I came across an article promising 101 ETF investment tips from 57 ETF experts (but it appears to not be online any more). While debating whether I thought I could slog through such a long article, I decided to focus on just those tips that I don’t follow. If I have a good reason not to follow them, I should be able to explain it. And maybe I’ll find a gem among the tips that changes my mind about the way I invest.
Talking about the tips I do follow is like having a meal with like-minded friends. It’s an enjoyable way to spend time, but that’s not my purpose here. So here are just those tips I don’t follow.
4. Allocate your age as your percentage in fixed income.
I don’t have any bonds at all in my long-term savings. I only use safe fixed income investments for money I’ll need in less than 5 years. I plan to carry this approach into retirement by holding 5 years of my spending in guaranteed investments and holding the rest in stocks. I expect my allocation to fixed income to be less than my age indefinitely, but I don’t recommend this approach to others. Each person’s appetite for risk and employment situation are different.
5. Save at least 10% of pay into a target date fund.
I prefer to save much more than 10% of pay during good times because bad times are inevitable. I’m not interested in target date funds. I see the beginning of retirement as just a phase change in a lifetime of investing rather than as a final destination. I prefer to control my allocation to fixed income myself.
22. Stop comparing your investment returns to your neighbors’ or that of a specific index.
I agree it makes little sense to compare your returns to your neighbours’ returns. After all, most of your neighbours don’t know their investment returns and will likely make up wild overestimates. However, I’m leery of those who say not to compare your returns to an index. It’s true that comparing your returns to the wrong index is a bad idea. For example, don’t compare your portfolio of 5 Canadian balanced funds to the S&P/TSX. But you could compare this portfolio’s returns to a 50/50 blend of a Canadian bond index and the S&P/TSX. Whenever I hear an advisor say not to compare your returns to an index, I suspect the advisor might be trying to hide huge fees.
39. Buy and hold investing is dead and only works in bull markets where inflation is a constant.
I hear this nonsense all the time from those who try to sell their ability to beat the markets on your behalf. Fortunately, the very next tip is that buy-and-hold investing isn’t dead. Subsequent tips call buy-and-hold investing “not great in 2015,” “better than the alternative,” “the worst way to invest, except all the other methods that have been tried so far,” and my favourite “boring and the only proven long term winner.” I guess the compilers of this list didn’t mind including contradictory views.
82. Over a 20-Year Time Horizon, I’m Bullish On The Nasdaq 100 (QQQ).
This is just one of a series of items in the list where advisors talk about areas where they think there will be long-term investment success. I stopped trying to beat the market years ago. I much prefer to just own everything with very low costs and bet on human progress.
I didn’t find a gem that changes my mind about my investment approach, but I still find it useful to read the ideas of those who disagree with me from time to time. Doing this too often can be exhausting, but doing it too little keeps you from learning. After all, I would never have switched to index investing if I had just read about the latest ways to beat the market.