Friday, January 6, 2012

A New Investing Era

Non-Standard View
I write and say a number of things in this blog which are not exactly in line with your standard financial advice.  If all I wanted to do was make a buck from every poor soul who didn't know what to do with their money, I would be a financial advisor playing that game by those rules.  My own conscience prevents me from doing that.  I gradually learned over many, many years that what the little person is being told to do with their money has little, if anything, to do with us making any significant return on our investments.

The System
I am not saying they are doing anything illegal, but too much of what goes on is less than ethical.  Nor am I saying most of the people we get to deal with are unethical.  The people you and I and our modest retirement savings get to deal with are usually sales people with training in "the system".  This system dictates that we are to divide our money up and allocate it in as many ways as they can charge fees for and then, hope that economics work in our favour.

Lousy Luck, Or...
I guess I almost always had money to invest at exactly the wrong time.  Time and again, I would hand my money over to someone with all of the seemingly correct training and proper track record, only to end up a few years later with less money than I had started with.  Fool me once, shame on you.  Fool me twice, shame on me.  I began to wonder if I was just having a run of lousy luck, or whether there was a pattern starting to emerge.

Buy Low; Sell High
I have always been a bit of a do-it-yourselfer.  So, at the same time as I was hiring people to look after my money, I also began to search for information that would improve my success.  I didn't know anybody who could tell me what I should do differently, so I began to read about various facets of investing.  I soon learned my problem would not be a lack of information, but rather an over-abundance of misinformation.  It was obvious a large number of people were making a lot of money by simply jumping on the band wagon and putting their spin on the things that everyone "knew" to be true.  I became suspicious of proprietary, complex, and expensive systems which were designed to make their creators wealthy while doing little for a client with a little money to invest.  After all, in its simplicity, the entire process boils down to one thing: buy low and sell high.

A New Paradigm
During this time I have seen the evolution of the financial services industry.  The first iteration was the broker-centric model.  Here, the flow of information was controlled by the broker.  People had to pay large fees to gain access to that information.  Not only were they the gatekeepers of information, they were also the gatekeepers with access to the markets.  Next, came the internet.  Eventually, more and more information became available through the world wide web.  Brokers created web-based accounts.  Now clients could enter and monitor trades on their own.  Now, I believe we are on the verge of a new paradigm - the client-centred model.

Client-Centred Investing
The client-centred model is one which places the customer in control.  Brokers who want to maintain a presence in this new world of investing will recognize their job is to facilitate, rather than control.  The primary goal of this approach is to make the greatest return possible for the client while the broker is compensated for their ability to assist in this generation of wealth, rather than the other way around.

This third iteration of investing is not going to happen overnight.  The financial institutions have wealth and political power.  They will not surrender quietly.  Yet, if you have ever been to a candle-light vigil that starts with one candle, you know how quickly the light spreads and grows.  In this case, the light is the light of education.  It is time to show the world that the universe does  not revolve around the financial services industry.  It is long past time to expose the myths funded by the enormous marketing budgets of financial institutions designed to empower them and disempower those left bewildered by it all.

Please Participate
My new year's resolution is to try to do a better job educating people about this new era of investing.  There may be prettier blogs, and better written blogs, but I want this blog to be the one which makes you, the reader, the most amount of money, not just now, but for years to come.  I don't know everything, and I make my share of mistakes, so I encourage people to challenge my reasoning, and ask questions about anything they don't understand which may be wasting their money.  I would rather spend my time on the things that are of importance to you and your wealth.

Are you happy with your investment returns?  Want to do better?


  1. I have been re-thinking my way of investing for a while. I have been using classic couch potato strategy at first and then just bought (and still hold) XTR when it became a monthly income fund. I have done reasonably well, but may be _only_ because from time to time I stepped away from the couch potato (i.e. after the last 50% correction I went 100% stocks and recovered what my couch potato portfolio lost by that time pretty fast). Then I returned back to that portfolio (too soon apparently) and left quite a bit of return on the table...
    Your approach starts growing on me, but putting 100% (as far as I understand) in XIU when it crosses 200 MA seems somewhat too risky...
    The strategy I am considering is splitting the money into four piles and each pile follows 10/20/30/40 week MA. Or ten piles and each following 5/10/../40/45/50 week MA. Or something like that.
    Have you ever considered such a strategy? Obviously, this means more trading but seems to provide smaller potential loss.
    What do you think?

  2. @Anonymous

    To answer your first question, yes, I have considered splitting my portfolio the way you suggest. Your comment raises a number of interesting points. To tell you what I think, I will have to ask you to forgive me while I explain my answer in the next post which, with any luck, will be later today, but tomorrow at the latest. Thanks for the questions, and thanks for your interest.

  3. Thank you and looking forward to you next post and the answer


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