# The best performing accounts



## james4beach (Nov 15, 2012)

This is from a few years ago, but still relevant, and I just stumbled into this recently. There was an anecdote shared by an asset manager: Fidelity (the US brokerage) analyzed which customer accounts had performed the best, and found that the best performing accounts were held by people who forgot about the account, and therefore did no buying or selling.

Article at AOL
Article at Business Insider



> Think about the ramifications of these stories. These investors took no advice from a "market-beating" broker or adviser. Considered no financial news. Made no effort to time the market. Made no additions to or subtractions from their portfolios. They engaged in no analysis of any kind. And yet, it worked. Could this be the key to investing success?


Related to this, Richard Bernstein also shares data on investor returns over 20 years. The average investor underperforms virtually every asset class, even cash! This shows that investors make very poor timing decisions when trading between stocks, or trading between assets.

I suppose the message is ... try to be as "hands-off" as possible with your investment accounts. The less you touch them, the better you'll perform.


----------



## Money172375 (Jun 29, 2018)

I’ve mentioned before....I witnessed this behaviour all the time while working in a branch bank. Staff would routinely trade in the opposite direction of customers.......selling, when they were buying and vice-versa. Going against the herd was very fruitful.

I on the other hand, started my first pre-authorized purchase plan (PAP) in my early 20s......on the advice of one of the personal bankers. Increased the amount each year with my pay increase and eventually started multiple savings plans for education, retirement, vacations, future car purchases. I’m of firm belief that Initiating a PAP and increasing The amount over time is the #1 tactic the average Canadian should employ.


----------



## james4beach (Nov 15, 2012)

I'm guilty of this too. I started investing ~ 20 years ago, but was far too active for many years. I was long the Canadian index for a while, then decided it would be smarter to dabble in individual stocks and options. (Spoiler: it was *not* smarter)

I was 'unfocused' for the first 14 years or so. Things improved only when I decided to commit to a specific plan.

It all seems so easy now in hindsight. How embarrassing that it took me 14 years to catch on to the fact that I was harming my returns by stumbling through the markets without a plan / policy.


----------



## GreatLaker (Mar 23, 2014)

Jack Bogle, founder of Vanguard Group said it this way:

Don’t Just Do Something, Stand There! (buckinghamadvisor.com)


Jack Bogle said:


> _While the interests of the business are served by the aphorism “Don’t just stand there. Do something!” the interests of investors are served by an approach that is its diametrical opposite: “Don’t do something. Just stand there!”
> 
> –Jack Bogle, founder of The Vanguard Group_


----------



## Juggernaut92 (Aug 9, 2020)

james4beach said:


> ound that the best performing accounts were held by people who forgot about the account, and therefore did no buying or selling.


This is why I started a post asking how often people check their investment accounts 



james4beach said:


> Things improved only when I decided to commit to a specific plan.


Can you elaborate on this a bit? Do you now have an asset allocation? Also, do you mainly go for whole market ETFs such as vanguard?


----------



## james4beach (Nov 15, 2012)

Juggernaut92 said:


> This is why I started a post asking how often people check their investment accounts


Good point! But checking (viewing) the account should be harmless, right? I think the harm to the long term returns comes from placing sell orders and re-organizing the investments.

So it should be safe to peek and look, as long as you don't sell anything!



Juggernaut92 said:


> Can you elaborate on this a bit? Do you now have an asset allocation? Also, do you mainly go for whole market ETFs such as vanguard?


Yes I have a clear plan. It's traditional asset allocation based on indexes. Mine is a bit weird, with 30% stocks, 50% bonds, 20% gold. The stocks are equal weights TSX index and S&P 500 index.

I haven't used whole market ETFs. In Canada, I'm actually mostly in XIU (the TSX 60) which is quite narrow, but I feel this is a very solid ETF. There isn't much of a difference from XIC.


----------



## Juggernaut92 (Aug 9, 2020)

james4beach said:


> Good point! But checking (viewing) the account should be harmless, right? I think the harm to the long term returns comes from placing sell orders and re-organizing the investments.
> 
> So it should be safe to peek and look, as long as you don't sell anything!


That is the interesting thing. I have been reading quite a few books on stocks and something common I heard was not to check your stocks/account too often. One of the reasons being that if you do look often you may be tempted to sell or buy other things based on the small regular market fluctuations which will hurt your portfolio long term. For me I think that makes sense but I know there are people who have an iron will and wont let prices fluctuating regularly bother them.

I see. That is an interesting mix and some diversification as well.


----------



## Pluto (Sep 12, 2013)

I agree completely with the premise of this thread. I have made money trading, but I also lost as well. When it was all said and done, all the drama and effort was not worth it. In recent years I have very low turnover in my stocks, lower actually than the s/p 500 index. So actually I am more passive than passive etf indexers. I do very well with little effort and a lot less drama. Index etf's are not passive. Reportedly the s/p 500 averages 22 turnovers per year. So based on the premise of this thread, that turnover according to automatic rules contributes to less performance, not more.


----------



## james4beach (Nov 15, 2012)

Pluto said:


> I agree completely with the premise of this thread. I have made money trading, but I also lost as well. When it was all said and done, all the drama and effort was not worth it. In recent years I have very low turnover in my stocks, lower actually than the s/p 500 index. So actually I am more passive than passive etf indexers. I do very well with little effort and a lot less drama. Index etf's are not passive. Reportedly the s/p 500 averages 22 turnovers per year. So based on the premise of this thread, that turnover according to automatic rules contributes to less performance, not more.


My results have also improved, the more passive I have gotten. I still have stock picks but these too are more passive, with way less turnover than I used to have.

I'm not convinced that just looking (peeking at) your portfolio is a harmful activity, as long as one can avoid placing trades. It's the trades (notably the selling) which hurts, not the peeking.


----------



## doctrine (Sep 30, 2011)

These days, you would think all of the new investors are achieving 300%+ returns this year on not just the Teslas, but telemedicine stocks with little revenue, and psychedelic stocks with zero revenue. There are some people who have gambled well. Unfortunately less heard from are those with garbage useless paper held in trading accounts whose best value is the lesson learned but hopefully not before real money is lost or the person leaves the market entirely, which does happen unfortunately.

Perhaps one of the most dangerous thing are the private discords and facebook groups and other groups focused on single stocks. They are either very toxic to majority opposing viewpoints, or so one sidedly bullish that everyone expects the moon and 1000%+ returns in a very short period of time. And they disappear once the story firmly ends leaving people holding garbage and wondering what happened.

Active trading is definitely not for me. A majority of my portfolio doesn't trade annually and the portion that does is typically invested from 3 months to several years. It's also good for mental health to not have to watch the irrationality of stock trading from minute to minute. It will drive you crazy.


----------



## Jimmy (May 19, 2017)

A good buy and hold portfolio will easily beat these indexes though. You could have bought Berkshire Hathaway and held it if for any length of time and beaten the meager returns of the S&P.


----------



## GreatLaker (Mar 23, 2014)

Jimmy said:


> A good buy and hold portfolio will easily beat these indexes though. You could have bought Berkshire Hathaway and held it if for any length of time and beaten the meager returns of the S&P.


Yabbut what percent of the population at large have the skill to buy a good portfolio and the tenacity to hold it?


----------



## Jimmy (May 19, 2017)

GreatLaker said:


> Yabbut what percent of the population at large have the skill to buy a good portfolio and the tenacity to hold it?


That is true. But people who have the time and inclination will realize this eventually.


----------



## james4beach (Nov 15, 2012)

doctrine said:


> These days, you would think all of the new investors are achieving 300%+ returns this year on not just the Teslas, but telemedicine stocks with little revenue, and psychedelic stocks with zero revenue. There are some people who have gambled well. Unfortunately less heard from are those with garbage useless paper held in trading accounts whose best value is the lesson learned but hopefully not before real money is lost or the person leaves the market entirely, which does happen unfortunately.
> 
> Perhaps one of the most dangerous thing are the private discords and facebook groups and other groups focused on single stocks. They are either very toxic to majority opposing viewpoints, or so one sidedly bullish that everyone expects the moon and 1000%+ returns in a very short period of time. And they disappear once the story firmly ends leaving people holding garbage and wondering what happened.


These people may have "gambled well" for the last 6 or 12 months but their performance over 5 or 10 years will be another matter.

There's a ton of overconfidence these days and many new investors who have never been through a bear market. It all seems so easy to them and I know why they feel this way. I just looked at my own high-risk stock portfolio and saw that my 1 year performance is 20%, more than triple the TSX performance. It's easy to get carried away with this and think that I'm a stock picking genius, or that it's very easy to pick stocks (and get rich quick)

But I've been through two bear markets and I know what happens when this all goes south. What worked at one time stops working. You discover that you really just had a high beta portfolio the whole time, or were overly concentrated in very few stocks, or overly concentrated to one sector.

Mr Market slaps you for being stupid and takes your money as punishment. Then you limp away from the online message boards, licking your wounds, and of course... at this point the speculators stop bragging to everyone.

I have a few friends who used to be extremely excited about stock picking and getting rich quick. These days, they don't invest at all and they also pretend that they never were into stocks. Want to guess what happened to them?


----------



## Jimmy (May 19, 2017)

It doesn't matter the market. if you can value stocks properly and know when to buy you can beat the lousy index returns. The Nasdaq is even up ~ 3x the lousy S&P index this year.

If an industry is growing at 30% it isn't too hard to find a few companies that will get similar or better returns. You have to learn to read F/S properly and keep an eye on the quarterly reports to check the sales growth is still there. It isn't some herculean task that can't be overcome. A stock advisory service can do all this for you as well where they do this all day for a living which helps too.


----------



## james4beach (Nov 15, 2012)

Jimmy said:


> It doesn't matter the market. if you can value stocks properly and know when to buy you can beat the lousy index returns. The Nasdaq is even up ~ 3x the lousy S&P index this year.


The lousy S&P 500? You mean the thing that's returned 13.7% annually over a decade. That's not enough performance for you any more?


----------



## Jimmy (May 19, 2017)

james4beach said:


> The lousy S&P 500? You mean the thing that's returned 13.7% annually over a decade. That's not enough performance for you any more?


That is because of the weight of the FANGS. Don't kid yourself. Historically it is more like 8%. Overall w the TSX and EAFE index returns are expected to be more in the 6% range going forward too which is mediocre at best.


----------



## MrBlackhill (Jun 10, 2020)

james4beach said:


> The lousy S&P 500? You mean the thing that's returned 13.7% annually over a decade. That's not enough performance for you any more?


I think the point was to compare it to other options. And then you can find that S&P 500's 14% CAGR over a decade is nothing impressive considering that NASDAQ did 20% CAGR during that same decade.

That 14% CAGR is a good performance in the absolute, but a bad performance in the relative.


----------



## james4beach (Nov 15, 2012)

MrBlackhill said:


> I think the point was to compare it to other options. And then you can find that S&P 500's 14% CAGR over a decade is nothing impressive considering that NASDAQ did 20% CAGR during that same decade.


For the last decade yes. But going back to the creation of QQQ, the performance of SPY and QQQ is about identical as shown here.


----------



## MrBlackhill (Jun 10, 2020)

james4beach said:


> For the last decade yes. But going back to the creation of QQQ, the performance of SPY and QQQ is about identical as shown here.


Wrong. Look at the rolling returns. Or just add a $10000 annual contribution for instance.


----------



## Jimmy (May 19, 2017)

james4beach said:


> For the last decade yes. But going back to the creation of QQQ, the performance of SPY and QQQ is about identical as shown here.


That is misleading again. That starts from the dotcom period bust of 2000 . QQQ is now based on real companies w real earnings. Start in 2002 for an apples to apples and you get cagr of 12.2% for QQQ vs the meager 8.37% for the S&P.


----------



## james4beach (Nov 15, 2012)

Guys, this is a textbook example of 'chasing returns' and is exactly why these ignored/forgotten accounts perform better over the long term.

First the crowd went with the S&P 500 index. Then the dot com bubble happens and everyone crowds into QQQ. I even went to university with a guy who used to wear a 'NASDAQ' t-shirt every day! That was around 2000.

Once that bubble burst, those who survived looked for the new hot thing. Foreign/emerging/energy took off (this includes Canada) and by 2004-2006 everyone was crowding into everything non-US, things like EEM, TSX Index, XEG, etc. This is also when energy-related royalty trusts (Canroys) were very popular.

Then another crash. Those few who survived were cynical about stocks for a long time. By maybe 2012-2014, people were again tempted back into the S&P 500.

And now we're into another tech bubble, and what we're seeing today is the crowd shifting to the latest hottest sector, NASDAQ/tech.

This is the kind of return-chasing behaviour that hurts long term returns. You have to really chose an index and stick with it. If you're saying QQQ is how you're investing in the US, fine, but you'd better stick with it over the next 20 years.

If you really could buy QQQ and stick with it consistently for many decades, I'm sure you would do fine. But what I've seen over 20 years is that the masses change their minds about this every few years. Currently, the masses love NASDAQ. This only started around 2018-2019, roughly.


----------



## Money172375 (Jun 29, 2018)

james4beach said:


> Guys, this is a textbook example of 'chasing returns' and is exactly why these ignored/forgotten accounts perform better over the long term.
> 
> First the crowd went with the S&P 500 index. Then the dot com bubble happens and everyone crowds into QQQ. I even went to university with a guy who used to wear a 'NASDAQ' t-shirt every day! That was around 2000.
> 
> ...


I put $5000 in a sci/tech fund and $5000 in a health science fund when I started my banking career. Unfortunately, I don’t know exactly when I bought them. I’m guessing 15-20 years ago. They’re now worth 85k and 55k respectively. The MERs are outrageous (1.99%) by today’s standards but I haven’t switched them yet. So yes, if you can buy and hold, these sector buys can pay off. Quite honestly, I had forgotten about them until I left the bank.

I’d like to find some comparable cheap ETFs for these two sectors. I suppose QQQ is one of them?

i can’t seem to get portfoliovisualizer to work with Canadian MFs. Where is the best place to graph Cdn MFs against ETFs?


----------



## fireseeker (Jul 24, 2017)

Money172375 said:


> i can’t seem to get portfoliovisualizer to work with Canadian MFs. Where is the best place to graph Cdn MFs against ETFs?


Don't know about "best," but you can do it at the Globe. Just type the ETF symbol into the "compare fund" box.


----------



## Jimmy (May 19, 2017)

james4beach said:


> Guys, this is a textbook example of 'chasing returns' and is exactly why these ignored/forgotten accounts perform better over the long term.
> 
> And now we're into another tech bubble, and what we're seeing today is the crowd shifting to the latest hottest sector, NASDAQ/tech.
> 
> This is the kind of return-chasing behaviour that hurts long term returns. You have to really chose an index and stick with it. If you're saying QQQ is how you're investing in the US, fine, but you'd better stick with it over the next 20 years.


Buying indexes gives you 6-8% index returns which is fine if you like low reward investing. The S&P is a mash of good and bad companies. If you learn about the companies you are investing in you can just invest in a few winners and beat the mediocre index. You have to study and learn about what you are investing in and the winners will change but this is not something insurmountable.

The growing companies you seem to have a disdain for beating the mediocre S&P are not in a 'tech bubble' either. They are fairly valued in fact w real earnings .Amazon has been growing sales 30+% for 20 yrs.

You should look at an Amazon. Read its 10-Qs see it is growing sales at ~ 30% and wait until the RSI is reasonable and buy some. make your 30%/yr like every one else. When it stops growing sales as much you sell it.

What is so hard about that?


----------



## fireseeker (Jul 24, 2017)

Eager Investor circa December 1972 said:


> You should look at Polaroid and the other Nifty Fifty stocks. Read their 10-Qs see them growing sales at ~ 30% and wait until the RSI is reasonable and buy some. make your 30%/yr like every one else. When it stops growing sales as much you sell it.
> What is so hard about that?





Eager Investor circa July 2000 said:


> You should look at Nortel. Read its 10-Qs see it is growing sales at ~ 30% and wait until the RSI is reasonable and buy some. make your 30%/yr like every one else. When it stops growing sales as much you sell it.
> What is so hard about that?


When you hear the music stop, it's already too late to sell successfully ...


----------



## Rusty O'Toole (Feb 1, 2012)

1) Most people listen to the fund managers, the media, various gurus and so called experts.
2) Most people lose money. 
There is a connection. If you listen to other people you are going to make bad investments. The people who make money don't listen to other people they pay attention to the markets. Some prefer a technical approach, some the fundamental approach but they all go to the facts and figures for guidance. 
Furthermore they don't mind being wrong. They know nobody bats 1000 and when an investment turns sour they drop it right away and go on to something else.


----------



## MrBlackhill (Jun 10, 2020)

fireseeker said:


> When you hear the music stop, it's already too late to sell successfully ...


Sure, but don't just hold AMZN, simply add a few stocks maybe like POOL, EXPO, ANSS, AAPL, ODFL, UNH, MSFT, IDXX, TECH, BIO, INTU, WST, PGR, ROL, NEE, SPGI, CHE, ROST, ADBE, HD, CSGP, RGEN, LRCX and TYL, then let's see what happens.


----------



## Jimmy (May 19, 2017)

False equivalency observer said:


> When you hear the music stop, it's already too late to sell successfully ...


Nortel and Polariod didn't have 20 yrs of real sales growth over 30%. Nortel was acquiring companies w no sales in fact.

The 'music' of cloud computing isn't stopping for awhile but will keep that in mind. maybe you have seen too many movies about the financial crisis.


----------



## james4beach (Nov 15, 2012)

Money172375 said:


> I put $5000 in a sci/tech fund and $5000 in a health science fund when I started my banking career. Unfortunately, I don’t know exactly when I bought them. I’m guessing 15-20 years ago. They’re now worth 85k and 55k respectively. The MERs are outrageous (1.99%) by today’s standards but I haven’t switched them yet. So yes, if you can buy and hold, these sector buys can pay off. Quite honestly, I had forgotten about them until I left the bank.


I'm glad it worked out great for you, but sector-focused bets are a roll of the dice. What if you had invested in the energy or mining sectors instead? (Many CMF people invested heavily in energy).

How about American REITs? Those were incredibly popular in the early 2000s.

I'm not a big fan of sector specific bets.


----------



## Money172375 (Jun 29, 2018)

james4beach said:


> I'm glad it worked out great for you, but sector-focused bets are a roll of the dice. What if you had invested in the energy or mining sectors instead? (Many CMF people invested heavily in energy).
> 
> How about American REITs? Those were incredibly popular in the early 2000s.
> 
> I'm not a big fan of sector specific bets.


I’m not either and getting sector trades through compliance was always difficult and still is. They would only allow small dollar and/or small positions relative to ones overall portfolio. 
im. Im not even sure what my thought process was at the time. probably took some silly advice to take advantage of the growing tech bubble. I’m sure I was talked out of redeeming them multiple times when they were down (in my search for beer money).


----------



## Fraser19 (Aug 23, 2013)

This is an interesting thread.

I so agree that less trading usually results in better returns. I look back om when I joined this form about seven years ago. I wanted to learn how to trade stocks. The more I did it the worse my returns were. I opened a TFSA and and RRSP and did the 33.3 CDN/US/INT index and have done well with that, and used the TFSA to pick stocks.

After about two years my return on the TFSA was -10 and I am not sure what the return on the index account was but it was not negative. At that point I figured the answer was to just set up a PAP and index, since then everything has been going great.


I suppose you could say I am an active trader in one sense, when the markets dive down, I borrow 25k and invest that in index funds and repay it at $175 a week. Of course this causes my weekly contribution into investments to drop from $350 a week to $175 as well. But I have found that works pretty well for boosting my returns. Also when I get my bonus in July I also direct that to the investment loan.

In my situation my TFSA and RRSP are maxed every year, so the majority of my new money is put into non-registered accounts. I am 31, and I sat down one day and had to think long and hard about how to get the best possible return, indexes are working and that was going to be the plan, but I also want to have minimal taxes to pay.

By using a low turnover fund I am able to let my investments grow, pay very little taxes due to them being passive and pay no commissions. I find taxation is often overlooked by people who want to trade a lot. Even if you are successful (which most are not) then you also need to consider how taxes are impacting you.

At the end of the day, I want the highest after tax return possible. When you factor, commissions, losses, taxes and inflation, it just seemed clear to me that a buy and hold index strategy was the best way for me to get the maximum return possible.

When I joined this form I had a slightly negative net worth, and in 7 years I have managed to get a net worth of 250,000.00 k (All investments, no fixed assets) which I totaled up yesterday. All done via boring investing.

Yes I look daily, but I don't trade, I have only two stocks remaining from when I started and I just don't see any reason to use anything beyond indexes in my case.

The other thing is, I trust index investing. All over the world people are being born, tech is improving, consumption is generally increasing, so just buying the index I can participate in all of this without doing much research at all. 

I can't see why I would really want to do anything else.


----------

