Index funds/ETFs - Questions

[HardWorker]

I'm curious as to why index funds/ETFs don't get more spot light than they deserve (to me anyways)?

The simplicity, lower costs, and solid returns were very attractive to me. I know some funds and individual stocks have a chance at returning much better rates. But overall and in the long haul, the indexes have done well. I chose index funds over ETFs until I build up a bigger lump sum. At which point, ETFs are even more attractive.

So is it the risk/reward aspect of it, or am I missing something here? And I'm talking about the average investor and not overly active investors who'll obviously see ETFs and index funds as boring and slow.

[Bylo Selhi]

According to IFIC, the industry lobby group, Canadians have about $660B invested in mutual funds. At a conservative average MER of 2% that means Canadians spend ~$13B every year on mutual fund fees. Even if only 10% of that is spent on advertising and promotion such as the currently on-going RRSP blitz, it means that at least $1B a year gets spent promoting high-MER, actively-managed, commission/trailer-paying funds.

How much do you think gets spent on promoting low-cost index funds?

OTOH almost all academics, pundits and money managers who don't have a vested interest in active management (and even a few who do) invest their own money in index funds and ETFs. Why do you think that is?

The situation is similar in the US except that the numbers are about an order of magnitude higher.

P.S. Even when companies like BGI spend big money to promote ETFs, the emphasis is often on the ability to trade ETFs continuously throughout the day rather than to buy them and hold them "forever." Why? Because stock brokers don't make much money if their customers adopt the latter strategy.

[HardWorker]

Very well said Bylo. And I was also refereeing to the academics as well. But now I realize that most the books I see in the library and books stores are very likely written by people in the industry with a vested interest. Index funds and ETFs get mentioned, but at a discounted rate.

I'm still learning the ropes, and honestly thought I was missing something major. I have decided to limit my stock picking to virtual portfolios as an educational tool for now, and then only invest a small amount once my mortgage is paid off. But thanks Bylo for the reassurance that I'm going against the grain the right way.

[mikester]

I think Bylo said it perfectly regarding the marketing aspect and the fact that not many companies can make money from them.

The other problem I think is the tendency for Canadians to only invest through an advisor which is odd considering the number of people who don't think anything of ripping their bathroom apart on weekends to save on reno costs yet they blindly invest through an "advisor" and don't know/care what the costs are.

I believe in the US it is more common for people to DIY investments which might help explain why ETFs are more popular there.

[jiHymas]

OTOH almost all academics, pundits and money managers who don't have a vested interest in active management (and even a few who do) invest their own money in index funds and ETFs.

Cite?

Anyway, we discuss this question 30 times a week. More or less. Active management has a story, you can do it via somebody you know, and the time required to become comfortable with investing (if only in ETFs) is sufficiently long to make it an incredibly boring worse-than-minimum-wage job for most people.

Me, I can't understand why people don't knot their own carpets. Look, it's a perfectly simple process and you get a better carpet when you're done. Virtually everybody who has studied carpets gets hand-knotted Persians, at the very least. Even some carpet manufacturers own Persian Carpets.

It's all a carpet-conspiracy, that's what it is. But now the Voices are telling me to ... er ... do something else.

[notnormal]

Me, I can't understand why people don't knot their own carpets. Look, it's a perfectly simple process and you get a better carpet when you're done. Virtually everybody who has studied carpets gets hand-knotted Persians, at the very least. Even some carpet manufacturers own Persian Carpets.

It's all a carpet-conspiracy, that's what it is. But now the Voices are telling me to ... er ... do something else.

lol!

[patriot1]

The other problem I think is the tendency for Canadians to only invest through [s]an advisor[/s] a commissioned salesperson.

Nuff said.

[HardWorker]

It's all a carpet-conspiracy, that's what it is. But now the Voices are telling me to ... er ... do something else.

Hahahaha......don't forgot your pills this morning

[YogiBear]

... the time required to become comfortable with investing (if only in ETFs) is sufficiently long to make it an incredibly boring worse-than-minimum-wage job for most people.

Cite?

BTW, how exactly do you figure that foregoing the payment of a 1-2% (or larger) annuity to an active manager- i.e., the incremental cost for that service, and related expenses, over and above indexing- over one's investing lifetime adds up to a "worse-than-minimum-wage job"? Particularly considering the compounded effect of those payments over 30+ years?

Perhaps your comment only refers to portfolios under $20K in value ... or perhaps when you buy a Persian Carpet, you think it's OK to keep paying the salesperson who sold it to you a 2% commission every year for life in return for the "service" he provided?

[jiHymas]

BTW, how exactly do you figure that foregoing the payment of a 1-2% (or larger) annuity to an active manager- i.e., the incremental cost for that service, and related expenses, over and above indexing- over one's investing lifetime adds up to a "worse-than-minimum-wage job"?

How much time do you feel a person should spend on acquiring and maintaining investment expertise before investing their first nickel? And how much time do you estimate such a person will need before they, personally, feel comfortable investing that nickel?

Include time spent reading the financial press and obsessing over whether the US allocation should be 12% or 15%.

I figure 100 hours annually, absolutely rock bottom. What's your number?

[YogiBear]

BTW, how exactly do you figure that foregoing the payment of a 1-2% (or larger) annuity to an active manager- i.e., the incremental cost for that service, and related expenses, over and above indexing- over one's investing lifetime adds up to a "worse-than-minimum-wage job"?

How much time do you feel a person should spend on acquiring and maintaining investment expertise before investing their first nickel? And how much time do you estimate such a person will need before they, personally, feel comfortable investing that nickel?

Include time spent reading the financial press and obsessing over whether the US allocation should be 12% or 15%.

I figure 100 hours annually, absolutely rock bottom. What's your number?

How much time is required to read, say, Bernstein's Four Pillars book, then go to one of several websites and discover a Canadian version of a basic "couch potato" portfolio allocation? Then to create a CAD-US-EAFE-Bond portfolio from no load bank index funds? And thereafter spend a couple of hours a year contributing and rebalancing?

Not only would that be a perfectly functional retail portfolio, but for anything more than a tiny investment, the savings of active-management incremental costs will provide a payback greatly in excess of a "worse-than-minimum-wage job" (and even more in subsequent years)- not to mention the additional impact of what you chose not to quote from my previous post:

Particularly considering the compounded effect of those [incremental active management cost] payments over 30+ years?

I know- before you mention it- that there is the question of "how much time do you estimate such a person will need before they, personally, feel comfortable investing" in such a way (my emphasis). Not everyone can do as I suggested- you asserted that was the case "for most people". Thus my request- where is your source for "most"?

With a little education and encouragement (such as some of us try to do here ... ), it is worth considering how many retail investors could save themselves a lot more than the equivalent of "minimum wage", and learn to take charge of their financial futures, instead of being kept in a state of ignorant dependency on money-spinning active management. Then again, whose interests would that serve, other than their own?

[jiHymas]

Not everyone can do as I suggested- you asserted that was the case "for most people". Thus my request- where is your source for "most"?

Talking to people, Yogi. Talking to real, live, actual people. In person, using my own name and putting my own reputation on the line before flapping my yap.

Explaining how, for instance, it is possible to lose money in a mortgage fund. Explaining, for instance, that it is OK to buy a fixed income instrument at a premium to par provided that the coupon is big enough to cover. Advising, for instance, that they should stay out of tech stocks and income trusts even though all their friends have made huge profits and they are looking at me as if they're not sure that I, personally, am not crooked and/or incompetent.

Not preaching to the converted under an assumed name, that's for sure.

[yielder]

With a little education and encouragement (such as some of us try to do here ... ), it is worth considering how many retail investors could save themselves a lot more than the equivalent of "minimum wage", and learn to take charge of their financial futures, instead of being kept in a state of ignorant dependency on money-spinning active management. Then again, whose interests would that serve, other than their own?

All winking aside, don't blame the state of ignorant dependency on money-spinning active management. Granted, they don't make it easy but the ultimate responsibility lies with the investor. People don't like stepping up to take responsibility for their actions/inactions especially when there's such low-hanging fruit on which they can offload responsibility. Nudge, nudge, ,

[YogiBear]

Not everyone can do as I suggested- you asserted that was the case "for most people". Thus my request- where is your source for "most"?

Talking to people, Yogi. Talking to real, live, actual people. In person, using my own name and putting my own reputation on the line before flapping my yap.

Explaining how, for instance, it is possible to lose money in a mortgage fund. Explaining, for instance, that it is OK to buy a fixed income instrument at a premium to par provided that the coupon is big enough to cover. Advising, for instance, that they should stay out of tech stocks and income trusts even though all their friends have made huge profits and they are looking at me as if they're not sure that I, personally, am not crooked and/or incompetent.

Not preaching to the converted under an assumed name, that's for sure.

Yep ... I directly answered your points and invited further debate on your part. But the response is personal nastiness while avoiding the issues. I've been to this dance before with you- I'm not interested in going again. You've got the thread to yourself ... carry on ...

[twa2w]

How much time is required to read, say, Bernstein's Four Pillars book, then go to one of several websites and discover a Canadian version of a basic "couch potato" portfolio allocation? Then to create a CAD-US-EAFE-Bond portfolio from no load bank index funds? And thereafter spend a couple of hours a year contributing and rebalancing?

Not only would that be a perfectly functional retail portfolio, but for anything more than a tiny investment, the savings of active-management incremental costs will provide a payback greatly in excess of a "worse-than-minimum-wage job" (and even more in subsequent years)- not to mention the additional impact of what you chose not to quote from my previous post:

Great strategy but how am I, as a tyro, to know that that is the book I should to read(not one fo the other 187 investment books at the library) and that a couch potato portfolio is an investing portfolio and not a farm strategy. How am I to know that I should listen to this strategy and not the one from the bank/broker/salesman/one my friend recommended. Isn't Fortune and Money magazine a good source of investments. its awfull nice to be able to appraoch it from hind sight but how much research, reading did you do over the last number of years before you figured out your curent approach. As a beginner and i put in my inheritance of 50M into one of your strategies how likley am I to stick with it when it is down to 30M after the first 9 months because it was just one fo the wrong times?? How do you know it is the right approach - you won't until long after it is too late. I see a whole lot of strategies on this board- will they work - time will tell.
Cheers
J

[Brix]

[...H]ow am I, as a tyro, to know that that is the book I should to read(not one fo the other 187 investment books at the library) and that a couch potato portfolio is an investing portfolio and not a farm strategy.

It's true: you may have to do some research, read, think, check and confirm. Especially regarding what claims are being made for a given investment strategy and the probability it will live up to those claims in relation to your own financial needs.

I see a whole lot of strategies on this board- will they work - time will tell.

That's a problem with comparison shopping in general. Nonetheless it's probably worth doing some serious comparison shopping before embarking on what are likely to be larger purchases with long-term consequences for your wellbeing.

It's an old saw that most people spend more time and energy choosing and planning a single holiday trip than they do on developing a lifelong financial plan and investment policy.

[drejmd]

Talking to people, Yogi. Talking to real, live, actual people. In person, using my own name and putting my own reputation on the line before flapping my yap.

Explaining how, for instance, it is possible to lose money in a mortgage fund. Explaining, for instance, that it is OK to buy a fixed income instrument at a premium to par provided that the coupon is big enough to cover. Advising, for instance, that they should stay out of tech stocks and income trusts even though all their friends have made huge profits and they are looking at me as if they're not sure that I, personally, am not crooked and/or incompetent.

Not preaching to the converted under an assumed name, that's for sure.

Yep ... I directly answered your points and invited further debate on your part. But the response is personal nastiness while avoiding the issues. I've been to this dance before with you- I'm not interested in going again. You've got the thread to yourself ... carry on ...

I personally enjoy reading both of these posters and feel they both have an enormous amount to offer me by way of education. I must say I don't like it when they fight, particularly when they are actually agreeing IMHO.

I think Mr Hymas is expounding the virtues of a financial advisor whereas Mr Yogi ( and Bylo up-thread) are poo-pooing the value of "active management" (ie. actively managed mutual funds).

The fun little book by Bill Schultheis, "The Coffeehouse Investor", while extoling the virtues of passive investing (ie. index funds), clearly states on page 122 that there is nothing inherently wrong with working with a financial advisor as long as "you never lose sight of what you hired her to do. ...to help you develop and maintain your long-term financial plan - a plan that should have at its foundation in the three principles of investing - asset allocation, approximating the return of the stock market average and reaching your savings goal."

And as far as citations go and in answer to the original poster's question about the popularity of indexing (ETFs as an example), Schultheis polled "some of the largest and most sophisticated investors in the country - the administrators of state pension funds" to "find out how much of its stock market money was indexed..."

washington 100%,california 85%, kentucky 65%, florida 60%, new york 75%, connecticut 84%

My conclusion: paying (and knowing what you are paying) for a knowledeable person to help me implement and maintain a reasonable plan is ....reasonable. Paying ( and usually not knowing what I am paying) for someone to beat the stock market is probably not reasonable. And spending about as much time a year learning about financial matters as my spouse spends planning our family vacations, seems to be all that I need, to be confident that (I think) I know what is "reasonable".

Cheers,

Doug, AKA drejmd

[Bylo Selhi]

I think Mr Hymas is expounding the virtues of a financial advisor whereas Mr Yogi ( and Bylo up-thread) are poo-pooing the value of "active management" (ie. actively managed mutual funds).

Exactly. And the two need not be mutually exclusive. There are advisors who have structured their practice in such a way as to be able to offer their clients indexing options and get fairly compensated for doing so. One such advisor is John deGoey, who has written widely about these and related issues. Here's a snippet from a recent article he wrote for Advisor's Edge Report:

My concern (and fund flows clearly support me on this) is that advisors tend to recommend active options nearly exclusively. When asked, many would insist that they are “independent professionals who help their clients make smart decisions with their money.” I beg to differ. I would be inclined to challenge all three ideas contained in that kind of statement. In my view, recommending actively managed products while consistently not recommending passive options is neither professional, nor independent nor intelligent.

Please do not bring in the red herring of “but advisors need to be paid.” Of course they do. I never suggested otherwise. All I’m saying is that it isn’t particularly true that an all-active approach contains one attribute from the list of independent, professional or smart – much less all three. My view, with great respect, is that most advisors take an “ask-meno-questions-and-I’ll-tell-you-no lies” type of approach to giving advice in the active/passive debate.

Rather than have frank discussion about the merits or pitfalls associated with either, they simply gloss over the discussion entirely and act as though active management is always the more sensible approach to take. Furthermore, the first broad principle of regulation is that full, true and plain disclosure of the facts necessary to make reasoned investment decisions be used. In a courtroom, witnesses are expected to tell the truth, the whole truth and nothing but the truth. My understanding is that advisors effectively face a similar test every day as it pertains to their fiduciary responsibility.

Let’s face it, as long as we rely on product suppliers to make compensation decisions and to collect our compensation for us, we cannot, and will not, be particularly independent, professional or smart.

Sadly one rarely sees discussion about these sorts of issues on advisors' forums and when they come up here they're immediately labelled as "advisor bashing." I wonder why that is?

And as far as citations go and in answer to the original poster's question about the popularity of indexing (ETFs as an example)...

In addition to the usual academic suspects there are many, e.g. Robert Shiller and Andrew Lo, who have made their careers from challenging EMH yet they freely admit that they index their own portfolios. Likewise fund managers like Peter Lynch and Ted Aronson, who while succeeding professionally as active fund managers, nevertheless recommend indexing. And then, of course, there's Warren Buffett. It's particularly important to understand why these people index and when it may be appropriate to try to beat the market and when it's not.

This forum isn't about proving that indexing is good and active management is evil. This forum is intended to help people to DIY as effectively as possible. But it also serves to help people recognize when, whether because of their temperament, the complexity of their situation, or some other reason, it's appropriate that they seek assistance from professionals.

Added: Here's a proponent of active management. He not only successfully ran a fundco that believes strongly in active management (PH&N) but now, in "retirement", he's launching a new one:

In general, I believe that patient, long-term investors don't need a lot of advice. It is more important that you keep your costs down. Occasional advice and low fees are a great combination. Having said that, I recognize that some people are in need of more help and that costs money.

[jiHymas]

I think Mr Hymas is expounding the virtues of a financial advisor whereas Mr Yogi ( and Bylo up-thread) are poo-pooing the value of "active management" (ie. actively managed mutual funds).

Close, but that's not it exactly.

I am simply stating that boring investments like index funds will never attract a following comparable to active management. That's neither a good thing nor a bad thing. It's simply human nature. And to blame the evil investment management business for it makes about as much sense as blaming the modelling industry and Hollywood for teenage dieting.

(Incidentally, every time I see another headline about the Horrors of Childhood Obesity, I keep wondering just what message the various Powers That Be are sending, in sum. Be skinny but don't think about it, fatso?)

The investment management industry, as a whole, will attempt to sell people what they want to buy. Sir John Templeton popularized mutual funds because he figured he could make a buck doing it. Michael Irwin is in the business because he figures he can make a buck doing it. This applies to any investment manager / advisor / back office clerk I can think of, with the exception of John Bogle, who got into the business because he wanted to help make the world a better place, out of simple human charity. Just like Mother Theresa.

On the whole, it's a good thing. I don't think anybody thinks that a step back to the old days would constitute economic progress - when, basically, Joe Average would put his money in a bank, full stop. If Joe Average can capture the equity premium for a MER of only 2%, he's way ahead of the game.

But but but! Joe Average could capture the equity premium for a cost of only 0.135469782% if he opened an account at Interactive Brokers and paid $7.75 commission + $1 for VWAP because that helps make sure the evil traders don't rip him off.

So what? Joe Average ain't gonna do it. Joe Average wants to be taken care of without having to understand anything or make any decisions. Just like me when something mysterious happens and my computer won't turn on. I'm very happy to pay somebody a ridiculous hourly rate to take my problem away. It's human nature. If you don't like it, complain to God. On the Computer Hardware Webring Forum, they feel sorry for unsuspecting innocents like me who are exploited by the machinations of the hardware repair industry. 'After all', they say, 'you just need Bergenwhatsis' book on motherboard repair and soldering iron! Two minutes and you're done!' You know what? The Computer Hardware Webring Forum can shove it.

So I get a little annoyed at paranoid and unsupported statements like:

OTOH almost all academics, pundits and money managers who don't have a vested interest in active management (and even a few who do) invest their own money in index funds and ETFs.

Now, I'm not going to go so far as to say that's a deliberate lie. After all, even if it's a complete fantasy, maybe it's just marketting spin, which is OK because other people put marketting spin on their statements so it must be ethical right? But I will ask for an actual cite and draw my own conclusions if I don't get one.

Later in this thread, some anecdotal information not contrary to the thesis quoted above was provided:

"some of the largest and most sophisticated investors in the country - the administrators of state pension funds"

administrators of state pension funds? largest, sure, but the most sophisticated investors in the country? hahahhahahaaahahahaha! Somebody should advise Mr. Schultheis that the chief objective in being the administrator of a state pension fund is not to screw up. Nobody ever got fired for buying IBM.

(I was a little surprised to see California on the list, considering CALPERS' activism [they own a lot of private equity and hedge funds, by the way]. However, I do understand that CALPERS made a conscious decision that their version of active managment was going to be shareholder activism rather than shareholder trading. Given their size and clout, that's not an unreasonable view).

So sometimes I get annoyed. I also get annoyed when people are so utterly clueless as to suggest that one book (prescribed by the State, presumably, so that people won't get confused by evil conflicting ideas) and a few hours a year are all that's required for expertise in investing. It's the most patronising, arrogant worldview possible. 'People should simply follow my plan because it's obviously the best plan possible and you don't need to know anything before reaching that conclusion. And they should trust me, because I'm cleverer than the average bear!' When people say silly things, I treat them like silly people.

I also get highly annoyed at Internet anonymity. Things are so easy when you're anonymous and don't have to take any responsibility. I'll have a lot more respect for Bylo & Yogi when they get a license, convince real people that their advice is sound and take the heat when the market's down. Until then ... well, they don't have sufficient confidence in their own statements to put their own names behind them. So who cares?

The wonderful thing about the Internet is that it allows people of all different views to meet in a single place. Wars and prejudice will become a thing of the past once we all get to know each other, right?

Wrong. The internet simply allows a greater specialization in crony-dom. Instead of talking about stocks once a week with Bill down the street, we can talk about stocks all day long on this forum, or, if we wish, a forum dominated by left-handed Marxists who like looking at pictures of girls wearing mittens. In practice, the 'Net simply allows one to spend more time with people who think exactly the same things.

Most, if not all, people on this forum are perfectly capable of looking after their own investments (even if they're just here to ask questions. Wanting confirmation is also human nature), and happier doing so than they would be by blindly writing cheques to buy whatever was advertised most heavily on TV. And they certainly will do better, on average, than those paying a fee will do. Good for them. To leap from that observation to a conclusion that this one size will fit all is simply arrogance.

[Norbert Schlenker]

So what? Joe Average ain't gonna do it. Joe Average wants to be taken care of without having to understand anything or make any decisions. Just like me when something mysterious happens and my computer won't turn on. I'm very happy to pay somebody a ridiculous hourly rate to take my problem away. It's human nature. If you don't like it, complain to God. On the Computer Hardware Webring Forum, they feel sorry for unsuspecting innocents like me who are exploited by the machinations of the hardware repair industry. 'After all', they say, 'you just need Bergenwhatsis' book on motherboard repair and soldering iron! Two minutes and you're done!' You know what? The Computer Hardware Webring Forum can shove it.

What he said.

if we wish, a forum dominated by left-handed Marxists who like looking at pictures of girls wearing mittens.

Where is that forum? Inquiring minds would like to know.

[mikester]

Wow, some heavy duty posts...King Kong vs Godzilla.

I wish I had something intelligent to add to the thread.

[YogiBear]

Geez, there I was thinking I was done with this thread, and lo!, along comes the greatest temptation since, oh, who knows when. I know I'll regret it in the morning, but for tonight, let's have fun. Now, where to begin? At the start, 'suppose ...

The investment management industry, as a whole, will attempt to sell people what they want to buy.

Bull. The "investment management industry, as a whole, will attempt to sell people" what they are able to sell- just like any other industry. And if no one wants to buy the latest profitable idea, then best efforts will be deployed to create sufficient demand- just like any other industry. It is just "human nature" to see one's own gang as somehow better than everyone else- that doesn't make it true.

I don't think anybody thinks that a step back to the old days would constitute economic progress - when, basically, Joe Average would put his money in a bank, full stop. If Joe Average can capture the equity premium for a MER of only 2%, he's way ahead of the game.

Straw man alert! The debate is not between wanting to "step back to the old days ... when, basically, Joe Average would put his money in a bank" and an MER of 2%. That is a false argument. The point is whether "Joe Average" (isn't somebody complaining about patronising attitudes? "Joe Average"? That's not patronising?) "can capture the equity premium for a MER of only [sic] 2%", or whether he "can capture the equity premium for a MER" of 0.25% or less. I trust that the long term benefit of that 1.75% MER advantage is evident.

So I get a little annoyed at paranoid and unsupported statements ...

Now, I'm not going to go so far as to say that's a deliberate lie. After all, even if it's a complete fantasy, maybe it's just marketting spin, which is OK because other people put marketting spin on their statements so it must be ethical right? But I will ask for an actual cite and draw my own conclusions if I don't get one.

Later in this thread, some anecdotal information not contrary to the thesis quoted above was provided ...

I recall an over-generalized and "unsupported statement" upthread to the effect that "the time required to become comfortable with investing (if only in ETFs) is sufficiently long to make it an incredibly boring worse-than-minimum-wage job for most people."

Now, I'm not going to go so far as to say that's a deliberate lie. After all, even if it's a complete fantasy, maybe it's just marketting spin, which is OK because other people put marketting spin on their statements so it must be ethical right? But I will ask for an actual cite and draw my own conclusions if I don't get one.

Later in this thread, some anecdotal information not contrary to the thesis quoted above was provided concerning conversations about investing with several people.

Tell me- are you familiar with the definition of hypocrisy, or shall I spell it out for you?

I also get annoyed when people are so utterly clueless as to suggest that one book ... and a few hours a year are all that's required for expertise in investing.

Yet another straw man alert! No one has suggested that "expertise in investing" is obtainable in that fashion. That is a false argument. The point is that a retail investor does not need to become an expert in order to put the odds of long term investing success on their side. Some basic knowledge- such as can be acquired through several books- and some independent thought provide a perfectly adequate starting point for many people. Some will then spend additional time to plan and implement their own portfolio, while others will hire a fee-for-service advisor to carry out the planning for them. In either case, the only complaints one hears are from the investment management industry intermediaries who do not get their usual series of cuts ...

I also get highly annoyed at Internet anonymity. Things are so easy when you're anonymous and don't have to take any responsibility. I'll have a lot more respect for Bylo & Yogi when they get a license, convince real people that their advice is sound and take the heat when the market's down. Until then ... well, they don't have sufficient confidence in their own statements to put their own names behind them. So who cares?

Who cares? You do, apparently! Oh, but- wait, what's this? At the bottom of every one of your 1000 or so posts? ... Why, it's:
_________________
www.himivest.com ..... www.prefshares.com
www.prefinfo.com ..... www.prefblog.com

I guess if your handle was jiBigmouth instead of your name, that would sort of defeat the purpose of covering every post with advertisements for your business, wouldn't it?

Oh, and I'm quite intrigued with your little suggestion that you will have "a lot more respect for Bylo & Yogi when they get a license, convince real people that their advice is sound and take the heat when the market's down." So- only licensed professionals can disagree with you without incurring your scorn? Otherwise, the ignorant plebes had best keep their contrary mouths shut, lest the righteous wrath of jiHymas descend on them from on high ...?

Most, if not all, people on this forum are perfectly capable of looking after their own investments ... and happier doing so than they would be by blindly writing cheques to buy whatever was advertised most heavily on TV. And they certainly will do better, on average, than those paying a fee will do. Good for them. To leap from that observation to a conclusion that this one size will fit all is simply arrogance.

Final straw man alert! No one has concluded that "one size will fit all" in retail investing. That is a false argument. The point made was that it was possible to invest at much lower cost than that attributable to active management, and in particular to do so without requiring a great input of time and effort. Nowhere was it suggested that it was necessary to do so- except by you, of course.


So it ends. Shame. That could have been better- in fact, it was almost too easy. Oh well, good night all!

[Bylo Selhi]

Geez, there I was thinking I was done with this thread, and lo!, along comes the greatest temptation since, oh, who knows when. I know I'll regret it in the morning, but for tonight, let's have fun. Now, where to begin? At the start, 'suppose ...

Thanks! I intentionally held back in order to give you the chance to make a more eloquent response than I ever could. You didn't disappoint

So, just a couple of comments.

I also get highly annoyed at Internet anonymity. Things are so easy when you're anonymous and don't have to take any responsibility. I'll have a lot more respect for Bylo & Yogi when they get a license, convince real people that their advice is sound and take the heat when the market's down. Until then ... well, they don't have sufficient confidence in their own statements to put their own names behind them. So who cares?

I almost regret I didn't use a name like Bob Smith instead of Bylo Selhi when I started posting on the Internet. That way, to people like Mr Hymas, I could appear to be using my "real" name rather than a pseudonym. That presumably would have addressed his objection to anonymity. (Although it would make it a lot harder for people to find my website via Google.)

As for credentials, hasn't Mr Hymas railed in previous threads against those who use the letters after their name to bolster their arguments? So why must "Bylo & Yogi ... get a license" in order to "convince real people that their advice is sound"? I submit that the people who read my posts can make their own judgements about the quality and sincerity of my contributions just as they can about yours or anyone else's.

As for responsibility and accountability, judging by (a) what I read in the media that's written by some (by no means all) highly credentialled advisors and (b) how few credentialled financial advisors ever get sanctioned by their SROs or xSCs, I don't quite see how adding a CFP to my name would make any practical difference on that front.

So what? Joe Average ain't gonna do it. Joe Average wants to be taken care of without having to understand anything or make any decisions...

What he said.

Going by the "data" that's bandied about by the industry during RRSP season, "Joe Average" has maybe $25k in investments and grows his portfolio by maybe $1,000 per year. Is that the profile of the sort of investors to which this site is supposed to appeal? Sure, we'd like to see more of them here, but just how realistic is that?

So what if "Joe Average" won't necessarily come here or go to "the Computer Hardware Webring Forum" or the one on car maintenance or dieting, etc. Some will. And those who do will be well-served by the advice and encouragement they get from us. If I didn't believe that I wouldn't spend the sort of time I do around here. And neither, I suspect, would you.

To be clear, I value the contributions that Mr Hymas makes here on preferreds and the insights into the mechanics of securities industry and related topics that he shares with us. Don't take this in any negative way, but I'm curious, why do you participate here?

[Norbert Schlenker]

So what? Joe Average ain't gonna do it. Joe Average wants to be taken care of without having to understand anything or make any decisions...

What he said.

Going by the "data" that's bandied about by the industry during RRSP season, "Joe Average" has maybe $25k in investments and grows his portfolio by maybe $1,000 per year. Is that the profile of the sort of investors to which this site is supposed to appeal? Sure, we'd like to see more of them here, but just how realistic is that?[

So what if "Joe Average" won't necessarily come here or go to "the Computer Hardware Webring Forum" or the one on car maintenance or dieting, etc. Some will. And those who do will be well-served by the advice and encouragement they get from us. If I didn't believe that I wouldn't spend the sort of time I do around here. And neither, I suspect, would you.

True but that doesn't detract from James' point here, which is that there appear to be about as many people interested in doing a good job of DIY investing - by reading good, not bad, books and coming to forums like this to talk things out - as there are people interested in soldering motherboards or rewriting fsck from scratch.

Most investors do not have a clue and do not want to have a clue. Either they are completely passive, in which case their money is sitting in GICs at the bank - no capturing the equity premium there, as James said - or they go buy funds with the help of a planner - giving up a pile of the equity premium in fees and a third of their retirement accounts over time - or they spec their brains out - and end up five years later tail between legs doing GICs at the bank.

As Yogi said, there's a choice between capturing the equity premium less 0.25% and less 2%, the difference is not that hard to keep and the effect is in the end huge. But let's not fool ourselves. Books like 4 Pillars and forums like this one are being used by 0.01% of the population and the other 99.99% either will not or cannot. For 99.99% then, the choice is between the equity premium less a quarter, which involves real work, or a significant haircut. The reason I say it involves real work is that, although successful investing is in the end simple, the process of getting to and having confidence in that simple answer is not.

Many investors cannot get there. They might be incapable of understanding the argument. They might be too lazy. They might be too busy. They have to have a coach or, if you like, an expensive bully to get them to do the right thing. The coach will cost them a fortune, which none of us posting here think is a good thing. But if there's no coach, then it is presumptuous to think that Joe Average will end up on the efficient frontier instead of rolling GICs at the bank.

[Shakespeare]

The popular books are get rich quick. What most of us do here (or have done) is get rich slow. It lacks pizazz and will never sell.

People don't want to hear about watching expenses and saving money.