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Mutual Fund News

Passive investor, steady hand

Special to The Globe and Mail

Lior Hershkovitz, 30

Occupation: Mortgage agent, Brampton, Ont.

Portfolio: Holdings include the following exchange-traded funds (ETFs): Vanguard Total Stock Market, Vanguard Emerging Markets, iShares DEX Universe Bond Index Fund, iShares S&P/TSX Global Gold Index Fund, iShares S&P/TSX Capped REIT Index Fund, iShares S&P/TSX 60 Index Fund

The investor

"I started investing when I was in my mid-20s," Lior Hershkovitz says. "I took a good six months to familiarize myself with how the markets work. I read several books, including John Bogle's Common Sense on Mutual Funds and Benjamin Graham's The Intelligent Investor."

"The more I read about index funds, the more I realized how two key elements can greatly influence my portfolio's return: complexity and fees. Indexing allows me to easily keep my allocation under control and minimize costs."

Mr. Hershkovitz currently works as a mortgage agent. He is studying for his Certified Financial Planner (CFP) designation.

Investment approach

He is a passive investor with a steady hand, "There will be storms along the way but if you stay the course and maintain the asset allocation appropriate to your level of risk aversion, you will fare well in the long term," he says.

To maintain his asset allocation, he rebalances semi-annually. "If the allocation deviates from its target, sometimes I will just buy more of the class that's underweight as opposed to selling the one that's overweight. It depends on the circumstances."

Part of his portfolio has been set aside for active investing. He bought the ProShares UltraShort Euro ETF in December after reading about emerging problems with European sovereign debt.

"Given how the euro zone is structured economically, I knew it's only a matter of time before there would be a domino effect," he explains. "And I think the problem will get worse. Things certainly didn't get better even with the announcement of a massive package by the [European Central Bank] and IMF."

Best move

"It was simplifying my portfolio with ETFs."

Worst move

"Just like many others who had a significant exposure to equities, I took a beating during the most recent financial meltdown."

Advice

"Wealth, just like knowledge, accumulates over time," says Mr. Hershkovitz, author of a blog on mortgages and personal finance at liorh.com. "Don't be in a rush. And avoid a disorganized approach, that is, avoid high turnover, picking yesterday's favourites, paying too much attention to past returns and paying too many fees."

Want to share your strategies?

E-mail mccolumn@yahoo.com

© 2007 The Globe and Mail. All rights reserved.

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