What’s in your portfolio? DIY investor Richard Garand – Take 2

A few years ago on this site I reached out to various bloggers and financial experts to ask what’s in their portfolio.  I pursued this because I was curious about their financial goals, their investments strategies to realize these goals and how they might differ from my own.  You can find the links to some of the folks I wrote to and how they responded in the past below.

Over the past few weeks I had a chance to catch up with a couple of these investors and see what’s new, what’s different in their portfolio, and just as importantly why things are different.

Thanks Richard for revisiting your portfolio with me.  Richard, can you provide me with an update on your investing goals – in one or two sentences?

My investing goal is to keep a healthy portfolio that will let me do what I want with my life now and in the future without worrying about how I’ll pay the bills next month.

Please share your elevator speech on your current investment strategy to realize these goals.

I try to keep a high savings rate and invest in a portfolio of index funds that requires almost no management. It’s important to build this up as early as possible so that it has time to grow and benefit from the positive surprises that sometimes happen in the market while giving me time to wait out any negative surprises. I would rather get too aggressive and possibly have to cut back later or withdraw a little cash instead of taking the risk of letting the opportunity slip by while I try to decide what to do. I’ve had to slow down a few times but I’ve never had to take anything out of my portfolio. It just keeps growing.

List some of your current investments.  Why do you own them?

The core holdings are XIC, VTI, VXUS, and ZRE. That gives me a diversified global portfolio that has consistently done well at almost any time. At times I might use VEA or VWO to balance out the allocation in VXUS.

What’s changed with your approach or investments over the last couple of years?  Why?  Why not?

I’ve moved more towards investing in a taxable corporate account. This allows me to defer some taxes, giving me part of the benefits of an RRSP, while being a lot more flexible. It’s also a margin account where I can borrow half of the account value at any time without selling investments. I don’t think I can borrow money at such a low interest rate anywhere else since I don’t own real estate.

I mostly use this to manage my cashflow. I did decide a couple of years ago to leverage my investments a bit. Right now the leverage is around 7% of the net portfolio value. I sometimes see people asking how they can find more high-risk investments to increase their returns. The thing is that you don’t need to go buy IPOs of startups you don’t understand.

Instead you can easily increase the risk and return for the assets you already own. Over time I gradually cut down my bond allocation to 0 and then started adding leverage. My portfolio didn’t change other than that. You have to look at how the whole portfolio delivers what you want instead of thinking that you need to add one specific asset.

You do have to understand the risk. That’s much easier with assets you already know. The biggest risk for me is a margin call so I have several ways to avoid that. The chances of forced selling after a drop are very small. As long as I hang in long enough I expect this to be a profitable strategy.

Any big financial concerns right now?  Why?  Why not?

In the last two years I’ve moved to another city and made major changes in my business and the type of work I do. Throughout the whole process I never had to worry about coming up with cash thanks to my focus on keeping a highly liquid portfolio built for long-term growth and using tools like the margin account. It would have been a bit harder if there was a major market crash during that time. I always make sure I have multiple options if that happens so I don’t have to take a big loss. With the long-term potential of investing like this I don’t think there’s anything to worry about.

What takeaway message do you have for other investors?

Investing makes a difference now, not just at retirement. Retiring with $1 million in 30 or 40 years might seem far away from your regular life. If you can get to a fraction of that it will give you more security and freedom while you’re young so you can do more things you want. It also means that portfolio will grow to the point where it’s probably more than enough for retirement.

The three keys to building a larger portfolio are: 1) invest early 2) invest monthly 3) increase the monthly amount regularly.

As I get more experience in managing my investments I think less and less about how I could find a slightly “better” way and I spend less time managing it. Get it to the point where it’s good enough then live your life.

My investment strategy is so simple that it’s left me enough free time to write a book that explains everything and gives the exact steps to follow it.  Here’s a link for your readers Mark.  Thanks again for this post on your site.

I want to thank Richard for this update and providing some insight into how he invests on his journey to financial freedom.  What questions do you have for Richard?  Share them below.  Thanks for reading.

Disclaimer:  The contents of this post are not recommendations for any individual investor but have been shared to educate readers and provide insight into how other investors are managing their portfolios.  My Own Advisor is not a financial professional.   Every reader is encouraged to seek help from a financial professional before making any important investment decisions.

10 Responses to "What’s in your portfolio? DIY investor Richard Garand – Take 2"

  1. Hi Richard,

    I still get
    “Oops, page not found!
    It seems that the page you are looking for does not exist”

    Maybe it is something on my side?

  2. (This comment is somewhat off-topic.)

    And I would suspect 99.9% of investors cannot buy when the market is down (the collective data shows they actually sell).

    I don’t disagree with your approach, as I said, invest in the long, trade the short. But…what you and the 99.9% are doing is exempting yourself from the other half — you buy the long when the markets are down but you never buy the down when the markets are up. You are certain the markets will go up, which the data shows; you are also certain the markets will go down, which the data shows, but you never take advantage of this movement. You seek time in the market but you are basically removing your money from the market 25% of the time. To buy/sell when the markets drop requires cash, money that is not in the market, i.e. this money has no “time in the markets”.

    It’s totally a psychological thing. The 99.9% have one macro/micro strategy: long. Their view of the market is ‘hope for up’. When the markets move against their one-sided strategy, and most often than not in a violent manner, that hope turns to fear and that fear causes them to take damaging actions. If an investor developed a whole market mindset and psychology, that is to look at the market as a place to make money no matter what is happening, then they don’t harbour fear, they have a strategy for up and a strategy for down.

    It’s not a matter of accuracy, either. As a long, I can say that you cannot long the market with any accuracy. It’s the same deal, you merely want to capture the bulk (or at least a good chunk) of the movement. I believe it was Jesse Livermore who’s rule/thought was to buy at 10% off the bottom and sell at 10% from the peak (80/20 Rule, anyone?). A “short” strategy doesn’t have to be complex or risky, but it does have to be rules-based in order to over-ride the emotional conditioning we all have when it comes to loss. As well, you’ll probably only utilize such a strategy perhaps only once a year, it’s not a glued-to-your-screen day trading mechanism.

    Even if a long-only investor didn’t implement a downside protection strategy, it would definitely behoove them to adopt a whole market psychology.

    I’ll leave you with a read from one of our favourites, Ben Carlson: Why Momentum Investing Works

    Thanks for the space. 🙂

    1. I know you don’t disagree with my approach, it’s working 🙂

      Kidding aside, ideally you want to do what you are saying but it’s very difficult; to buy requires cash so ultimately, you (rather I) lose out from time to time by being unable to buy at times when I really want to. Therefore I don’t always have “time in the markets” but what I do, now that I have a decent nest egg established, is keep my portfolio in the markets (in good and bad times) and now wait for when markets or particular stocks correct or crash to buy them when few people want them. Thus, by celebrating bad markets, I end up winning.

      Essentially now I don’t do what you say I shouldn’t SST – I don’t harbour fear. I embrace it. At least the investing side of things. I fear a bunch of other things!!!

      “Basically, momentum tries to benefit from irrational market participants. This can be easier said than done as these trends don’t last forever and can have swift reversals when they do come to an end after they overshoot.” Would you consider the recent O&G stock crash momentum investing, or just that these stocks were out of favour in general?

      The reality is, every strategy has pitfalls. Even holding cash does, holding cash has speculation. The only winner is the rearview mirror!

      1. “Would you consider the recent O&G stock crash momentum investing, or just that these stocks were out of favour in general?”

        It’s only momentum investing if you take advantage of the momentum, e.g. being ‘long’ and taking advantage of the gradual grind upward.

        I don’t like the term “out of favour”, it makes it seem like there was no actual reason for the collapse, that people just decided one day that they didn’t like O&G stocks. The main problem with any commodity based company will be the underlying commodity; the company will almost never have control over the direction of the commodity. I own stock in an awesomely managed oil company (e.g. they have never carried debt) which took a hit simply because the product they were selling declined in price. Compare that with, say Coca-Cola, whose stock price won’t plummet if sugar or orange juice prices jump 50%.

        For this reason, I think the more micro you get, the more difficult momentum trading becomes, simply because you need to examine a lot more factors (just as it’s more difficult selecting individual stocks). People index the general market for ease and “safety”, I can trade the momentum of the general market for the same reasons. I don’t hold the view that “it’s very difficult”; I could say the same thing about longs trying to ‘beat the market’.

        Perhaps I need to write a book, too. 😉

        1. In some respects, I believe “out of favour” is not that far off line. It’s not like suddenly the business model for Suncor changed in one month 🙂

          People index the general market for ease and “safety” – agreed but even then, most people can mess that up easily by buying and selling at the wrong time.

          Momentum has risks I think but they are usually calculated ones by calculating investors.

  3. “You have to look at how the whole portfolio delivers what you want…”

    Yes. Don’t buy stuff just because you think you need it.

    “Get it [managing your finances] to the point where it’s good enough then live your life.”
    (In tandem with his comments from Part 1: “Figure out what will actually earn you more dollars – researching investments to get a slightly higher return, or working harder and making lifestyle changes so you can save more to invest more.”)

    Yes. More fiddling is merely inviting decreasing returns on your effort.

    “My investment strategy is so simple that it’s left me enough free time to write a book that explains everything and gives the exact steps to follow it.” “I only started investing in 2008…”

    Sigh….#85,001 and counting…..

    Also from Part 1 (if I may so comment): “My biggest fear is being out of the market. The majority of the time it goes up, so staying out of the market is generally a losing proposition.”

    That’s both true and semi-false. 🙂 Yes, on all time scales — daily to 20 year — “The Market” does increase in value but then you have to account for the time your money is in the market. The first dollar in, when you’re 25, will have a very different average return than the last dollar in, when you’re 65 (not that any of us actually experience the average return).

    The other part is what time scale you focus on, daily through decades. Annually, the market increases 75% of the time and decreases 25% off the time. Observe that the decreases occur fast and sharp, whereas the increases are long and gradual. Thus, your money is increasing in value perhaps 50% of the time. It might be wise for a true market investor to attain knowledge and skill on how to short the market. Invest in the long, trade the short, otherwise you’re kinda “out of the market” half the time and in a “losing proposition”.

    1. Some critiques SST…but I do believe time in the market is your friend for most investors. I can speak for myself, I have benefited from staying the course and being boring. I prefer to be the dog walker and not the dog.

      I use times when the dog (market) is darting back and forth to invest where I can. Otherwise, it’s buy and hold and hold some more.

      You disagree with this approach? I would suspect 99.9% of all investors cannot short the market with any accuracy.


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