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www.insideHALTON.com · OAKVILLE BEAVER Thursday, January 10, 2013 · 8 VanSpall's T nofrills.ca Avoid active management Dollars & Sense By Peter Watson SAVE 2 $ 89 Kraft peanut butter 750 g - 1 kg selected varieties 3 grape tomatoes pint product of U.S.A., broccoli product of U.S.A. or 88 his week's column is about an Oakville homeowner who decided to make a winter skating rink. We are going to rely on the world of science to provide a little guidance. When the temperature dropped below freezing, the homeowner sprayed with water the area that would soon be full of happy children enjoying skating outdoors. There was one problem -- the water did not freeze. His neighbour walked over to chat and learned the homeowner had installed a salt-water system. The neighbour explained salt water would not freeze. The homeowner was determined and continued to spray the rink. His neighbour said science gives the same results when repeating a process. Now let's apply the same scientific logic to your attempt to manage your investment portfolio. Like the homeowner, many investors are constantly disappointed. With the same tenacity, they repeat the same investment strategy year after year and regrettably get the same disappointing results. There is a science to investing where academic scholars have studied the results of the stock markets. These scholars often are finance and economics professors at leading universities. They publish their research results in scholarly journals for review and comment. The science of investing clearly shows the vast majority of active stock picking managers fail to beat the markets in which they invest. The longer the period we are measuring, the greater the portion of underperforming managers. Unlike the salt water approach that never works, an active investment manager will occasionally, but randomly, outperform the market, meaning you have little hope of choosing in advance a manager who can outperform the market. Many determined individual investors ignore what has been shown in the research not to work. They continue to invest in activity-managed mutual funds and other types of active-portfolio management options and the same disappointing results that have happened in the past continue to happen. That is the way science works. The same set of inputs will net the same predictable results. So, if you employ active management in your portfolio, we suggest you remind yourself of the failed attempt to construct a rink with salt water. We recommend at some point you accept the science of investing and stop pouring salt water on your investments. It is time to use science to your advantage and rule out the myth that active management can provide successful investing results. Historically, when investors receive poor investment results, they change managers, but that does not work. It is time for a change. Stop investing with active managers. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. Great cruises, incredible vacations! Alaska - Glacier Bay June 5, 2013 7 nights Norse Legends June 29, 2013 7 nights $ $ Plus 167 taxes and fees 819* $ $ Plus 115 taxes and fees 819** whole white mushrooms 227 g product of Ontario .88 Ports of call on the ms Volendam: Vancouver · Scenic Inside Passage Cruising · Tracy Arm · Juneau · Skagway · Glacier Bay Cruising · Ketchikan · Scenic Inside Passage Cruising · Vancouver Ports of call on the ms Rotterdam: Rotterdam · Bergen · Alesund · Skjolden · Scenic Cruising Hardangerfjord · Eidfjord · Rotterdam CAA Bonus Receive a Pinnacle Grill dinner for 2, a Holland America Line Cookbook and attend an exclusive Savor & Swirl Culinary Event. CAA Bonus Receive a Pinnacle Grill dinner for 2, a Holland America Line Cookbook and attend an exclusive Savor & Swirl Culinary Event. Prices effective from Friday, January 11 to Thursday, January 17, 2013 Visit your local CAA Store or call 1-800-992-8143 Click www.caasco.com/cruiseoffer for more information Rates are per person, cruise only, based on double occupancy and in Canadian Dollars. *Based on a Category N Inside Stateroom. CAA Bonus and rates are based on June 5, 2013 departure. Quote AAA Vacations Code TPD. **Based on a Category MM Inside Stateroom. CAA Bonus and rates are based on June 29, 2013 departure. Quote AAA Vacations Code TN5. Offer is applicable to new bookings only and is subject to availability. Amenities may vary per ship & sailing date. Airfare is additional. 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