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March 19, 2018 | Risk off

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

That’s what the traders, hedgers, advisors and fund managers say to each other over fresh Sbux when they wake up and decide to trash your RRSP. And it’s one of those weeks.

Facebook screwed up with a massive personal data release and is being seriously spanked. Trump’s inching closer to firing Mueller, creating a full-blown crisis. Armies of children are about the shame the NRA and most of Congress. Putin and Xi just cemented their locks on power, becoming democratic dictators. Uber ran over a woman with an experimental self-driving car. Apple crushed suppliers’ stock with news it’s making its own screens. And a former ‘Sex in the City’ star is running to be governor of New York.

Phew. But there’s more. In Canada Doug Ford is up and Justin Trudeau is down. Jag The Good’s being accused of playing footsie with terrorists. And on Wednesday American interest rates swell for the fifth time in little more than a year, pushing our mortgages up. Risk on. Monday, by the way, saw the Dow shed 400 points and Bay Street give up over 150. The dollar staggered along at 76 and a half cents.

Much of this underscores the peril of owning individual stocks in your portfolio. Facebook, Tesla, Netflix, Amazon – sexy, visionary outfits whose shares often soar even when the companies underneath are profitless. Much safer to own the whole market through a broad-based ETF. Why hold a few stocks when one fund will deliver a position in the 500 largest?

Then there’s currency risk. Rising US rates and a worried Bank of Canada will further devalue the loonie – thus the long-standing suggestion here to keep 20% of your investment assets in dollar-denominated stuff. It’s part of being balanced. When one set of holdings falls, another ascends. Equilibrium.

And as for rising rates, they’re an inevitability, whatever befalls the Socialist Republicks of Hockeystan. So keeping 15% or so of your portfolio in rate-reset preferreds will protect you from declines in the bond holdings – which are necessary to reduce portfolio volatility. They gain in value along with the cost of money, plus pay you a dividend just for showing up.

This is how to invest in a volatile world, without chewing your nails or ordering Tums for lunch. Balance. Diversity. Liquidity. No stocks. No mutual funds. No deferred sales charges or high MERs. Never hire an advisor who sells you stuff and is paid on commission, or a guy who gets some money from you every time he makes a trade. When someone hands you a card saying they’re an insurance specialist, run. And never sign up for an RESP with one of those baby vultures. As for [email protected], I would like to share an email with you from a guy I will be trying to help (he’s an ashamed bank employee, and made a nice ask):

I am 21 years old working as a full-time Financial Advisor for (deleted) bank, making 40,000 yearly, single but my family depends on my income to help with bills and I go to school full-time as well. Total assets I have are 15,000 that’s fairly liquid, 7,000 of which is in my ownership plan stocks. My goals is exactly what I wanted to talk to you about. Putting clients and their finances first before the business you work for. So my request – and I know it sounds a bit out of the blue – I’d like to have some mentor ship. I’m interested in the field of Advising and Investing, but I am working for a company in the industry that only lets you sell what they want and not what’s best for the client which makes it difficult to learn past the bubble they’ve created. I’d also definitely like to get some Investing help of my own and I do understand if you are too busy, I just thought I would reach out to try.

Well, that speaks for itself. Good kid. Sincere. Wants to do the right thing and reaches out to a wizened fossil for knowledge. Kudos for Robert. But it also makes you wonder how many people wander into The Bank thinking they’ll get professional, seasoned, banky and knowledgeable help, only to end up in the clutches of a kid whose mandate is to sell them stuff. He admits to little life experience, scant personal assets or investing knowledge and being shackled in his job. Robert sits behind a plaque saying ‘Financial Advisor’. But he has no advice to give. It’s a fraud. I will try to rescue him.

The world is unlikely to get less volatile or more ethical. Investing today is absolutely necessary, but deeply scary. The best advice is to ignore the noise – including those strutting cowboys here who pretend to flip stocks – and set up a terminally-boring balanced and globally diversified portfolio. In the days to come I’ll review the assets and weightings. Your job is to calm down.

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March 19th, 2018

Posted In: The Greater Fool

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