Seeking a simpler portfolio

The problem

The 47-year-old business owner from Kelowna, B.C., is a busy man. He’s a DIY investor who manages RRSPs and TFSAs for himself and his wife Debbie, 52, but he doesn’t always have the time to carefully review their portfolio. “I stick to the couch potato for half our RRSPs, but get impulsive and stock pick the rest of the time for all the accounts,” says Jeff. The result? A portfolio that’s hard to manage, is seldom rebalanced and whose performance is difficult to assess. With no company pensions, Jeff wants their money to grow tax-efficiently for retirement. He considered hiring an investment advisor, but decided he wasn’t comfortable paying a 2% fee. At some point he says he’ll likely need help, but for now wants a simple DIY strategy.

The fix

John DeGoey, portfolio manager with iA Securities in Toronto, says the biggest problem with Jeff’s portfolio is that it’s too exposed to Canada. “Home country bias is a common problem with investors,” says DeGoey, who recommends Jeff lower his Canadian equity holdings to 18% from 41%. Sector risk is another concern, says DeGoey. In Jeff’s case he is overexposed to energy and pipeline stocks. On the flip side, he has little exposure to emerging markets, which provide diversification with strong growth. DeGoey believes Jeff should double his holding in this area to 18%. With a growing portfolio it makes sense to consider independent financial advice, which may not be as pricey as Jeff believes. The typical cost to manage portfolios of several hundred thousand would be about 1%. There are other benefits, too. For non-registered accounts, investment counseling fees are tax deductible. But for now, as a DIY investor, DeGoey says Jeff should consider using lower-cost ETFs instead of the mutual funds he currently holds.