How I Invest My Money

Markus Muhs - Jan 15, 2021
I recently picked up a Kindle version of Josh Brown and Brian Portnoy’s new book entitled How I Invest My Money. Using it as inspiration, I’ve drafted my own chapter for the book…
The book is an interesting read, with each chapter written by a different author; mostly independent financial planners, portfolio managers, and other thought leaders in the FinTwit community. Some of the authors go into exquisite detail on their relationship with money growing up, while others focus more on the particulars of their savings plans, from 401-Ks, to Roth IRAs, and 529 Plans for their kids. They're all U.S.-based, so some of the chapters focusing more on the latter might be a bit Greek to us, though once you figure out what’s what it can also be fairly useful advice. Those chapters focusing more on the author's relationship with money are very insightful though.
 
Each chapter also included a drawing by Carl Richards (his book, The Behavior Gap, I cannot recommend more highly) sort of illustrating the general concept in each chapter.
 
I wouldn’t put this book at the very top of my reading list, but for those keenly interested in personal finance as I am, it’s a good read, and an easy one (it’s basically like reading 25 blog posts). 
 
Josh has been selling the book on the various podcasts he’s been interviewed on as being “advisors opening the kimono” to reveal how they themselves manage their own money, and whether they eat their own cooking. So, here we go, this is how I, a single financial advisor of approximately 40 years of age, manage my money.
 
Initially, I thought of recounting the whole story of how I got here in terms of my investment philosophy, but it turned into way too long of a post. I think I’ll leave my origin story for a “prequel” post in the next few weeks.
 
The standard disclaimer applies, that any particular investment I mention below, while appropriate for my own personal risk tolerance and circumstances, may not be appropriate for you, so none of this should be construed as advice. If you want to chat about any of this or get a second opinion on your own portfolio, feel free to connect via one of the options on my contact page.
 

ESPP

 
I’m going to start with one of the core employee benefits that I believe everyone should take advantage of—if offered through your work—and that is the matching plan. That is, any plan in which you invest $X and your employer either matches you or contributes half, whether that be a group savings plan or employee stock purchase plan (ESPP), or both. 
 
At Canaccord Genuity I have no pension plan, but I have an employee stock purchase plan through Morgan Stanley's Shareworks (the former Solium). Every monthly paycheque I contribute a bit more than what’s needed to get the maximum employer match into this plan, into Canaccord Genuity shares.
 
I find it absolutely imperative, before contemplating any additional long-term savings, that if there’s free money to be had via an ESPP to take full advantage of it (to get the maximum matching); I did this at my former employer too. If you want that money, or don’t care to hold the stock, you generally can pull your own contributions out of such a plan periodically, and the employer contributions after a vesting period (usually 2 years).
 
For myself, share ownership in my employer has always been an important thing; especially being with a smaller company. I actually own around 0.005% of the company! Even when analyzing investment funds, one of the criteria I pay attention to is employee and fund manager ownership in their own company: is it a large publicly traded bank of which the employees own minimal shares (less preferable), or a private company where each employee has significant share ownership (preferable)? Essentially, do the managers have a stake in the business and something that might keep them there long-term?
 
I balance out my share ownership with my own shrewd philosophy of keeping stock concentration at not much more than 10% of my net worth—at most maybe 20%. I recommend the same to my clients in such plans; you don't want to be that Enron or Lehman Bros employee who had their entire retirement plan in company stock. In the years leading up to now, as my share ownership slowly accumulated, this wasn’t an issue. In late summer though, with some appreciation in the stock price, I was well past the 10% mark and I sold some shares for the first time. Unfortunately, this was at a price quite a bit lower than today.
 

TFSA

 
Every two years, as my CG shares accumulate and more of the employer contributed portion frees up, I shift these shares out of Shareworks and into my TFSA with CGWM, where I still have plenty of contribution room. As I built my business over the years my main investments outside of RRSP and my stock purchase plan have been back into my business—plus I had some lean years—so I estimate I still have well over $30K TFSA contribution room in 2021. As I still have plenty of TFSA space, I have very little invested non-registered, just a few stock positions that I've had kicking around over the years, which I'll sell if I ever need to offset a capital gain (note: moving these into my TFSA would forfeit the cap loss... I might do such a move if they returned closer to break-even, then shelter future gains).
 
Within my TFSA I still own a penny stock from years back—one I stubbornly held on to that actually has been on a comeback this past year (this normally doesn’t happen; don’t buy penny stocks). In addition to the CF shares mentioned above, I’ve been investing my CF dividends and proceeds from when I trimmed some shares into the Fidelity Special Situations fund. This is a fund I’ve been using since my early TD days, for my clients’ risk assets. It helps satiate my own (and clients') desire to speculate, as I know that with the fund I have a hyper-active manager who does the speculating for me, buying trendy stocks (through this fund I had exposure to Zoom since its IPO) and beaten up things (apparently right now I have exposure to some cruise ship companies, which I otherwise wouldn’t touch with a ten-foot pole as individual stock holdings).
 
Given the extreme level of risk within my TFSA (a Canadian small cap financial, a little in a very aggressive mutual fund, and a biotech penny stock that recovered from 5 cents back to the 20 cents I bought it at), in a year in which risk ruled supreme, it did extremely well in 2020. I don't expect it always will, and these are assets I consider super long-term and not really attached to any goal, so I take maximum risk in this account. 
 

LIRA

 
Moving on from the TFSA, my other investments are far more like those of my clients. While at my previous employer—a big 5 bank—I was incredibly privileged to have been part of the endangered species of pension plans: the fabled defined benefit pension plan. Unfortunately, I wasn't in it very long, and my benefit income over there wasn’t really high enough for it to amount to much when I made the move to CGWM. Being given the choice between a two-digit monthly pension income in 30 years, or just under $25K transferred to a Locked in Retirement Account (LIRA), I chose the latter.
 
I decided from the get-go that this money would be hands-off—not another play money account—and invested the whole lump sum in a fund I’ve been using for clients since my early days: the Capital Group Global Equity fund. Since 2013 this money has now doubled to around $53K. The only time I touch it is to sell a tiny bit to make up the AUM fee that I charge myself.
 

RRSP

 
My biggest account is my RRSP. It’s actually three accounts right now, with the lion’s share in the MWP Elementum GlobalEx portfolio, a very small amount in a U.S. drugmaker within a separate U.S. dollar RSP, and the rest in my “legacy RRSP”, which contains some beaten up penny stocks  I still have kicking around (mistakes, to remind me not to buy penny stocks!) as well as a reasonable amount in the EdgePoint Global Portfolio.
 
You can see some info, and performance, of my GlobalEx portfolio at the link above. The drugmaker and penny stocks have been duds, though one of them—in a small uranium miner—is making a comeback of late.
 
The EdgePoint portfolio, though an underperformer in the recent past, is a good complement to my more index-based GlobalEx portfolio, as it’s invested very differently; smaller names chosen by very active fund managers. I also use this fund as the gateway for my monthly RRSP contributions, as it’s easier to set up a monthly contribution to go directly into a mutual fund than into an ETF portfolio.
 

Misc.

 
My last investment of significance might surprise readers and clients. Around 10% of my net worth is in bullion. Actual cold hard metal too, none of those ETFs or certificate nonsense. This is not something I recommend to many, but it’s the ultimate diversifier for someone like myself whose livelihood depends on the financial markets. I think.
 
The image at the top of the post is even an actual photo I took of some of my silver coins, not a stock image. Those stacks of coins with shiny flat edges on the left and right are Austrian Philharmonics, the stack in the middle are American Silver Eagles, and then there's some random other stuff.
 
Initially, I bought a gold maple leaf coin and some silver bullion, purely to just get a bit of exposure to the metals when they were relatively cheap around 2014. I actually sold that gold maple leaf this past summer at a nice gain (not only was gold at highs of around $2000US, but the CAD had come down since 2014). This then turned into a bit of a hobby collecting silver coins over the years.
 
The bulk of this collection are silver “semi-numismatics” of various collectible series (Chinese Pandas, Perth Mint Lunar New Year series, Canadian wildlife, etc), which are so called because they’re not anywhere near as rare or expensive as true numismatics (they're usually minted in the hundreds of thousands or millions, and sold at only a slight premium to their underlying silver "melt value"), but because they’re parts of series of varying designs, and highly sought after, they have some collectible value in addition to their base bullion value. 
 
Though silver had a strong year, up almost 50% in 2020, I think overall I'm not up that much on this collection just yet. The stupid thing with bullion too is that it doesn't pay a dividend, and it's not very liquid. I can sell it all to a local coin shop at a slight discount to the bullion value (after paying a significant premium when buying it) or find another collector (ie: sell over eBay) to get the full collector's value.
 
I have branched out a bit into some interesting modern numismatics as well (newly issued coins, as opposed to old collectibles) such as the Austrian Mint’s colorful niobium series. These are relatively easy to collect with issues of 65K of each coin and they all have interesting science & technology themes. Some years they sell out almost immediately, others a bit slower, but once the Mint is sold out they tend to go for a nice premium on eBay. Next issue, for 2021, should be coming out soon.
 

Summary

 
Summing it all up, the bulk of my overall financial net worth is in the form of my GlobalEx portfolio, and within it the bulk of the assets are invested in low-cost index ETFs. My own crude visualization of my portfolio looks something like this:
 
 
My overall philosophy in portfolio construction is to own the basic building blocks—the core—as cheaply as possible via index funds. The blog post I just linked discusses why it fundamentally makes sense to index the core of your portfolio, but there's always room for some active, whether to gain exposure to particular assets and diverse strategies or to just satiate a perfectly human addiction to speculation (as I do with the Fidelity fund mentioned above; keeping myself from buying any new spec stocks). 
 
The active funds I complement my index funds with tend to be anti-index funds. The fund in my LIRA is an exception, as it's somewhat index-like, but follows a multi-manager process that I like and has overall low costs (and it's just easy and simple for a small account to just have that one fund). 
 
Process and discipline matter more than stock or fund picks; it's not what you invest in that matters as much as how you invest. Via social media and reading blogs and web forums I too often see people deliberating the tiniest things, like which ETF has a 5 basis point lower fee, or lower tracking error, or people stumped in choosing funds for their work RSP/pension because they consider the MERs too high, or people just generally paralyzed in fear about investing in the markets. Over-thinking those decisions and missing out on the long-term growth trend of equities often makes the other things moot. Just make your choice and get on with it! 
 
The fact that I put money aside monthly into the EdgePoint fund in my RRSP makes a whole lot more difference in my ability to reach my long-term goals than my decision of having picked that fund when I could have picked a much lower costing index ETF. When I transfered my pension, I didn't sit in cash while I deliberated the merits of VXC or XAW; I just put the cash right into a fund I was familiar with and was using for my clients anyway (the fact that it has beaten both ETFs by more than 3% annually, net of fees, over the past 5 years is just a happy coincidence).
 
Automation of savings strategies also factors largely into my financial plan, and it should for everybody in the accumulation stage. Not only does it make things easier on you, but it allows you to get on with life while keeping the amount of times you check your portfolio to an absolute minimum. What have I got to gain by looking at my accounts every week? Switching things around because of very short-term performance usually ends up being the absolute worst thing anyone can do.
 
So, there you have it. A peek inside my own portfolio and my own way of thinking. I think most clients will recognize that they're not invested that much differently than I am, and those wanting to trade speculative stocks will understand why I generally have an aversion to them. We all have behavioral biases, and I know mine. Clearly I have some Regret Avoidance bias, otherwise I would have sold some of those losing stocks years ago.
 
As mentioned, I'm always happy to discuss this or provide you a second opinion on your portfolio. If anyone's interested in buying some Chinese Pandas or Australian Kookaburras (coins) hit me up too!
 
 
Investment Advisor & Portfolio Manager