Douglas Porter, chief economist at BMO Nesbitt Burns, says his investment philosophy revolves around buying ‘high quality.Salvatore Sacco
Douglas Porter's first foray into investing was as a young boy, when his parents gave him and his three brothers each $100 to invest in any stock they wanted. Mr. Porter, who was 10 years old and a big fan of ice cream, picked Laura Secord. He wasn't even a teenager when he learned what a capital loss meant, and that investing required a bigger picture outlook beyond picking products you like. Mr. Porter, the chief economist at BMO Nesbitt Burns, is a more prudent investor today. The Globe spoke with Mr. Porter recently about his investment style, advice for investors and his one and only short-selling experience.
Describe your investing journey to date.
I didn't begin to seriously accumulate assets until I was in my 30s. The reality is, I became an adult in the eighties and nineties, during a period of very high interest rates. The philosophy in those years was pretty simple: build as much of a nest egg as possible until you could put together a down payment for a home. Then, after buying a home, pay off as much debt as you could as fast as you could. There wasn't a lot of asset allocation. It's a completely different world now.
What's your investment philosophy today?
I try to buy high quality when it goes on sale, and keep a little bit of cash for when there are opportunities. I can't spend a lot of time on my portfolio, so I like to buy and hold them for a long period of time. I invest in well-known stocks.
What's in your portfolio today?
Over the past 10 to 15 years, I've tried to create a portfolio built mostly on ETFs. Anyone in the industry knows it's incredibly hard to beat the markets consistently over time – but they still try. I do also invest in specific stocks in areas that I believe tend to do a little better over time. I'm overweight equities. The ancient rule of thumb is your equity share should be 100 minus your age, but I think, given where interest rates are now, that's gone by the wayside. I'm heavily weighted to dividend-paying stocks given where yields are and the favourable tax treatment. Also, I usually try to maintain my cash between about 5 to 10 per cent.
Do you invest on your own or use an adviser?
A hybrid. I work with an investment adviser on part of my portfolio. No matter how sophisticated an investor is, I think it's always good to have a second opinion.
What has been your best investment move?
Being overweight cash in 2008-09 and moving slowly back in the market. I was quite concerned about what was going on in 2007, given the credit crisis that was developing. My savings at that point were going strictly into cash.
How about your worst?
It's tough to pick one. I got caught up in Ballard Power during the first tech boom. Also, when I first started on Bay Street in the mid-eighties, I joined an investment club made up of economists. We were generally successful and did especially well investing in bonds during the powerful bond rally during those years. But we made one huge mistake (which may rank up there with Ballard) – we were convinced that the U.S. auto market had peaked and tried shorting Chrysler, the company we thought was the weakest of the Big Three. We were right on the auto market, and eventually very right on Chrysler (just two decades early), but the auto makers kept rallying strongly with the rest of the market and we lost heavily on that one. The big lesson there was that timing is everything. I have never tried to short another stock since.
What's your advice for investors?
Be patient. You build wealth over time, slowly but surely. Some people get incredibly lucky, but those are the lottery ticket winners, effectively, in the market. There can be massive ebbs and flows in the market, but over time equities have proven to be the best investment.
This interview has been edited and condensed. For this series, a high-net-worth investor has investable assets of more than $750,000.