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Sleepy Mini Portfolio

September 3rd, 2007 · 21 Comments

The Sleepy Portfolio is fine for a benchmark but not many people invest a lump sum and then hardly ever add to the portfolio. If you are like me, you save a bit of money regularly and invest it gradually over the years. I get a lot of e-mail of how to invest small sums of money or the best way to set up a regular investing program.

In order to better reflect how average people normally invest, I am introducing a “Mini” version of the Sleepy Portfolio. The Mini portfolio would differ from the Sleepy Portfolio (and in fact, other lazy portfolios) in the following ways:

  1. The Sleepy Mini Portfolio will start with an initial investment of $1,000. Every ninety days, another $1,000 would be added to the portfolio. Thus, a total of $4,000 would be invested annually in the Sleepy Mini Portfolio.
  2. Since we are starting out with a small portfolio, the portfolio will initially not be exposed to all asset classes. The initial asset allocation will be quite simple: 20% bonds, 20% Canadian equities, 30% US equities, 30% International equities.
  3. The portfolio will be rebalanced to the target allocation every time new funds are invested.
  4. The portfolio is assumed to be in a tax-deferred account such as a RRSP. However, the portfolio should be fairly tax efficient (except for the bond portion) as rebalancing is done by adding new money and not selling current holdings.
  5. The Mini portfolio would be constructed using TD e-Series Mutual funds. The minimum initial investment and the minimum subsequent investment for these funds is a low $100.

Transactions:

TDB909 - TD Canadian Bond Index (e-Series) - Buy 19.0839 units at $10.48 for a total of $200
TDB900 - TD Canadian Index (e-Series) - Buy 8.9726 units at $22.29 for a total of $200
TDB902 - TD US Index (e-Series) - Buy 10.89720 units at $27.53 for a total of $300
TDB911 - TD International Index (e-Series) - Buy 22.71 units at $13.21 for a total of $300

That’s it! Investing couldn’t be simpler.

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Tags: Investing · Sleepy Portfolio

21 responses so far ↓

  • 1 The Financial Blogger // Sep 4, 2007 at 7:41 am

    Hi CC, this is a great example for a new investor. Easy to use, well diversified and it doesn’t need much money to get in.

    I agree with you that an individual that is not on the verge of retirement, should not put much into fixed income funds. 20% seems to be a good number.

    However, I would be curious to know what would be the expected return of such portfolio (what is the historic yield of each funds?).

  • 2 Stefan // Sep 4, 2007 at 9:00 am

    A simple portfolio, I follow the same, but I use TD eFunds instead, the four you mentioned are available with lower MER’s in e-series versions. I’m sure you where already aware of that though, is there a specific reason you choose the non e-series?

  • 3 Canadian Capitalist // Sep 4, 2007 at 9:36 am

    Stefan: These funds are TD e-Series mutual funds (that’s the name for the old eFunds). I should probably clarify that better in the post. I’ll update.

  • 4 Canadian Capitalist // Sep 4, 2007 at 11:13 am

    FB: Honestly, I don’t know what future returns are going to be like. I’ll take the easy route and accept John Bogle’s outlook:

    4.5% for bonds.
    7% for equities.

    In that scenario, the portfolio has an expected return of 6.5% ignoring taxes.

  • 5 Jamie // Sep 4, 2007 at 12:10 pm

    Thanks for posting about this! I’m young and a relatively new investor and I’m setting up my RRSP for just this type of portfolio. These are exactly the funds I’ve been looking at. Just one question: The US & International are also available in a “currency neutral” e-series fund (TDB904, 905). Is there any reason why you chose these over the currency neutral versions of the same funds?

  • 6 yannickt // Sep 4, 2007 at 1:10 pm

    TD also offers managed index e-series portfolios. The MER is slightly higher, however they will charge you 125$ if you have less than $25k in your self-directed RRSP. So going with the managed portfolio that is closer to your desired asset allocation might be a good choice if you are just getting started.

  • 7 Canadian Capitalist // Sep 4, 2007 at 1:22 pm

    Yannick: TD e-Series portfolios are far too expensive IMO. If you can do a bit of arithmetic, you can save yourself 0.75%. I discussed this in an earlier post:

    Link

  • 8 CanadianRetiredGuy // Sep 5, 2007 at 11:15 pm

    Looks to me to be a good starter portfolio. I’m going to keep tracking it in Quicken. I trust you will report re-invested dividends and interest as they happen.

    Up $3.83 yesterday.
    Down $8.57 today.

    CRG

  • 9 Sleepy Mini Portfolio Update // Nov 4, 2007 at 10:14 pm

    [...] three months since the Sleepy Mini Portfolio was launched and it’s time to add another $1,000 to the portfolio. The portfolio’s initial asset [...]

  • 10 Joe // Nov 5, 2007 at 3:48 pm

    What are the difference between the 3 US index funds from TD e-funds are?: TD U.S. Index, TD U.S. Index ($US) and the TD U.S. Index Currency Neutral

    As well, any idea how I can “switch” my existing RRPS’s with Royal Bank to TD E-Funds? Can they be switched as cash within an RRSP account?

  • 11 Canadian Capitalist // Nov 5, 2007 at 4:13 pm

    Joe:

    TD US Index tracks the S&P 500 in Canadian dollar terms. There is no hedging involved, so any change in value of the USD will affect your returns. The fund is denominated in CAD.

    TD US Index (US$) is denominated in US dollars, so your transactions are in USD.

    TD US Index Currency Neutral tracks the S&P 500 but hedges the USD exposure. So, you get the same return as the S&P 500 in Canadian dollars. Since hedging is involved this fund charges an extra 0.15%.

    Is your existing RRSP with Royal Bank invested in cash or mutual funds or stocks?

  • 12 Marika // Nov 21, 2007 at 11:10 pm

    I want to invest cad75.000 , i am a 63 yrs. old senior in Canada. and just want to make money on CAD 75.000 , so I can profit annually , not locked investment.

    Pls. help me , thanksbv .

  • 13 Choosing Asset Allocation | Quest For Four Pillars // Jan 7, 2008 at 6:09 am

    [...] the more confused you will probably get. I’ve concluded recently that maybe just picking a simpler asset allocation is probably the best approach since I’m not sure how much it really matters what your exact [...]

  • 14 Sleepy Mini Portfolio Update // Mar 3, 2008 at 7:51 pm

    [...] past three months have not been kind to the Sleepy Mini Portfolio. The sharp fall in equities has resulted in a 7.5% loss since inception. While it is hard not be [...]

  • 15 Switching from Index Mutual Funds to ETFs // May 28, 2008 at 11:59 pm

    [...] from Ed, who wants to switch from index mutual funds to ETFs: Many years ago I set up my RRSP using TD’s low MER e-Series index mutual funds. I learned quite awhile ago that most actively managed funds cannot beat the indexes over the long [...]

  • 16 Sleepy Mini Portfolio Q2-2008 Update // Jun 2, 2008 at 8:34 pm

    [...] recovery in the equity markets is reflected in the Sleepy Mini Portfolio, which swung from a 7.5% loss at the time of the last update to a gain of 1.1% at the end of May. [...]

  • 17 Daniel // Jun 14, 2008 at 3:24 pm

    Hi,
    Thanks for the great info. I’m interested in the TD Canadian Index Fund which comes as the e-series and the Investor or I series. The manager is the same, but the e-series MER is much lower. Is there a difference between the funds in regards to investment strategy or performance? They seem to match up historically.

    Thanks!

    Daniel

  • 18 Canadian Capitalist // Jun 14, 2008 at 6:34 pm

    Daniel: e-Series funds are available only through the internet but they are exactly the same as any other index fund that tracks the same index. That’s the beauty of index funds — the cheaper the fund is, the better :)

    I’m a huge fund of TD e-Series for precisely this reason. Even someone who is investing a few hundred dollars every month can build a fairly sophisticated portfolio at an extremely low cost — we’re talking less than 0.5% here.

  • 19 Daniel // Jun 15, 2008 at 11:15 am

    Hi,
    Thanks so much! That’s what I thought until I read a rather heated exchange about the funds on your blog about the difference in NAVPS in relation to a lower MER, etc, etc.

    My one question now is whether an actively managed dividend fund (Td Dividend Growth Fund) with a higher MER would be better then an Index Fund like the TD Canadian Index E-fund. Is the higher MER worth it…..historically the Dividend Growth Fund did not yield significantly higher amounts then the index fund.

    Thx!

    Daniel

  • 20 Canadian Capitalist // Jun 15, 2008 at 6:55 pm

    Daniel: I’m a big fan of index funds because with active management (1) it is hard to pick the winning funds in advance (2) Long-term investors face long odds of their fund doing better than the index.

    You can improve the odds of picking a decent fund by keeping two factors in mind: (1) the lower the MER, the better and (2) the lower the turnover, the better. Given that index funds are clearly superior in (1) and (2), my feeling is why bother?

  • 21 Daniel // Jun 15, 2008 at 9:07 pm

    I’m definately a long term investor and I see what you mean by the long term vs the index in addition to the higher fees and taxation of distributions.

    Hmm, looks like it’s the TD Canadian index e-fund for starters.

    Thanks! Your site is great.

    Daniel

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