It’s 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 allocation - Bonds 20%, Canadian Equities 20%, US Equities 30% and International Equities 30% - was invested in the TD Bank’s e-Series Index mutual funds. Over the past ninety days, the portfolio has declined by about 3%. Bonds and Canadian Equities were positive but the rapid appreciation of our dollar has dragged down the returns from U.S. and International Equities.
Bonds = $202.63
Canadian Stocks = $211.04
US Equities = $272.43
International Equities = $284.96
Total = $971.05
Since we are adding $1,000 to the portfolio, we have a total of $1,971.05 to work with. As per our original asset allocation, we need to end up with $394.21 in bonds and Canadian stocks and $591.32 in U.S. and International stocks. Subtracting the amounts already invested in these asset classes, we need to put $191.58 in bonds, $183.17 in Canadian equities, $318.89 in U.S. equities and $306.36 in International equities. If you notice, we are putting more money into the asset class that dropped the most (US equities) and less into the asset class that went up the most (Canadian equities).
Transactions:
TDB909 - TD Canadian Bond Index (e-Series) - Buy 18.21 units at $10.52.
TDB900 - TD Canadian Index (e-Series) - Buy 7.65 units at $23.95.
TDB902 - TD US Index (e-Series) - Buy 12.26 units at $26.02.
TDB911 - TD International Index (e-Series) - Buy 23.60 units at $12.98.
Who said investing needs to be complicated?
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7 responses so far ↓
1 Warren // Nov 4, 2007 at 10:56 pm
You make it seem so easy… which of course it is. You’ve inspired me to copy your plan. I’ll have more cash to put into RRSPs in 2008, and plan to gradually use up my extra RRSP room over the next few years. I think I’ll follow a similar plan with my extra contributions.
2 Phil S // Nov 5, 2007 at 9:58 am
In Canadian Business magazine, one journalist described the US government’s fiscal situation as “drunken sailor economics”. Whether you want to refer to my investment style as contrarian or value investment or trying to time the market, the fact remains that I continue to be bearish on the US currency and economy until they somehow extricate themselves from Iraq and balance the budget. Until then, I will be excluding US assets from my investment decisions going forward. I do have a US brokerage account that is fully invested and will remain that way, I’m just not putting any new money into the USA until they fix their inherent structural problems. That could still be years away.
3 WhereDoesAllMyMoneyGo.com // Nov 5, 2007 at 10:02 am
A good case of “boring is beautiful”! This is essentially what all mutual fund of funds wrap programs do, but you have a guaranteed 2% increased ROR by dropping the management fees.
CC - do you ever adjust your weightings based on gut feelings? i.e. if you felt that interest rates were about to have a long slow decline would you increase your weightings to bonds from 20% to 25%? Or if the US had three consecutive negative years, would you bump that up taking a contrarian stance? Or is it more fire and forget and taking advantage of the dips by rebalancing with new deposits?
Thanks!
4 Canadian Capitalist // Nov 5, 2007 at 11:09 am
Warren: The trick is getting the initial asset allocation right. The rest is easy. You can dial down risk, if you want to, by increasing the bond portion.
Phil: The US makes up about 45% of the world capital markets. It has an economy that is 1/3 (I think) of world GDP. Yes, there are all sorts of structural problems, but I think it is already baked into the price of US assets. Not only that, everyone is bearish on the US these days. Personally, I’m sticking with market weight of US equities.
Preet: I don’t play around with the asset allocation unless I am adjusting portfolio risk. I do stay in cash if I feel an asset class is overpriced (I have 0% in REITs and 2% in emerging markets but I have planned 5% in both). Other than that, it is mostly sticking to the original asset allocation. I say mostly, because with ETFs you can only get the allocation approximately right.
5 Tony Danza // Nov 5, 2007 at 6:35 pm
Phil S., If you were to heed the advice of someone like Warren Buffet now would seem the perfect time to start increasing your position in US equities, be fearful when others are greedy and greedy when others are fearful. It’s usually when everyone knows something is the worst investment you could possibly make that it is actually the best time to make that investment. It’s also the hardest trade to make.
Personally I am decreasing my Canadian equities and dollar cost averaging an increased weighting in the US market.
6 Nabloid // Nov 5, 2007 at 11:00 pm
I am a bit bearish on the U.S. as well… but many (not all) of their problems are common to all G8 nations but they aren’t as obvious in the other nations at the moment due to the extreme cash leak the U.S. has which is starting to bring the problem to the forefront. I hope people demand sweeping changes and get the U.S. back on a financial stable course.
7 T-Money Bags // Nov 11, 2007 at 1:14 am
As a Canadian, can somebody break down the advantages of having Canadian equities in my portfolio? What percentage of my portfolio should I allocate to Canadian equities, if at all?
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