Quote:
Originally Posted by CaptainYooh
I stopped buying mutual funds a few years ago as I find them too expensive for what they do (exception - MMFs as cash substitutes in $CDN and $US). I split my investments between dividend-paying financials and utilities, real estate, high-yield bonds and some higher-risk technology stocks. I still hold some integrated energy conglomerates (Husky, Statoil) that did very well for me in the past but are down from their peaks now. I have been gradually moving my portfolio holdings towards more $US weighting, as I think US market will outperform Canadian market in the short term (18-24 months). I look for and try buying undervalued financials in US market (AllianceBernstein, Genworth). My overall portfolio 6% IRR is net after all fees and commissions. One more thing, it was closer to 8.5% in summer before oil price collapse and will likely go up once the energy prices recover.
So, you are an educated investor. What is your own self-managed portfolio net IRR and over which period of time?
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That all sounds logical for the most part. Though IMO the best investment strategy for 99% of retail investors is to use a disciplined passive strategy (ETFs) as their core and the mess around with the human desire to beat the market around the edges of the portfolio. If you actually looked at it, you probably did not beat the market over that period of time - so why not just buy the market. The big macro question in the market right now of course is when interest rates will rise in the US. When they do start rising, investors need to be very careful in sectors such as utilities, REITs and pipelines (companies with lots of debt that have some qualities of bonds). And of course fixed income, including high yield which looks particularly overvalued given the hunt for yield. Spreads are at all time lows and they could blow out with any kind of interest rate hike. There is a lot of risk in bonds right now and the high yield market is insane even with recent sell off.
I don't know what my IRR is. I have a few different accounts, lots of transactions and cash flows, I've never really looked. You should know that IRR typically isn't the best return metric to use for this application. When you have multiple cash flows and changes of sign it can screw with IRR. IRR is typically used for single investments, projects, private equity, and real estate where the cash flows are more logical and defined. That being said, given that we're talking about an RRSP account, I suppose if there were no cash flows out of the account and you treated the entire account as a "project" and the mark to market value as the terminal value it could work. But for example in a non-reg account, when I've been withdrawing and depositing multiple times per year, it really makes IRR irrelevant and possibly misleading.
In terms of sectors I'm mostly invested in industrials, energy, financials, technology and health care. I have a core passive strategy. Definitely been weighted more towards the US over the last few years. I own some international and emerging market stuff as well. Apple was my best investment last year (common and options), I bought a bunch when it was beat up after the huge run to 700. I own PPL and IPL, ARX, CTRX, McKesson. Telus and Rogers small positions. ETFs I own SDY, VIG, CLU, CDZ, EEM, CEW, XGI ( I think ). With my contribution this year I'll be changing my strategic allocation to a more significant weighting in Europe and EM, and also quality Canadian energy names. I invest for the very long term and so as a general principle I move cash from markets that have done very well/look overvalued (bonds, high yield and investment grade fixed income, US equity) into markets that haven't (Europe, EM, Energy). It's impossible to time the market but that's not my goal - even if energy continues to go down and be weak, I'll keep chipping away at it (again with quality stocks with good balance sheets, long declines and good mgmt teams). I sold all of my high yield and fixed income (ie I owned some prefs) exposure over the last year. I carry a relatively large amount of cash because I like the optionality of it. My worst investments have been Blackberry (years back), few junior energy names, I had a thing for covered call ETFs that was silly in hindsight.
The hardest part of investing is to have the courage to buy when everyone is selling which is what pays off in the long run. The key again is that it only works if you have a very long time horizon. We haven't seen the capitulation in energy yet but when we do it could be a massive buying opportunity.