As any investor is well aware, keeping up with global politics, macro-economics, regional currency fluctuations plus the vagaries of sectors and individual stocks is almost a full-time job. The wealth of digital sources available on the web and through iPads, smart phones and the like is both a blessing and a curse.
Of course, if you’re strictly a purist “index” investor, you can largely ignore the noise as it relates to making individual portfolio adjustments, apart from occasional rebalancing of asset classes. However, based on the feedback MoneySense got from Preet Banerjee’s article on Core and Explore investing, I suspect more investors — even occasional indexers — are much more active in making tactical portfolio adjustments.
Bottom line is most of us need to make some effort to keep up with economic and financial developments around the world. But I’ve found the very ubiquity of information and technology can be harnessed to our advantage, no matter how busy we are. In my own case, I have a commute of almost an hour in each direction, much of it on the subway.
I’ve found that various financial audio (and video) podcasts downloaded to an iPhone (and most other devices) is a useful way to absorb information while commuting or exercising, or even waiting in the many lineups life can subject us to over time. Here’s a rundown of some daily and/or weekly podcasts I find useful:
BBC World Service Global News: This is a handy global affairs roundup of 20 to 30 minutes that is available every 12 hours.
BBC World Business Report: a less frequent podcast of different durations more focused on economics, business and investing.
BBC Documentary Archive: long (25 to 40 minutes) audio documentaries that are indepth on a single topic (a recent one was on Hillary Clinton)
Bloomberg on the Economy: Usually single-source summaries of between 5 and 20 minutes with various economic and investment experts around the world. Alternative is Bloomberg — All Podcasts.
FT Money Show: Weekly 20-minute podcast from the Financial Times
The Economist All Audio: 7 to 15 minutes most days often on single world political events and occasional financial topics. Those who subscribe to the iPad edition of the Economist can also download audio of the entire weekly magazine: good for absorbing world events on long walks or treadmill sessions!
60 Minutes Podcast: Weekly 45-minute full-audio podcast of the famous TV show.
Jim Cramer’s Mad Money; 45-minutes daily in the week: full video of Cramer’s manic but often insightful take on (primarily) the U.S. stock market. This guy is the “anti-indexer” but does sometimes recommend ETFs outside the US market. He’s been preaching diversification and lately has been positive on both gold (the GLD ETF) and Canada broadly.
Motley Fool Money: Weekly audio show just under 40 minutes: excellent wrap-up of the week’s major events in the U.S. stock market, usually with 3 or 4 guests. Good to listen to while exercising on weekends: most recently I listened to it while grocery shopping!
The Disciplined Investor: Weekly hour-long podcast by Andrew Horowitz, usually with special guests.
NPR Planet Money: 20 minutes or so every few days on quirky topics like “why buying a car is so awful”
The Suze Orman Show: Weekly 45-minute full video of Twitter’s most-followed personal finance guru.
The Dave Ramsey Show; 40 minutes but not having listened to this one yet, can’t comment further.
Mostly Money, Mostly Canadian: 20 to 40 minute occasional podcast by Preet Banerjee and the title aptly sums it up. Various guests, including an appearance by myself.
Financial Post: Various audio podcasts from staff writers from Canada’s daily financial newspaper.
As noted in my Wealthy Boomer blog here, American indexing guru and author Charles Ellis [seen in photo on left] gave Canadian money managers both a history and arithmetic lesson on Tuesday. His point in a nutshell is that annual mutual fund Management Expense Ratios (MERs) of 2.5% or so (in Canada) are “terrible” but even the investment counselling fees of 1% (plus or minus 50 basis points) are also excessive.
These numbers may seem small when expressed as a percentage of assets but Ellis said the way to look at it is as a percentage of the return generated by active managers. So even if the active manager could generate a pre-fee return of 10%, the 2.5% fee takes that down t0 7.5%, so amounts to a 25% reduction of the return: or ten times the 2.5% figure that seems so insignificant. If returns are more likely pre-fee 6 or 7%, then a 1% fee takes it down to 5 or 6%, and amounts to a 15% reduction of return, he said.
Ellis himself prefers market-cap weighted index funds or ETFs of firms like Vanguard Group (which recently set up shop in Canada.) Investors can buy the “market” for as little as 10 basis points (0.1%), which long ago was a figure that customers of money managers were accustomed to pay. But as he related in his Monday talk in Toronto, customers didn’t balk when one firm hiked it to 25 beeps, others followed suit and eventually even a full 1% didn’t seem out of line.
This cost-conscious approach consistent with Findependence Day model
None of this should surprise readers of this blog, since the Findependence Day model cuts costs to the bone by emphasizing use of discount brokerages to cut commission costs, and then implementing trades of ETFs or index funds, the fees of which will range from about 8 or 9 beeps to 55 beeps for most mainstream ETFs, and perhaps a bit more for some esoteric ones. Of course, you can also try and pick your own individual securities, although Ellis would probably call that the “loser’s game,” as per the title of his book, Winning the Loser’s Game.
The third point is that you can still benefit from good advice by engaging a fee-only financial planner who charges by the hour, month, quarter or year, or perhaps by the project (which might be a financial plan or portfolio assessment). You can also go the fee-based route but keep in mind that a 1% fee will be on top of the underlying MERs of the ETFs, which could easily run 1.5% or so. For some investors, especially buy-and-hold investors who don’t trade frequently, a traditional commission-based full-service advisor could make sense from a cost perspective, at least relative to a high-fee-based alternative.
– 61 –