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www.insideHALTON.com · OAKVILLE BEAVER Thursday, September 20, 2012 · 24 Failing investments? Good time to change a losing game I t is time to go to Plan B. Specifically, stop investing the way you have in the past. It is frustrating and the fees are often high. There are better ways. Oakville resident and author Dr. David Posen's best-selling book title says it best: "Always Change a Losing Game." If you are unsuccessful with your investing then it is time to reassess your approach. If you are making mistakes then stop making the same mistakes. As it turns out, most investors are not as successful at investing as they might hope. We have mentioned this in past columns so here is a brief recap of earlier comments. Investment managers' performance results show that one in three managers will beat the market each year. That gain is small and the annual loss to the market that the losing managers experience is larger than the gain. Scholars collect investment information over a long time frame and then effectively keep score on what does and does not win. Investors can engage in the same scorekeeping each year by reviewing how managers perform against specific benchmarks. If your manager invests in Canadian stocks then what is the track record of that manager compared to the market returns of Dollars & Sense By Peter Watson the entire Canadian stock market? That will show if the manager adds any value to your investing. The key here is to make sure you are comparing your manager to a relevant benchmark. Comparing a Canadian equity fund with 50 per cent invested in the U.S. against the TSX Index is not a relevant comparison. Reasons for investors not achieving the results they desire include trading costs and taxes. Trading costs include commissions and other fees incurred by you when you buy or sell an investment. Those taxes charged are on capital gains made from the sale of an investment outside of registered plans. There is a solution. Call this Plan B. Stop investing the way most Canadians do by skipping the attempt to outguess the market or trying to select good managers who will hopefully pick good investments for you. Our recommendation is to buy capitalism. Buy everything. For example, if your asset allocation strategy is to have a certain amount in Canadian equities then invest in something that allows you to purchase the entire Canadian market. The reason is simple -- capitalism works. Over time, the markets have produced reliable returns. Yes, they are volatile but over longer time periods, market returns have been remarkably steady. Capitalism is essentially money chasing the highest return and avoiding poor returns. Buy capitalism and weed out the middleman. Stop trying to beat the market and just accept capitalism for what it is, a very efficient system that rewards investors. For the part of your portfolio that is to be invested in equities, adopt asset class investing. Diversify by owning the broad market in Canada, the U.S. and the rest of the world. Your goal should be to achieve as much of the return offered by the market as possible. Now many investors attempt to beat the market and the cost structure of that attempt means that you usually get poor investment results. Your investments are important for you to be able to accomplish your financial objectives. If you are failing with your investments, it is a good time to change a losing game. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. Get face-to-face with thousands of consumers! November23 -25 Careport Centre, Hamilton Booth space & sponsorship StillAvailable! Engage Entice Sponsored by: Educate Entertain marquis dreamstore.ca A DIVISION OF 289-337-8002 thechristmasshow.ca ContactUsTODAY!