Tuesday, December 23, 2008


OK, having enjoyed my rant on what to stop doing, now I will share my thoughts on what you should do!

Let me preface this by saying my beliefs carry into the work I choose to do but do not require an investor to engage my services or, anybody's, to take charge of your investments. Consider it a free consult!


You both "earn" your money and "own" your money. It seems that many people spend more time cleaning their golf clubs than they do managing their money. Sorry, I do not believe the common drivel that “I am so busy I have no time”. You spend 8-10 hours each working day to earn money and then you hand it to an advisor you met an hour ago because they are your friend’s cousin’s brother and thus can be trusted.

Understand that Advisors and Financial Planners are simply sales people. Would you hand your chequing account to a car salesman and say hold my money until you find me a good car? Not likely yet it is almost a certainty the car dealer cares more about your follow up business than your advisor. If your car breaks down you are immediately inconvenienced; if your portfolio breaks down you pay a price at a future date. Trust your advisor like you would any 100% commission sales person.


The investment industry fills the airwaves and newspapers with financial pornography designed to excite you and thus lower your defenses as they pick your wallet. The blogosphere cannot be trusted, after all who is behind the blog and how do they make money? Ya, that includes me if you have not done your homework.

Go to unbiased or low biased sources. An unbiased source would be “investopedia.com” which provides definitions and articles to help explain investing(ignore the ads). A "near unbiased" source would be the Canadian Securities Institute, which is supposed to be unbiased but seems to think mutual funds are heaven sent. Take the Canadian Securities Course, it will cost you a few hundred bucks and a few hours work but it will provide some good definitions and explanations. You do not need to do the exam to learn.

Point: You need to explore your personal needs before you go hunting for a sales person to sell you securities.

You can’t explain what you need if you do not know what you need. The sales person knows what they need; your money and a securities company that will pay them to deliver your money. What do you need?


Go and get a “real” financial plan.
DO NOT accept a two page plan that says you need to put $235mo into our mutual funds. Get a plan with at least two scenarios so you can compare options, and by the way you should choose the options not the planner. If you are good with a spreadsheet then do your own forecasts but you will need to get the tax piece right so be careful. The plan should link to your investment strategy by pointing out what rate of return will meet your future needs.

Point: You need to direct your advisor on what you need to do.
You can take advice, but never hand the wheel to the advisor. If you have less than $150,000.00 you should probably just do it yourself as you will not likely find a good advisor anyway!

If you want to hire an advisor, interview at least three. You should set the parameters upfront with the advisor to weed out the obvious greedy bastards.
- I will not pay total costs in excess of 2% ever
- I will not buy deferred sales charge funds EVER
- My target rate of returns net of fees is x%, what is the lowest risk portfolio you can structure to achieve that goal over the next 5-10 years
- I will not hold any individual security that represents more than 10% of my portfolio
- I do not want any product where I do not understand how it works or how everybody involved gets paid

You need to get the advisor to sign the above documented objectives for your records.

Point: We are back to the key point “ONLY YOU CARE ABOUT YOU”.
You need to have independent monitoring of the investment accounts. It is best if you do this yourself. You need to have a composite or blended benchmark and you need to know your rate of return (not the rate of the fund you’re in as it will differ)

There are a variety of ways to monitor your accounts. The best way is to use two free websites to determine both your true rate of return and how your benchmark returns performed.


Point: The on-going management of your account is made either hard or easy based upon whether you think you have super powers or whether you think you are normal. If you have super powers and can tell really good B.S. from the truth and can explain why the smart folks with sure fire winning strategies are giving away the information for free, then you should actively manage your money and make lots of really smart trades every day!

Action: Nobody consistently beats the markets. Nobody consistently beats the market. Yes I did repeat that for a reason. It is very expensive to buy into the delusional view that some people know what random market move will happen tomorrow.

It is quite cheap to “participate” in the markets with a good diversified low risk portfolio of index funds and ETF’s. Similarly some well monitored, well diversified “buy and monitor” portfolios will be successful over time. Pick a strategy to participate at low cost. Avoid any strategy that is designed to beat the market.


Every advisor needs to have a secret solution that others seek. I gave my secret away (since I am not a securities advisor).

ONLY YOU CARE ABOUT YOU…..and based upon your actions, EVEN YOU MAY NOT CARE ENOUGH TO DO IT RIGHT! For years I was guilty of this....very busy and very important!

To those who do care and think your money is important for what it can provide your family for years to come; put in the effort or hire somebody to do it for you.
Find somebody who is very tightly bound to your goals (by contract in writing preferably) and monitor their performance and more importantly also their strategy ,to ensure they always put your family first.
When their need comes first you will see a change in strategy. That change should be viewed as the canary in the coal mine. Look for the signs: more calls and recommendations for purchases, a shift to "managed", "structured" or "guaranteed" products, and the biggest warning sign; when they utter the killer phrase "it's different this time". When that strategy shift happens, get out quickly!
Your skeptically focused blogger,

sois mike

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