Friday, November 23, 2007

Investing adventures

Moolanomy is hosting a contest on investing stories. I’m not interested in entering the contest, since I just won another one, but I thought it might be a good story to post about anyway.

Plonkee has recommended that all investing stories be boring, which is very good advice. My current RRSP investing strategy is somewhat boring, and will get more so as time goes by:

  • I invested first in a Canadian equity fund. It’s doing very well.
  • I then invested in a Canadian monthly income fund which DRIPs with satisfying drabbles back into itself every month. It’s not particularly high yielding, but it balances my otherwise heavy equity (higher risk) funds.
  • Next I bought a global equity fund. It grew so fast that it’s now frozen to new purchases while its managers figure out what to do with all the spare cash lying around in it. High risk, but high profit so far.
  • Since I couldn’t put more money into that fund, I spent another couple of weeks finding a second global fund to invest in, which I then did. I’ve only had it for a month. It’s up a bit, but that’s meaningless over so short a timeframe.
  • My next set of cash will go into a low-cost S&P/TSX composite index fund. I’m just waiting until I have the minimum investment required for the one I want.
  • I’ve been starting to check out bond funds for more diversification, but since I believe interest rates will rise over the next few years (and therefore bond prices will fall), I’m not sure it’s the best time for it. Correct me if I’m wrong on the logic of that sentiment; I’m certainly not a market expert, and I’m more ignorant of bonds and bond funds than I am of pretty much anything else out there.

I’m still fairly young. I’ll slowly move into safer investments as I age, but right now I want growth since I still have time to make up for losses.

I do have one interesting investing experience, however. One that thankfully was no risk to me, but cost my father quite a few bucks. He was an investment advisor before he retired, which he did quite comfortably I might add. I have the postcards from around the world to prove it.

When I was about 20, Dad had a look through my incredibly boring portfolio (about $10,000 in a single mutual fund, not tax-protected) and said “If I guarantee your initial investment, would you let me play the market a bit with this?”

Um, so if you lose money you’ll give me back my $10,000, but if you gain money it’s mine?

Duh. Go for it.

So he did. He sold my boring and low-yielding fund, and bought some shares in a software company. They did great. He sold at the right time for a tidy profit. Sadly, the next investment was not so well timed. The company in question was due to come out with this great new product. It tanked, as did their share prices before Dad could get back out of it, and my portfolio was down to a measly $1700.

Happily for me, Dad gave me roughly $10,000 in nice solid Royal Bank of Canada shares from his own portfolio. Since I received them, they’ve split twice. I paid for two years of university with them, and I still have about $11,000 worth, give or take a grand depending on the month. Nice.

Lessons learned:

  • The market is tough, even if you’re a professional.
  • I don’t have the stomach for buying and selling stocks. I prefer a buy and hold strategy of a solid stock from a solid company.
  • I like the diversification inherent in mutual funds.
  • Dad keeps his promises, even when they hurt.

Luckily, those lessons didn’t cost me a thing. Dad sucked up an $8300 loss, but it didn’t harm him too badly or for very long, and I think he had a bit of fun trying to make me rich.

Win some, lose some. Learn from it. Move on.

Now I just have to convince Hubby that just because his US equity fund is currently tanking it doesn’t mean the market is out to get him. It just means the American market is having a rough time, compounded by the change in exchange rates between our dollars. Two issues which I’m sure some of you have suffered as well.


Pinyo said...

I added your article to the list with a little asterisk. If your number comes us as the winner, we can decide what to do then.

Thanks for sharing a great article.

Fecundity said...

Thanks, Pinyo. Appreciate the link.