# TFSA investment help?



## jargey3000 (Jan 25, 2011)

I want to move a chunk of my TFSA into a fairly conservative vehicle for the next 3 years or so.
FYI, most of the balance is in a couple of stocks and VGRO.
I think we're going to be in for a bit turbulence in markets sometime in that time frame so, 
I'm leaning towards something like VCNS or maybe a mutual fund like RBF448, or possibly even a 3-yr GIC. Anyone have any comments?


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## james4beach (Nov 15, 2012)

For short periods like that, I always vote for the GICs myself, or cash.

If you wait a few days you should see GIC rates go even higher.


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## Beaver101 (Nov 14, 2011)

^^ A FYI, I think RBF448 (A series) is no longer for sale in registered accounts, that includes TFSAs ... nor is D series version available. However, you might want to look at the PH&N version, still sold by RBC.


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## jargey3000 (Jan 25, 2011)

james4beach said:


> For short periods like that, I always vote for the GICs myself, or cash.
> 
> If you wait a few days you should see GIC rates go even higher.


ya think?? (re rates)


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## AltaRed (Jun 8, 2009)

The issue is that while Jargey waits for potentially higher GIC rates (by maybe 15-25 bp), the more his equities could go down in the meantime. The equity haircut could far exceed any GIC interest gain.


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## jargey3000 (Jan 25, 2011)

^^^^^^


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## l1quidfinance (Mar 17, 2017)

Why try and time the market? Have an asset allocation plan and stick to it. 

That stopped me from bailing out last March and ultimately saved a significant (to me) amount of moeny.


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## james4beach (Nov 15, 2012)

AltaRed said:


> The issue is that while Jargey waits for potentially higher GIC rates (by maybe 15-25 bp), the more his equities could go down in the meantime. The equity haircut could far exceed any GIC interest gain.


Oh if the equities make you nervous, I'd sell them ASAP.

You should only be sitting in equities if you have a very long term horizon. Someone with a 3 year horizon shouldn't be in equities IMO.

@jargey3000 you've sounded pretty conservative to me over the last few years. I'm surprised to hear you've been in VGRO.


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## james4beach (Nov 15, 2012)

l1quidfinance said:


> Why try and time the market? Have an asset allocation plan and stick to it.
> 
> That stopped me from bailing out last March and ultimately saved a significant (to me) amount of moeny.


I agree. People are only going to get good results if they decide on an asset allocation plan and stick with it.

I don't see how someone can get a good return by jumping in and out of stocks based on feeling.

But "sticking with it" requires a long time horizon and it requires commitment. It also requires tolerances for volatility, because there will always be volatility.


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## MarcoE (May 3, 2018)

Your time horizon is just three years? I personally wouldn't invest in anything for three years. I'd just keep the cash in a savings account. The 3-year GIC sounds right to me.


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## AltaRed (Jun 8, 2009)

I don't think Jargey is saying 'only 3 years' for an investment horizon. I think he is saying he has the jitters over equities right now and wants a safe haven for ~3 years until he gains confidence again in equities. He is exhibiting market timing behaviour. He must be a much better investor than I am becauase I have been investing for a very long time and I don't know any magic about timing the market.


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## james4beach (Nov 15, 2012)

I can sympathize with jitters. I'm not happy about these declines either... I'm seeing my stocks, bonds, and gold all decline simultaneously.

Oh well. Investing is tough. If it was easy, everyone would be getting 7% annualized throughout our lives.

One way to tackle those jitters is to reduce your % in equities and hold more GICs.


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## cainvest (May 1, 2013)

james4beach said:


> One way to tackle those jitters is to reduce your % in equities and hold more GICs.


Current GIC rates give me the jitters more than stocks.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> Oh well. Investing is tough. If it was easy, everyone would be getting 7% annualized throughout our lives.


7% is your reference as being hard to get? I thought it was usually the reference as being what the average one can get, therefore easy. For instance, it is pretty much guaranteed that your permanent portfolio allocation with passive indexing should be getting you that 7% if you hold it for 20+ years.


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## Thal81 (Sep 5, 2017)

The markets are always turbulent to some degree, especially over a period of three years where you're guaranteed to have some sharp corrections, whichever 3-year period you look at. In your situation I'd dollar cost average into VBAL over the next 6 months or so.


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## MrBlackhill (Jun 10, 2020)

jargey3000 said:


> I want to move a chunk of my TFSA into a fairly conservative vehicle for the next 3 years or so.
> FYI, most of the balance is in a couple of stocks and VGRO.
> I think we're going to be in for a bit turbulence in markets sometime in that time frame so,
> I'm leaning towards something like VCNS or maybe a mutual fund like RBF448, or possibly even a 3-yr GIC. Anyone have any comments?


My understanding is that you just want to reduce your portfolio volatility for the next 3 years, but you aren't saying that you have to cash out in 3 years.

Well, you've looked at Vanguard's asset allocation ETFs.

You've been in VGRO which is 80/20 and going to VCNS which is 40/60 is already much less volatile. That's half the exposure to stocks. You could also look at VCIP which is 20/80 if you want to reduce your exposure to stocks even more.

If you goal is just to reduce volatility in the next 3 years, then those ETFs are good ideas.

But going from VGRO to VCNS is already a big change in asset allocation and a big reduction in volatility. The in-between is VBAL which is 60/40.

To visualize Vanguard's offer :

VEQT (100/0)
VGRO (80/20)
VBAL (60/40)
VCNS (40/60)
VCIP (20/80)

If you plan to need that money in 3 years, then I agree that you must look at much more conservative allocations.


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## MrMatt (Dec 21, 2011)

cainvest said:


> Current GIC rates give me the jitters more than stocks.


What gives me "jitters" is the incompetence of banks.

I went to buy a GIC, the online 60 day rate is higher than their 1year rate, and their up to 364 day rate is also higher than the 1 year rate.

It drives me nuts that the 1yr rate (.38%) while the 180-364 day rate is (.55%) 
I'm trying to remember, might not be exact, but basically that's what it is at BNS.

If you have a 3 year time horizon, a few GICs, or even cashable ones might be a good idea.
I don't think market timing is a good idea.
But portfolio timing based on personal circumstances is valid.

It is close to market timing, but if you're feeling more risk adverse, it's appropriate to rebalance accordingly.


Finally, if you think you should do something, do it.
Holding off on what you "know" you should do, is typically a bad idea.
When you lose money, which you inevitably will, you'll be kicking yourself because "you knew" you were doing the wrong thing.
Never knowingly do the wrong thing, and you'll have less regret.


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## jargey3000 (Jan 25, 2011)

gonna go the GIC route I think.
not trying "time" the market...hehehe...I just took a nice profit in one investment & added my 6K contribution, so i had a lump of $ to put into something. might be wrong, but didnt feel comfortable exposing this lump to too much risk at this time. I'll leave that part to VGRO, AAPL & FTS. dont think i'll " need" the money in the 3 years...but as im pushing 70 , who knows, ffs...da wife might need it..lol

now...where's that GIC rate-checker....?


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> 7% is your reference as being hard to get? I thought it was usually the reference as being what the average one can get, therefore easy


The approach is easy on paper. Not easy on the real human mind ... this is a mental game.

The illustrations of this are right under your nose, MrBlackhill. One example is post #1 of this thread. Another example is over here.

And here's another example. This guy actually published a Bloomberg article as he liquidated everything on May 11.

Many people don't stick with an ideal plan. It's very common to keep adjusting, trading in & out of positions, and ruining their long term returns. Or someone will look at their couch potato ETFs and kill one of the positions because it's been disappointing them. Everyone is always timing the market and chasing performance.

So I stand by my statement that 7% is an impressive investment return. I don't think many people achieve it in practice.

Investing is very hard, @MrBlackhill


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> The approach is easy on paper. Not easy on the real human mind ... this is a mental game.
> 
> The illustrations of this are right under your nose, MrBlackhill. One example is post #1 of this thread. Another example is over here.
> 
> ...


I said this because generating 7% CAGR on 20+ years doesn't need any special skill. You simply setup & forget into one of these passive solutions which are moderate risk. That means no more than -10% to -15% drawdowns. And since that basically means not risky, you can just open your account once a year to see how you are doing towards your goal. That's it, done.

You buy MAW104 and you'll get that 7%.
You buy VBAL / XBAL / ZBAL and you'll get that 7%.
You buy VCNS / XCNS / ZCON and you'll get that 7%.
You buy just a few passive indexing ETFs to do a Permanent Portfolio and you'll get that 7%.
You buy just a few passive indexing ETFs to do an All Weather Portfolio and you'll get that 7%.
You buy just a few passive indexing ETFs to do a Gyroscopic Investing Desert Portfolio and you'll get that 7%.
And so on...

There are many, many non-risky ways to get that 7%. It's the average return of the moderate risk. It can't be more average than this.

My first 10 years of investment I didn't even know my investment balance until I withdrew it to buy a house. I had automatic purchase in some mutual fund. And it did over 7%.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> I said this because generating 7% CAGR on 20+ years doesn't need any special skill . . . you can just open you account once a year to see how you are doing towards your goal.


Many people can't just lock away money for years at a time, without looking at it and worrying.

As I mentioned in another thread, once you start investing larger amounts of money you might see what I mean. Or who knows, maybe you will be one of the rare people who can invest 300K and not be bothered when you see it plummet 10% or 20%.

Next, try it with $1 million. Even a moderate 20% correction means a brokerage statement showing that you're $200,000 poorer.

Generating 7% CAGR *does* require special skill. It requires (a) fundamentally solid investments, (b) nerves of steel, (c) keeping a calm head during declines, (d) confidence to stick with a plan even when people later try to convince you to change your strategy, (e) enough common sense to actually adapt to legitimate, material changes that require attention

The nice investments you listed here all satisfy (a) but there is more to this game ... there's also (b), (c), (d), (e)

It's a mistake to think this game is entirely about choosing things which look good in back-tests.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> Many people can't just lock away money for years at a time, without looking at it and worrying.
> 
> As I mentioned in another thread, once you start investing larger amounts of money you might see what I mean. Or who knows, maybe you will be one of the rare people who can invest 300K and not be bothered when you see it plummet 10% or 20%.
> 
> ...


Well... When I decided to buy a property, we were in 2018 and I didn't even know how much money I had after nearly 10 years of automatic investments. I noticed I had 6 figures, so it was a substantial amount. And as you know, 2018 wasn't I great year. But I didn't even notice it because I didn't even know what was a "drawdown". I just remember I calculated how much money I had in total and then a few months later I told my girlfriend that I now had a bit less than previously calculated. And then I bought a property in 2019 and noticed that my total wealth was back up.

You don't need any of (a) (b) (c) (d) (e) if you invest in an all-in-one solution that you trust and with an automatic contribution setup.

a) I trusted the investment product (would you not trust XBAL for instance?)
b) I didn't need nerves of steel because I never even watched the status of my investment other than once a year
c) Same answer as b)
d) Same answer as a)
e) Nothing needed any particular attention, same answer as a)


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## cainvest (May 1, 2013)

james4beach said:


> Generating 7% CAGR *does* require special skill.


I think special skills is a stretch but basic investing skills are required. Yes there are those that'll go the self-directed route and fail (sell out of fear) but I think that's small percentage. As MrBlackhill says, it pretty easy to get a 7% return ... ok maybe 5% if you're really conservative or with a bank advisor.

In regards to your other points I think that's why many (wisely) don't go the self-directed route, they need the arms length to their investments.


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## james4beach (Nov 15, 2012)

cainvest said:


> In regards to your other points I think that's why many (wisely) don't go the self-directed route, they need the arms length to their investments.


The Dalbar study talks about DIY investors, true. It shows that investment results are _more dependent on investor behaviour_ than the specific choice of funds. Figuring out your ideal ETF mix, or the good mutual fund(s) is really a small part of the investment story.









Americans are still terrible at investing, annual study once again shows


It’s not about fees or unscrupulous advisers — it’s that we lack the patience to hold investments for more than a few years. By Lance Roberts.




www.marketwatch.com





Over 30 years, investor's returns in equities were only 3.98% versus 10.16% for the index. Investors *underperformed by 6% annualized over the long term. * It's due to timing and skittish behavior.

Equity fund retention averaged just 3.8 years. People think they are long term investors, but aren't in reality. The data shows that people lack patience.

@MrBlackhill hopefully this study helps explain what I mean, when I say that investing is very hard, and getting a good return is hard.

Back-testing your ideal return and deciding on good ETFs is just a small part of the overall investing challenge... probably the least important part. Many people are getting far worse than these index or benchmark returns.

And if you say "I'm smarter", well, keep in mind that everyone thinks they are above average, and everyone thinks they are immune to these human follies.


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## MrBlackhill (Jun 10, 2020)

It depends what's the focus of the study.

I'm just saying that an investor going for the most passive solution like a fund like MAW104 or all-in-one solutions like XBAL & such would certainly get that 7% without any effort.

But I agree that if the investor is trying to do some DIY mixes and picks, then he becomes some kind of active manager of his portfolio and he becomes at risk with regards to his behaviour and then yes I agree that the end result could be worst than expected.


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## AltaRed (Jun 8, 2009)

James has it right. Investors in general under perform the markets because of buying high and selling low, or jumping on trends far too late. Study after study has shown that active investors in general under perform, just using the data points James has provided.

I would not use the phrase that 'investing is hard'. I would prefer to use 'investors are their own worst enemy' or 'investors lack discipline'. Very few have the discipline to stay the course over even one business cycle of 5-10 years, never mind 2 or 3 business cycles.

The best investors buy a global balanced fund/ETFand leave them alone for years on end.


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## cainvest (May 1, 2013)

AltaRed said:


> The best investors buy a global balanced fund/ETFand leave them alone for years on end.


That's pretty much the end game today.

With the number of products available with various stock/bond combinations, maybe throw in a few GICs into the mix, it's pretty easy. Yes, one has to learn not to panic and trust the numbers over time OR let someone else (an advisor) manage this to keep you from doing the wrong things during bad times.


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## cainvest (May 1, 2013)

james4beach said:


> Many people can't just lock away money for years at a time, without looking at it and worrying.


I was wondering how many actually "lock away money" each year. I know all of my close friends are doing this, most with advisors and only a few being self-directed. Maybe it's an age thing with the younger crowd paying too much attention to the ups and downs? 



james4beach said:


> As I mentioned in another thread, once you start investing larger amounts of money you might see what I mean. Or who knows, maybe you will be one of the rare people who can invest 300K and not be bothered when you see it plummet 10% or 20%.


Related to the above ... I'm sure many of my friends dropped 6 figure amounts in their portfolios back in Mar/Apr of 2020 and there was no discussion of selling. So I wonder how rare it really is to just leave things be?

On the flip side I know only one took advantage of the low prices with a few extra purchases.


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## fireseeker (Jul 24, 2017)

cainvest said:


> I was wondering how many actually "lock away money" each year. I know all of my close friends are doing this, most with advisors and only a few being self-directed. Maybe it's an age thing with the younger crowd paying too much attention to the ups and downs?
> 
> Related to the above ... I'm sure many of my friends dropped 6 figure amounts in their portfolios back in Mar/Apr of 2020 and there was no discussion of selling. So I wonder how rare it really is to just leave things be?
> 
> On the flip side I know only one took advantage of the low prices with a few extra purchases.


The people who fled stocks last spring/summer are unlikely to be talking about it. Obviously, it turned out to be a terrible move. They're embarrassed.
OTOH, people who bought in March are likely to be bragging publicly.

So anecdotes like these have a built-in survivorship bias. 

This is why data from the Dalbar study are so useful -- we can see that, in aggregate, individual investors do poorly. For them, investing well is hard.


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## MrBlackhill (Jun 10, 2020)

AltaRed said:


> The best investors buy a global balanced fund/ETFand leave them alone for years on end.


Well, that's exactly why I believe that 7% CAGR is a reference and not something hard to achieve as those global balanced funds / ETFs will provide that 7% CAGR over 20+ years.



AltaRed said:


> James has it right. Investors in general under perform the markets because of buying high and selling low, or jumping on trends far too late. Study after study has shown that active investors in general under perform, just using the data points James has provided.


I think our disagreement is because we don't talk about the same kind of people. I'm saying that 7% CAGR is easy because if you go 100% purely passive (like the majority of the population), then you'll get that performance. Therefore, you don't need special skills.

Yes, if you are a DIY investor actively managing your portfolio, you are at risk of underperforming due to many factors. I agree with this. But DIY investors are a small part of the population. My ex-girlfriend knew absolutely nothing about investing. She had $500,000 invested in a fund when she was 18. All she cared to know was that her money was growing at what she believed was a decent rate. She would see her bank's financial advisor once a year and that's it. Otherwise she would have no idea of the status of her investment. She just trusted the product from her low level of understanding. And yet she was getting 8% CAGR at moderate risk. The 2008 crash was just news at the television to us, nothing more. We didn't even think of our investments because they were so passive that they felt so far from us.

I'd say there are different kinds of people who wants to save money on the long term and see that money grow.

1) The average people are not DIY investors. And since a portfolio ranging from 40/60 to 60/40 is the go-to portfolio for the average people (which is the level of risk that the average people are willing to take), then most people will end up in a fund in that range, which most likely provide 7% CAGR over 20+ years. When I wasn't a DIY investor, I would invest in mutual funds from my bank. My bank's financial advisors never ever got me into higher risk portfolios, even if I asked them to. I also didn't know much about investing other than buy low & sell high and that high risk usually comes with high reward. But the "buy low & sell high" adage never served me as I simply had weekly automatic investments. I wanted the highest risk portfolio and yet I ended up with a 60/40 portfolio and after years with different financial advisors I got to 80/20 and that was still below my risk tolerance. I watched the status of my investment once every 1-2 years. I never witnessed in real-time anything that happened from 2009-2019. Yet, I had over that 7% CAGR. Most people aren't DIY investors and most people don't even watch their investment on a monthly basis. As long as they've been advised some good portfolio ranging between 40/60 and 60/40, they'll get that 7% CAGR. It doesn't need any effort.

2) Then there are those who are a bit DIY, but stay highly passive. The ones that will invest by themselves in all-in-one products. Those who are able to learn by themselves that there are some great performing funds like MAW104 & such, there are all-in-one ETFs with low MER and that they can manage their investment by themselves. People DIY investing in MAW104 & such or all-in-one ETFs like XBAL and XCNS will also get that 7% CAGR. The only bigger risk here is if they don't know their risk tolerance and end up in XEQT or XGRO and panic-sell every drawdown. But I believe that those who invest in MAW104, XBAL, XCNS are also not the kind of people to watch their investment every single day.

To me, #1 and #2 represents a big part of the population which are very passive with the status of their savings and will likely get that 7% CAGR with no effort, no skill.

3) Then there are those even more DIY, but stay passive. The ones that will invest by themselves in a mix of ETFs and asset classes. Like #2, those people are at risk of panic-selling, but they also have another risk : not sticking to their plan. Since they are building their own recipe, they could be tempted to change their recipe according to their mood and end up making bad decisions. If they stick to their plan and don't panic-sell since they know their risk tolerance, then they will certainly easily get that 7% CAGR. Here, I agree that those people are much more likely to end up underperforming.

4) And finally there are those who are active DIY investors. The ones that will pick their own stocks, pick their own bonds, pick thematic ETFs, speculate, etc. They are a very small proportion of the population. Those are the ones that have the highest risk of underperforming. But also the highest probability of outperforming. But there comes those studies saying that the average active DIY investor ends up underperforming.

To me #3 and #4 are represented by the people on this forum. A small proportion of the population. So, to me, when you say that investors are underperforming, I agree if you talk about #3 and #4 because there's certainly much more DIY underperformers than outperformers. But I believe that's a small part of the population. The majority of the population is #1 or #2. (The majority of the population investing in portfolio funds, not the people like my parents who only bought GICs throughout their whole life.)

And I say that 7% CAGR is easy because the basic product provides that 7% CAGR to everybody. It's the average. It's the reference of a balanced portfolio. If you would say that making 12% CAGR over 20+ years is hard, now I would agree because #1 and #2 can't get that performance.

I say that 7% CAGR is easy because if you do "nothing" (like #1), you'll get that 7% CAGR. It's as if there was some very hard test with 100 questions. If you decide that you don't answer a question, you'll get the passing grade for that question. If you decide to answer the question, you'll get the grade that you deserve for that question. People like #1 will say "fine, I won't answer any question, just give me the passing grade (7% CAGR)". People like #2 will say "let me read all the questions..." and after reading all the questions, they'll decide it's better if they don't answer any of them and get the passing grade. People like #3 will try their skill on a few questions, which will make some of them fail the test. People like #4 will try their skill on every single question and lots of them will fail the test. And some of them will also get great grades.


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## cainvest (May 1, 2013)

fireseeker said:


> The people who fled stocks last spring/summer are unlikely to be talking about it. Obviously, it turned out to be a terrible move. They're embarrassed.
> OTOH, people who bought in March are likely to be bragging publicly.
> 
> So anecdotes like these have a built-in survivorship bias.


Close friends is a small sample compared to a study but we're open enough to admit (not lying) about buying/selling so no bias injected here.



fireseeker said:


> This is why data from the Dalbar study are so useful -- we can see that, in aggregate, individual investors do poorly. For them, investing well is hard.


Looking at the link j4b provided about ... am I correct in seeing the study only includes mutual funds and not ETFs?


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## AltaRed (Jun 8, 2009)

@MrBlackhill: You are using a different definition of 'easy' than James is, or that I have referred too. I agree achieving 7% is not hard at all IF one goes passive with a balanced fund AND leaves it alone. It is what the market delivers. The hard part is leaving the portfolio alone and most of the time that investors intervene in it, they actually under perform. This is a needless argument about semantics and I think we all violently agree.

@cainvest: I do believe the study is on mutual funds, but the same outcomes would show up with ETFs, especially now that we have hundreds, if not thousands, of ETFs all slicing and dicing in 100 different ways. Investors are going down the same rabbit hole with ETFs as they did with mutual funds. We probably don't need more than about 50 ETFs in total in the entire industry from 3-4 providers.


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## cainvest (May 1, 2013)

AltaRed said:


> @cainvest: I do believe the study is on mutual funds, but the same outcomes would show up with ETFs, especially now that we have hundreds, if not thousands, of ETFs all slicing and dicing in 100 different ways. Investors are going down the same rabbit hole with ETFs as they did with mutual funds. We probably don't need more than about 50 ETFs in total in the entire industry from 3-4 providers.


True, the ETF waters have become more murky with boutique offerings. MF (~8000 in US) vs ETF (~2200 in US) numbers still show significantly more MFs (likely most actively managed) vs ETFs (likely very few actively managed). It would be interesting to see if any difference in mentality has happened when comparing them overall.


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## james4beach (Nov 15, 2012)

fireseeker said:


> My understanding is that most five-year mortgages get broken. Something comes up -- a divorce, a baby, a career change -- that prompts people to move or redo their mortgage.


I'm quoting from another thread, because it's relevant here. Yes perhaps there is an age group difference, but what I repeatedly see in my circles (20s to 40s) is that people have a lot of trouble sticking to investment plans, and they also don't have very long term horizons in practice. Everyone starts by saying "I will leave this money alone for 40 years" but then, before you know it, something comes up and they liquidate and withdraw funds, or move to cash in anticipation of a need.

As @fireseeker mentions here, even a 5 year mortgage (not a very long plan!) is frequently broken. What I've seen is exactly the kind of thing described: babies, life changes, layoffs.

_Everyone_ thinks they are "long term investors" at first. Everyone thinks they can handle volatility and hold their investments through market disasters. It all seems like a no-brainer. This is how the game always starts 



fireseeker said:


> The people who fled stocks last spring/summer are unlikely to be talking about it.


Two of my close friends sold, liquidated everything during the pandemic. One of them told me he started buying back in around November.

One of my best friends in Ottawa has been sitting on hundreds of thousands $ of cash for probably ten years, waiting for the market to fall (he says). When it crashed during Covid, I asked if he finally bought. His answer? No way ... this is the start of a depression, you'd be crazy to buy into this market!

Here's one guy who wrote a Bloomberg article: Why I cashed out of the Covid-19 Rally. He starts the article by saying that passive buy & hold has generally served him well... until now. Now he's freaking out and selling!


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## Spudd (Oct 11, 2011)

I like the saying "It is simple, but it is not easy.".


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