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Options Licensed Advisors Are Rare

Posted by Preet on Apr 5, 2010 | 8 comments

How many financial advisors are in Canada? To give you a rough idea as to the number of financial advisors in Canada as a whole, there are about 75,000 MFDA advisors (mutual fund sales reps), 125,000 Life-Licensed advisors (insurance agents) and 25,000 IIROC advisors (licensed to sell individual stocks). Those are rough numbers for a few reasons: I’m going by memory (which may be flawed) for the life-licensed advisor number, and there are many advisors who are dual-licensed (MFDA + Life License or IIROC + Life License). Further, not all life-licensed advisors sell investments (for them, this would be segregated funds and annuities for the most part). So let’s...

Index Fund Tracking Error Sources

Posted by Preet on Mar 24, 2010 | 2 comments

NOTE: I’m scrambling to write this before I get on a plane and my laptop battery is near death, so pardon any typos for the time being – I’ll edit it tomorrow, and may even re-write it! It’s good to be my own editor…. :) Not all index funds are created equal. Some actually track their indices pretty well, and some do a poor job. Most people think that tracking an index would be a relatively simple thing but you know what they say, “in theory, theory and practice are the same but in practice they are not.” Some sources of index fund tracking errors: 1. Resampling (Or Optimization) If an index has 500 constituents, then it is...

Can you Diversify too much?

Posted by Preet on Jul 31, 2007 | 0 comments

This is a tricky topic to talk about. So please read the caveat at the bottom of this post! The wealthiest people in the world have, on average, made their fortunes on ONE stock… and that is usually the stock of the company they themselves founded and ran in the form of a small business that just kept expanding. But of course for every small business that becomes the next GOOGLE, there are countless more that fail and go under. This is the ultimate example of why you won’t get rich quickly by diversifying AND how you could lose everything quickly by NOT diversifying. Understanding this debate is understanding the trade off that you want to make...

Risk: Systematic Risk vs Non-Systematic Risk

Posted by Preet on Jul 26, 2007 | 0 comments

This is an advanced level topic – you may want to skip this post if you are just finding your feet with respect to finances! It assumes a basic understanding of portfolio diversification… With respect to any given stock market there are two types of risk (which is another word for variance according to Modern Portfolio Theory): 1) Systematic Risk and 2) Non-Systematic Risk. Systematic risk is the general ebb and flow of the market – kind of like the tendency for all stocks to get dragged down or move up in tandem at the same time to a certain degree. For example, the 1987 market decline was a Systematic event in that it really didn’t matter...