[Belguy]

As a buy-and-hold investor, I have not experienced net growth in my 'Couch Potato' portfolio over the past five years. I am not alone. Many investors, hoping to retire at age 65 have had to put their plans on hold because they have not been able to achieve their planned savings and investment objectives. Not only that, but, with great uncertainty in Europe, things could get a whole lot worse before they get better.

Here is a column by the G&M's Rob Carrick on this subject:

http://www.theglobeandmail.com/glob...d-end-of-saving-and-investing/article4257700/

A sad end indeed.

By way of example, the iShares S&P/TSX 60 Index Fund (XIU) comprised of the largest 60 companies on the TSX has total returns as follows:

YTD (as of May 31): -2.55%
1 Year: -14.52%
5 Years: -1.52%

Five lost years!! If your target gain had been 8 per cent, you are 9 1/2% under your target!! No wonder that folks are having a hard time retiring on their targeted schedule or, if already retired, living the lifestyle that they had expected and planned for.

Any thoughts?

 

[ddkay]

Follow the money, there are many opportunities outside north america

 

[Sherlock]

That simply shows that index investing alone is not the way to go. Different times call for different strategies but now you should invest in things that pay you to own them.

A balanced portfolio of index funds, dividend paying stocks/ETFs, and fixed income would have done a lot better.

Thoughts?

 

[Causalien]

That simply shows that index investing alone is not the way to go. Different times call for different strategies but now you should invest in things that pay you to own them.

A balanced portfolio of index funds, dividend paying stocks/ETFs, and fixed income would have done a lot better.

Thoughts?

So Unfair, I never get to enjoy a good investing environment.

 

[Miser]

It's a whole new world now.
Changing day to day.
Not the end but the beginning of a whole new concept.
Micro managing is the only way to survive.

Be on the new curve.

 

[sharbit]

Did you buy when the market dropped in 2008? If not, why not?

 

[Spidey]

It has been a frustrating time for passive investors. I have my registered accounts mostly passive with index funds while my non-registered are in dividend stocks. While I have a couple of stock disappointments, my stock portfolio has been holding it's own, while the index funds have been frustrating. I'm starting to wonder if it may be an idea to inject a little bit of timing into the passive portfolio - for example, if your model portfolio is a 50/50 equity, fixed-income split, after a couple of good years, like when the TSX recently hit the mid 13 level go to about 60% fixed income. And then gradually reverse that allocation in times like these. In fact, I think Berstein mentioned doing something like this.

That all being said, one has to realize that there will be 5 year periods like this and you have to look at an entire balanced passive portfolio, not just one index. You may have to more closely examine the makeup of your passive portfolio. For example, if your portfolio mimicked the FPX balanced, the 5 year annualized returns would be 2.25%.

 

[44545]

Five years is too small a sampling to gauge long term returns.

If the index had returned +25% in the preceding three years and roars back with +25% in the next two years, that would be ten years of outstanding long term performance.

Stop watching the excited dog.

If you can't stop watching the excited dog, stop posting about it. We don't care.

 

[crazyjackcsa]

I think your a manic depressive. We've said it before, 5 years is just too short a window.

 

[humble_pie]

xiu is a good example to present because the truth is that this etf has returned decently well over 1, 5 or 10 years to investors who do the right things with it.

i've held XIU since 2001. The total return is not as good as my overall portfolio, but for me this etf is a bond-like defensive holding. In its own way XIU is safer than all but government bonds because it'll never go bankrupt.

xiu's dividend yield right now is 3.19. Over the years yield has been higher but seldom lower. It'll never stop paying dividends unless the world ends.

in addition, i sell otm calls. These bring in another 3-4%, favourably taxed as capital gains. In 12 years, there has never been a day when my xiu holding has not been short a bunch of otm calls.

i don't reinvest the dividends, i take em as cash. The average annual current return in cash with the dividend/option combo is roughly 6-8%, not including notional or paper capital gains because my cost base is around $12.

any retiree wants to complain about that, i don't know what's wrong with em.

another advantage to xiu-plus-options=better-than-bonds is that it's a no-brainer. In a nearby thread folks are fretting about the time cost of DIY management. But the total time i spend on xiu in an entire year, including rolling the options forward, is 30 minutes.

anybody can do this. Belguy could do this.

 

[Investor72]

People who buy the whole market and hold for long term are at the mercy of economic growth. When economy is booming, everything goes up. Otherwise, the performance of the whole market will be mediocre or negative. However, In both economy conditions, the best businesses in the market can earn more consistant profit than the the index as a whole.

You get what you pay for. In the case of investing, aside from money, what you pay for the investment return is your investment knowledge. If you have no good knowledge about investment, how can you expect good return? Indexing will provide average return. Stock picking provides the chance for superior investment results. It's unreasonable for competent inteligent buy and hold investor who invest in individual companies to out perform the market consistantly by 5%~10% per year in the long term. Averge action produces average result. To get better performance, one needs to avoid herd behavior. See the big hype in Apple products and it's stock? I certainly won't invest in Apple despite its current huge profit margin, market dominance and earning growth. I don't own Apple products either because it seems everyone owns one.

When do you know your stock picking is working? You know it when the perfortfolio is less volatile than the market but performs better in terms of percentage than the market in most years.
I find it annoying that some people will keep doing stock picking not knowing what their return % is compared to the market. They just look at amount of dollar they have and thinking I am doing great.

Also keep in mind, the TSX index is 90% financial and resources. It's an example of putting all your eggs in one basket. Sector allocation and diversification is still important.

 

[slacker]

My couch potato portfolio is returning 2.45% above inflation.

While that's nothing to write home about. Imagine the alternative, where I would use balanced mutual funds charging 2.5% MER.

 

[Four Pillars]

It has been a frustrating time for passive investors. I have my registered accounts mostly passive with index funds while my non-registered are in dividend stocks. While I have a couple of stock disappointments, my stock portfolio has been holding it's own, while the index funds have been frustrating. I'm starting to wonder if it may be an idea to inject a little bit of timing into the passive portfolio - for example, if your model portfolio is a 50/50 equity, fixed-income split, after a couple of good years, like when the TSX recently hit the mid 13 level go to about 60% fixed income. And then gradually reverse that allocation in times like these. In fact, I think Berstein mentioned doing something like this.

That all being said, one has to realize that there will be 5 year periods like this and you have to look at an entire balanced passive portfolio, not just one index. You may have to more closely examine the makeup of your passive portfolio. For example, if your portfolio mimicked the FPX balanced, the 5 year annualized returns would be 2.25%.

Good comment.

Rick Ferri published an article today about adding some active management to a passive portfolio. Some good thoughts

http://www.rickferri.com/blog/investments/fantasy-alpha-and-your-portfolio/

 

[Ihatetaxes]

I'm happy that XIU is underperforming as I have been a buyer lately to the tune of six figures. Pulled a chunk of change out of ING and bought XIU in my wifes non registered account and at under $16.50 I have no doubt it will bounce back up to over $17.50 again and massacre any lame return we were getting from ING. My kids RESP is 100% XIU and as we won't be touching it for about 15 years I am confident its a secure investment that will bring some good returns while I keep buying it as the price fluctuates.

Like any investment if you know you won't need the funds for a long time might as well have your money in something you believe has good potential to appreciate without you losing sleep about risk.

Now I would like to see VTI take a bigger dive as I need to buy a lot of it. I sold some over $72 a few months ago and would love to buy in the low $60's.

 

[humble_pie]

what misguided individual among the 1st hours of this thread's life rated it 5-star ?

has the Beau Gars taken to rating his own posts as 5-star excellent now. Tch.

but it appears we can vote to offset a false rating. I voted "terrible" & lo ! the rating promptly dropped to 3-star.

anybody else votes "terrible" & the stars will get whittled down.

(aside to belguy) there's no such thing as an unfortunate retiree in canada. We probably have one of the highest guaranteed annual incomes for seniors in the world. There's free medical care, some subsidized housing, fantastic free cultural events & festivals in all the major cities (canadians are an arty bunch); plus a huge social work apparatchik built expressly to support them.

retirees can be as happy as they want to be. If they want to be unhappy, that's their problem.

don't you think it's a wee bit disgraceful for a rich canadian retiree to spend his days complaining how faraway geopolitical events are mysteriously conspiring to make him poorer ...

 

[Four Pillars]

what misguided individual among the 1st hours of this thread's life rated it 5-star ?

I'm thinking it was Miser. He seems to be the new BG without the links

It's a whole new world now.
Changing day to day.
Not the end but the beginning of a whole new concept.
Micro managing is the only way to survive.

Be on the new curve.

Whatever....

 

[Vitalogy80]

Don't we have like 3 other threads started by Belguy claiming the end of the world? Can't he just focus all his doom and gloom in a single thread??

 

[Belguy]

Who cares how many freakin' stars I get. I haven't even noticed them before now!!

The ten year total return of XIU is a stunning +6.60%. Two other planks in the 'Classic Couch Potato' portfolio have ten year total returns as follows: XSP: -0.09%, XIN: -1.11%

How impressive is that? Is that a long enough time line for you? Their inclusion in your geographically diversified portfolio would have served to drag things down a bit.

Maybe we could improve things a bit by throwing in some CWO, Broad Emerging Markets ETF units. It hasn't been around for ten years but it's one year return is an impressive -22.77%. Now, that would have perked up your returns some---NOT!!

When I first joined this forum, I was a very strong proponent of index or Couch Potato investing but am coming to the conclusion that it may indeed be a superior way to invest---during different market conditions than we are currently experiencing.

I now believe that a diversified portfolio of solid dividend paying stocks from companies who you feel will be around for the long term and who have a history of increasing those dividends over time is the better way to go.

Is there anyone reading this who still feels that investing in a portfolio of indexes is still the best method?

P.S. Keep up the attacks as I have an uncanny ability to turn the other cheek.

 

[humble_pie]

belguy index investing is yesteryear.

please read this thread. You'll see that Ihatetaxes is doing fine with index etfs + market timing.

i do fine with XIU + options.

value is key. Couldn't you use some of the time you spend complaining, learning how to add value to your portfolio selections

(??)

 

[Vitalogy80]

I'm not attacking you, but it's a little annoying to have to read the countless posts of people trying to help you and you just ignore them and post another end of the world link. If the world is really ending, why not just take everything out of stocks and spend it all in the next 5 years and enjoy yourself.