthy TSE companies are usually listed on NYSE anyway.

As to company stock; my current employer does have a plan of sorts being publicly traded but it’s awful. 2 year holding period, no matching, and minimums. They’re in the TSX60 and cross listed on NYSE. But no thanks to this ’employee plan’ it’s no deal.

#30 jess on 05.19.18 at 8:23 pm

gresham dynamic bad chasing out the good
somehow i doubt this guy will come back and clear his good name?

Sweden: ex-Bombardier Boss & Bribery Suspect Returns to Russia

https://www.occrp.org/en/27-ccwatch/cc-watch-briefs/8105-sweden-ex-bombardier-boss-bribery-suspect-returns-to-russia

Published: Friday, 18 May 2018 16:35
Written by Alex Cooper

#31 Mark on 05.19.18 at 8:28 pm

“#25 Tony on 05.19.18 at 7:17 pm
Re: #18 A Yank in BC on 05.19.18 at 6:09 pm
Shawn just like Mark fails to understand the influence the U.S. stock market has on Canadian stock market directions.”

There is long-term historical evidence of inverse correlation, ie: when the US does particularly well, Canada doesn’t. And when the US doesn’t do particularly well, Canada does.

1970s and 1980s — Canada outperformed. US underperformed.

1990s — US solidly outperformed. Canada (ex-Nortel) performed very poorly.

2000-2008 — Canada solidly outperformed. US did poorly.

2009-2017 US solid outperformance, Canada did poorly.

Etc. Can probably go back into history and find many other examples.

Much is related to the heavier exposure of the Canadian economy to commodities and natural resources. And less exposure to heavily debt-financed “consumer”-related firms that currently dominate the US stock market and are poised for underperformance as the higher long-term rates really start to bite.

#32 FISH on 05.19.18 at 8:30 pm

I’m not talking to that WACKO with Alberta plate

green truck Who has garbage and with The club stuck on the Steering wheel

Okay, you are officially too weird to be here. – Garth

#33 FISH on 05.19.18 at 8:42 pm

Did some grocery shopping good that I passed on the FRUIT AND VEGETABLES , IM JUST WAITING for the worms, I prefer meat

#34 Spectacle on 05.19.18 at 8:44 pm

Kudos to Crowded…and For Those about to flop. Similar summary from my perspective.

Referring back to real estate investing , in relation to Doug Rowat, honouring us with his insight and professional opinion.

Relative sold YVR Peak, and yes, a dumb lucky investment and dumb luck selling at peak!

The trap of a Next step, jump right back into condo downsize market with the ” winnings” .

Year later we have $12 million dollar Special Levy on common area and structure, Not even touching the actual building! Just Gosh in seeing how bad an investment from any angle.

And yes, spoke to them, and tried to convince them….the human nature of it all…. Oops.

#35 A Yank in BC on 05.19.18 at 8:44 pm

#25 Tony on 05.19.18 at 7:17 pm

To the contrary, I am in agreement with Shawn and was only seeking to expand on his comments. IMO.. most Canadian investors grossly overweight their own stock market to their own detriment.

#36 SoggyShorts on 05.19.18 at 9:36 pm

Hey Floppers, 7 of the first 19 posts are your pink snow stuff today….maybe start your own blog?

I know your work is appreciated by some, but not every day is about Vancouver Real Estate , and most people who read this blog aren’t planning on buying a $2m house in Vancouver, so really it’s just schadenfreude at this point.

Don’t get me wrong, I enjoy seeing someone slip on a banana peel as much as the next guy, but there’s a limit to how many times I want to scroll past the same video.

#37 FISH on 05.19.18 at 9:46 pm

Who yeah, what happens when you are married
And one spouse is in charge of his family ( step dad dies) and he has a crisis , I’m thinking his work, but NO
GE IS GO2 TO the big TO ROOMING with another taking the train to town, send you email saying I want out if our marriage meanwhile he wants a devorce forcing you to sell, and during that time your mother dies and nobody is therefore u

A # IS HE DOING it because of a large inheritence

AND HE IS JUST WORKING IN TO

B# YOU NEVER SIGN A PRENUPTIAL because there was No such thing when you got married

#38 For those about to flop... on 05.19.18 at 10:02 pm

#36 SoggyShorts on 05.19.18 at 9:36 pm
Hey Floppers, 7 of the first 19 posts are your pink snow stuff today….maybe start your own blog?

I know your work is appreciated by some, but not every day is about Vancouver Real Estate , and most people who read this blog aren’t planning on buying a $2m house in Vancouver, so really it’s just schadenfreude at this point.

Don’t get me wrong, I enjoy seeing someone slip on a banana peel as much as the next guy, but there’s a limit to how many times I want to scroll past the same video.

////////////////

I will help people out and be generous with my time as I see fit.

I will not be anyone’s doormat.

Get Flopped…

M43BC

#39 akashic record on 05.19.18 at 10:08 pm

DELETED

#40 Ace Goodheart on 05.19.18 at 10:33 pm

Cause I’ve been on the run so long they can’t find me. You waking up to remember I’m pretty. And when the chemicals leave my body. Yeah they’re going to find me in a hotel lobby…

There is a lot to be learned from a Pink song.

I have been extracting her wisdom since 2004.

Soul searching on crack.

Reminds me of high school stoner nights.

Basements.

What else are they for?

#41 acdel on 05.19.18 at 10:40 pm

Canada is doomed if we allow the current politicians to dictate what is so called best for us.

Current gas prices, carbon tax for what???? All it has done is make everything more expensive and made absolutely no difference, in a couple of weeks our groceries will be priced out of range for those who wish to eat healthy. Foe those of us that love camping, is it even worth it any longer?? Sad!

WAKE UP!!!

#42 Ace Goodheart on 05.19.18 at 10:46 pm

#38 :

Real estate.

The only investment you have to pay for.

I’m like, my rental makes 12k per year and cap gain is about 40k per year.

People are like, I’m losing money on my rental. But long term…

WTF?

Peeps.

Investments make money.

If you are paying for a real estate holding then it is not an investment.

I don’t know what it is.

Maybe hot young things at the local bar get turned on that you own six condos. If it is working like that 4U then ride on and I wish I was in your pasture.

But if you are holding properties that you are paying for and you think you are investing i can tell you. You are nuts.

Investments pay you.

If they do not do That, and you are not getting laid, it is not an investment

Oh and buy an international Harvester. Or a 50’s international non synchronised pick up.

Therapy vehicle.

Trust me….

#43 Mark on 05.19.18 at 10:50 pm

“IMO.. most Canadian investors grossly overweight their own stock market to their own detriment.”

What about American investors? Have they grossly overweighted their own stock market to their own detriment?

Hardly. The US bond market and stock market (but particularly the bond market) is where its been at since the early 1980s.

Canadian investors who overweight Canada will eventually have their day in the sun. Those US investors who overweighted their country will suffer as they did in the 1970s, and the 2000s. Balanced portfolios are best, of course, and provide an incremental return beyond just the weighted average of the individual components. But home country bias isn’t a problem when your home country is actually the one that outperforms.

Also, the TSX can lag a few percent behind and still represent a superior return to a Canadian investor on account of the dividend tax credit. If we assume a long-term return of 10%/annum, and dividends are 50% of that return, a 8.5%/annum annual return in the Canadian stock market is equal, on an after-tax basis, to a 10%/annum return in a foreign stock market. (assuming a 30% tax bracket, roughly speaking).

#44 Keep it up floppy on 05.19.18 at 10:53 pm

Floppy’s pink snows are the highlight of my day, and sometimes are the only thing worth reading. Keep up the good work floppy.

#45 Mitch on 05.19.18 at 10:56 pm

I struggle the most with the “anchoring” comment. Some of my best winners have been when I kept holding them even when they got to 50% loss to then have the company perception turn around and I have profited. Sometimes it takes a year for investor sentiment to turn, but usually my entry positions have been at an already suppressed stock price. When time is on your side, sometimes it’s best to hold onto your “losers” and wait for the other end of the investment cycle. One thing I have learned is that unless the company is really struggling, that everything is cyclical. Also a stock will go higher AND lower than you ever imagined possible.

I guess that’s you guys are the pros and cater to investors risk appetite. Not too many people can be calm as a cucumber when they see their position down significantly

#46 Ace Goodheart on 05.19.18 at 10:58 pm

Must be non synchronised.

The feeling of putting your own gears together, double clutching and figuring out how to match the engine speed to the vehicle speed so you can shift?

I need to hold classes.

I could solve 99% of the issues that people have nowadays with a 56 International crash box and an open country road.

Whatever was left could be massaged into place with Apple tarts and a bit of hometown love.

Nothing four on the floor and a crisp crash box can’t handle.

Beware therapy dogs.

We have you in our sights

#47 jefferson on 05.19.18 at 11:17 pm

another great post thanks Doug…

(Garth your “comments on the comments” are classic, please continue, laugh the loudest reading those)

#48 Waiverless on 05.19.18 at 11:31 pm

#7 For those about to flop…

The brokerage for 5988 Walker Ave,Burnaby. Paid 1.91 April 2016 ass 1.92 is Nu Stream Realty. Common tactic for them is to super underlist compared to what they want. They won’t accept 1.68 for this place for sure. They’re doing lame bidding war tactics in a buyers market.

#49 Waiverless on 05.19.18 at 11:33 pm

Flop I like your posts keep them up. They add some reasonable content to read in the comments section. I kind of skip over everything but your posts and Garth’s responses.

#50 Ace Goodheart on 05.19.18 at 11:34 pm

Markle shines.

My favorite princess.

She is awesome in so many ways

The future of British feminine monarchy.

She is my Queen

#51 PGYC on 05.20.18 at 12:47 am

I would like to buy bonds Thailand Vietnam Russia what is the best way of going about this I have a TD webbroke account

#52 Disgruntled on 05.20.18 at 1:07 am

#36 SoggyShorts

“Hey Floppers, 7 of the first 19 posts are your pink snow stuff today….maybe start your own blog?

I know your work is appreciated by some, but not every day is about Vancouver Real Estate , and most people who read this blog aren’t planning on buying a $2m house in Vancouver, so really it’s just schadenfreude at this point.

Don’t get me wrong, I enjoy seeing someone slip on a banana peel as much as the next guy, but there’s a limit to how many times I want to scroll past the same video.”

That’s right, Flop is very much appreciated on this blog, lot more than you. Many appreciate the info Flop collects on their own time, and no it’s not “schadenfreude” (big word, wrongly used given we are nowhere near a crash let alone meaningful corection in YVR RE).

Feel free to scroll past posts you don’t like rather than suggest anyone leave, just like others have to routinely scroll past far less informative posters than Flop. You have a mouse wheel — use it.

#53 Gravy Train on 05.20.18 at 8:16 am

For a thorough and comprehensive discussion of cognitive biases—esp. as they relate to financial and investment decisions—see Daniel Kahneman’s book Thinking, Fast and Slow (Doubleday Canada, 2011).

#54 North Burnaby on 05.20.18 at 8:43 am

Hey Flopper, stop focusing on boring detached homes. I need info about condos you foo!

#55 Reynolds531 on 05.20.18 at 8:48 am

Hey Ace I learned to drive a Mac Dump Truck 18 speed recently. Jelly?

How guys do that all day for a living is beyond me.

#56 Another Deckchair on 05.20.18 at 8:58 am

Doug;

Thanks for the blog posting.

It’s always good to have a good, hard look in the mirror every day. At least I think so, for myself.

We got into some “trouble” when trusting an ex.advisor too much, though, when we looked back through years of monthly statements and realized where the dividends went – fees were hidden in plain sight and really quite high.

So, if people question you, maybe a small part of it is them trying to figure out WHY you are doing things with their money.

Thoughts??

#57 crowdedelevatorfartz on 05.20.18 at 9:40 am

@#37 FISH

Another Bipolar episode I presume Smoking Man.

#58 crowdedelevatorfartz on 05.20.18 at 9:42 am

@#54 North Burnaby Brentwood mall condo owner.
“Hey Flopper, stop focusing on boring detached homes. I need info about condos….”
*************

Detached home prices stagnated and falling.
Overpriced BeeHives to follow.

#59 crowdedelevatorfartz on 05.20.18 at 9:49 am

Gas in the LowerBrainland this weekend $161.9

A friend filled up his Ford F-150 on Friday.
118 liters = $190.00 ( Oh and the truck wasnt empty……his tank holds 130 liters). It will last about a week driving in LowerBrainland traffic
Everyone is Beeyatching about the cost of everything.
With ever increasing prices, taxes, user fees, etc…. this economy will be grinding to a halt by Christmas.

#60 Doug Rowat on 05.20.18 at 10:57 am

#45 Mitch on 05.19.18 at 10:56 pm

I struggle the most with the “anchoring” comment. Some of my best winners have been when I kept holding them even when they got to 50% loss to then have the company perception turn around and I have profited.

If you’re lucky the turnaround is rapid, but years, if not decades, of investment time can be wasted waiting–just ask Bombardier investors. Companies can also go to zero.

–Doug

#61 Damifino on 05.20.18 at 11:41 am

#20 North Burnaby

Detached home owners deserve to lose money while condo owners are getting wealthy
——————————

Money has no idea who is deserving and who is not. It simply migrates to where conditions are favourable. Those conditions change constantly.

#62 Doug Rowat on 05.20.18 at 12:56 pm

#56 Another Deckchair on 05.20.18 at 8:58 am
Doug;

…if people question you, maybe a small part of it is them trying to figure out WHY you are doing things with their money.

We are very transparent with the rationale behind every transaction we make in our clients’ portfolios.

One of the advantages of a full-service advisor, unlike, say, a robo-advisor, is that a full explanation is only a phone call away.

–Doug

#63 Gravy Train on 05.20.18 at 1:09 pm

John Doerr’s new book Measure What Matters (Penguin Random House, 2018) looks to be a good read. It’s on order at the library; I’ve just put a hold on it! :)

#64 Shawn Allen on 05.20.18 at 1:20 pm

Mark on Balanced Portfolios

Mark said:

“Balanced portfolios are best, of course, and provide an incremental return beyond just the weighted average of the individual components.”

**********************************
Can you clarify that? An incremental return does not sound correct to me. Are you talking about on a risk-adjusted basis?

#65 FOUR FINGERS WATSON on 05.20.18 at 1:28 pm

Gas in the LowerBrainland this weekend $161.9

A friend filled up his Ford F-150 on Friday.
118 liters = $190.00 ( Oh and the truck wasnt empty……his tank holds 130 liters). It will last about a week driving in LowerBrainland traffic
Everyone is Beeyatching about the cost of everything.
With ever increasing prices, taxes, user fees, etc…. this economy will be grinding to a halt by Christmas.
……………………..

You must be mistaken…….inflation is only 1.8%…..just ask The Ploz.

#66 Shawn Allen on 05.20.18 at 1:33 pm

The Efficient Optimum Portfolio Theory

It is often mentioned that a Balanced Portfolio is optimum and that fits well with theory.

In fact if I recall right the theory is as follows:

Academic theory suggests, I believe, suggests that everyone ought to invest in the broadest possible portfolio with market cap weights for ALL asset classes and all geographies. Except for risk free cash which each investor can hold a different percentage of. The theory then suggests that risk be dialed up or down simply by investing more or less cash in a risk-free account, or in theory borrowing cash to add leverage if so inclined. Such a standard all-world-all-asset-class portfolio would be very hard to find but can perhaps be approximated. The theory does suggest that people have different risk tolerances and capacities which is why the cash or borrowing is used to dial in the risk while the risky assets are held in one standard FULLY balanced (across all assets except risk-free cash) portfolio, the same for all.

I am not totally convinced of this theory especially where it would suggest limiting Canada to 3% or whatever. I think the theory may assume we will all spend only 3% of our eventual wealth in Canada as well so the theory may need to be tweaked for currency risk.

Actually, if the theory were right and believed, someone could come up with one ETF holding an approximation of this universal most efficient portfolio and that along with a risk free cash account could in theory be used by everyone.

But anyone truly smarter than the market would still be wise to deviate from the universal portfolio.

#67 young & foolish on 05.20.18 at 1:39 pm

no offense intended flop … but maybe you should get your own blog/web site ???

#68 Damifino on 05.20.18 at 1:46 pm

#60 Doug Rowat

Companies can also go to zero.
—————————–

I’ll say. In the early 2000’s when I still owned only individual stocks, I had $3K in Group Telecom. In 2000, they were the Canada’s second largest phone competitor serving the commercial market. Their stock price rose by 67% that year.

Two years later, they filed for bankruptcy protection. I watched the share price fall from about $25 to 25 cents over a period of perhaps a year. Then to about 10 cents, and finally, to less than a cent. I suppose should have got out at $15. There was plenty of time. But at least it was a beautiful, textbook case of exponential decay.

#69 Steve B. on 05.20.18 at 2:46 pm

Great post, Doug. As you’ve probably seen, investors are generally their own worst enemies. Paying for good advice is the best thing most people can do.

#70 apd on 05.20.18 at 3:38 pm

“They’re hitting the ground like bags of wet cement.” Les Nessman (5 time winner of the Buckeye news hawk award)

#71 esporessobob on 05.20.18 at 4:44 pm

Is it better to mimic a global index or try to time an index?

What are the pros accomplishing? Can they beat the markets? Generally not.

So why not match a benchmark that many can’t outperform?

#72 Conn Smythe on 05.20.18 at 7:43 pm

#53

Great recommendation. Thinking, Fast and Slow is a gem!

#73 Leo Kolivakis on 05.20.18 at 10:55 pm

A great blog post from Brian Romanchuk on why Canada’s housing market is in perpetual motion (and may be in trouble):

http://www.bondeconomics.com/2018/05/canadian-housing-and-perpetual-motion.html

“The explosion in home prices since then generated wealth gains for some, at the cost of dragging down living standards for everyone else.”

#74 ThanXman on 05.21.18 at 2:45 am

This was a great article.

Interesting topic about investor biases, and well written.

I can see myself attribute these biases… some reflecting is required, and hopefully I’ll be more aware when they arise and avoid them.

Thanks Doug!

You and Ryan are getting better at this.

#75 The Technical Analyst, CSTA, CPD on 05.22.18 at 10:51 am

Ryan, I would like to add 1 to the list:

Fundamental Bias.
As 90% of IA (Investment Advisors) are fundamental driven convincing them that you can time the market and technical analysis has equal weight in buying and selling decisions. Hearing “we can’t time markets over the short term” or “you can’t time the market” are common symptoms.