Now that you have made it on this page, you probably know that our portfolios are personalized and vary from one client to another. We consider over 10 different factors to determine the portfolio that best suits a particular investor. It is thus irrelevant to publish the performance of a portfolio (or even a few) that would represent our investment philosophy. However, since you're probably used to select a portfolio manager based on its past performance, here are some facts to consider to better manage your expectations.
Past performance may not be repeated
This sentence is included in most portfolio managers advertising material. It is best not to ignore it! This study from Vanguard Canada shows that there is no persistence in the performance of portfolio managers. Thus, a manger who had a good performance during the past five years is usually not better than the average over the next 5 years. Despite these statistics, most investors continue to use past performance as the primary decision factor in the choice of a portfolio manager. Past performance is worth considering, especially when one has to choose and active manager who claims to be able to generate returns significantly higher than market returns. Such a manager will benefit from periods during which he has had good returns to increase its visibility and attract new clients. However, be aware that very few managers generate returns well above market returns over long periods. Since we focus on long term investing and want our clients to use our services for a long time, we believe it is best to understand our approach, rather than relying primarily on past performance.
Idema Investments : A different approach
Our investment approach is very different from most portfolio managers. We do not claim to have the best financial analysts able to select only those companies that will generate the best returns over the coming years. If this approach worked systematically, most managers would show good returns over a long period. This is not the case, and its not surprising, because active management is, at best, a zero sum game. We prefer to use products such as Exchange Traded Funds (ETFs) that allow for well diversified portfolios in a given asset class at a low cost. Not having to deal with stock selection allows to pay less attention to daily market volatility and focus more an asset allocation which is the most important driver of long term portfolio returns.
The importance of understanding fees
Since the performance of our portfolios will generally be close to the weighted performance of the different asset class used, it is important to understand all of the fees that can effect the performance of a portfolio. This is why our Free Analysis tries to quantify the anticipated costs of a given portfolio. For example, we calculate the costs of the ETFs used in our portfolios, even if these costs are not charged directly in the investors brokerage account (the are paid within the ETF just as for a mutual fund). Altough we can't predict future performance, the results of our Free Analysis allows to better manage your expectations.