This site will guide you on how to invest your RRSP wisely by using only exchange-traded funds ("ETFs") that will cost you much less than active management.  We believe that most active managers detract value after their fees are accounted for (as supported by research) and therefore you are much better off investing on your own.  This requires no more than 2 hours of your time per month.  We will track the performance of my recommendations so that you can see if I'm worth following.

Rule #1: You shouldn't pay someone to invest your RRSP if they can't add value.

I know the world of finance and investments can seem vast and confusing to most people.  Just like how to build a hi-rise building seems incredibly complicated to me, how to manage a portfolio of investments for retirement seems incredibly complicated to most people.  But please, at least hear me out because I want to help you and won't be charging for this service.  Even if you're not comfortable buying and selling your own stocks, there are other instruments out there called Exchange Traded Funds ("ETFs") that allow you to invest in so many different ways that you don't need to buy and sell your own stocks.  For the most part, ETFs are like mutual funds but there isn't as much active/discretionary decision making made by the people managing them (if any).  Also, ETFs are listed on public exchanges, so you can buy and sell them whenever you want as long as the exchange is open, whereas it takes a few days for an investor to exit most mutual funds.  iShares, which used to be owned by Barclays PLC but was sold to Blackrock Inc. in the wake of the financial crisis that forced Barclays to sell off some divisions, is the largest provider of ETFs in the world with an estimated 45-50% market share (see here for their Canadian website).  There are many other providers of ETFs as well, which we will discuss in more detail in other sections.  Just in case you don't believe me about the track record of active vs. more passive forms of investment management (passive management means very little oversight of the portfolio and costs much less), see here for S&P's 2009 year-end release of their Canadian Active Fund Scorecard.  According to S&P, in 2009, only 39.2% of Canadian equity active funds beat the S&P/TSX Composite Index.  However, 52% of active funds in the Canadian Small/Mid Cap Equity category beat the S&P/TSX SmallCap Index.  This last stat - the performance of investment managers that manage stocks of small companies ("small cap") - is something we'll discuss further in other sections.  There is more potential for value to be added by active management of small cap stocks.  Only 39.2% of actively managed funds (the funds that generally charge large fees for their services) beat a mostly-passive (i.e. managed with very little decision making) porftolio of stocks that mimics the weightings of companies included in the S&P/TSX index.  I say a 'mostly-passive' portfolio because S&P/TSX does make occasional changes to their index, which we will discuss further in other posts. 

Rule #2: When investing your RRSP, keep it simple and sweet.

Too many fund managers and investors that manage their own money complicate their portfolios for a variety of reasons, not the least of which is the desire to 'keep up with the Jones's' or obtain exposure to a variety of different trends, themes and asset types.  While there are a hundred reasons for why you should keep your porftolio simple, the most basic and most important reason is to keep it simple to manage and easy to adjust.  You'll need to perform occasional maintenance on your portfolio, like rebalancing the weightings of your various investments, exiting some of your investments and entering into new investments.  The more you complicate your portfolio, the more time and brainpower all of this takes for little to no additional reward.  In fact, after confusing yourself and losing track of the end goal of earning reasonable returns at a low cost, you'll probably end up reducing your investment returns through complication.

Rule #3: Don't try to time the market with your RRSP investments.

I don't want to start a debate here about whether or not market timing is possible.  The research is mixed, but strongly leans in favour of market timing at best adding zero value to returns, and at worst detracting significant value.  That said, I've known people who have successfully market timed for years, and I'm sure there are plenty of high-priced hedge fund managers out there that pull off market timing with fancy formulas based on a variety of macro- and micro-economic variables.  However, I don't think market timing is appropriate for the vast majority of individual investors.  Unless you're going to spend hours a week monitoring various publications and statistics to determine when to get into and out of the market, don't bother timing.  Stay 100% invested and, if you're up for it, consider adjusting the weightings of your various investments to either play it safe or agressive.  In reality, shifting your investment weightings isn't much different than market timing, but it's a more passive approach that enables you to monitor your portfolio infrequently.

Rule #4: I believe in one market anomaly: long-term reversion to the mean.

A market anomaly is a pattern to stock trading that is persistent and unexplainable according to the theory of efficient markets.  Without getting into the details, the common interpretation of efficient market theory implies that we should not be able to predict future stock prices based on historical price movements.  I generally agree with this premise.  However, there's an entire field of investing based on the notion that we can predict future stock prices based on historical price movements, known as technical analysis.  Without getting into a debate on the strengths and weaknesses of technical analysis, I do believe that investment returns exhibit a natural tendency to revert to the mean.  That is, a stock that has outperformed that market index consistently for months or years is likely to subsequently underperform the market index for months or years, thereby reverting to the mean of returns.  I believe the tendency for mean reversion is strongest with long-term underperforming investments.  In my view the main reason this happens is because the companies that have experienced severe operational or financial distress and have been battered down by investors for years, but manage to survive and turnaround (whereas most companies would have declined and gone bankrupt), end up undervalued by the market prior to and for a substantial part of their turnarounds.  This means the stock price rises faster than the rest of the market as it corrects to its appropriate fundamental value.  While this is just a guess, what's important to know is that this anomaly has been empirically verified by various independent researchers studying various different periods of time.  This trend can apply to entire industries as well, and I will apply it to my investment recommendations on this website.

From here I recommend you move on to Basic Investment Philosophy.  If you're already an experienced investor, you'll want to skim over the first section.