By Guest Blogger Doug Rowat
Those roboadvisor commercials are cute: Investors bantering with the camera and playfully debating whether to dip their timid and bewildered toes into capital markets. Their lack of understanding of volatility is almost palpable. But after this past quarter, I suspect that those investors, who are apparently real, are laughing and joking a lot less. Creating wealth, it turns out, isn’t simple after all.
But, despite the recent market volatility, there’s no denying that roboadvice has a bright future. A 2017 Deloitte report on the roboadvisor industry notes the following:
There are currently more than 100 roboadvisors in 15 countries as of today. The market in 2020 is expected to account for $2.2–3.7 trillion of Assets under Management (AuM). This figure increases to $16 trillion in 2025, which would account for a larger AuM than Blackrock.
But before we conclude that the AI takeover is nearing completion, Deloitte also notes that, at present, the roboadvisory industry only accounts for less than 1% of the world’s private banking and wealth management assets. Still, roboadvice is a growing presence, which we witnessed here in Canada last month when our biggest bank, RBC, announced the launch of InvestEase. RBC now joins BMO and Toronto-Dominion Bank in offering some form of ‘robo-guidance’ to clients. Clearly, the big Canadian banks are starting to take a look at the shifting trends in wealth management and are taking direct aim at Wealthsimple, which is the current market share leader in Canada, with roughly US$2.5 billion in assets.
So, investors are clearly finding value in roboadvice and I agree that it has merit. Smaller clients (InvestEase has only $1,000 minimums, for example) deserve low-cost investment advice and, as most roboadvisors use ETF platforms, I like the avoidance of expensive and ineffective mutual funds. (The latest SPIVA research, as a reminder, shows that 93% of Canadian large-cap mutual fund managers have underperformed their benchmark over the past year.)
However, in many other respects, you get what you pay for. As many of these roboadvisor platforms are relatively new to the market the effectiveness of their algorithmic active management, particularly in volatile markets, is unknown. The roboadvisor models remain largely untested.
Also, though many roboadvisors offer some form of human support, the experience level of these humans is questionable. I called InvestEase, for example, and asked what the minimum requirements were for their ‘portfolio advisors’. I was told that the humans manning the phones require a minimum of the Canadian Security Institute’s (CSI) Chartered Investment Manager (CIM) designation and two years of investment industry experience.
Now, I have great respect for the CSI and its ongoing efforts to educate investment industry professionals and I personally have the CIM designation; however, I know that it’s not enough. It consists of only three CSI courses. At this point in my career I’m up to 10 CSI courses and there are still many areas of investing that I’m unfamiliar with. Further, two years of investment industry experience means that you’ve lived through ZERO bear markets, never seen the Cboe Volatility Index (VIX) rise above 40 (as a point of comparison, it hit almost 80 during the financial crisis) and have never seen the ugliness of a recession. For the most part, over the past two years, at least as far as North American markets and economies are concerned, you’ve only witnessed sunshine and lollipops. Personally, I’d want my financial advice to come from someone old enough to at least know which Eagle rocks the guitar solo in Hotel California.
But perhaps my biggest issue with roboadvisors is the limited, and often self-serving, selection of ETFs made available for investment. RBC InvestEase, for example, offers only seven ETFs total and they’re all, naturally, RBC products. In a universe with more than 600 Canadian-listed ETFs supplied by more than 30 different ETF providers, this is an incredibly restrictive lineup. Earlier this year we correctly anticipated an increase in volatility and added a low-volatility Canadian equity ETF to most of our client portfolios. It has spectacularly outperformed the broader Canadian equity market. RBC InvestEase offers no such low-volatility ETF equivalent.
In the end, roboadvisors are a flawed yet still reasonable option for investors; however, there are other options. For instance, a highly experienced, devilishly handsome, full-service financial advisor.
How’s that for a commercial.
Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.
87 comments ↓
Recent sale report.
This house in Delta just came through as sold.
The details…
5710 Goldenrod Crescent, Delta.
Paid 1.51 June 2017
Sold 1.42 December 2018
Originally asking 1.58
Assessment 1.45
So this is another one on the evidence I saw, that was not trying to rip anyone off, just escape the trap set up by The Sell Squad.
I didn’t work out for them,taking a hit of around 11% or roughly 170k.
They needed a magic wand, but they ended up with the Glodenrod…
M44BC
https://www.zolo.ca/delta-real-estate/5710-goldenrod-crescent
https://www.bcassessment.ca/Property/Info/QTAwMDA1VktYRg==
Something that puzzles me is why people are so unwilling to take the time to learn about money management. They want to be financially comfortable/wealthy, but expect to be able to achieve that state without so much as balancing a cheque book (very old school stuff, but still). Even if they do try to educate themselves, actually applying the lessons to their daily finances is where the follow through lapses. Very much like New Year’s resolutions, where scores of folks vow to improve their health, start a routine only to return to their regular lifestyle before a month has passed. Maybe ‘rob-advisors’ will assist some towards the goal of financial independence, but seems to me that the only way to ensure success is to put the effort in to achieve it.
In the end, roboadvisors are a flawed yet still reasonable option for investors; however, there are other options. For instance, a highly experienced, devilishly handsome, full-service financial advisor.
=================================
Good luck with that.
Defining a set of investment strategies crafted for specific risk appetites as separate portfolios implemented with ETFs, that are actively managed based on constant market evaluation and feedback loop and on strong rating system, based on individual performance and industry metrics is not even AI, it is purely statistical and investment analysis, programming and data analytics.
You pick 3-4 portfolios, 45 % in international growth, 30 % in strong currencies bonds, corporate and government, 25 % in commodities and energy, utilities for example each comprised by some number of ETFs and you are set.
Some crafting for the appropriate tax status of the account, i.e. TSFA, RRSP etc., investment duration.
AI is when these advisers on the phone are replaced with programs, like Alexa, with instant access to market data, prepared portfolios, who will be able to guide you in the process of making the rights selection and possess the combined knowledge of hundreds of investment professionals, including tax advice.
I give general investment professionals 5-10 more years, max.
Even now robo-traders and index investing is outperforming most hedge funds.
So my advice as it is to most big city professionals these days is to look for some piece of farmland as in 10 years this could be the only source of labour related income available around.
And I am not kidding.
#108 AGuyInVancouver on 12.29.18 at 2:01 pm
—–
Yeah dude, I would never move to the overpriced moldy sun never shines opioid infested earth quake expecting alluvial outflow that is Vancouver.
DELETED
Neural networks have had great success in pattern recognition even to the point of defeating human chess and go champions. The key is to learn from a vast number of trials. Alphazero learned to play chess by playing itself millions of times.
I don’t see how this works with roboadvisors. There is only one stock market history to learn from. Consequently the roboadvisor is only the sum of its programmer’s prejudices. Maybe it can learn as it evaluates the results of its own investment decisions
based on historical samples of stock market data but is that learning pertinent to future markets?
Third poster! Top ten is still okay greetings from moose jaw Saskatchewan
Who needs 600 ETFs? This looks like more proof of slicing and dicing (speculating) in a market easily tracked using an index fund. Buy in, continue to make contributions, and never sell. Keep fees to a minimum. Is that not the long and short of investment advice equally applicable to minor as well as major accounts?
#2 Linda
what’s really amazing is that economists don’t learn. why is that?
‘The Euro is a suicide pact’ Economist Prof. Steve Keen on Brexit & European Central Bank ending QE
https://www.youtube.com/watch?v=vnRDiDeZ22M
Yanis Varoufakis | The Euro Has Never Been More Problematic | Oxford Union
https://www.youtube.com/watch?v=rhSg9X3q2gc
On Contact: The history of debt forgiveness
https://www.youtube.com/watch?v=AdPukQ96vEA
#107 When Will They Raise Rates?
Angela Merkel: Nation States Must “Give Up Sovereignty” To New World Order
“There were [politicians] who believed that they could decide when these agreements are no longer valid because they are representing The People But the people … are not a group who define themselves as the [German] people.” – Angela Merkel
“Nation states must today be prepared to give up their sovereignty”, according to German Chancellor Angela Merkel, who told an audience in Berlin that sovereign nation states must not listen to the will of their citizens when it comes to questions of immigration, borders, or even sovereignty.
https://www.zerohedge.com/news/2018-12-27/angela-merkel-nation-states-must-give-sovereignty-new-world-order
————————–
I can’t even believe we’re actually having this conversation!
This was the mother of all “conspiracy theory” back in the late 90’s… People who foresaw this were labeled “nuts”, literally “mentally ill”.
Now you’re fighting to make it happen, but what you don’t understand is what happens next…
—
Angela Merkel should have a ban for life from politics.
She, as a politician, is proposing to disobey the will of voters.
Merkel is proposing to end the fundamental of democracy: politicians are elected to represent and execute the will of the constituency.
Denying this principle is fundamentally the same as any dictatorship, where someone, some party claims to know better what’s best for the people who cast their vote.
The problem is “highly experienced, devilishly handsome, full-service financial advisor” are usually expensive and many conflicted and will not take on accounts less than 250K. I think a great option is to buy a vanguard asset allocation etf. That is what I told my son who has 10K in savings to buy.
Don Felder
Great advertising Doug….1% MER is a little high for a portfolio of ETF’s don’t cha think??….robos are .5%ish….i thought you wanna help the little guy?
Shawn # 116,
SA: “But in general people are people and should have rights.”
————————
BS: People do have rights.
The rights that a sovereign nation / republic like the US o A bestows on them, according to the constitution, if they are American citizens.
—————————-
SA:”Why is it fair that New York State has zero power to prevent poor people from anywhere in the U.S. from moving in”
—————————-
BS: Because all American citizens, have the right to live where they wish in the country, just as you acknowledged they should.
—————————-
SA: “but that the U.S. should be allowed to block all immigration if it happens to feel like it?”
————————
BS: A Sovereign Nation:
https://legal-dictionary.thefreedictionary.com/Sovereign+nation
“The supreme, absolute, and uncontrollable power by which an independent state is governed and from which all specific political powers are derived; the intentional independence of a state, combined with the right and”
Most importantly:
“power of regulating its internal affairs without foreign interference.”
That’s the important part.
——————————
SA: “If the U.S. is too harsh on immigration, the rest of the world should do what it can to shun them.”
————————
BS: This of course is the right, of other sovereigns or citizens to not travel to, or due business with, the the USA.
But the UN can shove their immigration policies.
Informative as always Doug.
Unfortunately to begin even professinally associating with an individual of your caliber (and your company, Turner Investments) what is the minimum? $100k? $250k?
By the time anyone who self manages their accounts reaches that level of wealth they are comfortable with trades and have experienced volatility.
Unfortunately I feel that someone in your position may be ignorant (not by choice of course, just circumstance) with regards to the financial situation that affects the majority of Canadians.
Most Millennials just don’t have the means to even be considered by your firm.
Not trying to disrespect you at all but these independent RoboAdvisors are certainly better then their “Financial Advisor” counterparts at the big banks with their 2.5% MER Mutual Funds.
As an aside, fantastic nod to Philip K. Dick. :)
#3 Stan Brooks on 12.29.18 at 3:21 pm
So my advice as it is to most big city professionals these days is to look for some piece of farmland as in 10 years this could be the only source of labour related income available around.
//////////////////////////
Oh Stanley, always so positive.
How’s the divorce coming along?
And I am not kidding.
“The latest SPIVA research, as a reminder, shows that 93% of Canadian large-cap mutual fund managers have underperformed their benchmark over the past year.)”
*****
After the last 1.5 months of Market madness…. I’m amazed it isnt ” 100% have underperformed” .
Based on my math comparing a popular Roboadvisor with a popular whole market global equity/bond ETF, once you get over $24,000 the fees of buying the ETF regularly and holding it in a self directed investment account are lower than the fees of the roboadvisor. And since the roboadvisor is just buying ETFs for you it seems buying the ETF yourself is a much better way to go, given the lower fees for doing so.
@#1 Flop
Jan 2nd should be interesting.
BC property Assessments come out for the delusional masses in Lotusland.
I cant wait to hear the howls of disbelief…
Not to mention.
Where are the NDP Dippers going to get the extra Billions in Property tax revenue now that the Golden Goose has laid an omlette………..
Rather than buy a bunch of ETF’s from a robo advisor, I’d suggest buying the following three common shares:
– CN Rail (CNR.TO)
– RBC (RY.TO)
– Fortis (FTS.TO)
Buy 1/3 of each, DRIP on, set it and forget it for 20-30 years. You’re welcome
Garth,
Please reread comment number five— I think this comment slipped past moderation.
Thank you. Deleted. – Garth
I would imagine one might be a bit more humble considering having $200K to invest is not enough for your company to even consider as a client.
Of course it is. Who told you otherwise? – Garth
Don Felder AND Joe Walsh !
cheers & happy new year !
#16 Penny Henny on 12.29.18 at 5:28 pm
Oh Stanley, always so positive.
How’s the divorce coming along?
==============================
That was all you could come up with? I had some higher hopes, but hey, it is Canada after all, we need to learn to live with lesser expectations.
So sleep relaxed, you are not having sex with me.
crowdedelevatorfartz on 12.29.18 at 5:36 pm
BC property Assessments come out for the delusional masses in Lotusland.
I cant wait to hear the howls of disbelief…
Not to mention.
Where are the NDP Dippers going to get the extra Billions in Property tax revenue now that the Golden Goose has laid an omlette………..
==============================
Not intending to diminish the B.C. NDP’s tax deficit situation… but doesn’t property tax in B.C. go to the municipality and region? For boring things like schools and roads.
I am amused at the braggarts boasting about their assessment values these past years. As a 10+ yr in same location I have typically challenged the assessment and got a well deserved reduction, over the phone (and after due process), of ~1/2 of the proposed increase.
#13 patty twinkle toes on 12.29.18 at 4:55 pm
Great advertising Doug….1% MER is a little high for a portfolio of ETF’s don’t cha think??….robos are .5%ish….i thought you wanna help the little guy?
—
We disclose the services we provide: portfolio and risk management, financial planning, tax minimization strategies, regular market commentary, quick responses to questions via email or phone, a helpful staff, regular portfolio reviews and so on. Prospects can decide if it’s worth the cost.
1% is also much lower than what most full-service advisors charge, and if it’s a fee-based percentage, it doesn’t favour large or small investors.
–Doug
Be sure to get as much money as you can to sock away. Good times don’t last forever. The goal is to let someone else take the risk, bear the costs of ownership – and to live as cost effectively as possible. Don’t waste your money on things that do not provide a long term benefit, e.g. property taxes, strata fees and hydro bills etc.. When everything hits the skids – you don’t want to be left holding the bag having to shell out money month after month. Life is short – Live it up whilke you are able.
#3 Stan Brooks on 12.29.18 at 3:21 pm
In the end, roboadvisors are a flawed yet still reasonable option for investors; however, there are other options. For instance, a highly experienced, devilishly handsome, full-service financial advisor.
=================================
Good luck with that.
AI is when these advisers on the phone are replaced with programs, like Alexa, with instant access to market data, prepared portfolios, who will be able to guide you in the process of making the rights selection and possess the combined knowledge of hundreds of investment professionals, including tax advice.
—
Make those in-person meetings pretty creepy, eh Stan. Welcome to the office, now talk to the black box. The Roomba will bring your coffee.
–Doug
John Bogle once said
Pick these index items, skip the fees, skip the one stock horror
I listened back in the 90’s
Dow index fund
Nasdaq index fund
SP500 index fund
Europe Broad index fund
Asian Broad index fund
300% gain since 2009….
He also said there is no profit withit taking it.
“Where are the NDP Dippers going to get the extra Billions in Property tax … ” — Crowded
they will just change the mill rate …
I’m sure there are a number of individuals reading this blog that would actually like to know what the minimum is to hire a fee based advisor?
It makes sense to hire a fee-based advisor when it’s economical to do so. Given the internal cost structure of most big brokerage firms (half an advsisor’s fee goes to the corporation to pay for compliance, regulatory oversight, trading desks, investor insurance etc.) there is a minimum cost any client must pay, regardless of portfolio size. Our view is that nobody should be paying more than 1% in total for a full-service advisor, so in our case that means anyone with $150,000 to invest or more falls into that category. You may find bank-owned brokerages, or some advisors who dislike dogs, will not accept clients with that amount. Figures. – Garth
“Not intending to diminish the B.C. NDP’s tax deficit situation… but doesn’t property tax in B.C. go to the municipality and region? For boring things like schools and roads.” Russ
No, it doesn’t. It goes into General Revenue. Has done for decades.
https://www.policynote.ca/everything-you-wanted-to-know-about-the-housing-taxes-and-expenditures-in-bc-budget-2018/
After years and years of investing, one thing I’ve learned
that never changes!
“You get exactly what you pay for”!
And you can take that to the bank amigo’s
#6 David McDonald on 12.29.18 at 3:31 pm
Neural networks have had great success in pattern recognition… The key is to learn from a vast number of trials…
I don’t see how this works with roboadvisors. There is only one stock market history to learn from. Consequently the roboadvisor is only the sum of its programmer’s prejudices. Maybe it can learn as it evaluates the results of its own investment decisions
based on historical samples of stock market data but is that learning pertinent to future markets?
———————————————————
That’s a BINGO! If you believe that there is a discernible pattern to the market or at least part of the market that can be bottled and tracked for predicting future behaviour then you have an AI training model…
Ryan what did you do in your first ten years as an CIM Investment Advisor, if it wasn’t actually advising on investing?
Way too many things are called AI, when they are not even playing the same sport. A couple of algorithms, some statistical analysis and a mess of data does not an AI make.
But I suppose this sell of AI as this harmless, cute and mostly ineffective gimmick, much like Tesla “autopilot”, will definitely pave the way for a warm acceptance of real AI, at some time in the future.
Joe Walsh
In the end, roboadvisors are a flawed yet still reasonable option for investors; however, there are other options. For instance, a highly experienced, devilishly handsome, full-service financial advisor.
—————–
Sounds intriguing.
Can you recommend one.
Porsche 911 a must.
Hi guys. One thing that is never mentioned about AI investing is the fact that they can’t determine what is truth and what is not in those news feeds. Another weakness is the reactive nature of those AI directed funds.
The AI’s that were short 100% of the market based on negative news articles and three months of losses on the 24th burned badly on the 26th and the 27th with the market rallies. They in fact were short squeezed and contributed to that rally to some degree. I know Ryan that Doug and yourself already know this.
In the near future is where the human investing manager will shine – as for one the ability to see liquidity traps before they happen. Volatility is not an AI strength.
A human investment manager would have been prepared for such a market reversal event – in effect using the AI tactics against themselves by holding some excess quality liquid ETF’s those AI’s need but are hard to find a buyer in a market free fall as an example.
AI investing can only react – they cannot predict.
The human investment manager has the ability to predict market events, and also to determine exactly what the AI’s will do in certain market moves.
Plan accordingly and we will all prosper at the AI’s expense.
Where will bc make more revenue…weed tax. Betcha there is a push to get more stores open…lots of places never closed down.
Weed revenue may also help the local governments as well, better than nothing.
The war against the machines has begun.
BC can also gain revenue through seizing the proceeds of crime…surely an endless revenue stream in North Columbia (formerly British).
T2 is about to get tough on China and international money laundering and drug trafficking…it’s election fever.
While the financial services industry has a lot to be ashamed of in terms of credentials, and lack of feduciary duty to clients, good experienced advisors should always be preferred over e-bullshit management.
There is pretty compelling evidence that the actions of electronic trading algorithms result in vastly more volatile trading patterns and market swings.
As these so called AI systems become more popular with the woke generation (ie the generation that thanks that if it can be done on a device, it is so much better) it will likely cause more market and trading volatility and thus trust in markets will be further eroded.
Just remember. AI does not exist.
Computer algorithms are neither intelligent nor artificial.
They are programmed by people, who are very intelligent, but don’t have a frigging clue about finance, people, markets, and risk, and most of whom have hardly left mom’s basement.
Algorithms do not have judgement, experience or wisdom, or intelligence as real people do, and never will.
If you think Alexa is actually AI, then you have been watching far too much sci-fi and need to get a life.
Have not read yet, but something came to my thoughts, ROCHESTER NEW YORK
Well its gone, I hope u are happy, quite easy to find the pic of mine is on the Web, and I can’t believe you ,
You came to help me but took from me, glad you sold your house, are you living in Steinbeck
Thanks for all your help, ps I was told about u how true
#3 Stan Brooks on 12.29.18 at 3:21 pm
I give general investment professionals 5-10 more years, max.
***********************
Ok, so both truckers and human advisors are out in 5-10 years max, right Stan?
Who else is on the chopping block?
Are you expecting 80 or 90% unemployment by 2025?
Yes, a lot of jobs will be replaced, but not so quickly that the world would collapse. Change is [b]slow[/b]
#20 JSS…
‘– CN Rail (CNR.TO)
– RBC (RY.TO)
– Fortis (FTS.TO)
Buy 1/3 of each, DRIP on, set it and forget it for 20-30 years. You’re welcome’
————————–
If you brought those back in 2008…here’s where you’d be now….
Yield on original cost, CAGR Dividend, CAGR Price
CN 7%, 14.7%, 15.9%
RY 8.4%, 6.5%, 8%
FTS 6.2%, 5.6%, 5.1%
Who say’s the TSC sucks…..ya just gotta forget the dregs….
#23 AACI Home-Dog on 12.29.18 at 5:51 pm
Don Felder AND Joe Walsh !
cheers & happy new year !
—
Pink champagne on ice.
–Doug
Hi Doug realizing you don’t give advice on this blog, would you be able to share the name of the Canadian low volatility ETF you added recently that has done well
Thanks
So Ace is back, to beat up the folks who bought into low interest rate, long term mortgage loans, and set their monthly budgets based on their payments + a few thou for extras.
We own our house. It is kind of small. Bought it in a rough ‘hood in the Six, for the princely sum of $329,000.00. Paid cash. We were told we were nuts. Nice double brick structure, new electrics and plumbing, PO replaced the roof, solid as a church, sound foundations, basement height acceptable (no need to “dig down” and have your house collapse onto you). But a rough ‘hood.
“You shouldn’t buy there”. “The schools are bad”. “There are shootings” (yeah, and people get shot in Cabbagetown all the time and this house, moved there, would be worth about 3.5 million dollars).
Friends bought into pricier hoods. “It has a neighbourhood block party every year” they said, as they paid 2.5 million dollars for a semi detached dump with questionable foundations, an “exposed brick wall” that turned out to be a massive heat loss and porous vapour barrier issue that weeped moisture into the basement subframes, and a backyard that you could not put a ping pong table into because it would not fit.
We renovated our 329,000 double brick detached two storey find. A new kitchen set us back $60,000.00. Paid cash. Business was good that year.
Friends bought into a Mississauga ‘hood. Top quality housing, paid 1.6 million for a five bedroom. The master bed is so big you could play baseball in there. Ensuite is the size of our second bedroom. Put it on a 30 year mortgage, 2.2%, figured they could carry it. Flash forward, to now. They have $200.00 disposable income at the end of each month. They have three children.
$200.00.
That is it. Both on fixed salaries, public servants (teachers), with a wage increase each year, but the extra taxes make that negligible.
One of them told me, 19 years’ from now, we’ll own this house. I was like “that sounds like a load of shit to me”. I got in trouble for saying that. So I continued to tell them that their plan to pay off their house on 2.2% interest, over 19 years, was like total horsesh*t and a load of donkey caca and I was laughing just thinking about it. How could they possibly know that interest rates would stay at 2.2% for the next 19 years?
So, at any rate, they didn’t.
These folks are now under water, earnings wise. They put the excess on their credit cards each month. What happened? Interest rates went up. That caused a short fall of about $700.00 per month, right now, meaning when their pay cheques are deposited, and all the bills are paid, $700.00 each month goes onto the credit cards, which have a $21,000 limit and there are two of them.
So, time for me to beat people up.
Because that is what I am really here for.
When I tell you all I paid $329,000 for a house that is worth now over a million dollars (because they are building a subway across the street, which I predicted ahead of time that they would do), and that I own a second building on the street where the subway is being built (paid $279,000 for that one, now worth about 1.2 million and goes up by about $200,000 per year), I am just beating people up for their stupid faith in real estate, without following the rules.
What are the rules for real estate investing?
I have posted them here before. Good building, with solid mechanicals, outwardly crappy looking, located in an area where an event will likely take place that will change the value of the land in that area. It is a bet, that something will happen. You are betting that an event will take place, that will change the value of your property, and in the mean time, you have a property that sold cheap, looked bad from the street, but fundamentally is sound and can be carried without any major repairs.
And yeah, don’t buy a cottage. Yeah I bought one, but I paid $189,000 cash during a financial crisis for a cottage on a main road, year round accessible, that is worth about $700,000 now. So unless you can do that, don’t buy one.
Cheers and Happy New Year!
#39 wallybc
Human managers can predict the market? Apparently 93 percent didn’t last quarter.
#48 debtslavecreator – I would wager a guess that it’s BMOs ZLB. There’s also low volatility ETFs for US, World and Emerging Markets…
Great piece. Thanks, Doug.
HNY to you, Ryan, Garth & your families!
Forgot to say 2 handle ornate ,
Thanks again Collen F
Re: robo advice:
Financial advisors as a rule have not advised through a bear market. Bear markets gut the financial advisor industry. Law suits result. At the end when things turn up again you have a new crop of financial advisors just finding their legs who have never advised through a bear market.
If you survive a bear market as an advisor lmk. You are part of a very small group of people. You should get an award.
Good luck to you all.
Hire good lawyers. You will need them.
The bear’s in da house.
Thanks Collen and thanks for your friend who also was there, glad you had a time to help, ps I never want to see any of you people again
I robovise all the time in my parents basement where I can be alone. Often I put on some Ross Kay podcasts and robovise for hours. And I always robovise before I sleep, it helps alleviate the tension I build up throughout the day.
Couple of thoughts. AI is cited as having the ability to do much more broad based analysis & thus have a clear advantage over human based advisors. Fair enough, but are there truly AI entities out there that would be available to the general public for such use? Plus how does one overcome the human trading factor? What if I or other investors choose to sell/buy even if our AI advisor says otherwise?
Plus, any AI is created by human programing & would thus presumably have potential programing flaws that could lead to an erroneous conclusion.
Perhaps I am imagining things, but it seems to me that there may be expectations of a ‘sure thing’ attached to the use of a robot advisor. Could end with more than a few tears if things do not go as expected…..
#50 reynolds531 on 12.29.18 at 9:16 pm
#39 wallybc
Human managers can predict the market? Apparently 93 percent didn’t last quarter.
—
Last year, to be precise. However, as I’ve noted, our services consist of much more than just simply beating a benchmark. In contrast, that’s literally all you should expect from a mutual fund manager because they don’t care at all about the details of your personal financial situation. In fact, you’ll never speak to them.
–Doug
Nassim came to my mind when I read this post:
“Our inability to predict in environments subjected to the Black Swan, coupled with a general lack of the awareness of this state of affairs, means that certain professionals, while believing they are experts, are in fact not based on their empirical record, they do not know more about their subject matter than the general population, but they are much better at narrating–or, worse, at smoking you with complicated mathematical models. They are also more likely to wear a tie”.
Funk 49…pow…Joe Walsh
https://www.bing.com/search?q=funk%2049%20james%20gang&PQ=funk%2049&SP=5&QS=AS&SK=AS4&sc=8-18&form=HPDTSS&pc=HPDTDF
James Gang … funk 49
Joe`s first band
In Vegas right now , where losers have family.
It’s a nice place.
Happy new year mutts. You intellectual spelling and grammar nazis are not welcome.
Safe space people. Well you are not invited.
Taking down the house with alien super powers
48 Debtslavecreator on 12.29.18 at 9:03 pm
Hi Doug realizing you don’t give advice on this blog, would you be able to share the name of the Canadian low volatility ETF you added recently that has done well
Thanks
Tmx Money website has a full etf listing for Canada. There are few low-vol funds (it’s in the title of the fund!) You can download the full directory as an excel file.
https://app.tmxmoney.com/etp/directory/
Warren Buffett’s advice has been gold for me over the last 3 decades
https://www.cnbc.com/2017/05/12/warren-buffett-says-index-funds-make-the-best-retirement-sense-practically-all-the-time.html
Nobody else comes close
why do roboadvisor when one can just buy and hold the s+p500 and tsx in a diy account….
Wish i had the amount of money required in order to only pay 1% for all that expertise and advice. Seriously can’t believe someone would complain…spending $10,000 on a million to make $60,000 seems a pretty sweet deal.
Well, this post was logically incoherent. You first stated “93% of Canadian large-cap mutual fund managers have underperformed their benchmark over the past year” then went on to convince us you could time the market by adding less volatile etf specifically now. Which one is it?
For small retail investor the low cost passive portfolio is the best. Just get an account with questrade and keep buying vanguard balanced etf.
For the big fish maybe you are special and beat the market but I doubt it. Just use your fee to educate your client not to sell into weakness and about tax.
#49 Ace Goodheart on 12.29.18 at 9:10 pm
Friends bought into pricier hoods. “It has a neighbourhood block party every year” they said, as they paid 2.5 million dollars for a semi detached dump with questionable foundations, an “exposed brick wall” that turned out to be a massive heat loss and porous vapour barrier issue that weeped moisture into the basement subframes, and a backyard that you could not put a ping pong table into because it would not fit.
We renovated our 329,000 double brick detached two storey find. A new kitchen set us back $60,000.00. Paid cash. Business was good that year.
Friends bought into a Mississauga ‘hood. Top quality housing, paid 1.6 million for a five bedroom. The master bed is so big you could play baseball in there. Ensuite is the size of our second bedroom. Put it on a 30 year mortgage, 2.2%, figured they could carry it. Flash forward, to now. They have $200.00 disposable income at the end of each month. They have three children.
$200.00.
That is it. Both on fixed salaries, public servants (teachers), with a wage increase each year, but the extra taxes make that negligible.
One of them told me, 19 years’ from now, we’ll own this house. I was like “that sounds like a load of shit to me”. I got in trouble for saying that. So I continued to tell them that their plan to pay off their house on 2.2% interest, over 19 years, was like total horsesh*t and a load of donkey caca and I was laughing just thinking about it. How could they possibly know that interest rates would stay at 2.2% for the next 19 years?
So, at any rate, they didn’t.
These folks are now under water, earnings wise. They put the excess on their credit cards each month. What happened? Interest rates went up. That caused a short fall of about $700.00 per month, right now, meaning when their pay cheques are deposited, and all the bills are paid, $700.00 each month goes onto the credit cards, which have a $21,000 limit and there are two of them.
—————————————-
LOL idiots!
Complete and utter morons. And they’re teachers to boot! That’s why I’ll be homeschooling my kids – That, and I don’t want them ending up like this soyboy, a proud product of the marxist education system:
https://www.youtube.com/watch?v=PK-mnbH4s74
Just to rub it in more, I’d offer them a line of credit at 0.1% less than what they’re currently paying, using their house as collateral. Lol!
Don Felder, Joe Walsh, whatever. Fact is, Don Henley was happy to assume most of the credit for the song. But he’s just that kind of guy.
I read Felder’s book. He’s the only Eagle to formally expose the band’s politics. Frey and Henley didn’t seem to respect him much, but he did play a ripping lead.
Toward the end, the band’s net proceeds were split into sevenths. Henley and Frey got two sevenths each. The other three got one seventh each.
Robo advisers? I am reminded of a movie that was done in the 1980’s where an american teenager logged on to a computer network that allowed access to a NORAD- USAF war gaming computer called the WOPR. The computer was programmed to play a wide variety of tactical and strategic games from tic tac toe to global thermonuclear war and find ways to win. The trouble is that the computer was given command over real military forces and would act on its own to win the game real or imagined. The computer really couldn’t tell the difference between a computer simulation and the real deal. The teenager just wanted to play a new computer game. Too much control by AI is a bad thing. AI will not be restrained by morality or conscience..
#10 akashik record
Denying this principle is fundamentally the same as any dictatorship, where someone, some party claims to know better what’s best for the people who cast their vote.
——————————————————————–
Uh….yahhhh…..you don’t have to dig too deep into Germany’s historical record of politicians to find a dictator who thinks he knows better.
https://www.youtube.com/watch?v=oVHtYKiv_4U
I have a question on the Central bank. Why is it independent. Why does it not work together with the government finance dept. Should not a elected government be able to control the interest rate since they will be blamed for whatever results.
Ask your advisor if she likes cats.
Yes? Ka-chinggggggg!!!!
You’ll be wealthy before you know it :)
@#68 When will they….
https://www.youtube.com/watch?v=PK-mnbH4s74
Wow! Amazing staff meltdown.
The other customer was completely speechless…….
Cameras are everywhere….
#67 Emre on 12.30.18 at 1:10 am
Well, this post was logically incoherent. You first stated “93% of Canadian large-cap mutual fund managers have underperformed their benchmark over the past year” then went on to convince us you could time the market by adding less volatile etf specifically now. Which one is it?
—
You’re convinced? That was easy. See comment #26. These are some of the services that we provide. Again, the only thing that you should expect a mutual fund manager to do is beat the market because they will never, ever talk to you about your finances or provide any other advice or service.
We don’t claim to beat the market every year and we will make mistakes, but we did correctly anticipate a riskier 2018 and took steps to control volatility in our clients’ portfolios. We view risk management as more important than absolute performance.
–Doug
Ok I’ll pull out my creds. Only 7 courses :(
No ‘fancy chart reading certificates’ though.
Trade to live, live to trade.
JSS’s Three stock portfolio
#20 JSS on 12.29.18 at 5:39 pm
Rather than buy a bunch of ETF’s from a robo advisor, I’d suggest buying the following three common shares:
– CN Rail (CNR.TO)
– RBC (RY.TO)
– Fortis (FTS.TO)
Buy 1/3 of each, DRIP on, set it and forget it for 20-30 years. You’re welcome
*******************************
While that can be criticized as too concentrated it is certainly not a bad idea especially for a small portfolio starting out. And assuming the money was not needed for spending for a long time.
Three companies that would meet Buffett’s test of simplicity and of a high probability of being and making more money and paying higher dividends ten and twenty years from now.
And it’s interesting to think that the same three might have come to mind 20 years ago, 15 years ago 10 years ago. CN was fairly new as a public company in 1998 but it’d strength was already apparent, I believe.
Most of the time these three did not trade at bargain prices but they probably rarely traded at outrageous prices.
Buying and holding those three at any time for at least the last twenty years would have worked out fine. And buying and adding money each year (or more often) from new savings would have worked out wonderfully.
And such a portfolio could be held in retirement for income. Again it can be criticized but it would have worked out well and probably will continue to do so.
I was looking at Bimini Island the other day off the coast of Florida on you tube. There was this yacht at the marina showing all inside with a horrible creature sleeping on the couch. I knew that the piracy figures were high, so assumed this Panther was being used for protection from pirates out to steal and rob. It turned out this was a huge family black cat. No thanks, as would rather have a dog than that thing aboard.
A balanced ETF
For years there was, inexplicably, no balanced ETF available while there were lots of expensive balanced mutual funds (and at least one cheaper one -Mawer).
Now there is VBAL and there will likely be more like it.
It will never replace the advice that many people need.
But a balanced low-fee ETF would be a good choice for many people. And while it is “one security” in form, VBAL is far from “one security” in substance.
However, there are other options. For instance, a highly experienced, devilishly handsome, full-service financial advisor.
————————————————————-
You really have a way with words!
DELETED
Terrie Rolph on 12.29.18 at 6:48 pm
… but doesn’t property tax in B.C. go to the municipality and region? For boring things like schools and roads.” Russ
No, it doesn’t. It goes into General Revenue. Has done for decades.
==================================================
Thanks for the link Terry.
I didn’t realize that the provincial govt had taxing authority within municipal boundaries. I make the tax payment cheque payable to the City.
Makes sense about the various taxes the NDP put into play last year and will do more in the future.
Especially with wood manufacturing jobs going/gone to China and Washington State.
I had a look at last years Prop Tax Notice rates:
school (on behalf of B.C.) @ 1.8%
regional @ 1.2%
city @ 4.5% (including Library)
As a home owner, the school (b.C.) tax and 25% of city tax is forgiven as a “grant”.
Cheers, R
Hmmmm.
Looks like the Libs arent going to let the NDP leader get this riding without a bit of a fight….
Election 2019 is starting to gear up….
Oh Kennedy Stewart….where for art thou when we needed thee…….?
https://theprovince.com/news/local-news/scientist-business-owner-seeking-liberal-nomination-to-take-on-ndps-singh/wcm/e6a99343-9d06-4a81-ae02-413473f626f8
#71 dharma bum on 12.30.18 at 8:26 am
#10 akashik record
Denying this principle is fundamentally the same as any dictatorship, where someone, some party claims to know better what’s best for the people who cast their vote.
——————————————————————–
Uh….yahhhh…..you don’t have to dig too deep into Germany’s historical record of politicians to find a dictator who thinks he knows better.
https://www.youtube.com/watch?v=oVHtYKiv_4U
—
Totalitarianism continued in East-Germany until 1989.
The EU started up after that as a great promise.
Merkel and Macron are now openly turn back to totalitarian governing ideas.
It’s one thing when David “Axis of Evil” Frum writes a column about how the political elite should override the votes of the constituency, and a whole different level when politicians in power start talking about it.
Too bad, their nouveau totalitarianism destroys EU, which started up with much promise.
#83 crowdedelevatorfartz on 12.30.18 at 2:50 pm
Hmmmm.
Looks like the Libs arent going to let the NDP leader get this riding without a bit of a fight….
——
Burnaby has an overwhelming Chinese population so its going to be a tough slog for Mr. Singh. But maybe that’s best he gets turfed out and they elect a more competent leader before 2019 who can actually challenge T2.
Hey Garth , first post ever , would a young couple with 150k total investment dollars qualify for your services ? Been reading for 3 years now daily and appreciate all advice you give!
@#86 not1st
Thanks for stating the overwhelmingly obvious about Burnaby but to expect the NDP to actually challenge the the Libs or Cons in a Federal election….
We’ll see a Trump wall on the Northern US border 1st.