“I don’t buy mutual funds, period,” says Tim Weichel, a Mississauga coffee company executive.

“If you’re going to be an online investor, you need three things:  you have to have the time, the interest, and the knowledge to manage your portfolio,” says Tim Weichel, 54, a vice president of a Mississauga coffee company.

He has been investing online since 2000 for his retirement as well as his children’s education;  daughter Grace is 15 and son Max is 17.

“I’m the definition of a conservative investor. I don’t buy stocks to trade them. I chose investments that are stable, steady, and long-term,” says Weichel.

In 2001, he took four courses at the Canadian Securities Institute (CSI):  the Canadian Securities Course (CSC), followed by Professional Financial Planning, Conduct and Practices, and one on Derivatives. This financial education means that Weichel is not a typical investor—and gives him a huge information edge.

He invests in stocks, bonds, REITs, and index funds;  he never trades commodities, forex, or options. Even with his CSI courses under his belt, Weichel confesses he “won’t trade what he doesn’t understand.”

“Now that I’ve set up a system for myself, I don’t put a lot of time into it,” says Weichel, who admits to looking at his portfolio every day—just because “the process of buying and selling instruments online is so easy. But I only make 10 or 12 trades per year and review my strategy annually,” he says.

Weichel’s conservative and smart strategy has been earning him about 10% returns annually. Here are Weichel’s tips for successful—and relatively stress-free—online investing:

Have the right account types. Weichel has four accounts:  RRSP, RESP, TFSA, and a margin account. He maximizes the tax benefits for the first three accounts before he does anything within the margin account.

For each account, decide on the asset allocation. In the registered accounts, he has a higher percentage of fixed income products to maximize tax breaks. He uses the margin account to hold his equities.  

Do your research. If you trade with one of the big banks, take advantage of its research offerings. Check out financial websites of newspapers. Weichel trades with RBC Direct Investing. He also has an account at TD Waterhouse Discount Brokerage, using their WebBroker platform, to take advantage of their e-Series of mutual funds (which are index funds), with a MER of just 0.25%.

Establish your investing philosophy or criteria. “I don’t buy mutual funds, period. I’m not willing to give up 2.5% of my returns, compounded over 20 years, to mutual fund companies,” says Weichel.

“In the long-term, the difference between an index fund and a mutual fund is, in fact, the MER,” says Weichel. “Bottom line? The mutual fund managers you’re paying for are not even meeting the index. So, why pay them?”

Establish your criteria for selecting stocks. Weichel applies Warren Buffet’s methodology:  about 15% return on equity;  a P/E ratio of less than 15;  he likes “tollhouse” businesses that take a piece of every transaction like banks or mutual fund companies—it creates steady income;  he only invests in very large cap companies, meaning $1 billion or more—he’s looking for low volatility;  he looks for a dividend of two per cent or better;  debt equity of less than one per cent;  and the company has to be profitable—he’s not willing to take a flyer on turn-arounds.

Establish your criteria for selecting bonds. Weichel’s philosophy on buying bonds is a bit different. “I don’t buy a bond fund, I buy individual corporate bonds,” he says, emphasizing that the MER on bond funds cuts into your returns even more.

He buys small quantities of individual corporate bonds to spread out his risk.  Bond ratings have to be triple B or better;  he generally shoots for A ratings.

“And everyone knows that RBC has the best bond desk in Canada,” says Weichel.

“I’m not willing to give up 2.5% of my returns, compounded over 20 years, to mutual fund companies,” he says.