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Who here uses a professional investment manager?

desert monk

Active member
Apr 22, 2009
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I have been doing DIY investing for several years now. I am getting sick of the emotion tied to market cycles, and my portfolio is getting large enough to where I could use a professional manager ($650K). I am no genius, and have done what I would call "okay" with my investments (I am around 5.9% average annual return), but definitely not "great" (10%+ annual average). Part of my problem is I have difficulty calculating my exact performance, and dividends make the calculations more complex. I am a little overwhelmed by the number of stocks/ETFs in my portfolio, and I really want to maximize the performance of it. My portfolio is probably ~4% cash, 6% bonds, 7% marijuana/high risk stocks, 33% growth mutual funds, 18% index ETFs, the rest in various (mostly blue chip) dividend stocks.

I can either A) sell everything, and go to pure index ETF to match the s and p 500 average market return B) get an investment manager to try and outperform index+his annual fee c) do nothing, adjust future investment contributions.

Thoughts?
 

farquhar

Well-known member
Jan 25, 2019
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How much in fees would you be willing to pay in order to get the investment manager to try and outperform the index? An investment manager at one of the Big Five Full-Service Firms probably would be between 0.80% - 1.00% + HST.

On $650K, that would be $5,200 + HST on the low end, and $6,500 + HST on the high end. That's a lot of money to shell out; are there independent investment managers out there who will work for less?

If the guy fails to beat the index, do you think he is going to give you a refund? I would like to know if anybody on here could get an investment manager to agree to that in writing.

A family member has a six-figure portfolio with Wood Gundy, on which she pays 0.80%. Does she get value for what she pays? All I know is, she ended up with a huge tax bill last year on filing (<$50,000) because her Investment Manager realized too much Capital Gains; she was pissed off. She doesn't care about growth as much at this point as she does passive investment income, as that is what she lives off.

Her investment manager just fluffed it off by saying: "Look at how much your portfolio is worth, what's a little extra tax?" If it were me, I would have fired his ass right there and went back to the discount brokerage.
 

desert monk

Active member
Apr 22, 2009
442
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How much in fees would you be willing to pay in order to get the investment manager to try and outperform the index? An investment manager at one of the Big Five Full-Service Firms probably would be between 0.80% - 1.00% + HST.

On $650K, that would be $5,200 + HST on the low end, and $6,500 + HST on the high end. That's a lot of money to shell out; are there independent investment managers out there who will work for less?

If the guy fails to beat the index, do you think he is going to give you a refund? I would like to know if anybody on here could get an investment manager to agree to that in writing.

A family member has a six-figure portfolio with Wood Gundy, on which she pays 0.80%. Does she get value for what she pays? All I know is, she ended up with a huge tax bill last year on filing (<$50,000) because her Investment Manager realized too much Capital Gains; she was pissed off. She doesn't care about growth as much at this point as she does passive investment income, as that is what she lives off.

Her investment manager just fluffed it off by saying: "Look at how much your portfolio is worth, what's a little extra tax?" If it were me, I would have fired his ass right there and went back to the discount brokerage.
I would say around 1% to 2% max. From what I understand, it's difficult for even the best fund managers in the world to consistently beat the market. My dad has been retired a long time, and I know he has his nest egg managed by a professional. However, he is much less financially savvy than myself (I am not a numbers guy as far as investments are concerned), so I don't think he is willing or able to do it himself.

I'm not sure what returns he has been getting or if there is any agreement in place, but he seems to be happy with the results.

Worst case scenario is you get a manager that sinks your life savings into some type of Bernie Madoff-esque ponzi scheme and lose everything.
 

farquhar

Well-known member
Jan 25, 2019
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I would say around 1% to 2% max. From what I understand, it's difficult for even the best fund managers in the world to consistently beat the market. My dad has been retired a long time, and I know he has his nest egg managed by a professional. However, he is much less financially savvy than myself (I am not a numbers guy as far as investments are concerned), so I don't think he is willing or able to do it himself.

I'm not sure what returns he has been getting or if there is any agreement in place, but he seems to be happy with the results.

Worst case scenario is you get a manager that sinks your life savings into some type of Bernie Madoff-esque ponzi scheme and lose everything.
You say you are sick of the emotion tied to market cycles; having the Investment Manager do your trading for you removes that off your shoulders. He may even find opportunites for you that you don't consider.

My family members guy at Wood Gundy just opened a position in Kraft-Heinz (KHC:US) @ $32.96. If you look at the quote, you will see KHC missed a regulatory filing deadline, and stock is way off its 52 week high of $64.99, in addition to a dividend cut. I discussed this trade with him (I have trading authority) and he feels the stock price does not reflect fundamentals; the missed regulatory filing was simply for an Accounting issue; and he believes Warren Buffett is going to take KHC private at some point in the future.

https://www.bloomberg.com/news/arti...er-bets-bite-as-kraft-coca-cola-face-pressure
 

Mencken

Well-known member
Oct 24, 2005
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I think 1% is more reasonable for an investment manager...although that might be the mark for a bit larger portfolio (say $1M).

The bigger issue is what do you want to compare against. Not the TSX...it's too flaky with it's energy/financial/pot mix. Perhaps the S/P500, but you would need to be mostly in US investments to want to try and match or beat it (or, as you say you could just do the ETF to match it, hedged or unhedged to the Can$) So really...what do you want. A return of what you indicate is pretty good really...I doubt you would do a lot better with an investment manager. You may want to change you mix...but that depends on your goals, etc. You may have a lot of duplication of higher risk stuff from what you indicate...your high risk stocks may be duplicated in the growth mutual funds...and ETFs can be anything. The only distinct part may be your blue chip dividend stocks.

My suggestion would be 3 - 5 ETFs. You can get all the diversification you'll ever need - fixed income, income generating equities, growth, and geographic diversification...etc. You might want to consider an ETF specialist for a one time consultation...you decide what you want the mix to look like, and someone familiar with the ETF world could suggest the names. After that...your costs will be less than half of one percent most likely.

And I know what you are saying about the difficulty of tracking performance...it is tricky when dividends come in, investments decisions are being made mid year, etc. But there is software out there to track that...some of it more or less free on discount brokerage sites, for example.

My inclination, and I have a smaller portfolio...is to go the dividend route, and then not look at it very often. If I would have consistently done that in the past I would be far ahead of where I am now. Compound returns add up over time. Increasing dividends eventually mean that what you originally paid for the stock becomes almost irrelevant. But that takes some time. I don't know your age. I know mine...and I may not have enough years left to really benefit from that strategy.
 

Barca

Active member
Sep 8, 2008
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Under a million, you'll pay at least 1% and probably more. Depends on what the manager is using. If it's 3rd party funds like MFs and ETFs you'll pay a lower management fee. If he/she is the stock picker, it could be as high as 2%.

Over a million to invest you normally start seeing breaks in pricing.
 

highpark

Member
Jan 20, 2004
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A month ago I would have said do it yourself forever. But after talking to many family and friends about helping them invest I realize it's not for every one.
First off I have to have a completely objective opinion and emotions. If u fall in love with one company or view or political way of thinking you're screwed. U have to be non biased and totally flexible in your thinking at all times.
Second u have to love to read about the news and companies you're invested in and stay up to speed at all times. If u get tired of it or it freaks u out you're screwed.
As Warren Buffett said in one of his interviews : there are many people who should own equities. If you're someone who's going to do stupid things when the market falls your probably shouldn't be involved in it.
 

highpark

Member
Jan 20, 2004
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Sorry. I meant to say Warren buffet says there are many people who SHOULD NOT own equities.
 

bazokajoe

Well-known member
Nov 6, 2010
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I have a financial adviser. He works for a large Mutual fund company. I choose to go this route because I don't have the time,brains or the resources to do it myself.
They also give advice on tax savings tips. I do pay fees and those are tax deductible( non registered funds only).
To each their own but I know my abilities and tax rules and investing isn't one of my strong suits.
 

desert monk

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Apr 22, 2009
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I read a book called “The Warren Buffet way”. It basically described his career as an investor, and what he did to achieve his successes. One interesting quote went something like this: “...Dumb money becomes smart money when it realizes its limitations.” He went on to explain that he means that most people should not invest in individual stocks, and instead should use low-cost index funds to get the best returns over time.

There are so many psychological components to stock investing, it really can’t be overstated. I have been thinking about my returns on stocks, and it is really easy to get comfortable in having a mediocre level of ROI from picking your own stocks. For example, in my portfolio, I have had a few clear winners, a lot that are basically keeping up with inflation and not much more, and a handful of disasters. Overall I am averaging about 6%. Which is good, sure, but relative to say 8% or 10% over time with compound returns? That’s a huge difference.
 

yomero5

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Jan 12, 2017
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I read a book called “The Warren Buffet way”. It basically described his career as an investor, and what he did to achieve his successes. One interesting quote went something like this: “...Dumb money becomes smart money when it realizes its limitations.” He went on to explain that he means that most people should not invest in individual stocks, and instead should use low-cost index funds to get the best returns over time.

There are so many psychological components to stock investing, it really can’t be overstated. I have been thinking about my returns on stocks, and it is really easy to get comfortable in having a mediocre level of ROI from picking your own stocks. For example, in my portfolio, I have had a few clear winners, a lot that are basically keeping up with inflation and not much more, and a handful of disasters. Overall I am averaging about 6%. Which is good, sure, but relative to say 8% or 10% over time with compound returns? That’s a huge difference.
Your example is exactly why 99.9% of the population should invest in low-fee index funds.
 
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