Stock market thread.

[Big Ev]

No, that isn't true. And the people that say that don't understand what active management is.

On one hand, active management could be the buying and selling of stocks on a daily basis, i.e. day trading. You're actively managing your portfolio.

On the other hand, and what is truly active management from a portfolio manager perspective, is changing asset allocations. Be it moving money from equity to bonds, or one equity to another, or lowering your ACB on a particular equity, using cash reserves to buy in low on companies you believe in.

For example, one of the funds I sell, like any US Growth Fund, holds Apple. At the end of Q2 this year, Apple made up about 3.4% of the portfolio. By the end of Q3, that was up to 4.1%. The reason, in the span of a month from mid-July to mid-August, Apple went from 132 down to under 100, and as soon as it went under 110 this PM was buying it up. Passive managers were sitting on their hands.

Don't get me wrong, both examples are "active management" but it's about having the proper mandates in place. Research.

EDIT: I'll add, there's also a huge difference between passive investing and value investing. An active manager can be a value investor, capable of holding companies for a long time. Look at MFS International Value - their average holding period of a company is over 6 years, but they're constantly monitoring those companies and tinkering with the allocation in the portfolio.

That's not true that passive investors don't change asset allocations. Passive investors rebalance their portfolios to suit their objectives. This can be done weekly or monthly if they so choose.

also another great option is robo advisors who also continuously rebalance your portfolio to match your risk profile.

[petegreg21]

You honestly sound more knowledgeable than most (myself included), so don't take my line of questioning the wrong way.

5 years isn't what I consider long term. I bet there is a monkey somewhere who could throw darts at a board for 5 years and beat the MSCI EAFE Index. What happens when you look at a 20-30 year horizon? Or do you need to be smart enough/flexible enough to know when a run is over and switch managers? How is picking a good manager any different than picking a good ETF/stock/etc??

Not taking it the wrong way, I'm more than happy to discuss.

I've been speaking to the Canadian version of MFS IV, but here's a link to the USD version (so the numbers are different) which has been around since 1995 but has the same mandate and PM. On the chart, stretch it to "maximum" and look at the performance against the index since 1995. http://www.morningstar.com/funds/xnas/mgiax/quote.html

I could get into a huge story on MFS and it's mandates and how it picks its portfolio managers and all the due diligence they do, but it would likely be too long for you to care/read haha. Long story short, it's a company that was founded in 1924 and credited with the first ever open-ended mutual fund. You know what the first company they bought was? A little company called the American Telephone and Telegraph Company, better known today as AT&T. They have held that company for 90 years. They've been through the great depression, two World Wars and every market crash you can think of, and they're still standing. How's that for longevity?

The run doesn't necessarily need to "be over". You shouldn't have to know when to change funds, thats what an advisor is for. Advisors talk to ******** like me who say "Hey, you've been using Fund XYZ for the past ten years, well look at how much more money you could have made for your clients if you had been with us!" and they say "oh well **** me, I'm going to start selling this product to my clients instead!". They're the ones with all the info, you don't have time to siphon through 600 International Equity Funds to figure out which is best for you.

In terms of differentiation from picking a good stock/ETF, I kind of have to take two directions.
Stocks: Well, picking a good manager basically gets you 100 stocks. Do you have time to get to know 30+ holdings (in traditional finance, this is the level where diversification stops mattering) to diversify your portfolio?
ETFs: Again, ETF's are passively managed, so while it isn't different than picking a good manager, the benefit is much greater because a manager can be opportunistic when deploying cash. ETF's don't.

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That's not true that passive investors don't change asset allocations. Passive investors rebalance their portfolios to suit their objectives. This can be done weekly or monthly if they so choose.

also another great option is robo advisors who also continuously rebalance your portfolio to match your risk profile.

Passive management aims to mirror an index. Any allocation changes are done to fulfill that objective, not to take any sort of conviction on a company, sector or country.

Similarly, the allocations are changed to get back down to your preferred mix (indv. investor standpoint) that you deem acceptable for a long term horizon. i.e. you want to hold 5% Google for the next 10 years. It goes on a run and suddenly makes up 6% of your portfolio, you sell off a portion to get back down to 5% and rebalance again.

Active allows you to say "I like Google, I'm going to leave it at 6%, or shit, maybe I'll move it up to 7%" or say "Woah, things aren't looking so great for Walmart, let's decrease that down to 2.5% of our holdings instead of 3.5%.

[forumname]

Not taking it the wrong way, I'm more than happy to discuss.

I've been speaking to the Canadian version of MFS IV, but here's a link to the USD version (so the numbers are different) which has been around since 1995 but has the same mandate and PM. On the chart, stretch it to "maximum" and look at the performance against the index since 1995. http://www.morningstar.com/funds/xnas/mgiax/quote.html

I could get into a huge story on MFS and it's mandates and how it picks its portfolio managers and all the due diligence they do, but it would likely be too long for you to care/read haha. Long story short, it's a company that was founded in 1924 and credited with the first ever open-ended mutual fund. You know what the first company they bought was? A little company called the American Telephone and Telegraph Company, better known today as AT&T. They have held that company for 90 years. They've been through the great depression, two World Wars and every market crash you can think of, and they're still standing. How's that for longevity?

The run doesn't necessarily need to "be over". You shouldn't have to know when to change funds, thats what an advisor is for. Advisors talk to ******** like me who say "Hey, you've been using Fund XYZ for the past ten years, well look at how much more money you could have made for your clients if you had been with us!" and they say "oh well **** me, I'm going to start selling this product to my clients instead!". They're the ones with all the info, you don't have time to siphon through 600 International Equity Funds to figure out which is best for you.

In terms of differentiation from picking a good stock/ETF, I kind of have to take two directions.
Stocks: Well, picking a good manager basically gets you 100 stocks. Do you have time to get to know 30+ holdings (in traditional finance, this is the level where diversification stops mattering) to diversify your portfolio?
ETFs: Again, ETF's are passively managed, so while it isn't different than picking a good manager, the benefit is much greater because a manager can be opportunistic when deploying cash. ETF's don't.

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Passive management aims to mirror an index. Any allocation changes are done to fulfill that objective, not to take any sort of conviction on a company, sector or country.

Thanks for that. If there were numbers that proved going with an advisor would benefit me more than my simple 4-fund ETF portfolio, I would be eager to change my tune, but I have yet to see that.

I understand that a comparison of averages gets completely thrown off because of the multitude of shitty managers/advisors that exist, but what do you suggest the common person should do? How does one go about finding the best solution, or finding a good advisor?

That's why the passive route appeals to me. I definitely won't finish 1st, but I sure as hell wont finish last, and maybe I'll finish high enough that is doesn't even matter. So why pay someone to help me gamble? Give me a consistent 70 point player over one who has a 90% chance of getting 40 points and a 10% chance of getting 90 points.

[petegreg21]

Thanks for that. If there were numbers that proved going with an advisor would benefit me more than my simple 4-fund ETF portfolio, I would be eager to change my tune, but I have yet to see that.

I understand that a comparison of averages gets completely thrown off because of the multitude of shitty managers/advisors that exist, but what do you suggest the common person should do? How does one go about finding the best solution, or finding a good advisor?

That's why the passive route appeals to me. I definitely won't finish 1st, but I sure as hell wont finish last, and maybe I'll finish high enough that is doesn't even matter. So why pay someone to help me gamble? Give me a consistent 70 point player over one who has a 90% chance of getting 40 points and a 10% chance of getting 90 points.

If you're in a growth stage with your money and you have flexibility to play around, by all means, do so. But when it comes to planning for retirement, looking to exploit taxes benefits, planning for a child's education, estate planning, the serious shit, ask around and you'll find quickly which advisors have a good reputation and which ones don't. Similarly some of them are experts in certain phases of life. The guy who makes the best bread does't necessarily have the best produce.

I don't mind the hockey analogy, but remember the market isn't a consistent 70 point player. I could harp on the same fund over and over again (i get paid to), but over the past 5 years the MFS IV fund has a down capture ratio of 40. That means, when the market loses 10%, MFS lost 4%. Combine that with the staggering growth I showed you and you can see that getting in the right spot can really benefit you over the long term both with gains and downside protection.

If you want an advisor in Victoria, I have a colleague who wholesales on the Island and I can ask him who the best advisor he deals with is and pass along that info. No commitment, just a meeting and i'm sure you can discuss with him the same things we've discussed

[forumname]

If you're in a growth stage with your money and you have flexibility to play around, by all means, do so. But when it comes to planning for retirement, looking to exploit taxes benefits, planning for a child's education, estate planning, the serious shit, ask around and you'll find quickly which advisors have a good reputation and which ones don't. Similarly some of them are experts in certain phases of life. The guy who makes the best bread does't necessarily have the best produce.

I don't mind the hockey analogy, but remember the market isn't a consistent 70 point player. I could harp on the same fund over and over again (i get paid to), but over the past 5 years the MFS IV fund has a down capture ratio of 40. That means, when the market loses 10%, MFS lost 4%. Combine that with the staggering growth I showed you and you can see that getting in the right spot can really benefit you over the long term both with gains and downside protection.

If you want an advisor in Victoria, I have a colleague who wholesales on the Island and I can ask him who the best advisor he deals with is and pass along that info. No commitment, just a meeting and i'm sure you can discuss with him the same things we've discussed

Not that you are nearly as inept, but this is starting to sound a lot like a conversation I had a while back with Dutch. He threw around a lot of sales slogans that he was clearly taught in a Las Vegas seminar/rally of some kind (a la "The guy who makes the best bread does't necessarily have the best produce"), and at the end of the day he was a crooked salesman. You are a salesman. You might be a good one, and hell, the product you're pushing actually sounds pretty good, but this is a hard thing to trust people on.

I'm also not saying the market is a 70 point player. I'm saying my ETF portfolio is a 70 point player. The market is the NHL in this analogy. Your strategy might be akin to someone like Draisaitl. Sure, over the last X games he has killed it, but what happens next?

[forumname]

I also understand why people like you get into arguments like this over the validity of your job. A real estate agent will do the same, though anybody on the outside can see that with enough work and research a real estate agent can be made obsolete. I see financial advisors in the same light. A useful resource for those too lazy or dumb (those aren't necessarily negative terms to me) to do it themselves. Not bad by any means, but not necessary either. Some people pay to have their car washed, nails clipped, hair cut and laundry done. Doesn't mean everyone should.

[petegreg21]

Not that you are nearly as inept, but this is starting to sound a lot like a conversation I had a while back with Dutch. He threw around a lot of sales slogans that he was clearly taught in a Las Vegas seminar/rally of some kind (a la "The guy who makes the best bread does't necessarily have the best produce"), and at the end of the day he was a crooked salesman. You are a salesman. You might be a good one, and hell, the product you're pushing actually sounds pretty good, but this is a hard thing to trust people on.

I'm also not saying the market is a 70 point player. I'm saying my ETF portfolio is a 70 point player. The market is the NHL in this analogy. Your strategy might be akin to someone like Draisaitl. Sure, over the last X games he has killed it, but what happens next?

There's a difference between being a salesman and being passionate. I've talked to advisors who say they're using a Fidelity fund or a Mawer fund or a Canoe fund and I can sit back and say "Wow, that's a great fund, good on you for choosing that." I've built portfolios for advisors that have one of our funds and the other 4 are competitors.

I don't push products, I help build solutions to help people meet their goals.

I'm only speaking to this particular product so much because I know it like the back of my hand and I've met the portfolio managers face to face.

Analogies and metaphors are something I use for everything, not just sales, so sorry if that comes off crooked to you

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I also understand why people like you get into arguments like this over the validity of your job. A real estate agent will do the same, though anybody on the outside can see that with enough work and research a real estate agent can be made obsolete. I see financial advisors in the same light. A useful resource for those too lazy or dumb (those aren't necessarily negative terms to me) to do it themselves. Not bad by any means, but not necessary either. Some people pay to have their car washed, nails clipped, hair cut and laundry done. Doesn't mean everyone should.

To be clear, I'm not an advisor.

[Big Ev]

Yeah Dutch was a slime ball working for a pyramid scheme.

[chuckcouples]

I understand that a comparison of averages gets completely thrown off because of the multitude of shitty managers/advisors that exist, but what do you suggest the common person should do? How does one go about finding the best solution, or finding a good advisor?

There is no easy way to find a good advisor without doing your homework. The best advice is to ask around and then set up meetings with a number of them and then decide for yourself. Make yourself a list of questions to ask and to discuss and then listen to their answers about all of them. Go into the meetings with a skeptical mind to make sure that you are not meeting with a salesperson but someone who is clearly looking out for your best interests. A good advisor should not be trying to sell you anything except himself the first few times you meet with them. I would also recommend an advisor that has both investment (IIROC or MFDA) and insurance licenses.

[blayze]

No, that isn't true. And the people that say that don't understand what active management is.

On one hand, active management could be the buying and selling of stocks on a daily basis, i.e. day trading. You're actively managing your portfolio.

On the other hand, and what is truly active management from a portfolio manager perspective, is changing asset allocations. Be it moving money from equity to bonds, or one equity to another, or lowering your ACB on a particular equity, using cash reserves to buy in low on companies you believe in.

Let's not confuse investing in ETFs with managing an overall balanced portfolio strategy here... nobody is saying you should dump all your money into a single ETF and just let it ride. Of COURSE you still have to manage and rebalance your portfolio to account for global and industry shifts which throw off your target weightings over time.

The relevant point is that a properly balanced portfolio COMPRISED OF ETFs... will beat an actively managed portfolio 9 times out of 10 (probably way more than that) over the long run (ie: 10-20 years).

Those high MERs on mutual funds, and the insane management fees charged by HNW managers (ie: the typical 2/20 fee structure) compound ridiculously over time and really eat into your long-term returns. Even if you exclude the impact of the compounding fees, mutual funds and fancy active HNW managers STILL underperform a well balanced portfolio of ETFs over the long run.

Look at all the long-term historical studies and metadata available (and no I won't find it for you because quite frankly I'm too lazy)... it's been proven time and time again - billionaire hedge fund managers, genius mathematicians, nobel prize teams have all had their asses handed to them by standard, balanced, index-tracking portfolios. Look up the story of "LTCM" one of the most impressive, knowledgeable team of powerhouse investors and traders ever assembled in history... they blew away the market in their first 3 years, and then they lost their shirt in year 4 when the asian crisis swept and the Russian ruble plummeted. Needless to say the fund collapsed after that.

Many in this thread pointing out specific stocks, mutual funds, etc that have outperformed the index... that's all completely irrelevant and you're missing the point. Of course there will always be stocks, funds, etc that outperform the market... by definition the market has to have winners and losers. But how likely are you be able to pick these out? For every one of those big winners, there are 19 other losers.

It's all about the Reward/Risk ratio... your goal is to maximize that ratio, and that's what the passive strategy accomplishes.

[petegreg21]

Let's not confuse investing in ETFs with an overall balanced portfolio strategy here... nobody is saying you should dump all your money into a single ETF and just let it ride. Of COURSE you still have to manage and rebalance your portfolio to account for global and industry shifts which throw off your target weightings over time.

The relevant point is that a properly balanced portfolio COMPRISED OF ETFs... will beat an actively managed portfolio 9 times out of 10 (probably way more than that) over the long run (ie: 10-20 years).

Those high MERs on mutual funds, and the insane management fees charged by HNW managers (ie: the typical 2/20 fee structure) compound ridiculously over time and really eat into your long-term returns. Even if you exclude the impact of the compounding fees, mutual funds and fancy active HNW managers STILL underperform a well balanced portfolio of ETFs over the long run.

Look at all the long-term historical studies and metadata available (and no I won't find it for you because quite frankly I'm too lazy)... it's been proven time and time again - billionaire hedge fund managers, genius mathematicians, nobel prize teams have all had their asses handed to them by a standard well balanced index tracking portfolios. Look up the story of "LTCM" one of the most powerful, connected, knowledgeable team of genius investors and traders ever assembled in history... they blew away the market in their first 3 years, and then they lost their shirt in year 4 when the asian crisis swept and the Russian ruble plummeted. Needless to say the fund collapsed after that.

There's also many in this thread pointing out to specific stocks, mutual funds, etc that have outperformed the index... your argument is completely irrelevant because you're missing the point. Of course there will always be stocks, funds, etc that outperform the market... but how likely are you be able to pick these out? For every one of those, there are 19 other losers. It's all about the Reward/Risk ratio... your goal is to maximize that ratio, and that's what the passive strategy accomplishes.

I never confused a single ETF with a balanced portfolio. Similarly, any fund I discuss should be seen as a portion of a portfolio, not a be all and end all. I know what diversification is.

Bringing HNW management fees into this is a totally different ball game, and lets be clear, anyone charging that better not be putting money into mutual funds, or else they're no better than any other guy on the street and don't deserve that fee.

I personally don't care about billionaire hedge fund managers, genius mathematicians and nobel prize teams. Especially in the case of the latter two, it's all TA. They dont understand the companies they're investing in, and thats what you need out of a portfolio manager. That's value investing at it's finest.

Personally, I don't find it difficult to pick the winners and losers, but I know what I'm doing. I hold 24 companies and 2 funds (international) and I'm up in excess of 16% YTD. Passive would have left me even keel for the year, but the biggest portion of my gains came from deploying cash at the end of August - active management.

As for LTCM, you'll see the company I've discussed is 90 years old. That's a little better than 3 years of luck, isn't it?

I'm also in Toronto, Blayze, so I'd welcome the opportunity to sit down for a beer and discuss this further. Sounds like you have some very strong opinions so I'd love to expand my horizons.

[Mr. Guru]

The relevant point is that a properly balanced portfolio COMPRISED OF ETFs... will beat an actively managed portfolio 9 times out of 10 (probably way more than that) over the long run (ie: 10-20 years).

I see you added the "(ie: 10-20 years)".

You obviously don't think that traders can be successful in the market, or that you have to be "billionaire hedge fund managers, nobel prize winners and genius mathematician".

I don't think you have to be any of the above to make enough money in the stock market. The problem is....what is enough?

You keep talking about risk/reward and it's something I look at everyday for plays. Theres no better risk/reward setups than micro caps. Volatility at it's finest.

Theres so much more I want to type but don't have time right now.

[forumname]

I see you added the "(ie: 10-20 years)".

You obviously don't think that traders can be successful in the market, or that you have to be "billionaire hedge fund managers, nobel prize winners and genius mathematician".

I don't think you have to be any of the above to make enough money in the stock market. The problem is....what is enough?

You keep talking about risk/reward and it's something I look at everyday for plays. Theres no better risk/reward setups than micro caps. Volatility at it's finest.

Theres so much more I want to type but don't have time right now.

"Enough" to me, is staying close to the market. If the market goes up and my portfolio goes down, I wouldn't be very happy.

Do you routinely beat the market? If you do, awesome. If you don't, you should reconsider.

[Bra]

OGI and CGC-V will soar on Monday. Marijuana Legalization is legit. Think of CGC as the new Molson's. Major takeovers will result in Q1. CGC will continue its market dominance.

[Bass56]

I don't know if this has been mentioned in this thread, but I am looking for a site that will teach me the basics of the stock market; basically, ''Stock Markets for Dummies''.

I've done some quick research online but I was not able to find a site that really starts from the basics and explains how stocks and the stock market work.

Any advice on where I can find such a site?