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Mutual Fund News

ME AND MY MONEY

Special to The Globe and Mail

Dale Roberts, 51

Occupation

Investment funds associate

The portfolio

A conservative mix of stock and bond ETFs and index funds.

The investor

Dale Roberts works at a Canadian financial institution that offers portfolios of index funds with automatic rebalancing "at the lowest fee." He is also a contributor to seekingalpha.com, where one of his monikers is "scaredy cat investor."

How he invests

Mr. Roberts started buying stocks in the late 1990s. His first trade doubled in a day. "Easy stuff, this stock picking," he thought. Then the tech bubble burst in 2000 and 2001.

By 2002, he wanted a smoother ride. So the "nightmarish mishmash of mismatched stocks" was converted in stages to a more diversified portfolio of index funds and ETFs. About 70-per-cent was initially allocated to bonds, largely through the iShares 1-5 Year Laddered Corporate Bond ETF. Gold stocks and ETFs also became a holding (since sold off).

This "scaredy cat" portfolio avoided the roller-coaster ride delivered by the stock-market crash of 2008. With the help of periodic rebalancing toward equities, it sailed to a 74-per-cent return from Jan. 1, 2007 to the end of 2011 (versus the TSX composite index's return of negative 5 per cent).

Currently, the allocation to his bond ETFs is 50 per cent. His equity ETFs track dividend stocks to a large extent, and their lower volatility (relative to the broad stock market) contributes to the objective of "a lower risk portfolio that still has the potential to deliver modest returns."

Even in today's low-rate world, Mr. Roberts continues to like bond ETFs. They preserve portfolio gains and protect against macro risks, such as deflation and financial crises. Also, the staggering of bond maturities ("laddered") within bond ETFs hedges against rising interest rates: As maturities expire, proceeds roll over into higher yielding bonds.

Best move

Switching to index funds and ETFs.

Worst move

Loading up on many tech companies in the late 1990s.

Advice

"The only good investment plan is the one we can stick with."

Want to share your strategies? E-mail mccolumn@yahoo.com

© 2007 The Globe and Mail. All rights reserved.

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