Canada Pension Plan Poor Results are a Valuable Investing Lesson
June 29, 2024
We have learned a valuable lesson on how to invest.
Do not overcomplicate your investment process, keep it simple. And manage all investment costs, meaning do not overpay.
This conclusion can be seen by looking at the Canada Pension Plan Investments 2024 Annual Report. Part of your paycheque goes to CPP and during retirement you will receive a small annual pension.
CPP, like all investors, has two options. Invest in an extremely well diversified portfolio so in effect you are not just buying specific stocks, you are effectively buying entire markets throughout the world.
Alternatively, you can be an active manager and pick what sectors to invest in and then more specifically which stocks within that sector. The hope is that you will outperform the general market.
CPP is a very active manager. It has a large team of highly paid intelligent people. Investments it makes are managed by highly paid intelligent people. All that sounds good.
Except there is an endless amount of research, history of investment returns and poor investing outcomes from millions of investors that prove this does not work.
To be fair, active management can have positive results in the short-term because of chance but because successful active management is so unpredictable and unreliable many of us in the industry consider that to be because of luck as opposed to skill.
My suggestion is simple. Overspending on high cost actively managed investments should be avoided.
Watson Securities (www.watsoninvestments.com) is a trade name of Aligned Capital Partners Inc. (ACPI). ACPI is regulated by the Investment Industry Regulatory Organization of Canada (www.iiroc.ca) and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Watson Securities is registered to advise in (securities and/or mutual funds) to clients residing in Ontario. This publication is for informational purposes only and shall not be construed to constitute any form of investment advice. The views expressed are those of the author and may not necessarily be those of ACPI. Opinions expressed are as of the date of this publication and are subject to change without notice and information has been compiled from sources believed to be reliable. This publication has been prepared for general circulation and without regard to the individual financial circumstances and objectives of persons who receive it. You should not act or rely on the information without seeking the advice of the appropriate professional. ACPI is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”). Investment services are provided through Watson Investments, an approved trade name of ACPI. Only investment-related products and services are offered through ACPI/Watson Investments and covered by the CIPF. Financial planning services are provided through Watson Investments. Watson Investments is an independent company separate and distinct from ACPI.
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