Maria Bartiromo or Jim Kramer won’t pay for my losses

I am not a regular watcher of Jon Stewart’s show. In fact, I don’t think I have ever watched more than five minutes at a time. However, the following vignette was sent to me last night by a friend who is an investment advisor with a major firm. I enjoyed it and thought you might too.

http://tinyurl.com/bd5soh

Using his own dry humour and some clips from business media over the last eighteen months (including notables like Kramer and Bartiromo) he illustrates the folly of taking business talking heads as being experts with their fingers on the pulse of all investment matters.

About eight years ago I decided to take on responsibility for management of my investment portfolio. This doesn’t necessarily mean managing an account and executing trades, as I do. But it does mean not acceding an understanding of what one owns and why.

There are lots of suspect investment managers and brokers who, frankly, don’t know anything more than how to sell. But there are also lots of investment advisors who know what they are talking about and always work toward their clients’ best interests.

This topic of understanding one’s portfolio and choosing their advisors is of some interest to me. I will write more on it in the future.

BRK.B

There is not much good news being published in the stock and bond markets these days.  While I have no idea when the current economic malaise will subside, I do have hope that we are closer to the bottom than the top (although I don’t believe I am able to time the market, so I don’t try).  

As a class B shareholder of Berkshire Hathaway stock I haven’t been been totally insulated from market meltdown.  I was pleased, though, to see that while the S&P 500 was down 37% in 2008, Berkshire was down “only” 9.6% for a difference of 27.4%.  

Since 1966 there are only five years where the S&P has come out ahead of Mr. Buffett.  Let’s hope Berkshire keeps up this trend even when the Oracle retires.

My investment portfolio at the end of 2008

It is not pretty, but I have taken a look at my portfolio and its 2008 performance and thought I would post some details here.

Structure – defensive and ready to buy

I hold a combination of equities directly and through index funds.   I also own bonds through index funds and hold cash in my registered retirement fund (RRSP’s in Canada, roughly equivalent to the US 401K) and in a non-registered trading account.  I trade on my own account through a major Canadian bank’s online brokerage.

I am pleased to say that I think my portfolio is fairly defensive with 32% in cash, 42% in equities and 22% in bonds.  At the age of 35 and using the “100 minus my age” rule of thumb I should be 65% equities and the balance in cash and bonds.  Over 2009 I expect do some buying, so the composition of my portfolio will likely change significantly in favour of stocks with some additions to my bond holdings too.

 

Holdings – not sufficiently understood

Admittedly I am bit embarrassed publishing a chart that specifies my holdings.  This embarrassment is not necessarily because I think the holdings are bad, indeed, I would not own them if I thought they were bad. 

I am embarrassed because I have not done nearly enough research on my holdings.  I own index funds and have not dug deeply into each fund’s holdings.  Consequently, I do not really have a handle on whether I am properly diversified.  Additionally, I have not performed the necessary financial analysis to determine whether my equities actually create shareholder value commensurate with their risk profiles or whether they erode it.

 

Performance

What a year.  My non registered account is down a mind numbing -19.21% and my RRSP (the money I plan to retire on!) is down a slightly less unnerving -16.09%. 

The only solace for me is that according to Google Finance, the S&P TSX Composite is down more than -33% and the S&P500 was down almost -37% for the twelve months ended 2008.  So I  am only slightly less unsuccessful than the S&P.  Most certainly nothing to write home about.

 

 

2009 – “You only tell who is fishing naked when the tide goes out.” – Warren Buffett

I have put together an investment discussion club comprised of five friends and myself.   All six of us come from different professional backgrounds (an entrepreneur, an Accenture consultant, the director of fiscal studies of a major Canadian economic think tank, the CFO of a small technology company and a director of business development from a battery supply company) and we range in age from 35 to 47. 

What we share is a keen interest in our investment portfolios.  We will not necessarily invest together and we are not putting any money on the table, so it is not an investment club per se.  What we will do is discuss investing strategies, methods for putting our personal portfolios together, tools for assessing investment opportunities and we will discuss specific investment recommendations.

Our group’s expectation is that we all become better investors and reach financial independence sooner as a result of our learning.

My hope for myself is that the group impresses sufficient discipline on me so that I will properly assess my portfolio, put more structure into its construction and take the time to review the financial performance of current and proposed equities.

Over the course of the year I’ll continue to post my portfolio’s performance.  If I have done my job properly then I should do far better in 2009 (after removing the effect of a far improved market (hope springs eternal, right?)).