Diversified Income XTR

Income generation becomes a primary goal for your investment portfolio as you enter retirement. Most see bonds and dividend bearing stocks as the primary investment vehicles vehicles for income, although REITs, preferred shares and infrastructure can also play a role in a diversified income portfolio.

While you can purchase a number of individual ETF products to assemble a diversified income portfolio, there can be advantages in  a single fund.  XTR from iShares is one such product, and we review it in this post.

What Does XTR Hold?

iShares XTR is a 'fund of funds' meaning that it holds other iShares ETFs, in this case 11 funds.  I list below in order of weighting the XTR portfolio (including my brief descriptor for each) as of May 2017:

• XHB (Canadian corporate bond) 20.5%
• XHY (US corporate bond) 13.7%
• CBO (Canadian 1-5 y corporate bond ladder) 12.0%
• XEI (Canadian dividend equity) 11.7%
• XRE (Canadian REIT) 8.7%
• XDV (Canadian dividend) 8.0%
• CUD (US dividend equity) 7.4%
• CPD (Canadian preferred share) 5.3%
• XUT (Canadian utilities) 5.2%
• XST (Canadian staples equity) 4.5%
• CLF (Canadian 1-5 y laddered government bond) 3.0%

You can get the details, including current portfolio weightings, of XTR directly from iShares here. To make the chart below I've lumped the funds into corporate bond, government bond, dividend equity, preferred share and REIT categories. While I have included XST with dividend equity, it is probably more properly viewed as a low volatility equity rather than strictly a dividend equity ETF.

The overall holdings in XTR are 76.7% Canadian, 19.7% US, and about 3.7% from all other countries combined. This is good for tax benefits when XTR is held outside registered accounts, but not great in terms of diversification.

As a fund of funds, XTR is diversified over a lot of different underlying holdings, a bit over 2200 at the time of writing.

Costs

The overall MER for XTR is now 0.60% (some sources still quote the audited 0.62% value), and that includes the fees inherent in the underlying funds that XTR holds.  The current TER is 0.02%, so trading within the fund does not add significantly to the overall costs. XTR is widely traded (typically 45 thousand units per trading day), so the spread between bid and ask is usually slight. While this MER may seem high compared to pure equity or broad bond ETFs, it is competitive with fees associated with most dividend and blended funds.

Performance

The performance of XTR is steady but certainly far from spectacular. In the past year it has had a total return of 10.0%, but over 5 years the return averages 4.6% annually, while over 10 years it averages 5.3% annually. The majority of years show positive returns, with only one of the last 5 having a negative return (-5.98% in 2015).

With XTR you are giving up a little bit in return for regular income at modest variability.

Advantages

Especially if you have a relatively modest portfolio, the idea of holing a single product that effectively represents the various components of a well diversified income fund makes sense. You save commission costs of adding US and Canadian dividend ETFs, along with several corporate bond ETFs.

XTR should be more stable than any one of these individual ETFs (e.g., the total yearly range of XTR over the past 12 months has just been 6% from minimum to maximum value), so it will help you reign in temptation to trade too often for your own good.

XTR pays out its distributions monthly, so it works well in a LIF or RIF where you are withdrawing funds monthly.

While the performance has been less than a simple equity and bond couch potato portfolio, the mix of investment products may (but see below under concerns) help cushion some market volatility.  As we move into retirement ages it is natural to worry more about the ups and downs of the market, so anything to reduce this variability is a positive.

If you don't immediately need the income, you can use DRIP to purchase additional units without commission costs.

While we have too many ETFs in my opinion, I don't think we have enough ETFs that are single products well tailored to a need (such as retirement income, or couch potato type portfolios). XTR is a well designed income ETF, and that is why many tens of thousands of units trade daily on the TSX.

Concerns

The bond holdings within the portfolio are not entirely investment grade.  For example XHB (the largest single component of XTR) has essentially none of its portfolio in A, with 80.7% in BBB and the rest in lower investment grades (see the explanation of bond ratings here). That being said, XHB has been remarkably stable - e.g. it has not shown a negative return for any of the past 5 years. While they are not in the high investment ratings of government bonds, the companies XHB holds are mainly household names in Canada. The US corporate bonds held in the XHY ETF within XTR have a similar investment quality range.

Also, the bonds in XTR are mainly corporate, with only a few percent in investment grade government bonds.  It is likely that in a major equity market correction these corporate bonds will not help cushion your portfolio the way that investment grade government bonds would.

Another potential concern is the high Canadian bias.  About 76.7% of the portfolio is held in Canadian products, and only 3.7% are held outside Canada and the US. XTR has essentially no emerging market exposure, in bonds or equities.

A fourth potential concern is that there is little in the way of direct inflation protection in XTR, since it does not hold real return or TIP bonds. Also the REIT component is largely restricted to Canada.

Considering these potential concerns, if seeking the most stability in returns, it makes sense to pair XTR with some holding in products such as CBD or XAL that give you more government bonds, inflation protection, and wider international coverage.  A future posting will consider these groupings quantitatively.

Alternatives to XTR

Perhaps the closest alternative to XTR is BMO's ZMI, which is also a 'fund of funds'. ZMI holds 17 other BMO funds, with the majority being a mix of Canadian and US dividend equity ETFs and corporate bond ETFs, with a little dose of REITs and other income ETFs. Compared to XTR, ZMI has slightly higher equity holdings and slightly lower bond exposure, but the differences are so small they hardly matter.  The BMO ZMI includes some of the option linked products that BMO has made popular, including

I slightly prefer XTR for the following reasons:

1. Longer track record (XTR started in 2005 and ZMI in 2011), with good stability since the end of 2009 (the price did decline in 2015, but has recovered nicely).
2. More widely traded (on a typical trading day ZMI trades a few thousand units, while XTR several tens of thousands of units).
3. Better transparency (the 11 ETFs included in XTR are all easy to understand offerings, while  ZMI include the covered call and put write holdings that many individual investors may not fully understand.
4. Although be careful comparing yields, I do like that XTR has given a very consistent approximately 6% yield (at current price) versus currently just over 4% for ZMI.

That being said, I would point out that if we compare 5 year annualized performances, ZMI has the edge at 5.70% vs 4.54% for XTR. There is also slightly more exposure outside North America in ZMI, an advantage in my opinion. The volatility of the two are very similar - according to Morningstar.ca the standard deviation for XTR is 4.8 while that of ZMI is 4.7.  

If I was grading the two products my overall grade would be very nearly a tie. Morningstar.ca currently also gives the edge to XTR, with *** vs  a ** rating for ZMI.  Either ETF is a good choice. There are of course many other income generating mutual funds and ETFs, although most of them have at least somewhat higher MER than these products.

Those seeking a mutual fund alternative should consider Steadyhand Income Fund.  The MER is slightly higher, but there are no commission charges. It is more conservatively invested than XTR, but returns have in the long run been marginally better (6.0% return per year averaged over the past 10 yr, although only 1.9% per year over the last 2 yr.)  If you are ready to invest at least $10,000, you can open a Steadyhand account directly, or you can buy Steadyhand Income Fund through most Canadian discount brokerages (SIF120).

Another good income alternative would be Tangerine Balanced Income investment fund. Over 5 years it has offered a similar return 5.5% over 5 years, and has been pretty consistent from year to year.  The portfolio is weighted to Canadian bonds, with about 10% in each of US and international equities. Its easy to set up an account with Tangerine,  It does only pay out its distributions once accually (in December), so not as well suited as XTR to directly providing monthly income.

Final Thoughts

XTR plays a major role in my personal retirement LIF, and I think XTR or ZMI make sense for many retirement accounts.  I like that it combines in a single product the components that I want to play a major role in my income funds (bond and dividend funds in US and Canada, REITs), and that it pays a stable monthly distribution.

In investing we should look forward not backward (a central message of the book The 3 Simple Rules of Investing).  If I look backward at returns, I would probably concentrate in an equity and bond portfolio, but if looking forward I see more stability in a broader set of income generating holdings, and XTR fits very nicely into what I want to hold.

That being said, I would not make it the only income product, although it may be the major one. I would consider an additional ETF that helps provide balance outside North America, as well as ideally more government bond exposure and some inflation protection  (such as CBD or possibly XAL that I will cover in a future posts).

Both XTR and ZMI provide a reliable income stream (currently about 5.7% for XTR and 4.0% for ZMI ) that is sufficient for many RIF retirement ratios, and that is paid monthly.  You do give up potential return with these products compared to simple stock plus bond portfolios but in return you obtain slightly more stability across more asset classes.

If considering holding these products outside a registered account, discuss tax implications with your financial advisor.

This posting is intended for education only and should not be considered investment advice. The reader is responsible for his or her own financial decisions.  The writer is not a financial planner or investment advisor, and reading this column should not be interpreted as obtaining individual financial planning or investment advice. For major financial decisions it is always wise to consult skilled professionals. While an effort has been made to be accurate, any statements of fact should be independently checked if important to the reader.

Disclosure:  The author of this column holds XTR (and has held ZMI, although not currently) and CBD. I also hold some SIF120. No compensation by any company has been offered, requested or received for writing this column.

Review: Portfolio First Aid

I picked up a copy of Portfolio First Aid at my local public library, intrigued by the title and impressed by the author team. Micahael Graham, PhD (Economics) was Chairman of the Board at Toronto investment firm Heathbridge Capital Management Ltd. at the time the book was published (2005), and had worked in investment industry for more than 40 years. He currently runs MGIS.  Co-author Bryan Snelson is a Vice-President and Investment Advisor at RBC Wealth Management.

What I Liked

Any investment book is only as good as the quality of the advice it offers. Given the expertise of the authors, one can have confidence in this book. An investment book also needs to be clear and engaging, and I would give this book high marks in both.

The writing is clear and precise.  I liked the use of boxes to draw attention to important points. The titles of these. In both these boxes and in sections titles effectively draw the reader in. By current standards the 2005 book is somewhat lacking in illustrative material, but the black and white visuals and tables explain key ideas effectively.

Perhaps it will not appeal to all readers, but I like how we come to know the authors through commentary throughout the book.  For example, on pg. 8 Michael relates the experience of flying to Winnipeg on Oct. 19, 1987, Black Monday, for a pre-planned meeting with investors. What do you say the day after markets have lost 23% in one day?

I particularly liked Chapter 7 Show Me The Money: Investing for Income. You will find coverage of dividends, real return and corporate bonds, laddered bonds, income trusts, dividend funds, preferred shares and much more.

After I finish reading a nonfiction book I always ask myself these four questions.  One is, was my time invested in the book, time well spent? Do I have confidence in the validity and balance in the presentation? Was I engaged in the book? What were the author's motives in writing the book? To the first three I could confidently answer YES for this book.

With respect to the last question, I suppose any author team always have mixed motivations for a book, but I do feel that in the case of this book there is an authentic desire to contribute to the well being of investors. The authors write in the preface

"There is nothing worse than having to inform an investor that his or her hard-earned savings has been badly mauled-sometimes irreparably"

They feel that with careful analysis and attention to a portfolio the odds of that can be lowered, while retaining reasonable returns.

Not That Book

One of the online reviews of the 2009 version of this book, a very negative review, complains that the book has little specific advice to offer, and emphasizes use of professional advisors more than it should. While I feel that the reviewer has been unfairly harsh, it's true that Chapter 4 You Need Financial Help! and Chapter 5 It's Always About You: Working With Your Advisor assume that the correct choice for most is to work with a financial advisor, rather than DIY investing. Perhaps because of this assumption, as the negative reviewer noted, little in the book that is detailed enough to guide the DIY investor in specific decisions.

I view this book as contributing to understanding the big picture of investing.  A recipe book for do it yourself investors it is not. Discount brokerage accounts are mentioned on only four different pages in the 2005 book, and not as a recurring theme.  Exchange traded funds (ETFs) find mention on only five different pages in the book.

That is not to say the book does not get involved. Chapter 9 Running With Scissors: Prescriptions for Managing Risk, for example, covers bond ratings, market risk, interest rate risk, default risk, lost-opportunity risk, purchasing power risk, stop-loss orders, options, calls, short-selling, puts, hedge funds and covered calls. They urge individual investors to avoid many of these financial instruments, however.

Concluding Thoughts

I liked this book and recommend it to Canadian investors for inclusion in a list of your first 10 investment books. I should point out that I reviewed the 2005 book, but an updated book on the same theme,  by these authors plus Cindy David, CFP. You can get the 2009 book at Amazon.ca in printed or kindle formats. You can pick up the 2005 edition from Amazon.ca and independent booksellers and you can probably find it at low cost from used bookstores, or free from a public library.

While no on can predict the future, there are many worrisome signs about the investing landscape these days.  It's a perfect time to consider how you can guard against the catastrophic losses, and this book will help.

Toronto based freelance financial journalist Jade Hemeon wrote the following in his review of the 2005 book on Amazon.ca.

"A useful and entertaining tour of the investment world that hits all the significant ports of call. Written by two veteran financial advisors in a vividly descriptive fashion, it offers sage advice enhanced by personal anecdotes and humor. This book will help investors avoid costly mistakes and develop a strategy that can withstand the drama of shifting market moods."

I could not say it better! Give this book a read, and you will come away with a deeper understanding of the investment world.  But don't expect the book to be a step by step guide to DIY investing, or you will be disappointed.

This posting is intended for education only and should not be considered investment advice. The reader is responsible for their own financial decisions.  The writer is not a professional financial planner or investment advisor. For major financial decisions it is always wise to consult skilled professionals. While an effort has been made to be accurate, any statements of fact should be independently checked if important to the reader.

Disclosure:  No compensation by any company, organization or individual has been offered, requested or received for writing this column. We do however belong to affiliate programs for some of the links that you find in our articles, details available upon request.

Books for Review: I will not promise a positive, or even any, review, but if you wish to submit your investment book for me to consider, contact me rhawkes (at) chignecto.ca. I am particularly interested in Canadian books.

Should You Buy Only Stocks You Understand?

Like many good questions, the answer to the question posed in the title is yes, but also no.  Let's elaborate.

Before we start, we assume that you have decided to hold some individual stocks in your portfolio, and that is a good choice for your financial situation.  That decision is a whole question in itself, and not a simple one to answer, and we will deal with in a future post.

Perhaps Warren Buffett is the best known proponent of the idea that you should only invest in what you really understand. Indeed number 7 on a list of Buffett investing quotes is "Never invest in a business you cannot understand."  Berkshire Hathaway Inc. invested mainly in big name companies operating in areas that he understood. Also, while others were rushing into technology stocks, Berkshire Hathaway Inc. stayed largely on the side (although recently holdings of Apple have been significantly increased).

It seems obvious that you should really know a company before you invest in that company.  No matter how many balance sheets you examine, how many analyst reports you read, it might be argued that you must understand the field the company operates in to truly understand it at the deepest level. It is only through that knowledge that you can reasonably predict how the company's financial situation is likely to change in coming years. Do you really understand fuel cells at a scientific and engineering level, if not why are you considering buying stocks of Ballard? Do you really know the pharmaceutical industry? If not, why are you considering Valeant?

So let's say you  have extensive work experience and academic background in the banking business.  You understand banks and insurance companies at a deep level.  More than any other area of the stock market, you feel qualified to choose which companies have a bright future, and which not so much. Indeed as Alexander MacDonald has pointed out, if you had invested only in Canadian Banks you would have out performed an other North American sector over the past 25 years.

The problem with that approach, however, is that it totally lacks in diversification, and therefore your investment portfolio is expected to be more volatile. A second possible problem is that you might depend too much on your personal expert viewpoint, and not give sufficient weight to the views of investment analysts. The 2008 financial crisis emphasized this point.

However, it is important to think about diversification across your entire financial holdings.  For example, if you have TFSA, RRSP and unregistered accounts, it is not necessary that each be fully diversified, but rather that in total your holdings are. There may well be tax reasons why your holdings in unregistered are different than in the RRSP.  The fact that TFSA accounts are not part of international tax treaties means that certain types of holdings should not be held there (more on that in a future post).

So back to our question on stocks.  If you do decide to hold a number of stocks in one or a few categories, because that is what you understand well, make sure that you balance that with broad holdings in the rest of your portfolio. Not only should no one stock represent a large part of your portfolio, but also no stock category should be a major part.

Some will work in companies where stocks in the company are either part of your compensation, or offered at an attractive price.  While it makes sense to hold those stocks, make sure that it does not represent all or most of your investment holdings. There is a good article on this topic by Eric Rosenberg here.

What are your thoughts on this topic?  Why not leave a comment?  As always, thanks for reading!

This posting is intended for education only and should not be considered investment advice. The reader is responsible for their own financial decisions.  The writer is not a financial planner or investment advisor, and reading this column should not be interpreted as obtaining individual financial planning or investment advice. For major financial decisions it is always wise to consult skilled professionals. While an effort has been made to be accurate, any statements of fact should be independently checked if important to the reader.

Disclosure:  The author of this column has not received any compensation from any financial company for writing this column, and has no association with any company mentioned.  I do hold a small number of individual stocks, but neither of the two mentioned by name in this column.

Diversification: Don't Grow Only Tomatoes!

Returning to our garden metaphor, let's assume you have a large parcel of agricultural land and that you want to make money by growing crops on it. While an analysis could be done to indicate, from crop yield and historical crop selling prices, what one crop would give you the most money per area for your farm land. Indeed, if your only goal is to have the largest statistical return on your farm investment, growing that one crop is the best choice.

Let's say you have determined that the optimum crop is tomatoes. If you have only one crop though, your risk will be higher when you grow just tomatoes than if you had a mixed garden. The reason for this is an event such as a late frost, a blight, or a pest that affects only tomatoes could wipe out almost the entire crop for a year.

If instead you grow a number of different crops, it is likely that environmental or other factors will not affect them all equally.  In fact, a cold wet season that is bad for some crops may be good for other crops.

Diversification

The idea of investing in different sectors to limit risk is called diversification. For individual investors while return on investment is important, limiting risk is also crucial.  For those in or near retirement, the need to limit investment is even more critical, since there is less time to rebuild after major stock losses.

A similar situation applies to investments, where diversification across different investments can help limit the amount of risk.  This is because changes in the economy affect different regions and industries differently. While rising interest rates might be negative for one industry, it  might be positive for another, while another is not interest rate sensitive at all.

We can diversify by making sure we hold enough different stocks, and that those stocks represent different types of companies from different regions.  It is also critical to hold bonds as part of your diversified portfolio, and possibly other investment types.  The next section provides more detail.

Types of Diversification

So how do you effectively diversify?

• Stocks and Bonds  Generally speaking high quality bonds go up in value when stocks go down, and vice versa, so having a mix of stocks and bonds is the first rule of diversification.  The exact mix will depend on your risk tolerance and financial situation, generally holding a higher amount in bonds later in life.
• Different Industries Sometimes overlooked is the importance of having a good mix of different types of industries represented in your portfolio.  You could be invested across the entire Canadian stock exchange, and still not have good industry diversification, since financial institutions and energy play such a large role in the exchange.
• Different Regions While the global financial world is interconnected, and it is likely that major stock losses in one region will influence others, that does not mean that they will be equally affected.  As well as Canada and the United States it is important that you have holdings in the rest of the developed and emerging markets too.
• Alternative Investments While stocks and bonds have been the traditional base for most investment portfolios, alternative investments, things like real estate trusts (REIT) or infrastructure, can further diversify your portfolio. These alternative investments can be particularly important if you need regular income from your investments.
• Types of Bonds As well as having bonds as part of your diversified portfolio, those bonds themselves should be diversified.  Your rate of return will be higher on bonds with longer durations, but longer duration bonds will be more sensitive to interest rate changes.  Also, a mix of government and corporate bonds is probably appropriate. Finally, it may make sense to hold some bonds, or similar instruments, that adjust their value according to interest rates.
• Different Sizes Sometimes the largest companies in a market perform better or worse than the smaller companies.  Therefore we can add a bit of diversification by having instruments that hold companies of varying sizes, not just the largest 60 in the TSX or the largest 500 in the Dow stock exchange in the US.
• Commodities I do not personally hold commodities in my investment funds, but some argue that this is yet another way to diversify, especially if one holds a mix of precious metals, oil, minerals and other commodities.
• Cash-Like Instruments Sometimes overlooked is the importance of having some funds in things like investment savings accounts or GICs.  With these a part of your portfolio is fully protected, and they can help you weather a significant stock market crash. If you use your investments to fund your retirement through income, we recommend at least a year worth of funds in these instruments.

Our list is somewhat longer than many diversified portfolios. In our view the current economic climate, with interest rates very low, the major developed economies having high valuations, and considerable political and economic uncertainty around the world, we feel it is important to be more diversified than was required in the past.

Achieving Diversification

Upcoming posts will show how you can achieve a diversified portfolio using different instruments - mutual funds, ETFs and other options.  At this point we will briefly mention two possibilities that may appeal to starting investors.

1. Tangerine Investment Funds  If you are a Tangerine customer, it is easy to add one (or more) of their balanced investment funds. These have relatively low MER, are easily purchased in small amounts, funds can be transferred from existing accounts, and you don't need a discount brokerage account. There are a family of funds with differing stock to bond ratios.  For example, their IN220 Balanced Fund has 40% Canadian bonds, 20% Canadian stocks, 20% US stocks and 20% international stocks.  The fund has a 5 year average annual performance of 8.1%, and the MER is 1.07% with the TER an additional 0.02% (see here for a description of these terms). There is no exposure to alternative investment classes in this fund.
2. Balanced Mutual Fund There are thousands of balanced mutual funds, we will mention only one  choice here as representative of the better choices. The PH&N RBF1350 fund, now part of the RBF family, is a solid balanced mutual fund with a reasonable MER of 0.88% (if purchased in the D form through your discount brokerage). It holds about 36% bonds (mainly Canadian), 29% Canadian stocks, 17% US stocks and 15% international stocks, along with a few percent in cash. Over the past five years it has averaged almost 8.7% return. You may need a discount brokerage to get this MER with no other fees, but you can readily buy forms of this fund through financial institutions. You can start with as little as $500 initial investment.
3. Balanced ETF Fund While there are ETFs that are a balance of stocks, bonds and other investments, as Andrew Hallam has lamented, the time is long overdue for a simplified, effective couch potato type of balanced ETF. iShares do offer a number of options, including the XGR Growth Core Portfolio ETF that is well diversified, including alternative investment classes. It has a comprehensive MER of 0.64%, and the 5 year average annual performance has been 5.5%. You will need a discount brokerage to purchase it, and unfortunately it is only thinly traded so you may need to be patient or pay a bit of premium to get units of it.  Two other 'fund of funds' from iShares that you may want to consider as a one stop ETF are CBD and CBN.  We will analyze these in more detail in a future post, but CBD has a tilt towards bonds and other income products, while CBN is tilted towards a balance of equities from around the world.
4. Set of ETFs Of course it is easy to build your own diversified balanced set of holdings within a discount brokerage. The Canadian Couch Potato provide guidance on how you can do exactly that, at a very low cost. I am a fan of their approach, and especially for those far from retirement, I think one of their model portfolios makes good sense.  Nearer or in retirement, I personally choose to add some additional types of diversification (see above). In a future post I will look at ETF options for balanced accounts in more detail.

Final Thoughts
While the degree of diversification depends on your investment horizon (how long until you probably need to access funds), all of us need diversification. Any one type of investment vehicle can suffer possibly large losses, and while often markets rebound quickly, this is not always the case. Also, emotionally large shifts in book value are difficult to take calmly.  A major theme in our site will always be on ways to lessen volatility while maintaining a reasonable expected performance and low investment costs. So keep following us at fundsgarden and @FundsGarden!

This posting is intended for education only. The reader is responsible for their own financial decisions.  The writer is not a financial planner and reading this column should not be interpreted as obtaining individual financial planning advice. For major financial decisions it is always wise to consult skilled financial professionals. While an effort has been made to be accurate, any statements of fact should be independently checked if important to the reader.

Disclosure:  The author of this column holds funds in the RBF1350 Balanced Fund and in the iShares CBD, CBN and XGR ETFs mentioned.  I am a Tangerine customer, but do not hold any of their investment funds at the current time.

A Garden of Funds

Think of your investments as a garden. You hope it will flourish and grow. It probably contains at least a few types of vegetables (funds).  Just as it is important to choose vegetable varieties relevant to your climate and soil, a good choice of funds for you is determined by your personal situation.

While a few people hire a gardener to do the work of maintaining their garden, most they take care of the garden themselves. While at times this can seem drudgery, most of the time gardening is rewarding.

We feel the same is true for investments: most people are capable, with a bit of research and education, of making good investment decisions. While occasional advice from a professional financial advisor is always wise, we feel that  you should feel in charge of your own investments.

Ultimately better decisions are made when you have educated yourself financially. The effort that we plan to put into this blog, and associated Twitter account, is based on the belief that investment education is important. We will not offer formal investment advice, and urge you to seek appropriate financial planning and investment advice, but we do hope to contribute to your investment education.

In the same way that sometimes a garden will perform beyond your expectations, sometimes an unforeseen event like a drought or severe storm will cause unpredicted damage to your investments. Part of feeling in charge of your own investments is to be emotionally ready for the unexpected.

Having diversification, a collection of different types of investments, will help you weather financial storms, in the same way that not growing only a single crop will make it less likely that you have a disastrous gardening season.

In my children, and now in my grandchildren, I see their joy when growing vegetables themselves.  Feeling empowered to understand and grow your own investments can be positive. Let's learn together.

This posting is intended for education only. The reader is responsible for their own financial decisions.  The writer is not a financial planner and reading this column should not be interpreted as obtaining individual financial planning advice. For major financial decisions it is always wise to consult skilled financial professionals. While an effort has been made to be accurate, any statements of fact should be independently checked if important to the reader.