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Old 12-26-2016, 06:38 AM   #7
Franchise Player
Join Date: Dec 2006
Location: Calgary, Alberta

Originally Posted by Johnny199r View Post
I'm talking about a Canadian couch potato portfolio. Globally balanced.

Obviously the logic being actively managed can't beat passive long term, especially net fees.
The truth is that those portfolios are active. They're "buy and hold" portfolios, but still active. Basically what you have there is someone has made a market call (and here is the 2015 link so you know that it's not just me saying this:

Sorry if you don't want to get this far in detail and I will try to be brief, but I really do love this stuff and love talking about it! In that link, I in particular want to draw your attention to this line, which kind of summarizes my point about active and passive investing.

Each option now includes several different asset allocations, ranging from conservative (70% bonds and 30% stocks) to aggressive (10% bonds and 90% stocks). The older model portfolios were all 40% bonds and 60% stocks, the traditional mix in a balanced portfolio.
Here's the issue with this. The passive investment can't be several different things. If it's truly passive you can't be making asset allocation decisions and allocating your investments in the first place. But delving deeper into that line of thinking, why did the passive model change here from the 40/60 mix he was advocating to the range? It's just not purely passive as the marketing would have you believe. How does an investor know when to make that switch? How does that proprietor of the strategy make the decision to offer a variety of the passive portfolio? It's just in direct contradiction to the point of passive investing.

The other point that I want to make here is that while indexes have their place, if you've already decided to make these exceptions and invest "a little bit" active to do you passive investing (I mean to be fair calling entire swaths of asset allocation, complete with full re-allocating and changing the funds entirely because you've found something you prefer elsewhere is far from "a little bit", but sure we can use that). But let's say you're willing to make that exception and call this passive. Why not add the extra little bit of asset allocation and just buy stocks as a proxy for the markets you want to represent? The MER in doing so is 0, which is almost assuredly cheaper than the MER for the indexes here, even if they are Vanguard and iShares. You're already rebalancing and trading ETFs under this plan anyway, so how far is the leap and just admitting that its a buy and hold strategy with asset allocation?

I give the gentleman running CCP full credit though; he's at least pursuing the CFP. There are dozens of others online who seemingly have no qualifications in personal finance or finance at all who are selling their strategies. At least he's making the effort and running his practice.
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