Comments on: Investment Time Horizon Explained

By: NN

NN — Tue, 09 Dec 2008 14:51:33 +0000

EconStudent – The volatility associated with REIT’s would put them closer to stocks than bonds, however I like their potential for increasing payouts in line with inflation. I can see myself having a decent exposure to them in retirement. The higher MER’s of REIT ETF’s are a pity though…

By: Canadian Capitalist

Canadian Capitalist — Tue, 09 Dec 2008 06:29:19 +0000

Too bad I had to miss the nice discussion between NN and ABC. To be honest, I haven’t given too much thought to portfolio construction and withdrawal strategies during retirement. I agree that a large bond component makes sense in retirement. I would count on consuming dividends from stocks with a reasonable degree of certainty that it will keep pace with inflation (that’s the long-term record, the double-digit increases of the recent past were not sustainable anyway).

EconStudent: I think of options as speculative vehicles. They don’t have an expected rate of return — in fact, after expenses options are a negative sum game. It is hard enough making money in positive sum games like stocks and bonds.

By: ABCs of Investing

ABCs of Investing — Sun, 07 Dec 2008 14:34:08 +0000

NN – yes, a long life (with good quality) would be nice!

Econ – REITs are not fixed income. I consider them on the same level as equities as far as risk is concerned.

By: EconStudent

EconStudent — Sun, 07 Dec 2008 14:13:12 +0000

NN, ABC – What do you guys think about REITs as a fixed income investment?

By: NN

NN — Sun, 07 Dec 2008 05:58:54 +0000

ABC – agreed, a balanced portfolio is a necessity. In my (limited) experience, people about to retire focus mainly on nominal income and capital protection, without sparing a thought for the cripling effect of inflation. Most of us should hope for a long life, i.e. investing in retirement should also have a ‘long term’ component

By: ABCs of Investing

ABCs of Investing — Sun, 07 Dec 2008 04:55:47 +0000

NN – some great points.

I’m not saying a good alternative to dividend investing is fixed income investing – just that no method of investing is perfect so it’s not a bad idea to have a plan B in place (ie have some cash).

By: NN

NN — Sat, 06 Dec 2008 21:12:12 +0000

ABC – indeed, nothing is guaranteed. But if we choose to ignore past data because the future is uncertain, what do we use for asset allocation decisions? The conventional wisdom that equities outperform bonds which outperform cash is out of the door then, and we start each day from scratch.

A retirement strategy that tries to maintain nominal income with high allocations to fixed interest instruments coupled with capital depletion is a high risk strategy in my opinion – the retiree is bound to have a decreasing real income and capital base.

By: EconStudent

EconStudent — Sat, 06 Dec 2008 19:53:49 +0000

ABCs: I think PHN is still a great company after being bought by RBC.

Is Steadyhand structured like Vanguard? I read that Steadyhand started very recently, but I think its MERs is quite high except Saving Fund. It needs economies of scale before MER can go lower. I will keep Steadyhand in mind when I do my job applications in Fall 2009.

By: ABCs of Investing

ABCs of Investing — Sat, 06 Dec 2008 18:20:01 +0000

NN – there is nothing guaranteed about the past dividend growth rate going forward. Stocks are supposed to return X% per year but over long periods (ie 20 years) the actual results can be quite different.

EconStudent – Random Walk is a great book in my opinion. The CFA is a very good course. I wouldn’t limit yourself to specific companies to work for – PHN was bought by RBC so they aren’t independent anymore. Maybe Steadyhand would be a better option for you?

By: EconStudent

EconStudent — Sat, 06 Dec 2008 14:54:11 +0000

NN: Thanks: I will read the Black Swan than. I have not been comfortable with the idea of “Black Swan”, because market crashes like this occurred in 1929 and 1974. As a result, crash of 2008 isn’t a new kind of historical event. Due to your encouragement, I finally understood options last night by rereading the appendix of Random Walk down Wall Street. I must of read that Random Walk down Wall like 4 times so far this year. Every time I reread it, I get more out of it. It is unbelievable.

I am wondering if you have any suggestions about getting my CFA level I.

I need a mentor to guide me to be successful in finance even when I am still in university. Like many here, I disagree with the mutual fund sales model, which doesn’t benefit investors.

I have given up on writing a business proposal for Vanguard to come to Canada. However, I am considering joining Philip, Hager, and North as a start for my career. PHN is the T. Rowe Price equivalent in Canada and does offer some of the lowest cost actively managed retail funds in Canada. I hope PHN can continue lowering the MER of their funds. Of course, there is no Vanguard equivalent in Canada unfortunately and I don’ think there will be one due barrier in entry and initial lack of economics of scale.

This has been a very long post. Any response would be appreciated.