I couldn’t resist. Here’s another response to my Globe column the other week (RRSP Nightmare: Too Many Funds in Your Basket) on the couple that owned 29 mutual funds.
Tony Evans wrote:
Sitting here in Tokyo on a Saturday morning I just read your article on the couple with the 29 funds. I know many like that unfortunately.
It reminded me of an article I read in the Globe perhaps 10 years ago. The author recommended that in many cases, what he called the “Rip Van Winkle” (RVW) approach was the best one to take, specifically place 80% in a good Canadian Balanced Fund and 20% in an international fund and leave it alone (those were the days of 20% max foreign ownership). That simple approach always fascinated me and I have always tracked some of these imaginary portfolios on my Microsoft Money 98 (yes I still run it, it has all my old prices on it).
The results have always amazed me. I have money in one of my pension funds and over 10 yrs I have always failed to beat my virtual RVW funds. Even expanding RVW to 3 funds (balanced, foreign, and a swing fund depending on whether I am bullish or bearish) I still can’t beat these RVW ones. I always considered myself as knowledgeable on this subject, I do have my Japan Securities License and was COO of a Japan-based Securities Company.
I finally listened to myself in 2006 and limited my pension portfolio to just 4 funds – you guessed it, my best year yet. Currently I still have only 4 funds (2 Canadian Equity, BGI International Index and Trimark), having swapped my 2 balanced funds for equity funds. My portfolio has never done so well.
My view, is that for most people with portfolios under say $100,000, the RVW is the way to go. Go to TD Bank (I love their variety), use the Balanced Index and International Index (lower MER) and then go on vacation.
Thanks for reminding me of this.
Tony’s response reminded me of a pearl of wisdom a client once passed on to me – “An investment portfolio is like a bar of soap. The more you touch it, the smaller it gets.”