Invest With A System

With investing it pays to simplify. It also pays to have a system. I forgot that in 2017 while I was waiting for the stock market to correct. I have read enough about investing to realize that there is value in buy, hold and pray especially for younger investors. However, the law of numbers reminds me that a 50% draw down in the stock market translates into needing to achieve 100% return. Good luck with that one.

This year I will start to use systems for deploying my investing capital.

There are only a few major categories for your investments.

  1. Equities
  2. Bonds/ GIC
  3. Real Estate
  4. Cash
  5. Commodities

I am starting to understand that there are certain principles that I need to ascribe to but the rest is what the market does in terms of equities, interest rates, local real estate markets, taxation issues, etc.

Therefore starting this year, I am planning to simply set out a plan. review it monthly and be more objective about it all. I want to spend my time researching quantitative strategies to deep dive and see if any of these strategies will optimize my portfolio.

Furthermore, I recognize the human need to be above average and thus I will also allocate a portion of my investable assets into play/ risk money wherein I can invest in anything. But I will not buy anything on margin and this investment needs to “swing for the fences” or else do not bother.

The whole point of this blog is to see if there is a simpler way through all this investing maze. Is there a basic template that could work for almost anyone? Then if someone becomes passionate in a certain area wherein they could easily create a greater return, then they could deviate from the template. With the recent news of crytocurrencies, and the massive amount of speculation and FOMO, it is not difficult to see why investing is complicated. The biggest risks to our wealth is likely our own nature of greed and envy. It is very difficult to watch as everyone else seems to be getting wealthy while you are sitting on the sidelines.

So that is where you need a system to get you into the market when you do not feel like it. Currently, I have nothing better than a buy, hold and pray strategy. However, I plan on researching more into this sphere and hopefully improve my investing results with time.

So I will go out on a limb and pick a system. I will revise it as I see fit especially if I uncover any large errors in thinking on my behalf. I will be very transparent since I am tired of reading about all these strategies that might not be telling me the whole story. Also this whole realm of money can not be viewed in isolation. I feel that you need to look at the whole strategy. The main problem is when you listen to advisors who are extremely passionate about their specific areas but are unable to tie the whole picture together.

When it comes to finances, there really are two main areas. Financial planning and investing. I plan on covering both areas as that is the reality of my life as well as a lot of other people.

I feel that I need to develop a strategy rather than listening to advice without a template to refer to. I do not want a junk drawer of investments. I want a plan that encapsulates many of the goals that I want to accomplish. It is a balancing act but I feel that it is now or never. At times, I often feel that I have missed the boat many times with investing. But as with much in life, you win some and you lose some. Either way it does not serve me well to dwell on them.

Our journey throughout life with money will be ongoing. You can never really not deal with it. I have come to that realization years ago. Many folks think that with enough money, all their financial worries are over. As stories of individuals experiencing ruin after winning lotteries will attest to, that’s probably not true.

Thus, it is about finding the balance of doing what is right for me at this stage in my life.

Currently I plan on these ratios but as you can see, I am not even close to being fully invested.

Asset Class Percentage- Optimal Percentage- Current (Jan 2018)
Equities 33 6.4
Bonds/ GIC 22 16.5
Real Estate 30 9
Cash 10 67.1
Commodities 4.5 0.9
Play 0.5 0

When it comes to equities, I plan on using ETFs with low MER. That has been proven to contribute substantially to the percentage of gains in a portfolio. Who knew? I also prefer to do this as a DIY investor since I plan on keeping it very simple. I realize that there is no controlling what the market will do. All one can do is to stay invested with some reasonable portion of their assets. The largest risk with the buy, hold and pray approach is the large draw downs which can accompany the equities market. Be honest with how much you can stomach during these downturns as you do not want to lock in the losses by selling your stocks when the market is taking a beating. That is, at what percentage draw down will you cry uncle!

So I need a system. And I need to keep learning of ways to automate so that I will do the right thing when it comes to my investments. This will be an interesting journey for me.

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