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GET YOUR MONEY BACK! Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis. • View topic - Where NOT to invest, Some What TO do's?

Where NOT to invest, Some What TO do's?

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Re: Where NOT to invest

Postby admin » Mon Jan 03, 2011 10:53 am

http://www.nytimes.com/interactive/2011 ... aphic.html

this link will send you to a great stock market performance chart, from Ed Easterling, who runs an investment management and research firm from Corvallis, Oregon.

It shows annualized returns for the S.& P. 500 for every starting year and every ending year since 1920 — nearly 4,000 combinations in all. READ ACROSS THE CHART to see how money invested in a given year performed, depending on when it was withdrawn.

When I told my daughter to invest in equities at her age of 20 something, for her "buy and hold forever" portfolio, this is partially the logic. While there may be times when equities will disappoint, no doubt, there are many opportunities for a better long term rate of return from owning quality companies, rather than loaning your money to same.

check out this well done graphic
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Re: Where NOT to invest

Postby admin » Sun Jan 02, 2011 11:05 pm

picking up the argument against "home country bias" investing in this post.................

Here we are again, and the argument goes like this:

1. Canada is less than 3% of the financial world
2. Canada (according to my own experience) is completely financially self regulated, meaning that the foxes get to hire their own referees and police their own behaviours. (If you do not believe me, I understand completely. Not everyone has walked a mile in my shoes)
3. New (over the holidays) reading of Prof Randall Morck at the University of Alberta tells me what I suspected, but in a much more professional and quality researched manner............namely, that Canada is held back by a rather incestuous "family" style of corporate share ownership, so intertwined as to bend the system, so powerful as to be able to mold things very much to their own advantage. It places a Canadian company investor at a competitive disadvantage. I urge Canadian prone investors to read his study titled:

Some Obstacles to Good Corporate Governance in Canada and How to Overcome Them
https://business.sitecore.ualberta.ca/R ... anada.ashx

His web site is found here
http://www.business.ualberta.ca/RandallMorck.aspx

So, to recap, if you invest 100% of your lifes work in a country that comprises only 3% of the financial globe, you "may" be missing some diversity in your portfolio. (some argument can be made for the positives of the "resource" sectors of Canada, but I am not here to argue the little details, just trying to get the concept right......own some resource if you like, but you will still be stuck with crooks for governance partners with many canadian resource partners)
Canada imports a great deal of its consumables (70% ?) and your retirement standard of living might depend on investing in a broader section of the globe. Imagine it this way. Would you put all your money in Mexico? No. Well the last time I looked Mexico was even or a slightly larger percentage of global GDP than we are here in Canada.

Second, financial regulation in Canada is a "wild west", "winner steal all" marketplace where the RCMP cannot even find their own cars in Calgary when it snows enough. They can never, ever, ever find and prosecute medium or larger sized financial crimes. I will give $100 reward for every criminal prosecution someone can find me where the RCMP have jailed a person for a securities crime over $100 million. They can catch a $5 million dollar bad apple, but when the big boys come out to play, the RCMP close their files.

Third, and thanks to Prof Morck and his global studies about governance etc, the game is clearly stacked against minority shareholders in Canada. You are not getting a fair deal with the Bronfmans, the Desmerais, the rest of the Canadian elite holding majority ownership in most quality Canadian companies. They control. You do not. Control wins. Read the study.

Conclusion. It is not safe to invest in any country that is
(a) financially a pipsqueak
(b) unwilling to police the markets
(c) tightly controlled by a few famillies
Any corrections, arguments, alternate points of view welcome.
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Re: Where NOT to invest

Postby admin » Sun Jan 02, 2011 9:28 pm

More to come about investing in Canada overall.......my daughter just spent time with me asking me this question......she has a new employer pension plan to invest in and it brought up some interesting things.

Her first question was "dad, what should I invest in?"

She showed me her employers plan, and the choices she had to choose from. I have to say it was quite reasonable. Why? Because she is with a large employer and they have a well negotiated set of investment choices (with a major financial firm). The thing that impressed me most was that all the management fees came in under about 1.6%.
I told her that my first choice would be to AVOID like the plague ANYTHING that smacked of high (retail) sales commissions or management fees. Why? Because an additional 2% fee will suck fully half of your future retirement value away from you over 35 years. Go look it up. Search for the rule of 72 and burn it into your head. Or retire poor and let the banks be rich on your life's work. Your call.

So I was happy with her choices of funds, and costs. (the lowest fees I have ever seen were 1/10th of one percent for investment management, but that was for a multi billion dollar Alberta Heritage Savings Trust fund.) Forget that end of the spectrum, but also forget ever paying 2% to 2.5% fees ever again. that is a license to steal from clients. Assante put out some proprietary funds with fees even much higher than this a while back, and they basically built a fortune on the backs of trusted clients........sold out for nearly a billion dollars thanks to this "taking advantage" of the trust of those they supposed to serve. But I digress.

Next on the list was to determine which fund, or blend of funds to invest in. With a very young person, we decided to tend toward equities on he hope that the world is not coming to an immediate end, and that "owning" might still beat "loaning" over the long term. I have no idea if true or not, but this discussion might take longer than allowed here to figure out. We will pick it up another time. Suffice it to say that only left "where" to invest. By where I mean geographically where, Canada, USA, World etc., etc. This was the easiest one for me, and the one most easily and most often gotten wrong. Many people suffer from a home country bias, like rooting for the town sports team etc. Not smart with your money. It might be OK to root for the Flames if they play in your home town, but to invest locally due to this bias might cost you. I think it might be another one of the largest determining factors in how much you have to retire on.

I will stop here and pick up the argument against "home country bias" investing in the next post.................
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Where NOT to invest, Some What TO do's?

Postby admin » Sun Jan 02, 2011 9:15 pm

Sorry for the title, but I am not going to get into the cluster of giving, discussing, predicting, or promoting investments. It is a waste of time and calories to have an internet discussion of this kind. One on one discussion with people is the only way. There are just too many personal variables.

However, 30 years of experience, some research, some hard knocks etc, should allow one to freely discuss where NOT to invest and why. Anyone can benefit from reasonable warnings, and no one need heed them if they do not agree. I can sleep at night though by telling people where the traps lay, and how to avoid them. I will try to do so below.

First and most obvious, the entire basis for this web site seems to conclude that investing with any person who claims to be an "advisor", while truly being a "salesman" is a dead giveaway. Run for the hills, you are being screwed even if you get a free coffee, lunch and a birthday card from your very nice advisor. I worked in this category for 20 years and I know a bit about the topic. (yes there are some 10% to 20% of those in the business who can and will try to place your interests ahead of their own.......trying to find them is nearly impossible.......and when they retire you are left in the hands of another predatory genius, or worse in the hands of the predatory financial firm who does not have your best interests at heart)
(this also means dont bother investing with any Canadian bank......they will only have a twenty year old selling you bank products under the guise of "advice".....really, really bad premise and you should avoid it)
(If you "have" to deal with a Canadian bank, you might want to own the damn thing, not buy their products or their advice)

I will fill in some more blanks over time, but until then check out the flogg topic titled "tricks of he trade" on this site, and "best practices" etc. It will hopefully give you the benefit of most of what I have learned over the years. I am glad if one person can protect themselves properly from financial predation by professionals. That is my schtick, that is what I do.

More to come about investing in Canada overall.......my daughter just spent time with me asking me this question.......to be continued............
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