A quick update to my 2013 active investing summary. Because Michael James put together a neat graph of his investing history, I thought I should make one as well. I don’t have as much history as he does (and I didn’t have a year so positive I needed drawing tools to break the line) so it’s not quite as impressive. My benchmark is a 50/50 mix of the Canadian and S&P500 e-series funds (all my rest-of-world exposure comes in through the passive portfolio). Like him, I had losses a bit worse than the benchmark in 2008, snapped back very strong in 2009, and lost a bit more in 2011. At this point you may notice I’ve had three out-performing years, and three under-performing years. Except for the fact that the magnitude of the out-performing years was (much) higher than the losing ones, this would look very depressing. As it is, it looks much like a coin-toss. It’s quite possible that I have no skill and this was a matter of luck. To defend against that I do passively invest (my RRSP and now Blueberry’s RESP are totally indexed), and it’s the approach I recommend for everyone1.
I also forgot to repeat my brief approach summary: I try to capture some of the benefits of a passive approach by trading as little as possible. In 2013, my equivalent MER from commission costs was 0.15% (this was helped along by the lack of savings while Wayfare was on mat leave for the first half of the year). Because I know that I am the easiest person to fool, savings from 2014 will go to the indexed portfolio (even though, as Wayfare pointed out, this is the equivalent of performance-chasing — I’m ok with that because I don’t have any buy ideas now anyway).
1. Well, practically everyone. Everyone who isn’t willing to take some accounting courses, read balance sheets and all the footnotes until 2 in the morning on a work night, or suffer through volatility and downturns — and call it fun all the while. Oh, and stuff their puny human emotions into a box and jettison it into space. So yeah, everyone.