BARGAIN VS VALUE ADDED INVESTING

We want to share an old blog post we wrote, based on a real life event.  Our investment philosophy is rooted in steering our clients in the appropriate direction, based on their investment goals and objectives. A topic that is often broached is what a Wealth Advisor, and the team, can bring to the table; specifically relating to bargain investing versus value added investing.  Here’s the blog, originally posted in 2018.

On a flight to Montreal, I was sitting next to a gentleman who was heading out West for work. We had a great conversation about his career, where he lives, and about life in general. He asked what I did for a living, and I told him about my role as a Wealth Advisor. He recoiled a bit, but soon began to ask the standard questions I’ve come to anticipate, like what “hot” investments are out there, and seeing if I could offer any make rich strategies he should know about. I recoil myself, at these types of questions; disappointed that this is how some individuals interpret our industry. I answered by telling him a little about our team, the James Financial Advisory Group, explaining we do not actively pick individual stocks or bonds for our clients; we instead focus our efforts on doing our due diligence in picking “best in class” investment managers, who in turn buy and sell stocks and bonds on behalf of our clients. A lot of investment professionals market themselves as adding value in actively selecting securities but the James Financial Advisory Group does not. Our process is a much more all-encompassing approach, tailored specifically to each of our clients’ needs. We implement the appropriate asset mix, and continuously rebalance back to the clients’ target asset mix (from market changes and/or cash flows); and coordinate our clients wealth planning with their other professionals to make sure there is synergy in all that is being done in order to help achieve their goals.

My new friend continued to tell me that he used to have an Wealth Advisor, at which time he invested in his RRSP over a number of years, saying he “did ok, and was averaging 5% or so, but thought there were cheaper options out there”. He then told me he transferred out his money and began making investment choices on his own, through one of the popular Robo Advisor sites. He picked a number of individual securities, around 15 or so – all stocks. Within a couple of years, he had turned his $50,000 into $20,000, then pulled out of the market, putting his entire portfolio into GICs. I asked him whether he intended to reinvest into the market at some point, and he replied, “maybe once things start to go up, I’ll buy back in”. So, what was the “cost” of the cheaper option here? These decisions made time and time again, translate to weaker investment performance and wealth destruction. Don’t get me wrong, I like a bargain as much as anybody, but unquestionably there are areas in our lives where we should not be looking for the cheapest option. A better outlook, when it comes to something as crucial as ones financial future, is best value per dollar spent.

Our team is committed to providing an exceptional client experience. If you ever have any questions about this topic, or any other financial matter, never hesitate to reach out. We’re here to help!