Stocks are down – what’s your plan?

Remember please, I am not a professional investor and I don’t offer investment advice.

Some at Royal Bank of Scotland and Société Générale are saying: “Sell everything!

Not me. I am sticking to my plan.

In 2012, after getting “back in” the market, I promised myself I would not fall prey to emotions and make foolish stock decisions.

And here we are in bearish times. How does that make me feel?

Well, the market has my fearful attention. Like most people I am not oblivious to the current level of volatility.  I have lived through a few major market downturns – 2008/09 is still a powerful memory.

So, to put my mind at ease, I am thinking once again about my plan. My plan is intended to be followed in good times and bad.

The core of my plan is simple: manage risk by maintaining planned asset allocations over the long run and continually saving/investing as much as we can.

My plan calls for me to review our portfolio quarterly. The central focus of the review is any necessary re-balancing –  both across asset classes and across single asset holdings.

I do what I can to ignore day-to-day market moves. I try to own “quality with growth,” “quality with income” and “quality with safety.”

In short, I created a plan to manage risk at a level I am comfortable with.

I want to sleep well at night.

How do you sleep well at night when the market goes bump?

5i Research’s latest picks

I am not usually a huge fan of BNN because I find the focus generally too short-term.  I also prefer a portfolio approach but BNN limits guests to just three top picks.

Having said that, Peter Hodson of 5i Research was a guest yesterday.  His picks were “safe” ones in his words:  Andrew Peller (ADW.A), OpenText (OTC) and Constellation Software (CSU). The segment can be viewed here.

Here’s my take.


Disclosure: I own CSU and OTC and in future may purchase ADW.A.

Market 2016: greed vs. fear

No one knows what the markets will bring in 2016. This time of year attracts a lot of predictions.

Market sentiment can be driven by so many factors, but in the end they tend to group around two: greed and fear.From what I’ve read, I can’t discern a dominant trend in sentiment. For example, CNN reports a neutral reading right now (which of course changes daily). The Globe and Mail discusses six sectors and their prospects for the new year and suggests ambiguity. Openfolio reports the top 50% of it’s investors in 2015 made a 2.8% return, while the average investor saw their portfolio drop by 4.2% – hardly a clear pattern.

And we know the TSX was down about 11% and the S&P 500 was down close to 1%.

Interest rates in the US appear poised for steady increases, further bolstering the value of the US dollar.  In Canada, the opposite looks likely for both interest rates and the Canadian dollar.

The oil patch and commodity sectors show no real sign of life. Yet technology and maybe consumer discretionary and health care might be positive.

We’re only scratching the surface here. There are so many ideas out there: secular cycles, technicals, mega-trends, disruptive technologies, geopolitical factors, China, emerging markets, Europe, black swans, going to cash, etc., etc., etc.

Who knows what 2016 will bring?

For me, I am trying to stay the course and follow my strategy and plan. I am trying to keep emotions – fear and greed – at bay.

I keep reminding myself that the three key things I can control are: objectives, risk management and asset allocation.

How are you managing your portfolio for 2016?

How much did your portfolio return this year?

It never ceases to amaze me when I speak to friends, colleagues and acquaintances about investing how little many of them know about their portfolio’s performance.

Often people are quite willing to share with me their latest strategy, tactic, analytical approach or hot tip (that is if they are interested in investing at all).  Typically this includes focusing on one or two examples of how their preferred approach has paid off for them (seasonal investing, technical analysis, momentum buying and selling, day trading, etc.).

Often, when probing a bit, folks will admit they don’t apply these ideas to all of their portfolio.  Instead they use them on their “bucket” of assets that they’re willing to either risk or experiment with.

So usually I let the discussion run unfettered to hear a description of the preferred approach.  Then, always the spoiler, I ask: “So how much money did you make this year using this approach?”  Usually there isn’t a clear answer.  Often it is qualified with either one or two times it worked really well, or with terms like “it depends.”

Then my follow up question is often: “How much did your total portfolio make this year?” That usually catches people off guard. The usual response is to focus on one account (my wife’s TFSA is up X%, or my high risk investments have done really well).  It is rare indeed that anyone can give me an idea of the percentage rate of return on their total portfolio so far in the current year.

I find that a bit alarming.

It would be less so if the person said I don’t have the rate of return handy but I do track total portfolio performance.  Or maybe some figure its none of my business.  But I try to explain I know exactly what my rate of return is year-to-date once I’ve asked.  It’s not about bragging or one-upmanship, or even comparing, because rates of return are only relevant to the owner of the portfolio; it’s about having a clear picture of how your portfolio is actually doing at any point in time.

And not just a piece of the portfolio – the whole enchilada.  To me it is vital to know how your overall personal finances are doing and how well your strategy, tactics, analytics, plan and processes are contributing to that performance.

Maybe some of these tactics, hot tips and techniques people often like to talk about are useful and profitable. But unless the overall portfolio performance is tracked, and a clear understanding of how these approaches contribute to overall returns is assessed, it’s kind of like just playing in the sandbox.

Focusing on a segment of your financial picture without having a handle on the big picture is risky.  Probably much riskier than the market as a whole.


New poll on how often OSC fantasy portfolios should be reviewed in meetings

One of the discussion topics at our December 8, 2015 meeting was how often to put the fantasy portfolios on the agenda.  This correlates with how often trades should be considered/made.

Here is a poll to get your feedback.

Ottawa Share Club voting results are now available

The OSC voting results for the growth and income portfolios are now available here.

The OSC Executive is reviewing the results and discussions begin November 24.  The proposed portfolios based on the voting results and OSC Executive review will be presented to members at the next OSC meeting on Tuesday, December 8.

Ottawa Share Club fantasy portfolio game begins to take shape

The Ottawa Share Club (OSC) members voted on the composition guidelines for the growth and income portfolios November 10, 2015.

I’ve now compiled the initial results for review and discussion with the OSC Executive.

We’ll be meeting November 23 to go over the results and discuss next steps.

See more about the OSC fantasy portfolios here.