Island Paradise Day 31

One of my goals in retirement has been to learn more about the stock market and investments so as to be able to manage my own portfolio and thus save management fees I have had to pay in the past. Now many people do not really understand the true cost of these fees. The typical mutual fund charges you (up front when you buy) around 1.2 %. You don't really see or feel that fee - cause it is only reflected in a reduced number of shares. You give your broker $100,000 and $100,000 less the mutual company's fee is invested. Then your broker (advisor) charges typically an additional 1% fee per year (based on your portfolio value). So if you have $100,000, he/she is taking $1000 a year. This total amount of fees (2.1% ) may not seem so bad...but that is not the whole picture.

If your $100,000 fund is returning to you 6% a year - you are making $6000 a year in interest minus the $2100 in fees. That means 35% of your returns are going to the broker! (Divide 2.1% in fees by the 6% expected market return before fees). That’s a lot!! It gets worse though...if the market is bad - and your fund only returns 4 % - the broker is now getting 52.5% of your returns!

I have always known this was eating into my RRSP growth, but at the time there was just no delight in market watching, and every time I tried to pay attention my stamina for learning was minimal and I quickly lost interest (no pun intended). I was just not into it. It felt like work to do all the learning necessary. It bored me. Besides, at the time I was too busy working and making up for those losses by earning an income. But now that I am retired, I have no excuse, and I truly cannot afford to lose 40% of my investment income to someone who is probably way richer than I am!

So, like I tend to do in life, I took a big breath and jumped!

I took back my money. Basically I transferred all of my RRSP investments which I previously had with Edward Jones into a Scotia iTrade account. Having thruster control forced me into taking action…it “motivated” me. It was sink or swim time.

I started by reading the Stock Market for Dummies book. An easy read that gave me the basics of a “buy and hold” investment strategy: look for quality companies that have a great track record, impeccable books, projected growth, and that are currently undervalued. In other words, instead of rushing out and buying a cheap sweater at Walmart that looks good today (but will likely fall apart in months), look for a high quality sweater from a well-known brand and wait until it is on sale – then buy it! I also bought access to an online program called Simply Wall St. It is a fun to use program that allows you to access research and analysis on companies - but the work is all done for you - and it is expressed in colourful graphics...a child could make good investment decisions with this program. They offer a free two week trial, and I would encourage you to check it out. (hint...look for a big green snowflake).

I then moved on to reading a few more complicated books on day trading and momentum trading strategies. These are riskier investment strategies but also have the potential for higher returns in the short term (I mean, hey, I am not getting any younger). I am still learning about these methods of investing and I have done a little bit of trading with some great wins, but also some losses.

Most people cannot stomach this sort of thing, but as someone who is driven by the need to control my own destiny, it actually gives me a sense of relief to know that if I lose money – it is my fault. That feels better to me than someone else losing my money. That really pisses me off. So I have decided to give myself a year: if my returns are not greater than the returns on the money I placed in a Clean Tech Socially Responsible ETF with Wealthsimple, (an online robo advisor with extremely low fees) in November 2017, which has so far returned 4.7%, then I will put the remainder of the money I am currently working with into a few different ETFs and walk away – not a failure, but wiser for having tried.

The truth of the matter is I have always done best with real estate investments – so the majority of my modest net worth is in my two homes in B.C. I do, however, take seriously the adage that one should not have all their eggs in one basket, and the uber safe alternative (GIC’s) is just not palatable to me because with 2-3 % inflation, cash and GICs actually lose value if they are paying out less than that in interest. It is a negative return - you'd be better off spending your money at that rate!

On the other hand, having a chunk of cash right now allows me to buy some very good quality sweaters - I mean - stocks “on sale” when the inevitable crash comes. And it will come! I try to look forward to that as I am following Warren Buffet’s strategy of “Be fearful when others are greedy and greedy when others are fearful.” In other words, when everyone is selling, that is when you should buy. Don't sweat that your good quality stocks are going down in value, but rather, think of it as a great buying opportunity. A blue light special, so to speak. Interestingly, that has always been my real estate strategy. But low, sell high, and don’t get greedy. It works.

Managing your own money is certainly not for everyone – but I trust myself to act rationally, do my homework and due diligence, and if all fails and at the end of the year I have lost some money – oh well. Shit happens. Just like Michael Jordan said, “I can accept failure. Everybody fails at something. But I can't accept not trying.”