Tag Archives: Strategy

Passive versus Active Investing: There are no Shortcuts

I had a friend who absolutely hated weeding his mother’s flower beds and herb garden.

Even as a teen I knew they were something amazing, literally dominating an acre, and his mother’s pride.  I don’t suppose I’m equipped even now to understand where gardening for pleasure becomes gardening to impress, but clearly Danny’s mom was gardening to impress.

Fed up, Danny decided one day to take a short cut and nipped out to Canadian Tire to buy some herbicide.  Three days later nothing was left but flower bed after flower bed of dead and dying plant material.  I didn’t see Danny for the rest of the summer.

Investing is much like that:  there are no shortcuts.

You can, like me, buy cut flowers which pleases Linda and is convenient to me.  Living in a condo doesn’t leave space in my life for growing things and frankly I don’t place much value on the process, only the result.  It’s a lot like the planters on King Street West that miraculously have gone from winter foliage to spring flowers overnight.

The other end of the spectrum are the gardeners in our condo complex.  Our flower gardens are beautiful, and a small group of volunteers spend countless hours of their retired time keeping them that way, developing through the spring with early blossoms to late fall ablaze.  I didn’t exactly endear myself to one of them last year when she was complaining about not getting any help to which I quipped maybe we just needed to pave them over.  I know myself and as much as I love the results I’m not prepared to spend the time getting them there.

The decision about whether to be a passive or active investor is a lot like that.

There are no short cuts to riches.

“Overnight” success in investing requires a lot of trial and error, and time committed to experimentation and failure, until you find a groove which works for you.  People like me can help with the process, providing advice, guidance and mentorship but ultimately you must take responsibility and work at it.

At the other end of the spectrum is the “buyer of cut flowers”.

Passive investing is a lot less labor intensive and if all you want is the benefit of the bloom, you need to school yourself in terms of expectations.  On occasion you might benefit from the blaze of color, but generally what you’re going to get is a well ordered manicured investment landscape.

I’ve toyed a lot with the concept of control when it comes to defining investment.  But I keep coming back to the same thing.

It’s about time commitment.

My profession is one of my passions, but I get that not everyone shares my interests.  The demarcation is your willingness to experiment, to take the time and effort to learn what you need to make an informed decision.

And if you think you found the magical answer to instant riches, remember Danny and his herbicide.

David Chellew and Linda Odnokon have been life partners and in business together for almost 19 years. During that time, they have mellowed into their respective roles and enjoy working with individual investment clients. Dave is a Portfolio Manager and Linda is an Investment Advisor with iAS and work out of the co-work space Brightlane on King West in downtown Toronto.

 Industrial Alliance Securities Inc. (iAS) is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by David Chellew, Portfolio Manager for Industrial Alliance Securities Inc. (iAS) and does not necessarily reflect the opinion of iAS. The opinions expressed are based on an analysis and interpretation dating from the type of publication and are subject to change. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. For more information about iAS, please consult the official website at www.iasecurities.ca. David Chellew can open accounts only in the provinces where he is registered.

Three Habits You Need to Successfully Save for Retirement: Beware of “Money for Nothing and Chicks for Free*”

 

I’ve always been a gifted academic, fortunate that I see complexity as a puzzle that can be quickly solved.  And long ago I learned to stop suffering from paralysis of analysis to make recommendations and follow through on them.  But having an academic bent or good ‘gut’ instincts for the market means nothing when you’re saving for retirement.

Since I first got into the brokerage business I’ve always struggled with our collective need to “beat” the market, although there is merit in managing risk and opportunity.  In my opinion, building a strategy based on a lottery ticket mentality turns the stock market into an elaborate casino.  I personally don’t like spending time in casinos and I don’t want to work in one.

Don’t get me wrong; I have clients who have made enormous amounts of money speculating.  And they have in the main retained most of it.  They deal with me because I am a source of information and analysis, a set of second eyeballs for their deals, an arbiter of technical trends and a latent conscience.

In my opinion, this doesn’t represent most investors.  As much as we all like to sally forth from the walls of our complacency, taking a risk with a little bit of money, close contact with the time demands, angst and uncertainty of investing in a single speculative stock quickly defeats us.

Frankly, if you think about the last “big thing” in Canadian markets, many investors would have been better off spending a smaller portion of their money on bud and smoking it.  At least they would have been chill.

In my many years in the industry I see three highly effective investment habits over and over that lead to a healthy retirement:

1.    Save Systematically

Either you’re committed or not.

I have seen people with below average incomes saving disproportionally larger shares of their income and amassing huge sums of money.  And I have seen others with large incomes facing the horror and panic of having five years to save enough money to last them for 40.

Saving systematically is a habituation.  If you have the discipline to commit to and keep to a saving program then it is merely a matter of defining what that amount will be for the year and reviewing it to increase it on an annual basis.

If you need a little external discipline, then borrow it to invest, provided you pay it off during the year.

I have seen both approaches work very well over the last 25 years.

2.   Have a Sound, Consistent and Easy Strategy to Follow

There are far too many get-rich-quick schemes out there and they inevitably line the pockets of the purveyors and producers of this garbage.

Some years ago, a friend and colleague reminded me that the market was driven by fear, greed and envy.  Yet successful savers that I have known and come to respect fall for none of these.  That doesn’t mean they don’t suffer from anxiety from time to time, or that they are not tempted to jump on board the “latest thing”.  It means regardless of the temptation or fear, they don’t depart from their strategy.

A sound strategy is one that is replicable, timeless and concise.  We will be talking about building a retirement portfolio using rate reset preferred shares, or new issues, real estate investment trusts (REITs), strip bonds or only bank and insurance stocks in later posts.  They can all form part of a sound strategy singularly or in combination.

Regardless of your short-term risk profile, a strategy like this is built around doing the same thing over and over.  They are not “Dire Straits” opportunities.  You know the ones:

“That ain’t workin’ that’s the way you do it
Money for nothin’ and chicks for free”[1]

3.    Be Clear on Your Goal

Goals can be clear, concise and easy to monitor.  Too many moving parts and the chances that you will keep to a routine that will allow you to meet the goal is lost.

Many years ago, I started working out at a gym.  I had one of the PTs put together an exercise routine for me that focused on upper and lower body on alternate days.  I spent the first month or so trying to learn the “slow, slow, quick, quick” of the dance of the machines.  I became about proficient as I was with waltz classes.  Don’t ask me to dance.

I only became successful when I hired a full time PT that I was committed to 3 days a week.  The goal was to make the work out; I allowed him to guide me through the routine, vary it for maximum effectiveness and he held me accountable for both cardio that I did on my own and my off-day routines.  The point?  I had a goal:  to make every workout I had scheduled and in doing so keeping the PT off my back.

 

Getting Started

The time to start is now.  If you’re like most people, you’re carrying a lot of garbage.

It’s time we sat down and explored your attitudes toward saving and set a measurable and achievable goal to help you start down the road to financial fitness.

I’m not going to promise you that it’s easy.  I can promise you that after meeting you will feel lighter because we’ve helped you take out the trash.  I can also promise that we can set a goal that is both timely and achievable.

Partner Linda Odnokon (437-266-1126) and I (437-266-1125) are both available to explore your financial anxiety.  Give us a call.


[1] Easy, easy money for nothin’, chicks for free) (I want my, I want my MTV)
(Money for nothin’ chicks for free)

Written by Mark Knopfler, Gordon Sumner • Copyright © Universal Music Publishing Group

[11] Ibid

 

David Chellew and Linda Odnokon have been life partners and in business together for almost 19 years.  During that time, they have mellowed into their respective roles and enjoy working with individual investment clients.  Dave is a Portfolio Manager and Linda is an Investment Advisor with iAS and work out of the co-work space Brightlane on King West in downtown Toronto.

Industrial Alliance Securities Inc. (IAS) is a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by David Chellew, Portfolio Manager for Industrial Alliance Securities Inc. (IAS) and does not necessarily reflect the opinion of IAS. The opinions expressed are based on an analysis and interpretation dating from the type of publication and are subject to change. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. For more information about IAS, please consult the official website at www.iasecurities.ca. David Chellew can open accounts only in the provinces where he is registered.