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Fred Vettese, chief actuary at human resources consulting firm Morneau Shepell, says actuaries ‘do figure that over the very long term, equities are going to do better than bonds.’ (Fred Lum/The Globe and Mail)
Fred Vettese, chief actuary at human resources consulting firm Morneau Shepell, says actuaries ‘do figure that over the very long term, equities are going to do better than bonds.’ (Fred Lum/The Globe and Mail)

HIGH NET WORTH

How the chief actuary at Morneau Shepell invests his money Add to ...

Fred Vettese has had a successful career assessing financial risk, but even the chief actuary at human resources consulting firm Morneau Shepell can offer a few cautionary tales from his personal investing past.

After dabbling a bit in stock picking, short selling and penny stocks over the years, Mr. Vettese now seeks the comfort of pooled funds (which are aggregated investments from individual investors, similar to mutual funds) overseen by an investment adviser.

How Canada's ultra-rich are investing amid volatility (BNN Video)

The Globe recently spoke with Mr. Vettese – author of The Essential Retirement Guide: A Contrarian’s Perspective and The Real Retirement, which he co-wrote with former colleague and current federal Finance Minister Bill Morneau – about his investing style.

When did you start investing?

When I was about 23 years old, I got a random call from a stock-market promoter to buy a penny mining stock. This was back in the day when these calls were pretty common. I bought a few hundred shares. After a few months, I got kind of nervous about it and sold it. I actually made a tiny profit, which whet my appetite for investing in the stock market. I got myself a proper stock-market broker and started buying and selling stocks. The first few years were reasonably good. I thought I could invest on my own and market time and do well. Eventually, after a couple of disasters, I realized I would be better off not trying to pick my own stocks. I went with an investment adviser after that.

What’s in your portfolio today?

About 10 years ago, I decided to invest in pooled funds. It’s a great load off my mind not having individual stocks. Otherwise, I’d be tempted to check them all the time. About 70 per cent of my investments are in equities and 30 per cent in fixed income. I wanted to be 60-40 a year ago, but there was no place to invest. Where do you put your money if you don’t put it in equities? I didn’t feel comfortable being in cash or money-market investments for a long time. I figured I would take my chances and keep [my money] in equities.

What’s your geographic mix?

About one-third of my equities are in Canada, a bit more than a third is in U.S. equities – which has been a good place to be because of the dollar – and the rest in international equities.

Do you have any individual stocks?

About 25 per cent of my investments are in Morneau Shepell stock. Normally, I would recommend more diversification. It has worked out well for me, but I’m not saying everyone else should be doing it this way.

Are actuaries more cautious investors?

In our professional lives, we are a lot more buttoned-down sometimes than we are in our own personal investing. That said, we do figure that over the very long term, equities are going to do better than bonds, with some ups and downs along the way. We are more into value investing. That means picking something that seems like a good price for the money as opposed to momentum investing – something that has already tripled in value and everyone says will keep going up. For example, at its peak, I would have avoided something like Nortel.

What has been your worst investment move to date?

I did some short selling for a little while in the early 1980s. [A short sale occurs when the seller borrows stock from a brokerage, and sells it, expecting the price to fall. If it does, the seller will buy stock at the lower price to replace the stock that was borrowed.] My biggest mistake was on Gulf Oil, back when it was a stock you could buy. My short sell was doing pretty well, then all of sudden they discovered oil in Hibernia and the stock went crazy. I lost a bunch of money in a very short time span. I learned that short selling can be pretty dangerous.

What has been your best move?

It was during the 2008-09 market meltdown. As painful as it was, I resisted the temptation to sell. I held on and stayed fully invested.

What are you doing in today’s volatile market?

Worrying a little bit, but trying to ride it out. I’ve been advising others the two things to avoid are: buying from greed at the wrong times, or selling from fear. That’s usually the time when you make your mistakes.

This interview has been edited and condensed. For this series, a high-net-worth investor has investable assets of more than $750,000.

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