RSS
About
I am a 25 year old former tech entrepreneur from Alberta, Canada, now working a more typical job. This leaves me time to focus on finance and investing, a passion I’ve had since high school.
Investment Philosophy
I am by no means a strict believer in the efficient market hypothesis. I believe that securities can and are mispriced from time to time, and that individuals with appropriate training and knowledge can take advantage of such opportunities to generate above-market returns. Typically, the way to achieve this is through some form of value investing.
That said, I do not believe that accomplishing this task is an easy proposition for the average person trying to save for retirement or some other personal goal. In fact, I think most actively managed investment assets available to the general public which adhere to these philosophy are quite poor. Part of this is due to the fact that our country’s financial services industry is designed to pay themselves first (instead of the investor). It is also due in part to the ongoing development of ever-sophisticated quantitative strategies being employed by banks, hedge funds, behemoths like Barclays, and small time boutiques, all of whom have legions of PhD’s looking for minute mispricings and statistically significant strategies to beat the market. These firms are making it ever more difficult for regular and even institutional investors to beat market returns. Furthermore, the Canadian equity market is relatively small, making it hard for even very good institutional investors with large mutual funds to find opportunities without affecting the market valuation of the stock they wish to buy. Just take a look at the Top 10 holdings for most multi-billion dollar equity mutual funds in Canada - more often than not they hold 4 or more of the same names as their peers.
As a result, you have the typical investment vehicles that are geared towards small investors (mutual funds, segregated funds, and the like) which are more often than not going to provide you with inferior returns over time. Given the current state of the markets as outlined above, I have a two-pronged approach to investing that I believe is appropriate for the majority of ‘typical’ investors:
- A core portfolio of index funds (70-90%). Depending on your investment goals (retirement, education savings, etc.) and current status, this is some combination of equity, bond, and money market funds. Asset allocation decisions should be made according to risk tolerance, goals, and long term historical risk/return characteristics.
- A discretionary ’satellite’ portfolio (10-30%) of investments (public/private equities, real estate, secured debt, etc.) that are geared towards market-independent returns. This portion could be independently or professionally managed.
I belive that this strategy will outperform the vast majority of Canadians over time, given the typical advice they will get from a commission based investment advisor/financial planner.