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moneysense.ca, 13/09/12
This and That: Staying the course, adviceDirect, QE3 and more…
Why stick to an investment plan?
The past 10 years have not been a happy one for stock investors. But diversified, low-cost portfolios have generated modest returns. A New York Times column makes this point with a retired couple’s portfolio that has been through two big stock market downturns.
Carrick on adviceDirect
BMO InvestorLine recently launched a product called adviceDirect that promises to offer personalized assistance to investors (for a price, of course). Rob Carrick weighed in calling it a co-pilot for DIY investors.
What the Fed is doing?
The Federal Reserve announced new quantitative measures (dubbed QE3) this week that sent US stocks soaring to five-year highs. This article on Money magazine explains what the Fed is doing and why.
Auto Insurance Loophole
A column in The Ottawa Citizen pointed out that a little-known loophole in Ontario’s insurance rules allows auto insurers to limit the liability amount if the driver is found to be criminally negligent. In the story, a couple waiting at a bus stop were hit and killed by a driver who was later found guilty of criminal negligence. The driver’s auto insurance policy included a $1 million liability coverage but the insurer paid out just $300,000.
Loyalty is for suckers?
This blog post on the Time Magazine website looked at a report that found that auto insurance companies “reward” loyal customers by charging them more. The implication is that it is worthwhile to shop around for such things as cable, Internet, cell phone service, home and auto insurance etc.
Zvi Bodie defends his strategy
moneysense.ca, 13/09/12
I found the Bodie and Taqqu articles to be filled with a lot of intelligent-sounding nonsense. The most concrete part was the discussion of a zero-cost collar. However, only the numerically-challenged would think that it is a good idea to accept a 5% upside cap that comes with only a 15% downside cap. Bodie has been selling this message for a long time, and I can’t figure out why.
@Michael: I suppose Bodie’s strategy made sense a decade ago when inflation-adjusted bonds were yielding 3%. Today, they are yielding 0%. This strategy now requires one to save a large amount of capital to meet retirement goal. Most investors would take say a 90% chance of hitting retirement goals over 100% chance of not meeting it.
Even if an investor finds they have a shortfall, so what? They can have a Plan B to work a little bit longer, maybe take a part-time job or even cut their spending to match their reduced retirement income.
I am skeptical of the NYT article questioning organic food, the study cited was financed by a big supporter of GM/GMO food lines, Cargill.
http://www.corpwatch.org/article.php?id=15783
The BMO service sounds pretty underwhelming. DIYers should stay away from services that charge on on a % of assets basis.
I agree with you opinion on adviceDirect. I think there are advantages to offering feedback to portfolios based on target asset allocation. The feedback might be helpful in avoiding some of the investing pitfalls. However, 1% is too much of a price for such a service.
Re: Carrick on AdviceDirect
Asking a bank for investment advice would be like asking a car salesman what car you should buy.
Not only is the fee exhorbitant, the symbols of most of the ETFs they will recommend will start with “Z”.
They just want to “churn” your account for more fees AND get paid for churning your account!
That’s a very good point. The adviceDirect marketing materials say that they get the rating from 3rd party sources. But it is worth wondering if such a service from BMO will primarily direct clients to BMO mutual funds and BMO ETFs.