Investorial

Irwin Michael, fund manager of ABC funds, has just put up his latest monthly commentary for April 2006. Investorial readers will know that Irwin is my favourite Canadian fund manager, and is often talked about in these articles.

What’s so refreshing about Irwin is that he lets everybody in on his thought processes so that you may learn about how he picks stocks. This month, Irwin focuses on the oil & gas run-ups and comments about metal prices.

… Interestingly, the oil & gas and mining sectors now comprise over 45% of the TSX index causing many investors to question whether the current market boom is akin to the high technology boom (and bust) of six years ago. In fact, for these investors who cannot recall, one TSE stock out of 300, Nortel, comprised at its peak price of $124½ over 35% of the TSX 300 index. Is the present resource boom reminiscent of the high tech mania of 1999-2000? Probably not, however, we are becoming increasingly concerned about the spectacular price rise in metals prices …

I was pleasantly surprised to see that Irwin has a podcast syndication feed on the site! Kudos to Mr. Michael for getting with the times!

My work with American customers clues me in that MorningStar is a ratings authority whom investors depend on for some investment guidance. The debate is not about whether MorningStar deserves that attention, but rather to point out that Americans have a lot of choices when it comes to analyst ratings for funds and investments with Barons, Lipper’s, S&P, Morgan Stanley and a host of other firms.

Where does this leave Canadian investors? We can depend on U.S. analyst firms regarding equity investments, but they are not much help when the topic is about Canadian mutual funds. MorningStar does hold a Canadian presence with MorningStar.ca. Admittedly, it is not the first media I would use or recommend for others to check out. I thought it’s about time I took a quick tour of the site.

I believe most investors think of GlobeFund.com first when they are researching mutual funds. Yet a quick comparison reveals that GlobeFund basically gets all its information and even ratings from (more…)

If you’re wondering, the above title is a lame pun on the famous phrase “Who Watches The Watchmen?“. If you’re a regular reader of personal finance blogs, you should be familiar with the term “passive investing“. For the uninitiated, it means that you are investing in an index fund - a mutual fund that follows a well-known index such as the Russell 2000, or the most famous index of all, the S&P 500. The S&P 500 is the top 500 companies as determined by Standard & Poors to represent the stock market at large.

So What’s My Beef?
I have long contended that there is nothing passive about investing in index funds. Simply put, you’re paying a fund manager a little less than 1% management fee to enjoy having your portfolio actively managed by somebody else! Who’s that somebody else? The index of course! It’s no secret that indexes frequently add or drop companies from their list. How is this different from regular mutual fund turnovers? In the example of S&P 500 index funds, the only advantage achieved are (more…)

I haven’t gone off the deep end yet. Investorial is not a Blog about my own portfolio. I also don’t share the propensity to divulge my investment practices as other bloggers do. But I did enjoy reading The Dividend Guy and Investing Intelligently provide updates about their portfolio decisions.

The decision to not involve myself with posting portfolio updates is because the spirit of Investorial is to talk and discuss about media influences in the investment and financial arena. In my mind, it’s a conflict of interest to talk about my own investment practices.

However, I felt it was relatable to share with you that I have recently disposed of any seggregated funds in my portfolio. I used to have a small position in a seg fund that I bought at the beginning of my investing career. You can read my views about seg fund in this archived post.

This is neither an endorsement for or against seggregated funds, but a post about the fact that one shouldn’t jump into investments for the wrong reasons. I jumped into the situation while I was only starting to learn about investments, I was listening to friends and “advisors”. I was also less knowledgable and catch-phrases like “guarantee” were pleasing to a consumer like myself who only hears what they want to hear.

Arming myself with knowledge, I’m able to look back at my decisions and critique them. I chose to redeploy the invested capital and I’ve learnt to judge with a critical eye before leaping into action.

I would like to get a series started about all the different RSP ads that are popping up for the season. What are the sales tactics of these mutual fund companies to get you to contribute to your retirement savings plans? How can we filter the truth from the marketing?

I’ll give you an example borrowed from Mark Cuban. Mark Cuban said that the smartest marketing that shampoo companies ingrained into the population was the slogan of “Rinse & Repeat”. It’s a genius way to get people to quickly use up your products and buy more! But no studies prove that rinsing and repeating will actually help versus just doing it once, and letting the shampoo bubbles work their magic!

I’m currently collecting any RSP ads in any media (internet, radio, television and print). When I have more spare time, I will examine these scrutinize these ads and I won’t hold back! For our American audience, I would also like to bring to light any type of marketing efforts you see in the Retirement plans, IRAs, 401Ks; whether it be internet articles, or advertising. Please submit to me, any advertising campaign that interests you, Canadian or American alike!

Since November 03, 2005. Fidelity Canada has brought over its popular LifeCycle fund line-up from the United States. The fund line-up is called ClearPath. This blog is not a recommendation to buy these funds, but rather it is a news-worthy announcement meant for educational purposes.

What are LifeCycle funds? They are actually a different way to approach asset-allocation strategies with time as a major consideration. Initially, ClearPath funds (called the Freedom series in the States) will start with a very agressive asset-allocation strategy. The allocation strategy is then adjusted over time to become more conservative until the traget “retirement date” has hit.

Fidelity Canada has become more consumer oriented as of late with an advertising blitz. They are starting to bring over ideas from their American counter-parts. Are the LifeCycle funds a good idea from a business point of view? Certainly, they have been very popular in the States and has already been around for a decade. We Canadians are very much northern hillbillies when it comes to investment innovations. Among my biggest pet peeve is having to pay approximately $25 for equity trades. Why doesn’t Fidelity bring their $8 trading brokerage business up north??

Watch for the Canadian financial community to monitor the reception to these LifeCycle funds, and come up with their own versions if it proves to be popular. The personal finance scene is still dominated by the banks. Fund companies will have to find ways to partner with these behemoths to secure any marketshare.

More often than not, stocks, mutual funds and investments are ’sold’ to the general public. Investments is not like the furniture business where customers look for what they want. All the public has to do is say ‘I’m interested’, and there’ll be hordes of information waiting to sell you and tell you what you need.

Take a look at this article about managing risk through diversification. It is a sound article except for the sales tactics and overtones that fail to leave the article. I’m not saying that the author is trying to sell you something, rather I see that he is regurgitating the same sales talk from financial institutions and advisors alike. Let’s examine this closer!

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Do good value Stocks have to be from good businesses or good companies? Most value investing gurus will make the case to search for a fallen company that is fundamentally a good business. However, my favourite fund manager - Irwin Michael suggests the contrary as is his nature. I always enjoy Irwin’s writing, not because of his tremendous track record, but because I am opened to new ideas for value investing through his logical analysis of common stocks for uncommon return.

I don’t forget about a stock when I sell it. Instead, I file it in my mental Rolodex. I often check back to see how it’s doing since we parted company. And I frequently find that stocks I’ve bought and sold are tempting to buy again after they’ve settled back to bargain levels.

Irwin is also one of the most forthcoming fund manaagers out there, offering tremendous transparency of his stock selection process through ValueInvestigator.com. I wish more fund managers are more like him so that the public can learn from the managers and be able to evaluate them as well.

MoneySense.ca: ‘Why I Love Sequels’ by Irwin Michael