Skip to main content
investor newsletter

Morningstar director of personal finance and retirement planning Christine Benz published a column describing investors’ most common portfolio construction mistakes. The first, portfolio sprawl, is one I’m guilty of myself.

Ms. Benz lists portfolio sprawl as the most common investor issue she observes. It is the error of “too many accounts, too many holdings, too much redundancy.” In my case I have too many accounts, but in my defense, much of this was unavoidable, particularly in the case of locked-in accounts resulting from pension assets from prior employers.

Between RRSPs, TFSAs, non-registered accounts and pensions, it’s easy to see how many investors can lose track of how many accounts they own. The danger is that different accounts own similar assets, limiting diversification and adding risk.

The second common portfolio construction mistake is the redundant individual stock portfolio. This involves owning index ETFs and also the megacap stocks – Apple Inc.,, and Microsoft Corp and the S&P 500, for example – that already determine the bulk of returns for an index. Domestically, the potential danger is in owning an S&P/TSX Composite Index ETF and a lot of bank stocks, leaving the portfolio massively overweight one sector.

Investors can also turn the virtue of not tinkering with a portfolio – avoiding attempts to time the market by buying and selling positions – into a fault by continuing to hold underperforming actively managed mutual funds.

Many investors don’t de-risk portfolios ahead of retirement, according to Ms. Benz. When approaching retirement, investors should emphasize safer assets like bonds to preserve capital.

The old rule of thumb was that the percentage of cash and fixed income in a portfolio should equal the investor’s age. That rule might be a bit outdated after an extended period of low bond yields, but de-risking to lock in investment gains remains vital ahead of retirement.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

RioCan REIT (REI-UN-T) If demographics are destiny, then this real estate investment trust is in a good position, argues The Contra Guys’ Philip MacKellar. A combination of high population growth, declining household size, and low construction drives high rents, low vacancy rates, and generates pent-up housing demand. And RioCan just happens to be a large builder and owner of residential real estate.

North American Construction Group Ltd. (NOA-T) This Alberta-based construction and mining contractor firm reported better-than-expected first-quarter financial results in April and management raised its 2023 earnings outlook. The stock is still trading at a reasonable valuation, relatively in-line with historical levels, and there was a recent hike in its dividend. Jennifer Dowty profiles the company.

Tesla Inc. (TSLA-Q) The electric auto maker has returned to the S&P 500 ESG index, the sustainable investing-focused market index, after the electric car maker added environmental disclosures.

The Rundown

Retail investors slow to buy into ARK Innovation Fund’s blistering rally

Individual investors have given a cold shoulder to Cathie Wood’s ARK Innovation Fund (ARKK-A) during their searing run this year, but some market watchers believe that may change if risk appetite keeps improving. The US$8-billion fund, which outperformed all U.S. equity funds during the pandemic rally of 2020 but suffered a steep fall last year, is up nearly 37 per cent year-to-date, outpacing broader markets. Despite those gains, the fund has notched more than US$250 million in net outflows since the start of the year, as Reuters reports.

Stock sale frenzy foretells U.S. IPO market comeback

A flurry of stock sales by companies points to a likely wave of initial public offerings launching come September, potentially marking the end of a weak market for debuts that has persisted for a year and a half.

We may be seeing the formation of a bubble in the stock market like no other

The S&P 500 has been on a tear since the beginning of the year and recently it entered bull-market territory. But if you exclude the U.S.’s seven largest tech stocks, which are up more than 50 per cent year to date, the S&P 500 was mostly flat over the period. Many wonder whether we have we seen this movie before and whether another bubble is being formed, one that will target the most profitable U.S. tech stocks. Count value investing professor Dr. George Athanassakos as one buying into the bubble theory.

Others (for subscribers)

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

What’s up in the days ahead

Billionaire investor Ken Fisher will tell us why it’s time to buy luxury goods stocks.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

Compiled by Globe Investor Staff

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe