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wealth steward

A 'minimalist' lifestyle usually refers to living only with the basics. The less 'stuff' you have, the less you have to worry about day-to-day and the happier you will be, say proponents.

Perhaps you can't part with your new smart phone, your second car or the notion of home ownership. But I am convinced that adopting a minimalist-like investing style would set most investors on the path to greater happiness and prosperity.

Balanced funds are under-rated

There was a time when I poo-pooed the use of balanced funds. As I grew more interested in investor behaviour - and saw anecdotal and broad-based quantitative behavioural evidence - I embraced the idea that balanced funds are good for most people. Even though balanced funds have not been terrific performers, my research on long-term investor returns showed that investors using balanced funds saw better performance compared to using a mix of individual stock and bond funds.

While balanced funds are considered best for novice investors with modest portfolios, they are hugely under-rated for larger portfolios. There is no good reason to invest $100,000 much differently than $10,000 - with one exception. Investors with significantly more money should generally expect to pay lower percentage fees. Since most investors - novice or expert, wealthy or not - are guilty of investor misbehaviour, a reasonably-priced diversified balanced fund can be an investor's only holding well into six-figure dollar amounts with pleasing results.

Avoid niche & gimmicky products

Funds and ETFs providing exposure to high-growth BRIC countries, the popular agriculture theme, or perhaps to higher-yielding infrastructure plays, are exciting. I get it. When stock markets are falling and bond yields are extra-lean, these can be exciting alternatives. But these themes and strategies usually hit Main Street long after big institutional investors have made the easy money. I'd rather see investors go into more broadly-based funds so I have a compromise to propose.

Do you want to invest outside of Canada but avoid emphasizing more developed but debt-laden U.S. and Europe and more of the more financially-fit emerging countries? Instead of picking a BRIC or China fund consider a fund like Dynamic Global Value or Manulife Global Focused. The idea isn't so much to run out and buy those specific funds but rather that the decision of which countries or themes to invest in should be taken out of the individual investors' hands.

This approach keeps the portfolio more compact, makes it lower-maintenance and reduces the likelihood of disappointing performance.

Pay attention to costs

Many financial advisers think I'm too tough when it comes to investment fees and expenses. By contrast, many investors and their advocates think I'm not tough enough. Sometimes I can't win. What's not debatable is the importance of costs. All investors should keep an eye on fees and expenses (those that are visible and those that are not).

Nearly two years ago, I gave Globe & Mail readers a few tips on how to pay attention to costs and keep them in proper perspective.

Less is more

Portfolios should be built to match an investor's assets with future spending plans. My partners at HighView and I use this goals-based approach to construct portfolios. Accordingly, each portfolio holding has a well-defined role to play in helping clients achieve stated goals.

When asked whether this theme or that strategy should be added to a portfolio we ask how it will help the portfolio move the client closer to his/her goals. If it doesn't fit, we don't consider it. If it does, then it may have a place.

Too many portfolios are product-driven, where products are added based on their availability. Rather, individual goals should define what is needed and whether the next new product or theme fits. I have no doubt that a simpler portfolio is the right structure for most investors. And if my research is any indication it won't just make you happier - but wealthier too.

Dan Hallett, CFA, CFP, is director of asset management for HighView Financial Group and a contributor to He has spent more than a dozen years doing research on investment funds, portfolio managers and financial markets. Formerly the president of Dan Hallett and Associates Inc. in Windsor, he is now responsible for manager research, portfolio construction and investment program design at HighView. Mr. Hallett has a Bachelor of Commerce degree from the Odette School of Business at the University of Windsor.

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