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Mutual Fund News

ME AND MY MONEY

Saturday, March 21, 2015

ROBB ENGEN

Occupation

Business development manager

The portfolio

Two exchange-traded funds (ETF): Vanguard All World exCanada Index ETF and Vanguard Canada Index ETF

The investor

In 2009, Robb Engen dumped his mutual funds and became a do-ityourself investor focused on stocks with growing dividends. In a Me and My Money column in October, 2010, he outlined his approach. After years of outperforming the S&P/TSX 60 index, he sold his dividend stocks in early 2015 and bought index funds.

Why he switched to index investing

In 2014, Mr. Engen had a hard time finding value-priced, bluechip dividend stocks because the bull market had pushed up prices so much. The few stocks he bought performed "flat-out terrible," causing his portfolio to underperform for the first time.

Busy with his family and career, he just didn't have "the time to spend researching undervalued stocks" in depth. Nor did he have the patience to let his incoming cash accumulate until the next bear market came along to create undervalued stocks.

Mr. Engen also began to wonder whether his market-beating returns from 2009 to 2013 reflected not so much skill as luck.

His good fortune was to set up a dividend portfolio at the beginning of a long bull market and an historic decline in interest rates (which made dividends look more attractive).

Besides, he didn't really have to take on the endeavour of beating the market. For his envisioned retirement lifestyle, market returns would get him there just fine - and with a lot less worry, exertion and risk.

Then there was the improvement in diversification. The Vanguard All World ex-Canada Index ETF follows more than 3,000 small and large-cap companies in all industry groups across 36 countries.

Finally, it was time to practise what he preached. Having launched a fee-only financial planning business in early 2014, he had been "recommending a couch potato [indexing] investment approach to anyone who'd listen."

Best move

Overcoming "behavioural biases" and realizing he wasn't "the next Warren Buffett."

Worst move

Buying dividend stocks that were not blue chip or value priced.

Advice

Watch out for getting overconfident as the market hits new highs, Mr. Engen advises.

Want to share your strategies?

E-mail mccolumn@yahoo.com

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