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Author Topic: Why don't you include ETFs in your portfolios?  (Read 15974 times)
garilou
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« on: February 02, 2016, 03:09:24 AM »

Hi SSP,

Sometimes, it is not enough to go at cash when the MTI is "DOWN".

Some stocks can still do pretty good, as your non "+" portfolios performance show.

But in the past months, HXD and HED have done great, and hedged well.
Those have been in the portfolios where I cannot short (REER and CELI).
They allowed me to buy high dividend paying stocks, while they were cheap.

Recently, Gold has done very well, but not all miners have done equally.
In the moment your portfolios are pretty loaded with gold miners.
Why not introduce the ETF HGU?


Today it went up 4.30%, more then ABX (0.72%), RIC (1.19%) and K (3.46%) - my favorite short not doing too good these days, NMI (3.46%), not to talk about some who did really bad CGG (-4.08%).

Sure, when gold goes down, HGU will fall sharply, but again, possibly not as much as other gold stocks

Anyone's thoughts?
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DCA
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« Reply #1 on: February 02, 2016, 07:57:01 PM »

Hi Garilou,

I must admit to having a near allergic reaction when I hear ETF.  (Though to be honest I have money in a few. Don't tell anyone!)  Lately I have been given attention from a variety of brokers pushing their "Managed" portfolio services.  Usually involves investing all my money into ETF. {one even had the audacity to suggest all of it into one mutual fund of a competitor.  I did not go for that but I did drive over to the competitor and open a brokerage account there}

So let me channel SSP here:  The principle of an ETF is that it allows a person with a small amount of money to diversify over a broader range of stocks than they could on their own and not have to worry about the buying and selling of individual stocks.  By their very nature they are designed to smooth out the effects of short term momentum in prices.  This momentum is the very thing that the portfolios here are intended to exploit.

Shaking that off, cueing dancing flames background lights and returning to my normal voice:

The Economist magazine states that 2015 was the "Year that Nothing Worked" in that no investment scheme seemed to achieve a profit.  I can attest that my SSP return for 2015 was -15.3% making it the worst ever year following the second worse year.  Thankfully my other investments picked up the slack so I can still claim to have done better than market.  Still, to be honest, I do not think any strategy I have worked in the positive sense.  Although, just to brag my Norwegian gas stock gained 33% (Thank you Mr. Putin) and I happy with RLI and GIG.  Still those are exceptions and it has been a while since the last 10 bagger.

Personally, I am returning to my love of Pharma.  I think the news on Valent has beaten up the sector and there are still plenty of pharmas willing to squeeze the sick.  I have my eye on MSL and GUD.

My equivalent to ETF is CSH.u and PLC.  The first has a steady supply of customers that it often is willing to pass onto the second.  In fact, you could say that the customers of the first are dying to leave and the second has customers that are dying to arrive.  Good dividend stream but not very exciting.  I will resist the urge to use the third obvious cliche.

And now to salve over the damage to my Karma from the above diatribe may I direct the attention of the readers: https://www.kiva.org/

D
« Last Edit: February 02, 2016, 08:32:14 PM by DCA » Logged
garilou
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« Reply #2 on: February 28, 2016, 05:11:58 PM »

Hi DCA,

I guess we don't chat very often but we seem to be the only ones to still express ideas on this forum.

I share almost 100% your allergy to ETFs.

If I was interested in Pharmaceuticals, I would certainly not buy an ETF.

Just a funny example:
Since a few weeks, in my US portfolio, I own (and trade a lot) Amarin -AMRN .
I trade it with (my own?) 3 thirds technique of down averaging.
Just yesterday I fell on an example of automated recommendations for ETFs that "could give us similar returns with lower volatility".
http://www.capitalcube.com/blog/index.php/etfs-with-exposure-to-amarin-corp-plc-february-26-2016/

 Angry

Or I would not buy TAN to be exposed to CSIQ!

2015 was a great year for me, because in the portfolios were I couldn't short, (you know how much I like to short) I was long HXD and HED, which allowed me to keep stocks with great dividends.
I also owned CSH.UN, but also STB, FRU, AW.UN (that I sold completely with a too big profit  Cheesy, I am now rebuilding a new position) and others similar.
After it cut its dividend, I also bought WIN: never believed I would do such a profit!

I did not do only good moves: since 2016, I even did very bad ones, so that 2 of my portfolios are doing great,(my registered accounts) but my last years winning portfolios are my 2016 big losers.

Back to ETFs.
When it comes to gold miners, there are so many, you cannot know them all!
Most just went up because of the probably short term boom in gold, and not for their intrinsic quality.
OK for Barrick, even Kinross (previously and since Thursday again) my favorite short.

Somewhat similar for the oil stocks.
For a few resilient ones, you have so many that went up when people naively believed the rumors of Saudis and Russians and even Iran possibly reducing production.
(That said, I still think that there is some upward possibility to oil: not $70 like some say, but also not $20 like others say)

But if during the long down period of the TSE, HXD and HED had been in the SSP portfolios, the returns would have been so much better.

And during this gold rally, HGU did even better as Barrick.
Had it replaced all other miners, then you would have other stocks in the portfolios, for the moment when gold will nose dive again.

Now look at the SSP portfolios: last week I already thought they were extremely risky, but this week is worst!

I have nothing against the sell of PRW.
But now all portfolios hold only gold miners!


You don't want me to ask what ETFs you own, fine, I told you mine.
My lazy portfolio also own HXU.

Thanks for your pharma ideas. Yes, too bad that so many were pulled down by Valeant.
Not all are so immoral. Never, ever, I would buy Valeant: what they did is unforgivable.
Now this sector seems over sold, that why I bought Amarin.
I choose it by first screening for a pharma stock located in Ireland and HEAVELY shorted.

Now to what you once called your best investment, https://www.kiva.org/, I would really appreciate if you told me more about you own experience.
My mother died aged 96 yo in July 2015, and we just received our inheritance.

I do not really need this money, so I gave a lot to charities, to my children and grand children.
I do want to keep some because I am not getting younger, and I was able to see how it was possible to keep my mom in good care thank to the money she had.

But I would be very interested to join you in KIVA.
I was always impressed each time I heard about the micro loans.

If you don't mind, tell me how you did to choose.
My question is not so much about who you were lending too (I pretty well know where I would like to lend) but how can you trust the intermediaries?
Especially in the agricultural sectors, how could I be sure that NOTHING goes to Monsanto, for example.
(All this could be in a private message)

I was happy to see your reply, and I really wish that SSP would reply too.

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garilou
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« Reply #3 on: February 28, 2016, 05:13:40 PM »

Hi SSP,

I have the feeling that you are very busy in the moment,  but I would really like to receive a reply to my question.

Thank you,

Louise
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garilou
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« Reply #4 on: February 28, 2016, 05:48:40 PM »


Hi again DCA
Just wanted to add that after looking closer to the 2 stocks, I find your comment:

In fact, you could say that the customers of the first are dying to leave and the second has customers that are dying to arrive.
very funny but do not understand very well.

I guess I'll have to do more "homework"
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DCA
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« Reply #5 on: March 01, 2016, 04:54:03 PM »

So let's look at the risk of volatility.  My SSP portfolio has been as high as +17.5% and a low of -20% (current -16%) during the last twelve months.

My US Options portfolio has been high of +36% and a low of -29%.  Did I ever get hammered during Dec/Jan.  I got hit by an added bonus - a 22% taxable profit for 2015 while I sit on an unrealized loss.  In case Argentina is crying - -25% current so there is 'improvement.'

My dividend portfolio peaked at +11% and dipped to 9%.  This is my equivalent to ETFs and allows me a little sleep at night.

To be honest there are a few ETFs lurking in that portfolio. No surprise that it tends to drift close to the market.

To be doubly honest, the stocks in my dividend portfolio are often featured in ETFs.  Good stable companies that pay regular dividends.  The proverbial widows and orphans stocks.  They also tend to be larger companies and they are the "market" so there is no surprise that they get returns close to market.  My computer can pick these stocks without the need for a management fee and very few ETF or mutual manage to outperform the market by more than their fees.

A few quotes:  "You are not as smart as you think you are when the market is going up, nor as stupid when the market is going down."

"Most Canadians are futile savers."http://www.straightgoods.ca/ViewFeature3.cfm?REF=627&Cookies=yes

Pay particular attention to the last two bullet points of the article.

The ETFs and dividend stocks run the danger of keeping you in the futile area.  I got out of futility by getting into stuff like the first two.  Rollercoaster but every so often you can get off close to the top.  Were there is volatility there is a greater possibility of change if you can be a little smart.

Since SSP looks for volatility and looks on the TSE it tends to concentrate on the more volatile industries and this means oil, rocks and drugs.

Over the years I have done quite well with SSP, however, I find now I am investing an ever decreasing part of my funds with it.  I think it is successful because it tends to pick smaller stocks but that also limits it.  Many of the positions are so hard to get into and out of that they take weeks and the resulting price moves makes larger blocks less profitable.

I sometimes think that the periods are extreme quiet here is because people drift away.  I blame the volatility rather than the 'smallness.'  My back-up theory is Facebook (I have heard that one can waste a lot of time there.)

Which is a shame since there is a dearth of good stock advice in Canada.  Most of my money is now invested outside the country because it seems that the only advisory information one gets here is on what ETF or GIC to buy.

My love of Chartwell comes from having to find a long term care facility for my mother.  In researching what was the best for her I also discovered that it looked like a very good investment.  My return on that investment more than paid for my mom's private room and her other needs so I get to make money and feel good about it.

With the pharma, tobacco, and specialty governmental type products I have no such morality safety cushion.  Charity does seem like a good option.  (In the middle ages robber barons funded monasteries to pray for their souls.  I think my solution is better.)  I have two rules for charity 1) I never admit to actually giving anything to charity, 2) I do not like to fund grown men wearing fezes and riding around on little motor bikes.

If I did give to charity microcredit would be the way to go.  Unless like me you have the luxury of travelling to the locations where the need is and seeing the clients directly there is no easy way to check the 'honesty' of the middle men.  The advantage of these is that there is payback.  So the money acts as its own verification device.  If there is dishonesty it does not come back.  Don't keep on sending it to the same middle man in that case.

Since I have inherent faith in the general goodness of most people (excepting those that own and are executives of pharmaceutical companies) I would anticipate that the funds on hand would grow faster than defaults deplete them.  I would not expect ETF rates of return but I would not be surprised if it exceeded bank GIC returns.  [Perhaps I should add bank executives in with pharma.]

D
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« Reply #6 on: March 10, 2016, 12:17:15 PM »

Hello Louise and DCA,

Here are our inputs regarding why there is no ETFs in our portfolios and what to do when the market timing is down:

* Down MTI signals mean "volatile non-uptrending market":
As a result, it does not just mean that the markets will go straight down neither. We did some research when creating the MTI, and we found that shorting the market (using contra-ETFs would produce the same results) would not produce good results if done blindly.
Following the MTI down signals help removing some volatility from your portfolio results.

* No ETFs in our portfolios:
- at the time of the SSP creation, ETFs were not that widely used and not that much were proposed on the markets. This is totally different nowadays.
- in the Price Momentum portfolios, we do look for volatility as a mean to get great performances. So, we do not look for ETFs that would provide an average performance in their given fields. Instead our filters will pick the best stocks from that sector.
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garilou
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« Reply #7 on: March 18, 2016, 02:15:16 PM »

Hi SSP,

I understand very well why you wouldn't want to include ETFs that are sort of mutual funds, with little or less volatility.

I think that some critical leveraged ETFs can be very helpful when either gold or oil have very strong up or down movements.
Or during marked bearish market movements.

Especially for gold!
Sure if gold goes up by 30 $ all miners will go up, and sometimes those are the most shorted and not necessarily "the best".
So to really "catch the best stocks from that sector" is extremely difficult, if you want to hold them more then a few days.

I must say that HED, HXD, HGU and HGD have been very good to me, especially in 2015 - HGU more recently (as said to DCA, mostly in the portfolios where I am not allowed to short)
They have allowed me to hold to some high dividend paying stocks without my portfolio getting hurt too much.

But at the end, it up to each one of us to decide.

Have ever thought again about what we (or was it only me?) have talked about, years ago: to use your technology to create a short portfolio?

But I must admit that even if bear markets you usually manage to find good performing stocks.


Thank you for this reply and keep you fantastic work,

Louise


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