If you have read my last post you will know by now that I am set to start my new portfolio at Clearsight. I have been debating what to choose for my US equity component, and whether or not to go with my advisor’s recommendation of CI Value Trust (satellite fund of Legg Mason Value Trust). I said in my last post that am not interested in investing in Bill Miller‘s Value Trust fund but that I said I would rather go with the Rydex S&P 500 Equal Weight Index ETF (RSP) instead. I have now come to the realization that RSP is very similar to the S&P 400 Midcap Index which is also available as an ETF (MDY). It is very highly correlated and comparing the performance of these two ETFs makes this obvious. There is also a small advantage to getting MDY over RSP in that “the higher volume on MDY is an advantage for that fund, as is the typically tighter bid/ask spread” but this is probably splitting hairs. Comparing either of these two funds to Bill Miller’s Value Trust is probably not a fair comparison, just as comparing S&P 500 (huge-cap) to S&P 500 Equal Weight (semi-large to large-cap) is not exactly a fair comparison as they are in different classes and will of course perform differently. I found yet another index choice today, the S&P 500 Value Index (IVE). It has beaten the S&P 500 index but it has not been able to catch Bill Miller’s Value Trust. Sounds like a great alternative to the S&P 500 index though as it screens out some stocks which aren’t a good value.
At this point I began to get frustrated with the number of choices out there. RSP, SPY, MDY, IVE, and that is only a few of the ETFs available. Then there are the actively managed mutual funds, LMVTX being only one of many, and of course there are the index mutual funds of which there are probably one for every index just like the ETFs I mentioned above. Sometimes I feel like I know exactly what I want, other times I can not makes heads or tails of it with all the choices and knowing there are even more choices out there that I have not examined is daunting. It is frustrating for some someone like me, skilled in the maths and sciences and now software, that there is not some exact deterministic way of determining the ideal choice.
When I left TD, one of the main reasons was because I did not have a proper selection process for what I would buy for my RRSPs. Usually I would scan the performance (usually the longest term possible, 10-years or since inception if available) and choose funds that looked like they had done well in the past. This was flawed because crappy funds can have a few stellar years and good funds can have a few bad years. Or sometimes I would look for funds that did well in the past, but might have just come off a bad year (hoping to catch the fund on the up-swing). This method was also flawed. The second reason I left TD was that I did not want to be a DIYer anymore. I felt like an amateur/hack trying to do a professional’s job, and I was not succeeding. Not only that but I did not have enough time to spend on this. You may think that writing and researching articles for this blog takes time, and yes is does (and I have learned a lot about investing by writing this blog), but it cannot compare to the amount of time financial advisors and their superiors have spent day in and day out trying to answer these same questions. It is after all their full-time job. My financial advisor says that he does not pick stocks. He leaves that to the professionals, such as Ross Healy or Bill Miller. He does not have time to research stocks for his clients. By the same token, I should leave the management of my portfolio to my advisor because I do not have time to do it myself.
This does not mean that I should leave everything up to my advisor. Much like my advisor will monitor the actions of Ross Healy and Bill Miller I should also vet all actions my advisor recommends for my portfolio. Right now I think I am ready to give up and let him decide what is best. I would like to have a say in the asset allocation and I really want to have 25% bonds and the rest balanced between Canadian, US, and International. But as for what is inside those categories I really do not have the time to examine his choices of holdings for me in microscopic detail. It has already taken far too much of my time. The portfolio that my advisor is recommending is already much better than my old TD portfolio for many reasons, and if going with an advisor helps keep my hands off my portfolio and helps me keep this allocation over the long term, then it will surely achieve much better performance in the long run than I was getting with TD as a DIYer.
No time to read over this rant, it’s too long. Grammar mistakes be damned!