Gordan Pape portfolio

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asked Sep 28, 2016 11:13 PM by
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Hi Jin

Just came across this portfolio while browsing.


Just wondering if you could provide a review of it and how it differs from your portfolios.


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answered Sep 29, 2016 10:51 AM by
Jin Won Choi gravatar image Administrator

Hi likiud,

First of all, I completely agree with Mr. Pape's assertion that we should put our most aggressive ideas in our TFSAs. This is also why my own TFSA account consists of riskier oil and gas stocks. However, there are some philosophical differences between the model portfolios that I offer, and the one that Mr. Pape uses.

Judging from the article you posted, Mr. Pape's portfolio consists of the following ETFs.

  • XIC: iShares Core S&P/TSX Capped Composite Index ETF
  • XCS: iShares S&P/TSX Small Cap Index ETF
  • XSU: iShares U.S. Small Cap Index ETF (CAD-Hedged)
  • XSP: iShares Core S&P 500 Index ETF (CAD- Hedged)
  • ZQQ: BMO NASDAQ 100 Equity Hedged to CAD ETF
  • XIN: iShares MSCI EAFE Index ETF (CAD-Hedged)
  • FM: iShares MSCI Frontier 100 ETF
  • EEM: iShares MSCI Emerging Markets ETF

I see three main philosophical differences between myself and Mr. Pape.

One, Mr. Pape doesn't use value investing ETFs, whereas I do. A lot of research has gone into the topic of whether value investing, which is the practice of trying to buy stocks for less than they're worth, actually delivers higher returns or not. The answer to this question appears to be "yes", and value investing ETFs included in MoneyGeek's regular portfolios have outperformed the market so far. That said, even non-value oriented ETFs like XIC should deliver higher returns than your average mutual fund, so I don't take big issues with Mr. Pape's portfolio in this regard.

Two, Mr. Pape seems to be a big believer in hedging currencies. I have the opposite view on this, especially with regards to U.S. stocks. In times of financial crisis, the U.S. dollar tends to rise as investors view the currency as a safe haven. This means that if you hold U.S. stocks in U.S. dollars in times of crisis, the rise in the U.S. dollar will somewhat offset the plunge in value of U.S. stocks. This happened in 2008, for example. But if you hedge the currency, you won't benefit from the rise of the U.S. dollar. I think my approach makes our portfolios safer.

Three, Mr. Pape seems to think that stocks in emerging markets like China and India will generate high returns going forward. I disagree, and historical results back up my view. As you can see from this chart, both EEM and FM rather severely underperformed U.S. stocks in the past 4 years (FM has no history before 4 years ago). There is good reason why EEM and FM underperformed, but the topic deserves a long explanation so I'll try to explain it on my blog at a later date.


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