Updated: Sep 16, 2021
Have you ever got a financial statement and couldn’t make heads nor tails of it? You can’t tell if you’re making money, losing money, or staying flush? You have no idea what you’re paying in fees annually or what the reports are telling you? Yearly, maybe on a phone call, your Advisor calls you to remind you of your RRSP & TFSA contribution and to exchange some pleasantries. If you broach the conversation to ask some questions about your portfolio, they proceed to tell you how complex investing is, or how lucky you are to have a small portfolio in their company that mainly manages large portfolios for famous people? They avoid the fee questions by explaining how lucky you are there are no front-end or back-end fees, and “what would you consider appropriate fees for a comprehensive plan managed by the best-of-the-best active fund managers?” They are hedging their bets that you didn’t look into it too hard, are intimidated by the complexity, and will drop the subject. You do. The quarterly financial reports that they mail you have colorful pie charts, showing the geographical mixes and values, and a long list of account activities showing “units in” and “units out”, but nothing that resembles the true goings-on in your portfolio. They have just enough information and data to confuse you or give you a perception that “it’s all looked after”. These reports are designed to give you the impression things are happening for you. But are they? I could never tell what I was paying or getting from the reports, and I was always suspicious because despite the annual growth charts, I wasn’t seeing that reflected in my portfolio value. This was my situation for many years.
In 2008 I got really frustrated. I demanded numbers from my Advisor for all the years I was with them. He was quite reluctant and spent a while talking to me on the phone, in a series of calls lasting months it seemed. He said things like, if I died, they would be there at my wife’s side to walk her through things financially, and who else would do this? She wouldn’t need to worry about a thing. He finally sent a peon to my house to meet personally and try to talk me down from leaving them. It was his daughter in fact, who was inheriting the business. Nobody had ever visited my home in the past 15 years I was with them. They showed up with a large binder of financial services, pictograms, and charts to explain what I’d be missing out on if I left. I remember thinking to myself hadn’t even used 99% of these services yet, but they tried the ol’ you’ll-be-missing-out tactics on me none-the-less. I explained to her that she might learn something in this whole process, and to please give me the numbers I wanted or else (basically). She was actually pretty cooperative and pleasant, gave in, and sent me the numbers that week. I built a spreadsheet and realized I was paying ~2.5% a year in fees, and trust me, it was a sizable annual value. Well, ... when you are getting less than 3% in distributions and paying ~2.5% you could clearly see what was happening and why my portfolio just seemed to float around a central point in value? I was paying most of the money I was earning from my investments to the fund managers for active management, and our portfolio was just floating on th indices. From the numbers I was also able to map the overall growth in my portfolio over several years against the market indices, and I was not beating the market, though they made these these claims in their marketing campaigns to me. Even if I was beating the market, with such an eroded return on my investments from the weight of the fees, I wasn’t seeing the compounding benefit of a dividend reinvestment plan (DRIP).
Very annoyed and feeling somewhat duped, I opened a few trade accounts in my bank’s brokerage platform for my and my wife’s RRSPs and TFSAs, and started doing my own investing. I couldn’t believe it when I could actually see what was happening. I could see all the numbers I needed to build my own reports and track my own progress. I had number of shares, book values and actual values, and true numbers on the investment distributions (dividends & interest payments). From all the information provided I could figure out my gains and losses, position costs and cost basis’ per share or fund. And, I could spreadsheet and chart it to my heart’s content. Not only that, I would learn what all the numbers meant so I could avoid emotional decisions and make more informed decisions. I can now see I make >4% collectively from our distributions every year, and I can manage my own reinvestment plans. Now, retired, I’m taking ~4% for retirement income. I can see which funds and shares are paying better or worse, and how they are tracking against what they cost on average. It really does help to track things yourself, ... if you want to do better.
Now I have what I call a big, hairy, odacious, financial spreadsheet to help me. It all started small with one excel folder within a spreadsheet, and evolved over many years as I systematically took over all my finances and wanted more information. Today, it has multiple folders, and I take pride in updating it every weekend and making periodic data tweaks. It has a financial overview folder, with income, accounts, expenses (budget), and cash flow information in one place. It has a ROI folder and spreadsheet, that tracks all my accounts, number of shares, ACB (adjusted cost basis), NPV (net present value), cash, and distributions/share with annual and total returns. I have a net wealth folder and spreadsheet with all our assets and liabilities. I have a portfolio folder and spreadsheet, where I have pie charts that show our investments by stock/fund allocations, asset type allocations, and investments by geography. I also built a retirement drawdown folder, with a large spreadsheet forecasting 35 years of our decumulation plan, complete with annual income and tax estimates, and timed introductions of fixed income sources like CPP and OAS. It also times in various tax credits that come available at our different ages. I have a few key inputs for the account withdrawal rates in this spreadsheet I can plug in to automatically see the impact across all the years. Also, I’ve built a detailed income and budget folder and spreadsheet that tracks the current years’ annual, quarterly, and monthly income and all expenses by month. It includes fixed and variable expenses, and whether they are one time, annual, quarterly, or monthy. I also have a folder and spreadsheets to individually track the income yields, which I update annually from the fund or stock information. Plus I’ve built individual folders/spreadsheets to track all my activities separately in all my investment accounts over time, so I can keep track of both current, past, and overall performance; what I’ve sold and what is still active. All of these spreadsheets are linked in different ways and feed information into each other, and now all I need to update weekly is the share prices and account balances to see the changes and trends reflected in every folder. Annually I update distribution information and my budgets.
There are many places where you can get fund or share information. I have 2 Vanguard ETFs (I recently simplified in my transition to retirement from holding 8 funds), and all their fund information is readily available on the Vanguard Canada website. I also have a number of blue-chip shares I buy when discounted and I have cash laying around. There are many platforms where share and fund information can be found, and a simple search for that fund or the company’s share distribution schedules will reveal them. Any fund can also be found on morningstar.ca. Most everything you need or want to know is at your fingertips now with a few clicks on the internet.
I can’t tell you how liberating and educational it is to track and manage your own investments. There is an added level of freedom you achieve from “knowing and taking responsibility”. Especially after years of not completely understanding what was going on in those non-transparent reports I was getting. I started out small to learn, and within a few years had completely taken it out of my Advisors hands and into mine. Now I wouldn’t have it any other way.
*** You can’t improve what you don’t measure ***