How are you managing your investments?

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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richwkc
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How are you managing your investments?

Post by richwkc »

I'm a graduate student at UofT and I'm writing my thesis on the using of financial advisers in managing investment portfolio.

I'd like to understand how people are currently constructing their portfolio, whether they use financial adviser and how are they currently doing their investment research. I'd like to take 2 minutes of your time to fill in a 10 questions survey on how you are managing your investment portfolio today.

Your thoughts would greatly help me in shaping my conclusion in terms of what are some of the obstacles in people managing their own investment portfolio today, and how can financial adviser or better investment tools provide a solution. To fill in the survey, please use the link below:

https://www.surveymonkey.com/s/WC6DQWW
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Re: How are you managing your investments?

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Thank you all for taking the time to read the post. I've had great responses on the survey, which helps me tremendously in my research topic and understanding how are Canadians managing their investment portfolio. As responses come in, I thought I would share the results with everyone.

Some interesting observations: [89%] don’t use advisers, [83%] enjoy doing their own research, [85%] keeps track of their investments in either spreadsheet or third party software such as Quicken, but [66%] would still like to have more information on their portfolio (the biggest two categories are projected yield and growth rate on the portfolio and how are assets correlated).

As a follow up question, if there is additional information that you would like to have on your portfolio, would you spend the time and resources to expand your spreadsheet and start tracking those, would you consider going to an adviser to get those information, or the additional information isn't high priority and you are comfortable not having it?

If you any other thoughts or experiences on how you are putting together your portfolio, please share as well. My personal view is that you should be in good shape as long as you have a diversified portfolio that reflects your risk tolerance, whether with the help of an adviser or through DIY.
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Last edited by richwkc on 23 Apr 2014 10:47, edited 2 times in total.
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AltaRed
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Re: How are you managing your investments?

Post by AltaRed »

richwkc wrote:Some interesting observations: 93% don’t use advisers, 82% enjoy doing their own research, 86% keeps track of their investments in either spreadsheet or third party software such as Quicken, but 64% would still like to have more information on their portfolio (the biggest two categories are projected yield and growth rate on the portfolio and how are assets correlated).
Just remember you are getting a very skewed sample from this forum. Most people are here because they want to take charge of their investments and DIY. On the whole, the Canadian public is probably 95% committed to advisors and 5% is DIY.
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richwkc
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Re: How are you managing your investments?

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Just remember you are getting a very skewed sample from this forum. Most people are here because they want to take charge of their investments and DIY. On the whole, the Canadian public is probably 95% committed to advisors and 5% is DIY.
You are absolutely right. I kind of clued in on that from the high % of people not working with an adviser. I'm going to take this bias into account. Reaching the general public is a bit harder, I'm going to post the same survey on some more general forums but I don't think I will get the same response rate I'm getting here. I even thought about doing it the old fashioned way (ie standing in a mall for an afternoon).
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Re: How are you managing your investments?

Post by ghariton »

richwkc wrote: even thought about doing it the old fashioned way (ie standing in a mall for an afternoon).
I strongly recommend a properly designed survey, across different locations and times of day/days of week.

Internet surveys are suggestive but it is very difficult and dangerous to generalize from them.

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Shakespeare
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Re: How are you managing your investments?

Post by Shakespeare »

The results from this survey will be representative of less than 1% IMO.
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Re: How are you managing your investments?

Post by kcowan »

On the timing issue, it was introduced right before Good Friday and by Easter Monday had been summarized. How many respondents did you get?
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Re: How are you managing your investments?

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I've had 49 responses so far, and I've been updating my second post as results come in. I had 21 responses when I first posted it up on Monday.

It seems if you have a little bit financial background and willing to take the time, portfolio construction/asset allocation isn't a big issue for most people on this forum. I understand its a from highly skewed sample of people who are taking the time to come to this forum. Still it's a very interesting exercise to go through.

If it is true as AltaRed and Shakespeare pointed out that 95% of the population use advisers (which is why I picked this topic to research on), I need to find a way to reach them and see how they are doing it.
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Re: How are you managing your investments?

Post by Shakespeare »

My 1% estimate comes from Bill Bernstein. I finally found the reference:

The Probability of Success
Bill Bernstein wrote:A decade ago, I really did believe that the average investor could do it himself. After all, the flesh was willing, the vehicles were available, and the math wasn’t that hard.

I was wrong. Having emailed and spoken to thousands of investors over the years, I’ve come to the sad conclusion that only a tiny minority, at most one percent, are capable of pulling it off.
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Re: How are you managing your investments?

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richwkc wrote:If it is true as AltaRed and Shakespeare pointed out that 95% of the population use advisers (which is why I picked this topic to research on), I need to find a way to reach them and see how they are doing it.
Whether the number is 95% or 99%, I don't know how you can reach a representative sample amongst all the other noise from the print and broadcast media. Again, it will only be those curious enough to spend the time filling out a survey however you find a way to reach them and therefore yet another skewed example.
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Re: How are you managing your investments?

Post by Bylo Selhi »

richwkc wrote:If it is true as AltaRed and Shakespeare pointed out that 95% of the population use advisers
There are also important distinctions within the general population among (a) those who don't invest, (b) those who invest solely via a captive means like an employer-sponsored pension plan, and (c) those who take direct responsibility for some or all of their investments.

Those in (a) don't have any investments to be managed. Ironically they most badly need advice (and most badly need to follow it.)

Those in (b) have little need for advice and generally have little or no say over how their investments are managed.

It's only (c) that really gets to choose between engaging an advisor or DIYing.
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Re: How are you managing your investments?

Post by kcowan »

It is also commonly misunderstood that an RRSP et al is an investment decision rather than another vehicle to pursue investment strategy. Banks like to continue this misunderstanding.
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Re: How are you managing your investments?

Post by Rooster »

Shakespeare wrote:My 1% estimate comes from Bill Bernstein. I finally found the reference:

The Probability of Success
Bill Bernstein wrote:A decade ago, I really did believe that the average investor could do it himself. After all, the flesh was willing, the vehicles were available, and the math wasn’t that hard.

I was wrong. Having emailed and spoken to thousands of investors over the years, I’ve come to the sad conclusion that only a tiny minority, at most one percent, are capable of pulling it off.
Going OT for a minute, but Bernstein seems to me to be a bit all over the place in that article, notably conflating skills required for active and passive investment and, while favoring low cost passive strategies and reaffirming emh, he states that skilled investors can take advantage of low skilled investors and reap greater returns.
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Re: How are you managing your investments?

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I still think that a properly randomized survey could yield the results that the OP is looking for.

The traditional tool was to piggy-back on Statistics Canada's labour force survey. But it is very expensive, perhaps $50,000. A home-made alternative is going door to door yourself, interviews at shopping malls, etc. Get one of your fellow graduate students, preferably one studying statistics, to design and analyze the survey for you. Then get ready to spend lots and lots of time doing the survey. The results will still be limited to the city in which you live, but I think that the results would be quite revealing.

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Re: How are you managing your investments?

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Speaking of surveys here are the results of a survey by Bankrate in the U.S.:
No gain, no pain.

That seems to be the general investment strategy for many Americans, according to Bankrate's monthly Financial Security Index. A majority appear to be gun-shy about the stock market, preferring predictable, yet dismal interest rate yields from CDs and savings accounts to rolling the dice on Wall Street.

The index, based on telephone interviews with more than 1,000 people in the U.S., found that nearly three-quarters of consumers would rather settle for low yields in liquid accounts than venture into the stock market. That's despite a post-recession surge in stocks, with 2013 returns hitting around 30 percent.

"People would rather have pathetically low interest rates in something safe rather than (what they see as) the roller-coaster returns on the stock market," says Rick Larrick, a professor of management at Duke University.
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Re: How are you managing your investments?

Post by Flaccidsteele »

Most individuals want to "manage risk" but what they really mean is that they want to "minimize volatility". Thus, they prefer to financially kill themselves slowly. Over long periods of time. Decades. To kill so much time that they will have absolutely no time whatsoever to recover. To retire with a pittance.

Speaking for myself, I have never prioritized "minimizing volatility". Managing volatility, to me, is a distraction/diversion and financially dangerous.
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Re: How are you managing your investments?

Post by parvus »

You'll need to unpack this. Are you suggesting that high-beta stocks are the answer? It's seems plausible, but not borne. Low-volality stocks seem to provide a better return, perhaps because of factor loadings (F-F premia).

Or are you suggesting a low-volatility portfolio, with a high weighting in bonds?
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Re: How are you managing your investments?

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Managing volatility, to me, is a distraction/diversion and financially dangerous.
Managing volatility might not matter during accumulation, but it should be managed during withdrawal because of variance drag.
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Re: How are you managing your investments?

Post by Flaccidsteele »

parvus wrote:You'll need to unpack this. Are you suggesting that high-beta stocks are the answer? It's seems plausible, but not borne. Low-volality stocks seem to provide a better return, perhaps because of factor loadings (F-F premia).

Or are you suggesting a low-volatility portfolio, with a high weighting in bonds?
I'm not suggesting any asset class in particular. I'm simply talking about individuals who attempt to apply the concept of minimizing volatility as a surrogate for minimizing risk.

Anecdotally, from my naive point of view, it appears that many investors prioritize minimizing volatility. That their definition of risk is correlated to volatility. Strategies such as conventional diversification, re-balancing and asset-allocation are simply different fear-based techniques to attempt to minimize volatility. In my opinion. Any investor that prioritizes minimizing volatility is committing financial suicide. Slowly. Over a long period of time. Perhaps decades. So much time will pass that their retirement will be more challenging than it needs to be. At a certain point there won't be any time left to recover. That is my completely anecdotal opinion.

The more time that the thorn of managing volatility is allowed to continue into the flesh, the more painful it will be to extract it. Eventually it won't even be possible to extract it at all.
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