I Manage To…

There’s a lot of ways to finish that sentence.

Right now I’m focused on writing about my experience on managing my parents’ investment portfolio.

For some reason, my parents are not very interested in knowing about or needing to know about their investments and its management. I’m not 100% sure why that is, but I realized this a little more than a decade ago and have since managed their financial (primarily investment and retirement income planning) affairs. I’ve managed to manage their liquid investable assets and I say that because I’m an amateur when it comes to investing. Honestly, I have no business in investing really but most people don’t know that until they’ve found it the hard way.

The details don’t matter, but let me paint a high-level picture. I just finished university, and during that time I only had one course in accounting (because it was mandatory). In fact, I’ve only had that one business or accounting course throughout my education. I despised business for some reason during my engineering school years but even if I didn’t I couldn’t take a course in anything really because there were only 2 electives possible. (I took literature and linguistics.). Ironically, I had joined a business competition and/or club in high school and managed to make it to the Nationals in Salt Lake City back in 2002.

Getting my first job also meant that I had net income for real for the first time and meant that I needed to do something with that money. I spent some of it on travel and other things a 20-something spends it on. With the small-digit sums left over to “invest” in, I made some poor investing decisions. I don’t regret making those mistakes because they continue to inform me about what not to do. It also taught me about businesses in general and taking time to read whatever information is available about management, the business and the general prospects of a given industry.

A few years after that, I woke up to the fact that my parents didn’t really do much to manage their retirement investments. I knew enough about it to know what was particularly toxic to their retirement plans; buying what someone told them to buy (who was on commission) and also buying extremely risky funds they didn’t know much about (like venture capital investment vehicles). I’m not sure how my Dad got into this but they also had an investment in a diamond exploration business in the Arctic. They also were sold a “fund” from an acquaintance that had a very high ongoing management expense fee. In Canada (where we live), it’s not unheard of that an average actively managed mutual fund can take 2% a year of your investment toward management expenses. (My parents had a couple of these in their portfolio.)

Luckily for them, they had the wherewithal to invest only tiny sums, negligible even. But I figured I’d take it on to “save” them from products with high fees, high risk or both. I helped them sell many things and bought others that I thought were better, as one would. It was easy to sell because this was the height of the Financial Crisis of the last 2000s and I was joining the bandwagon.

I was wrong, but only half wrong in selling at that time. It’s more what I did next that is interesting.

I starting buying individual stocks for my parents as if I knew what to do. I really had no business in doing that and luckily they came out okay. In the years proceeding, I managed to help them move out of risky investment vehicles and more questionable stocks to other (less?) questionable stocks.

To be clear they are all questionable because I knew enough but not enough to know how the stock or business would do. They derisked and I managed to keep things safe for them. Though, their performance suffered for the conservative bias.

Fast forward to today, I’m still learning.

Here are few lessons I learned that I needed the foundation of before I should make one transaction in any investment portfolio:

1. Tax minimization strategies
2. For investment funds, low management and other fees

Those alone help everyone to keep more of the hard-earned money. The rest of investing is still a black hole to me. I know a lot, I know more and I try my best to listen to the best people in the business. The reality is that investing is hard work and to do it well in a consistent way is near impossible as you battled your ego, your emotions and others who “play” in the markets. Each one of these challenges are worthwhile to explore in future posts and more on each in the future.

In the end, I managed to be do a mediocre job for my parents, imho.