Are we too old, crusty and conservative

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AltaRed
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Re: Are we too old, crusty and conservative

Post by AltaRed »

longinvest wrote: 30 Dec 2017 19:54 I'm not sure how to exactly define a conservative investor, these days. Would a conservative investor be 100% invested into high-interest savings accounts and GICs*? This seems so twentieth century to me. I think that in the twenty-first century a really conservative investor would be 100% invested into dividend stocks**.

* A conservative investor wouldn't assume so much inflation risk.
** A conservative investor would only care about the regular and increasing income, not about the stock price.

What do others think?
There seem to be a lot of people on www.highinterestsavings.ca that appear to invest in nothing but HISAs and GICs, chasing around multiple institutions for promotions and higher rates. That defines 'excessive' conservative investor to me even though they likely lose 'after inflation' in most instances. A similar style to what many of the Depression era folks did.

Maybe those daring to reach out to 'income mutual funds' should really be considered conservative investors, just the way mutual fund salespersons define it in their promotional materials.

I think once one gets to a 50/50 balanced scenario, the characterization starts to change...and the world is their oyster.
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Re: Are we too old, crusty and conservative

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Yes, in early seventies I am old but not too old (young at heart), crusty (possibly, but who cares?) and conservative (not politically but possibly in my investments. I do not see the need to gamble on flashy investments that I do not know or understand - am content as long as I can beat the indices. Been there, done that! Big difference between investing and gambling!

It is wonderful being old, crusty and conservative - enjoying every minute of it.
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Re: Are we too old, crusty and conservative

Post by peter »

Interesting question what conservative means. I always roughly assumed 60/40 - 40/60 (stocks/bonds) was conservative. Neither 100% fixed income (inflation) nor any 100% stocks is conservative, including 100% dividend paying stocks. The balanced fund range would be conservative but for an individual other circumstances modify what that range is. Maybe if you have a defined benefit pension or CPP/OAS is enough any portfolio (not counting extreme leverage) could be conservative? You could be leveraged if the portfolio is modest compared to other assets (defined benefit pension, house) and still qualify as conservative in my book.

The 100% HISA/GIC crowd is probably missing out compared to basic balanced funds or couch potato portfolios.
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ghariton
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Re: Are we too old, crusty and conservative

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Wallace wrote: 30 Dec 2017 20:15 BTW, I don't think people get crusty and conservative as they get older. Crusty old conservatives usually come from crusty young ones!
There's an old saying" If you're not a liberal before age 40, you have no heart. If you're not a conservative after age 40, you have no head.

FWIW I was a socialist when I was young. Then I went to work as a federal public servant. After seeing government up close, I became a conservative (or, as I prefer to call it, a classic liberal). It was a slow journey. That's for the political end.

As an investor, I think that the spectrum from conservative to -- what? speculator? -- is governed largely by one's tolerance for risk. Here I define risk both as short-term volatility and as the possibility of infrequent but large losses, as in 2008. The very risk averse will be found in HISAs and GICs (not marked to market), which give them the illusion of no risk, but in fact expose them to inflation-related losses. The risk-loving will be invested in over 100 per cent equities, using margin. Maybe bitcoin or some IPOs.

FWIW I started out with no appreciation for risk, and therefore no aversion to it. Almost all my portfolio was in tech stocks. After 2000 I became risk averse, perhaps excessively so. I have since moved toward a less risk-averse attitude. After all, I don't have that many more years to live, and so I need to finance fewer years' living expenses. Once I'm senile, I won't care anyway. (What's this? You say I'm repeating myself in various posts? Maybe senility has already arrived, and I should be investing in bitcoin after all.)

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deaddog
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Re: Are we too old, crusty and conservative

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ghariton wrote: 30 Dec 2017 21:11 The very risk averse will be found in HISAs and GICs (not marked to market), which give them the illusion of no risk, but in fact expose them to inflation-related losses. The risk-loving will be invested in over 100 per cent equities, using margin. Maybe bitcoin or some IPOs.

FWIW I started out with no appreciation for risk, and therefore no aversion to it. Almost all my portfolio was in tech stocks. After 2000 I became risk averse, perhaps excessively so. I have since moved toward a less risk-averse attitude. After all, I don't have that many more years to live, and so I need to finance fewer years' living expenses. Once I'm senile, I won't care anyway. (What's this? You say I'm repeating myself in various posts? Maybe senility has already arrived, and I should be investing in bitcoin after all.)

George
I consider myself very risk adverse and I'm also willing to be invested over 100% in equities.

I experienced the same tech wreck that reduced my nest egg by 50% just after I took early retirement (55).

I found what I considered a reasonable approach to managing risk. . Plan to take a calculated risk on each stock you buy and don't lose more than you planned. Going to cash is not much different from holding fixed income, granted you are not getting any income but you are not losing any money.

Big market losses start off as small losses. Big market gains come from letting your winners run.

I'm still old, crusty and conservative. My last documented buy was WEED. :)
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Re: Are we too old, crusty and conservative

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BTW, I don't think people get crusty and conservative as they get older. Crusty old conservatives usually come from crusty young ones!
Hmm. I think I have actually become more risk-taking as I have aged. Many here would tell me that it is bold, if not downright stupid, to be 100% in equities, and yet that's what I am. When I was younger I'm not sure that I would have taken such risk....but then I didn't have either the knowledge or the money to invest. However, according to longinvest, I am "a really conservative investor," as this definition fits me:
I think that in the twenty-first century a really conservative investor would be 100% invested into dividend stocks**.
As for this,
** A conservative investor would only care about the regular and increasing income, not about the stock price.
there is some truth to it in that I am mainly focused on the safety and growth of the dividends, but I do care about stock prices. Perhaps for psychological reasons, it isn't pleasant to underperform the index, even on a short term basis, while it is gratifying to beat it. (I know I shouldn't but I moniter my performance daily vs. index and about 15 different comparable mutual funds. I have noticed that I tend to lag when the market has a great day but outperform when it drops. I am defensively (conservatively?) positioned in mainly low-beta type dividend growth stocks with lots of pipelines, utilities, telecoms, banks)
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Re: Are we too old, crusty and conservative

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I never understood why Age and Investment Portfolio had anything to do with each other??
The Asset Allocation should be based upon the Need not the Greed.
Thirty something,net worth in millions,why use the stock market,stay with predictable.
70 something,need Income,Bonds and Prefereds and other income generators.
I am mid 70's, lately I have been buying FIRE,WEED,DOJA and other Cannabis stocks in my 10% Roll of the Dice portion of my Portfolio.
My needs do not define my approach,I do not need these monies,they are my Estate,hopefully 10years or so to grow.
I also own KWEB,XBI,JPM, lots of TD, some JNK,some XSB,no GIC's,buying US Treasuries as I expect a $0.73CDN when Trump the Chump blows up NAFTA.
I also have 15% CGL.
No Debts,modest lifestyle,No Alcohol or other bad habits and my Traveling days are over.
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Re: Are we too old, crusty and conservative

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I continue to get more risk averse as I age. My bond ladder is the one thing that gives me the most peace-of-mind as an investor because my RoR is known. I appreciate the certainty. Having said that, we are below plan for fixed income. As a result, I've maintained a fairly healthy cash cushion to cover forward spending requirements. My intention was to convert that ladder into an annuity when I reached 65 for the certainty, but I may entertain alternatives as annuities are extremely pricey in the current interest rate environment.

In terms of equity investment, I have become less interested in shooting for market beating returns, content to build a growing income stream through dividends and then supplement that with capital sales when required. For the most part, the income alone has been getting the job done. A diversified basket of large cap dividend payers seems to work pretty well. I have much less interest in REITs and preferred shares than I once did. They just move around too much in price as is typical for smaller less liquid holdings. The income is nice, but I've started to take that now in the form of capital gains rather than reaching for yield.

I have no interest in the latest crazes of Bitcoins or Pot stocks. I've even moved away from owning individual small cap stocks into a basket approach with a CEF. Foreign holdings are best left to someone else to manage who has some expertise in that area.

I have been reviewing our numbers over the past couple of days going back 15 years now and we have been extremely fortunate. What stood out is that the basics really do work if you give them time for the power of compounding to work it's magic. There's no doubt in my mind that risk and return aren't necessarily correlated the way that the text books suggest. The really risky stuff seldom pays off unless you get that one gem in the rough and have the courage to stick with it. When I look back there are holdings that I sold for what I thought was a really good profit and yet other less exciting things that we have held for many years have generated a lot more gain over time.

Is this being old, crusty and conservative? While I maybe wired a bit like someone that is near 20 years older than my chronological age, I prefer to think of myself as a realist, pretty much with all facets of life. Try and focus on doing the basics well and make adjustments when required. Realize your shortcomings and learn to accept good enough for what it is.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
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Re: Are we too old, crusty and conservative

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Bitcoins are just a byeproduct of Blockchain Technology,something that could change the fundamental system of currency away from the paper printing machines of government where the amount of paper created is designed to meet political objectives.
Cannabis is not a craze but an Industry in its' infancy,Canada has the inside track on what one day will be as globally accepted as Alcohol.
No Investment is without risk, ask those 5% Bond Holders in the 80's how secure their investment was when rates hit 21%???
My Cannabis Investments are at zero base,took my Initial Investments back and left profits invested.
The Revenue Stream must be adequate toe meet the Life's Dream,Dividend Stocks at this juncture are risky as interest rates have only one way to go,which means NAV goes down.
I am looking for an ETF that is geared to DIY,where the components reflect a need from modest to aggressive through four stages??
These ETF's could be bought in a combination that reflected the Investor's psyche and the length of time they were prepared to hold the asset.
RBC have model portfolios but you must buy the individual components and are working on a roboadvisor offering similar to BMO and wealthsimple.
I am less than 5% Canadian,bulk is U.S with EEE and some China and India components.
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Re: Are we too old, crusty and conservative

Post by JaydoubleU »

a byeproduct
A bye-product. That was a joke, right?
Cannabis is not a craze but an Industry in its' infancy,Canada has the inside track on what one day will be as globally accepted as Alcohol.
The fact that Canadians are rushing in does not mean all the world will. For one, MJ is not socially or politically acceptable in Asia; mere possession is a highly punishable offence, and I doubt this will change. Countries in the mid-east also do not approve.
Dividend Stocks at this juncture are risky as interest rates have only one way to go,which means NAV goes down.
Not all dividend stocks should suffer: insurance and banks could benefit by higher rates. Companies with manageable debt levels and strong growth should be fine.

Edited for clarity
Last edited by JaydoubleU on 31 Dec 2017 14:38, edited 1 time in total.
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AltaRed
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Re: Are we too old, crusty and conservative

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I am happy to leave all the speculative stuff to others. Absent a major export market, Canada's cannabis stocks are already priced way beyond market support (profitability). I barely dabbled in dotcom crap in the late '90s and am happy I stayed away. I am also happy I limited my foray into commodities in more recent times. Gotta know when to be contrarian to the cheerleaders in any sector.
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Re: Are we too old, crusty and conservative

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AltaRed wrote: 31 Dec 2017 14:18 I am happy to leave all the speculative stuff to others. Absent a major export market, Canada's cannabis stocks are already priced way beyond market support (profitability). I barely dabbled in dotcom crap in the late '90s and am happy I stayed away. I am also happy I limited my foray into commodities in more recent times. Gotta know when to be contrarian to the cheerleaders in any sector.
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ghariton
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Re: Are we too old, crusty and conservative

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I'm not going to invest in marijuana. I'm afraid all my profits would go up in smoke.

Besides, the marijuana supply is already huge, at least around here. I'm not sure that there's a huge unmet demand. Even if there is, I suspect that local entrepreneurs will move quickly to fill the gap. This is one case where buying locally makes a lot of sense to me. As to exporting the stuff: To whom? This is not a complicated product, and competition will be fierce in every place where it will be legal (and a lot of places where it will stay illegal). As for the licit Canadian market, I predict that it will be slow to develop, what with restrictive regulations and both federal and provincial governments setting taxes so high that they are positively inviting "moonshine".

As for bitcoin, we have had private currencies before. Heck, I still have a stash of Canadian Tire money somewhere. The problem with cryptocurrencies is the limited number of people who will accept them as payment. But until they are widely accepted by others, people will not want to be paid in them. This leads to a vicious circle.

I might be willing to invest in bitcoin once I can pay my taxes to CRA in them. Until then, there is no real anchor for the stuff.

George
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Re: Are we too old, crusty and conservative

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One person's conservative is another persons aggressive. And that can be shaped by a lot of factors, like education, previous experience, parental guidance etc.

When I was mentoring rookie investment advisors and mutual fund sales people, they would get told by clients that the client was conservative or aggressive. This almost always put preconceived ideas about the client into their heads and would influence the spiel they would start to give the client and what they would put on the KYC( know your client form).
I always told them to respond as follows; conservative( or aggressive) means different things to different people. Tell me what you mean by conservative or what conservative means to you.

I always told them the story of my uncle Tom. I was at his home in Toronto visiting for the afternoon and his coffee table was covered in financial reports. We started chatting a bit about investing and he told me that in the last couple of years he had gotten a lot more conservative. I immediately was thinking bonds, gics and short term stuff. I must have said something about the financial statements or about interedt rates. He laughed and said that he had started only buying stocks that paid dividends. He had never owned a bond or GIC in his life.
He was 90 at the time. ( note this was about 35 years ago)

Like me, my trainees were often in for a surprise and they learned( at least the better ones) to not take any terms or definitions for granted.

There is an investment advisor in the US, Nick Murray, who writes books for investment advisors. He has a very interesting take on risk tolerance. He has a little skit he does where he likens it to a patient going to a doctor and being asked his pain tolerance. And the treatment being based on the pain tolerance, not what the patient needs.
He also skewers the notion of asset allocation extremely well.
A very different take on investing and the selling of, if you want a different perspective.
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ghariton
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Re: Are we too old, crusty and conservative

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twa2w wrote: 31 Dec 2017 15:06 There is an investment advisor in the US, Nick Murray, who writes books for investment advisors.
He has a number of books listed on Amazon. Which would you recommend for a non-adviser like me?

Thanks

George
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Re: Are we too old, crusty and conservative

Post by Vaper »

People will buy a bunch of bricks and sticks whose value is defined by what some other person will offer and will consume increasing amounts of cash, like being in a boat and trying to keep baling so it does not sink.
This is SAFE,and many old curmudgeons are sitting in this box whereas they could sit in a smaller box and diversify.
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