A rookie do-it-yourself investor recently asked for some guidance on which bonds to choose for her portfolio.
Then, she asked for ideas on who to turn to for a second opinion on her portfolio. The questions were asked one after the other via the “Ask Rob” link on my e-mail newsletter, Carrick on Money. I’ve seen this a lot over the years – DIY investors with self-doubts.
More and more, second opinions are available to self-directed investors who simply want a consultation and not an ongoing advisory relationship. I wrote about three options for second opinions in 2019, including a $600 consultation offered by Money Coaches Canada. You might also find people willing to provide such a service in a directory of fee-for-service financial planners
Avoid investment advisers offering second opinions – they tend to use this type of interaction as a come-on for attracting clients. You’re unlikely to get an objective analysis of your DIY portfolio from someone who makes a living by managing investments for people.
Here’s another thought if you’re investing on your own and feeling lost: Try a balanced exchange-traded fund, also known as an asset allocation ETF. The reader asking about bonds for her portfolio put me in mind of this option.
Balanced ETFs hold various blends of underlying stock and bond funds. Just pick the right mix for your needs – income, growth, balanced or conservative – and you’re done. There is no need to worry about which bonds to hold because a widely diversified bond ETF is part of the mix. Balanced ETFs provide continuous rebalancing so your bond weighting remains just where you want it.
Balanced ETFs are an ideal product for the rookie DIY investor with doubts. You can hold one with complete confidence that you are owning a low-cost, well-built portfolio. If you choose to build a portfolio with stocks or funds you’ve chosen, you can migrate from the balanced ETF with ease.
Second opinions can be worth the money if they help you build a better portfolio. But a balanced ETF might be what you really need.
-- Rob Carrick, Globe and Mail market strategist
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Stocks to ponder
Canadian Imperial Bank of Commerce If you want to buy a promising Canadian bank stock this year, consider CIBC. The reason? The stock has been underperforming. CIBC shares increased just 6.3 per cent in 2019 (not including dividends), trailing the other big banks. The reason to pounce: Canada’s big banks tend to rebound from bummer years. David Berman explains how the numbers support this theory over the long term.
Three shrewd investing trends hidden in all the hype about surging ETF sales
A lot of questionable products are being released by ETF companies in an effort to build market share. But a National Bank Financial report reveals some underlying trends that show investors are making excellent use of what ETFs have to offer. Rob Carrick provides three examples
A skeptic’s guide to the surging gold market.
Gold has had a nice run since last summer, but wise investors shouldn’t count on its winning streak continuing. Ian McGugan explains why.
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Number Cruncher: These 15 Canadian economic 'moat’ stocks are on a growth trajectory
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Ask Globe Investor
Question: I’m retired with a pretty solid dividend portfolio built over 30 years. My millennial children are looking to start building their own portfolios, but they (and I) fear this is a poor time to start investing with the looming prospect of recession and possible severe market dives. Buying a house may also be on the horizon in a year or two. Current dips in the markets do not present confidence for investing hard earned cash and GICs return so little. What would be a prudent thing to do?
Answer: If a house purchase is on the horizon, the prudent course would be for the children to protect their assets from a market correction. Most economists predict there will not be a recession in 2020, but U.S. indexes are at record highs and we’re sure to have a pull-back at some point. If your children were taking a long view, that shouldn’t be a major concern, in fact it would represent a buying opportunity. But a house in the short-term forecast changes the equation.
I suggest they keep the money in a CDIC insured high-interest savings account. Laurentian Bank is currently offing 3.3 per cent on digital accounts. You’ll also find good rates at Motive Financial, EQ Bank, and Oaken Financial.
Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.
What’s up in the days ahead
Rob Carrick updates the ‘two-minute portfolio’, a quick and easy stock-picking strategy where you invest equal amounts in the largest two dividend stocks in each of the 11 TSX subgroups.
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Compiled by Globe Investor Staff