What’s in your portfolio? DIY Investor Richard Garand

If you’ve been following my blog for the last month or so you know I reached out to various bloggers and financial experts to ask what’s in their portfolio.  I did this to find out what their investing goals were, learn a little about their investing strategies, uncover some of the products they own and see what advice they might have for other investors.  So far, here is what these investors kindly shared with me:

Larry MacDonald’s portfolio

The Passive Income Earner portfolio 

Dividend Ninja portfolio 

Big Cajun Man portfolio

The Dividend Guy portfolio

Robb Engen portfolio

Kyle Prevost portfolio

Today’s post is from Richard Garand, an entrepreneur and advocate of index investing. He has created a handy portfolio rebalancing tool available for free here.  Below Richard describes how and why he implemented his indexing strategy.

1. Describe your investing goals Richard in one or two sentences:

My portfolio should create a steady and reasonable income (a 4-5% real return) with as little work as possible so that I can focus on other things in my life. I plan to build it up as much as possible and let it run on auto-pilot. As it grows I can take more risks with my regular income knowing that I can still pay the bills.

2. Describe your investing strategy that helps you fulfill your goals in one or two sentences:

I buy index funds, adding a fixed monthly amount using a specific asset allocation. I also follow investor psychology and change my asset allocation when I think it is getting to an extreme level. For example I increased my international asset class to 36% of the portfolio a couple of years ago when everyone was scared of Europe during the debt crisis. That turned to be a great move.  I only started investing in 2008 so I haven’t had any periods of extreme greed to avoid but I watch for that too 🙂

3. List some of the investing products you own that help you with your investing strategy:

My actual holdings currently represent:

• 29% Canadian stocks,
• 5% Canadian real estate,
• 28% US stocks,
• 31% international stocks,
• 5% emerging stocks, and
• 2% in leftover cash and other small holdings.

The funds that I use for this are ZCN, ZRE, VTI, VEA, VXUS, as well as very small positions in Fisgard MIC (2011) and Canoe EIT (2013).  Pretty simple actually.

4. What advice do you have for other investors Richard based on what’s working for you?

I have a number of thoughts I’d like to share Mark, I know you feel the same about some of these, so here they are:

• Permanent losses are usually caused by a lack of diversification. This is why seemingly good strategies and some mutual fund managers can cause damage that you can’t recover from.   For example Bill Miller was a great mutual fund manager for 15 years. Over the next few years starting in 2006, investors in his fund had anywhere from 15 – 40% less returns than those who would have just bought the S&P 500 index.  The less diversified you are, the more confident you have to be and the more lucky you have to be to succeed.
• Remember the index represents that average of all investors. Math tells us that half of non-index investors have to do worse than the average, the other half do better.  People don’t set out to lose money; it just happened to them because of the risk they took on and not prepared to handle.
• I suggest you spend 95% of your energy on what you can control, by automatically investing as much as you can afford every month and sticking to a sensible plan. For the first few years this is hard because it seems like nothing is happening. If you stick with your plan long enough though eventually you will see your money growing.
• 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.
• Do what you are comfortable with in terms of risk.  For example, I don’t own any bonds because it is very unlikely (I think) that they will have good returns over the next 10 years. That works for me because I get excited when the stock market goes down. If that makes you nervous, then bonds or dividend stocks might help you stick to a sensible plan.
• Indexed portfolios with regular rebalancing are a great way that completely uninformed investors can participate in a market and still have a good chance of coming out ahead. The basic math is cruel to active investors but is usually kind to index investors.
• Guessing when the market will change directions is a bad idea. If the market was a person it would be locked up in an insane asylum.
• 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.

I want to thank Richard for participating in my series including sharing some great perspectives above.  Readers, drop me an email via my About & Contact link if you wish to be profiled.  That’s it for now, I hope you enjoyed the series.

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 others 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.