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Discussion Starter #1
An Italian trader lost his savings (95% of it) by investing in a single stock (LK).


He paid a big price, but has learned his lesson.

After getting hammered overnight, he shared the expensive lesson he learned. “I’m gonna just invest in ETFs, gold and bonds for the rest of my hopefully long but quite useless life,” he said.
He could have learned that lesson for free by joining CMF.
 

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Cases like these show that a mutual fund (and even an advisor) is not necessarily a bad idea. Sometimes, on this board, we're too hard on advisors and mutual funds in general. There are few good mutual funds in Canada, and many decent mutual funds. For example some generic bank Canadian Equity fund, or a Balanced fund, has probably done OK over the last 10 or 20 years.

By OK, I mean that it's probably given a positive real return, which at the end of the day, is a "win"... and is sometimes much better than what a DIY investor does.

One of my best friends has been DIY investing since we studied together around 2000. He has not done well. The sad truth is that he would have probably done better with a fund company advisor, even with a 2% MER.

In recent years, I have started suggesting mutual funds to some friends & family. If they can use a discount brokerage, I point them to something like XBAL. But otherwise, I point them to Mawer Balanced, Tangerine Balanced, or BMO Monthly Income.
 

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Cases like these show that a mutual fund (and even an advisor) is not necessarily a bad idea. Sometimes, on this board, we're too hard on advisors and mutual funds in general. There are few good mutual funds in Canada, and many decent mutual funds. For example some generic bank Canadian Equity fund, or a Balanced fund, has probably done OK over the last 10 or 20 years.

By OK, I mean that it's probably given a positive real return, which at the end of the day, is a "win"... and is sometimes much better than what a DIY investor does.

One of my best friends has been DIY investing since we studied together around 2000. He has not done well. The sad truth is that he would have probably done better with a fund company advisor, even with a 2% MER.

In recent years, I have started suggesting mutual funds to some friends & family. If they can use a discount brokerage, I point them to something like XBAL. But otherwise, I point them to Mawer Balanced, Tangerine Balanced, or BMO Monthly Income.
agree 100%. I saw it everyday in my branch. I’d bet 80% of diy investors underperform a standard balanced mf Over the long term. They may hit it “big” in one year, then get wiped out the next. We had a lot of success transitioning DIYers to dedicated advisors, where it made sense. I’ve said it before. Most People spend more time on their vacation planning, than on their retirement planning each year. Maybe the pandemic will change that. Ha ha.
 

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agree 100%. I saw it everyday in my branch. I’d bet 80% of diy investors underperform a standard balanced mf Over the long term. They may hit it “big” in one year, then get wiped out the next. We had a lot of success transitioning DIYers to dedicated advisors, where it made sense. I’ve said it before. Most People spend more time on their vacation planning, than on their retirement planning each year. Maybe the pandemic will change that. Ha ha.
... another irony. Considering a banker / (ex)-banker who was asking for "predictions" on bank-earnings (link below) so he can hold or dump/trade his bank stocks:

Bank earnings

:eek:
 

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Discussion Starter #5
The more I think about it, the more I come to the conclusion that for many investors a fee-based advisor may be a necessity rather than a luxury, at least at the beginning. It is not the fund selection that matters so much, but the education and emotion control.

It takes time and effort to get where an investor is solidly on the right path, whether it be asset allocation or security selection; in the meantime the financial losses are real.
 

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It probably depends on the individual. Some people do need help. But don't generalize.

We looked at fee based management of our retirement savings just before retirement. It would have cost us ~1% of our holding whether equities or bonds or gics. This regardless of performance. And not one on one. If we had gone with that, the managers would have ended up getting 25% of the income from the portfolio.
As a result, I decided I had a new job. This stuff is not that hard to learn. Dumped the FS brokerage along with it's management offer and have not looked back!
 

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Most retail investors do need some guidance, at least early in investing careers. Whether that is a % of AUM advisor, fee only planner, or DIY learning via forums like CMF. None of us who have taken control of our own portfolios and have been doing it for 10-30 years can really appreciate/understand how difficult it is for neophytes/newbies.

I am of the strong opinion, along the lines of J4B, that early investors, whether DIY or not, should be in simple low cost balanced offerings, at least until they have gotten their feet wet. It is no more complicated than that.
 

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Discussion Starter #8
No generalization was intended.

A fee-only advisor will not charge based on assets-under-management or commissions; the charge is a flat fee, often based on time spent or amount of help needed. Depends on the size of the assets being invested, but usually it come out to cost less than 1%. Moreover, even a 1% one-time fee would be worth it in the long term, if it helps people from meandering in the financial maze for years.
 

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Discussion Starter #10
I should have said "fee-only". My apologies. Thank you for pointing that out.
 

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It probably depends on the individual. Some people do need help. But don't generalize.

We looked at fee based management of our retirement savings just before retirement. It would have cost us ~1% of our holding whether equities or bonds or gics. This regardless of performance. And not one on one. If we had gone with that, the managers would have ended up getting 25% of the income from the portfolio.
As a result, I decided I had a new job. This stuff is not that hard to learn. Dumped the FS brokerage along with it's management offer and have not looked back!
I considered the same thing and interviewed some fee-based and fee-only advisors. In the end I could not justify the percentage of assets a fee-based advisor would charge and decided to go 100% DIY. I learned a lot from forums like this, Finiki, blogs and books and don't regret it for a second.

I think only a small percent of investors have the temperament and tenacity to be good DIY investors though.
 

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There is also the matter of time, in addition to interest and acumen. Someone in their 20s-40s with a career and family shouldn't be spending (or justifiably can't spend) more than a few hours a month on their investments. As much as finance always interested me, it was not until I was an empty nester that I could justify the hours I spent every week on finance and investing, and ultimately taking charge of my portfolio. It is a lot easier today with the Internet that came into its own in the late '90s, a broader range of DIY investing, and continual reductions in costs, both transactional and MER.

There is nothing simpler than opening a DIY brokerage account with the bank one banks with and simply buy units of an Asset Allocation ETF every month and never look at the account more than once a month. The problem is for a youngish individual to be able to spend the time to get to that A-HA moment. It is terribly unfortunate.
 

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Many of those 20-40 yr olds and some a bit older, likely don't have enough saved to warrant hiring a fee based adviser.

At that stage, we banked with a local BMO branch. The manager, along with an investment adviser, actually came and visited us at our home. No charge or pressure to buy anything. Just ran through the kind of things we should be thinking about. Even gave us a free book to help! At the time we were otherwise occupied but hopefully some of it sank in!

It was some time later that the FS brokerage prepared a detailed retirement investment 'plan'. That we did not buy into!
 

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It takes time and effort to get where an investor is solidly on the right path, whether it be asset allocation or security selection; in the meantime the financial losses are real.
DIY is a neat concept, but I wonder how many people are willing to put in the time and effort to get the point they can do well with DIY.

I've been investing for 22 years, but counting from when I switched to DIY, it took me about 12 years of additional learning to actually get reasonably good at DIY.

Looking back at this (see details below) I can't say that DIY was easy. There was a lot of learning & studying involved, and a huge amount of ramp-up time.

~ ~ ~ ~ ~ ~ ~ ~ ~

For me, it's been a long journey. If we count year 0 as when I first started investing, I was with RBC mutual funds (mostly phone-based advisor) for the first few years. This didn't go too badly, actually. By year 6, I felt that I knew what was going on, and got money out of mutual funds and into a discount brokerage.

From year 6 to about year 12, I was doing badly with DIY but didn't even realize it. I was overconfident, as many young men are. I'm sure this is a very common experience. After this I started to smarten up, analyze and critique my performance.

At year 15 or so, I started to read an insane amount about all this, and educated myself. This is when things really turned around for me and my results/performance was already improving. Seeing this improvement was exciting.

By year 16-18, I was obsessively reading and playing with a ton of data, and some may remember my all-night posts as I backtested various things. I put a huge amount of work into all this. I probably spent about 800 hours per year studying all this, likely a cumulative total of 2,000 to 4,000 hours of intense learning over a few years.

^ it's noteworthy that this became almost a full-time job. It was only possible because the work was similar to my day job (engineering models, data analysis) and happened to scratch a certain professional itch I have. But it was a TON of work.

Currently at 22 years
 
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