Beat the Thundering Herd

by | Sep 29, 2014 | Archives

There is an easy way to invest better than most professionals and beat the thundering herd.

ENR Asset Managers have added a new portfolio called the ENR Global Growth ETF Portfolio.

enr portfolio

ENR Global ETF Portfolio (click on image to enlarge) (1)

This portfolio makes enormous sense because ETFs are one of the easiest but least expensive ways to invest in value.

Statistics show that more than 75% of all active money managers fail to beat a bellwether index in their sector over short and longer term periods.

Most actively-managed stock funds can’t beat the stock market nor can they beat investors who use indexing.

Indexing is an investment strategy that aims to equal a specific market index as closely as possible.  Traditional investment managers aim to outperform their targeted benchmark.

I am delighted to see the introduction of this portfolio because it fits in the main approach of my PIEC investing strategy.  Indexing is the core of my three stage layering PIEC Investing strategy.

PIEC is an acronym for “Personal Income Earning Corridor”.  The first layer is your own business.   A total PIEC portfolio comes in three layers, first the business, then a layer of very safe investments and finally a much smaller layer of speculative deals.

The majority of PIEC diversification should be in safe, good value, long term investments.

These very safe investments and act as reserves if your business hits a sticky patch and can provide ready finance if sudden business opportunities arise. They also don’t take up much time in research, accounting, watching the market, etc. so you can devote your energy doing what you love (your business) instead.

This second layer is the portion of the portfolio usually left with an investment manager.  This is where the ENR Global Growth ETF Portfolio comes in.

The third layer of diversification can be speculative.  Modern portfolio theory suggests that safe investments are enhanced and made safer by adding a small amount of higher risk deals. This also allows us to fulfill any casino mentality we might have left if having our own business is not enough.  For example I have my investments (that I have written about often)  in Sandalwood, agriculture, water, Singapore REITS, silver mining and European banks.

The new ENR Global Growth ETF Portfolio fills the second tier role and is currently invested in the following ETFs.

* PowerShares Intl Dividend Achievers ETF

* SPDR S&P Dividend ETF

* Vanguard FTSE Emerging Markets ETF

* Vanguard FTSE All-World ex-US Sm-Cap ETF

* First Trust Dow Jones Global Sel Div ETF

* iShares MSCI ACWI

* iShares International Select Dividend

* Vanguard Total International Stock ETF.

For investors seeking a low-cost European private banking relationship combined with a low-cost portfolio, this is among the most competitive ways to gain global diversification.

You save on taxes.  Actively managed funds exert a heftier tax bill on your portfolio than passive products.

Then there’s portfolio turnover. Every time a manager makes a trade, there’s a cost.  ETFs invest in the shares that compose the index and do not trade.  During 2013 actively managed funds in the US turned over 85% of their holdings. Remember that this activity resulted in poorer average results than the indices for 75% of these funds.

As this is a new portfolio, ENR back tested the portfolio after deduction of fees. You can see the comparison with the MCSI World Index in the chart above.

Investing discipline is rare in the real world which is why most of us will benefit when we have a PIEC approach to earning and saving.  Having a disciplined investment manager like ENR Asset Management is a powerful low cost way to have an investment manager look after the second stage of your wealth.

Gary

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(1)  See details on the portfolio at ENR’s September Market Update