Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs by Dan Bortolotti

Images
 STEP 1
 STOP TRYING TO BEAT THE
 MARKET

Ivividly remember when I first let go of the idea that successful investing
 was about beating the market.
 It was in the summer of 2008, when I was a full-time journalist and a
 regular contributor to MoneySense. Up to that point, I had almost never
 written about investing: most of my work for the magazine centred on
 topics like saving money on kids’ music lessons or getting a good deal on a
 gas barbecue. But that year, the editors planned an event called the Seven-
Day Financial Makeover and invited three couples and one single person to
 a week-long boot camp in a Toronto hotel. There were workshops led by
 experts covering everything from smart spending to debt management to
 investing. I was supposed to be there as a reporter, but I ended up getting a
 makeover of my own.
 MoneySense was an early adopter of the Couch Potato strategy, which
 involves investing in a portfolio of low-cost index funds. These funds get
 their name because they’re designed to mimic popular benchmarks for the
 stock and bond markets rather than having someone pick individual
 securities or make tactical moves based on forecasts. During the workshops,
 the experts explained that this simple strategy with the playful name

delivered higher returns than the majority of mutual funds and money
 managers.
 I was fascinated, but skeptical. It sounded like someone was selling a
 golf strategy that could beat most players on the PGA Tour. It took me a
 while to appreciate why that’s a poor analogy. Professional golfers routinely
 shoot under par, but the vast majority of investors—both amateurs and pros
 —fail to outperform their benchmark indexes.
 Inspired by the workshops, I hungrily read everything I could about the
 theory and practice of indexing, studying the math and the logic behind it.
 Once I understood how and why the strategy works, I fired my advisor, sold
 my high-fee mutual funds, opened an online brokerage account and rebuilt
 my portfolio with ETFs.
 A few weeks later, in September 2008, the markets crashed and I lost
 more than 20% of my savings. I went from couch potato to mashed potato.
 But I didn’t lose faith in the strategy—and not because I was an
 experienced investor with nerves of steel. The reason I held on was because
 I had done my homework and I knew what to expect when markets fell. I
 was stressed and scared like everyone else, but I wasn’t tempted to abandon
 the strategy, because I was no longer under the illusion that a more active
 approach would have improved my situation. Indeed, it likely would have
 made it worse.
 You don’t need to read dozens of books on index investing to get to that
 place, but a review of the evidence that the strategy works should help you
 build confidence in the approach and stick to it even when markets are in
 freefall.

Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs by Dan Bortolotti