Over the past few weeks on CFRA’s Experts on Call, we’ve had some great discussions about the pitfalls of active investing and the benefits of the passive approach that’s backed up by the evidence. Here are a few interesting points arising from those shows:

  • If you invested $100,000 in globally diversified equity portfolio on January 1, 1994, and you had left it there until December 31, 2015 (only rebalancing it every few months to maintain the right mix), despite the tech crash, 9/11, the credit crisis and all the other bad periods on the market, you’d have $603,000 today.
  • If you had missed out on the 10 best months out of the 22 years (10 months out of 264), your returns would have been only $305,000. So trying to time the market is risky and expensive. Buying and holding means you don’t miss out on the best opportunities.
  • While about 32% of US assets are invested in index funds, only about 12% of Canadian assets are. Is that because we’re slow to catch up to the trend? Or is it because the commissions and incentives for selling active stock picking are higher in Canada?
  • Growth in the stock market is typically driven by a small number of companies. But if you pick stocks, you won’t have any way of knowing in advance which those companies will be. Choosing an index fund is like picking every player in the NHL in your hockey pool. The odds of you having the top five scorers in the league go way up if you get everyone instead of just a few players.

Join us again on February 13 and 27 when we’ll be raising other interesting facts about investing.