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me and my money

Daniel Morton



Managing director,

The portfolio

Exchange-traded products (ETPs) tracking equities, income and volatility

The investor

Daniel Morton went to work for his father at CIBC Wood Gundy in 2009, near the bottom of the stock-market crash. His focus was on developing ETP portfolios capable of minimizing downward fluctuations. Recently, he branched out on his own to launch and share his research findings.

How he invests

Mr. Morton invests in asset classes that historically have provided a positive rate of return and overlays them with hedges against major downturns. By preventing "catastrophic losses, one can feel comfortable that their portfolio can easily recover from setbacks," he says.

His portfolio pursues growth by tracking equities through an exchange-traded fund, the Vanguard Total World Stock ETF.

A second component provides income and smoothing of portfolio returns through a couple of bond ETFs. The Horizons Active Floating Rate Bond has a yield that moves with market rates; the Pimco 15+ Year U.S. TIPS yield is indexed to inflation.

A third component provides an offset to "undesirable performance setbacks." It includes ETPs tracking volatility indexes, and the CurrencyShares Swiss Franc ETF. They usually see gains when stocks are experiencing bouts of selling.

When he makes a purchase, Mr. Morton always has a plan for how he is going to sell. Specifically, if a moving average of the ETF's price falls by a certain amount, it's time to lighten up. Also, "to lower the risk of ruin if something unprecedented happens," he keeps about 20 per cent of his portfolio in cash.

Best move

His best move came in 2011 when he bought an exchange-traded note (the VelocityShares Daily Inverse VIX Short-Term ETN) that tracks the inverse of a volatility index. It has enjoyed "several strong uptrends" as the U.S. stock market gained ground and volatility measures declined.

Worst move

"In early 2011, I learned a valuable lesson when I ignored my risk controls on a tactical position in the BMO Junior Gold ETF."


"Focus more on protecting your downside. Assume correlations of risky assets will go to one [all move the same] during market panics, so consider making use of ETPs with a negative correlation to equities."

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