Risk Free

Risk Free?

Liars… anyone who says anything does not have risk.

Or simply wrong.

Here are three  of our 50 golden rules of investing:

#3: To attain higher growth you must either increase risk or trust luck.

#15:  Risk is your friend or alibi for expecting higher returns.

#32: Risk is your partner…for better or for worse.

All investments have risk because the first Golden Rule of Investing is there is always something we do not know.

Everything has risk… just getting up in the morn… or living on this planet.

For example last month, a space rock, just slightly smaller than the Chelyabinsk meteor that blew up over Russia in 2013. zoomed by earth, coming within 27,300 miles – an eighth of the distance from the Earth to the Moon.

There have plenty of near misses this year, over a half dozen speeding space rocks came considerably closer than the moon, as they passed Earth.

We had plenty of warning with this latest missile, but this is not always the case. On August 27-28, 2016 an asteroid estimated to be at least twice as big as the Chelyabinsk meteor came much closer than the distance to the moon only hours after it was detected.

An infinite series of events controls the future so we cannot know what’s next… for sure.

To manage investing risk, we started a personal Pifolio at our Purposeful investing Course (Pi) and tested low cost ways to have investments that are:

inexpensive to buy and hold.

Sophisticated  portfolios that are…

incredibly safe…  with great profit potential.

The keys to this portfolio is the ability to invest logically without spending large amounts of and time, but to keep trading and management costs low.

The Test for Low Cost Trading

I wanted to find the very least expensive way to create and hold this portfolio so I performed a test.

First, I searched for an optimal way to buy and hold the Pifolio.  The research reduced my choice to two tactics.

Tactic #1: Motif.  Motif  is a unique online broker that appeared to offer the lowest cost way of investing in the Pifolio.

What’s a Motif? A motif is a basket of up to 30 stocks or ETFs intelligently weighted to reflect an investment theme, market insight or innovative trend.

Motif Investing was founded by Hardeep Walia, a former Microsoft executive in 2010.

Motif Investing is an online broker that has pioneered thematic investing via “motifs” for low fees. Motif Investing is a registered broker dealer and a member of SIPC. Motif was recently ranked number one on Fast Company’s list of Most Innovative Companies in Personal Finance and has been recognized for two consecutive years on the CNBC Disrupter 50 list. The company’s investors include Goldman Sachs, JPMorgan Chase, and Renren Inc. Board members include former Securities Exchange Commission Chairman, Arthur Levitt, and former Boston Consulting Group Chairman, Carl Stern.

The basic service is to create motifs of up to 30 stocks or exchange-traded funds for just $9.95 per motif.

Motif Investing offers more than 150 professionally built portfolios, but of course my goal was to build a Pifolio Motif.

You can learn about Motif and how to use them at their website Motif.com

Be sure to read Motif’s: Terms of Use

Be sure to read their Business Rule 605 Statement

Tactic #2: United Southern Bank.  The other approach was to use a community bank in Smalltown USA. I chose United Southern Bank.

United Southern Bank (USB) began in 1937 and today has eleven offices in the Lake County area. The bank believes in strong customer relationships. The bank’s officers live here, some of them all their lives, and they know their customers and their businesses. Our customer family tells us they prefer doing business with a bank that is locally owned and managed and realize that they are invested in their customer’s success as much as their own.

I took my portfolio, one that would be somewhat foreign to community banks, to USB and asked them if they could and would hold this account.  I was very happy to find that they could, would and their fees were a fraction of what I paid to other banks and brokers.

I have used USB since and really have gained from the very sophisticated but personal service they provide.  The benefit of small banks is that they still treat us as a human beings (instead of numbers) and when we need, it’s easy to go right to the top to answer a question or get a problem resolved. There are no call centers and the bank and the person looking after my account is just around the corner.

To learn more about United Southern Bank, click here

Or contact the Senior VP in charge of trusts, Ken Carpenter, at kenneth.carpenter@unitedsouthernbank.com

Once I had narrowed down the choices, I wanted to see if wither had any hidden costs.

I wanted to see how Motif purchase prices might compare with the pricing I received at USB.  Working with Ken Carpenter at USB, I created two accounts, one at Motif and the other at USB. I placed $40,000 in each.

I set up the order for the 17 country ETFs online, while Ken set up orders for the identical amounts of the same shares in his system. Then we got on the phone, coordinated our timing and on a count of three each pushed the button “BUY”.

Prices were the same within pennies, so using one or the other would depend on what is preferred:  dealing online or with the personal service of a small bank.

That portfolio has certainly been easy.  Since I created it, we have made two additions.  I added a Canada market ETF.

The good value markets have only changed once in two years, adding Turkey as a good value emerging market.  I did not add Turkey, but did add a small investment in PPLT the platinum ETF as a speculation.  (That has tanked so far).

The portfolio has had pretty good performance as well.   Here is the latest year to date performance, up 23.2% in the last ten months.


The portfolio (blue) strongly outperformed the S&P 500  (green).



These ETFs provide safety through diversification in hundreds of shares around the world.  Here is the Pifolio.  Each of these ETFs represents a position in dozens or hundreds of shares.



Pi gets even better.

One big benefit in using ETFs is the low management cost of ETFs versus managed funds.

I currently am invested manly using the iShares ETFs managed by Blackrock. The fees are already low but as the Wall Street Journal article “Franklin Templeton Undercuts BlackRock on Single-Country Stock ETFs”   points out, they are going lower.

The article says Latest effort by fund company to compete on pricing ETFs

Franklin Templeton Investments, a unit of Franklin Resources, announced the launch of 16 ultra-low-cost foreign stock ETFs that will undercut the management fees of nearly every rival product currently on the market.

Franklin’s new ETFs will lower the bar significantly on what investors pay to own baskets of stocks from a variety of regions and countries from Australia to Mexico. A dozen of the new products, including the Franklin FTSE Japan ETF, will carry an expense ratio of 0.9% per year, or $9 for every $10,000 invested. That compares with the 0.48% expense ratio that comes with the $17.4 billion iShares MSCI Japan ETF.

Four Franklin ETFs linked to indexes in Brazil, China, Mexico and Taiwan will cost investors 0.19%, significantly cheaper than the largest ETFs in each category.

This is simple, safe, profitable value investing, finding good value markets and diversifying equally in single country ETFs that represent these markets.


(1)  wsj.com Franklin Templeton undercuts Blackrock on single country stock etfs


Related Artices

If you enjoyed this article "Risk Free" you may find these related articles of interest too: