Thursday, May 10, 2012

Leafs, Mutual Funds, and Other Addictions

As I watched in awestruck horror, my Maple Leaf hockey team slowly disintegrated before my eyes this winter. It is a very difficult time to be a Leaf fan and it is getting harder to say ‘we will get’em next year”.  Of course my friends all claim to be long time fans of Boston or Chicago or anybody else that has had recent success. Many who claim to be friends seem to take great joy in pointing to the folly of being a fan of such an incredibly bumbling organization. The senior leaders in the Leaf hierarchy continue to insist they care more about winning than making enormous profits; yet year after year they manage to seem cheerful when they tell shareholders about the huge profits they have ‘earned’ (?) for the owners. As I watch this unfold I struggled to find an analogy for being a loyal Leafs fan.

Then, I had an epiphany!  I opened my investment statement and it all became clear. Cheering for the Leafs is the very same as investing in Mutual Funds! How could I not see it before? Think about the following points and see if you agree:

1.       They both seemed like a good idea years ago when I invested in them. In the early years (I am mid-fifties in age) the Leafs were winners and life was good for Leaf fans. In the early years Mutual Funds paid double digit returns and investors all made money!

2.       Being a fan of the Leafs is an emotional journey. They raise you up just to knock you down again and then they repeat the pattern endlessly. My Mutual Funds have also had great days, weeks, months and even years but they are now worth no more (and often less) than they were worth when I originally invested in them. The crashes are sudden, without warning, and devastating. Sound familiar?

3.       The Maple Leafs cannot seem to recognize quality assets. They trade draft picks and young ‘stars- to- be’ for old tired and worn out players. When they do get a good spot in the draft they still manage to find a dud. Not surprising all the top free agents stay away. Funny, when I look back at my fund holdings I see the same story. Stocks bought when they were past their prime and stocks sold just before they went on a tear. Top fund managers leaving for better firms and no quality replacements in sight.

4.       Leaf tickets are priced as if the Leafs of old were still here winning championships. Why am I forced to pay huge ticket prices to see a team that stinks! Similarly, Mutual Fund fees are the highest in the world here in Canada and performance also stinks. Paying a couple or 3 per cent on returns of 12-15% was not bad in the eighties. But paying over 2% now for funds that return nothing over a decade seems a bit much. I am being ripped off every way I turn!

5.       Sports analysts (talking heads) continually pump up the volume on how great the Leafs will be soon..... not now, but soon! Come the trade deadlines or draft day you would think the Leafs had phenomenal assets to trade or the next great star about to be drafted. Soon we realize it was all B.S. designed to get us to buy more tickets and Leaf jerseys with a new saviors name on the back. As for Mutual Funds, every terrible statement comes with an explanation of why now is the time to invest. Markets are just about to go on a bull run and the newest stock picker hired by the fund company is a real genius! Remember this RRSP season you need to double up on your deposits because this coming year is the big one for investors.....right?

6.       Perhaps the biggest similarity is my inability to wean myself off of these addictions. Why would I continue to work with an advisor that I have come to realize is just a salesperson sucking me dry? Why as a Leafs fan do I still turn on the game and start every season thinking this year will be different? Alas to this simple question there is no simple answer!

Having carried the analogy far enough I now see there is one huge difference. I do not really love my advisor/salesperson. I can picture life without them. I can manage my own investments or I can find a low cost fund firm like SteadyHand or Mawer or Leith Wheeler or I can buy low cost ETFs. In short, I have control over whether I use an advisor/salesperson.

As for the Leafs, well matters of the heart are more difficult. I will continue to try to grow apart from the Leafs but I can never, ever, ever, ever cheer for Montreal or Ottawa! That would just be too much to ask of a recovering Leafs addict!


Anonymous said...

Lol whats with ppl and blaming mutual funds, its a simple equation they make money if you hold onto them so I question the legitamacy of your article!

Anonymous said...
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Anonymous said...

The Leafs and financial advisors are a joke.

Anonymous said...

OMG, forget Warren Buffett, Peter Lynch & the Vogal guy at Vanguard.

I can't wait for your book titled, "I'm smart, Those guys are Dumb"

Anonymous said...

if your a fee for service advisor, you must be really cheap. Your advice sure is.

Mike Macdonald said...

Dear Anonymous, I am not sure what has you so riled up. The blog never stated that mutual funds could not ever make money, simply that they are oft over rated and over priced....just like the Leafs.
As to Buffet and Lynch and "Vogal" at Vanguard (I am guessing you mean Bogle) you will find Buffet is not a mutual fund guy and Bogle is an index supporter.

SaSa said...

Mike is very smart!!

Anonymous said...

Hi Mike,
I enjoyed this article and felt obligated to post this in light of all the clowns that have posted. I did like the commenter referring to "Vogal".

I squarely blame the Leafs continual losses for my now complete lack of interest in hockey (as of 10 years ago).