Archive for August, 2011

Sleepy Mini Portfolio Q3-2011 Update

August 31, 2011

14 comments

Since my previous update roughly three months back, the Sleepy Mini Portfolio has lost 6.4% of its value due to sizable corrections experienced by stock markets around the world. Every stock fund in the portfolio dropped in value but bonds fulfilled their role of providing a ballast. Recall that the portfolio started out with an initial investment of $1,000 in August 2007 and $1,000 was added to the portfolio every quarter ever since:

TDB909 – Canadian Bonds – $3,701 (22%)
TDB900 – Canadian Equities – $3,342 (19.9%)
TDB902 – US Equities – $4,953 (29.5%)
TDB911 – International Equities – $4,792 (28.5%)
Total – $16,789
Total Invested – $16,000

Despite the market volatility, the whole point of a portfolio such as this is to simply add money periodically while resisting the urge to divine which way the markets are headed. With that in mind, we’ll now add another $1,000 to the portfolio and rebalance it according to our original asset allocation — 20% bonds, 20% Canadian stocks, 30% US stocks and 30% international stocks — using this rebalancing spreadsheet. Here are the results:

Transactions

TDB909 – TD Canadian Bond Index (e-Series) – Sell units for $143.63.
TDB900 – TD Canadian Index (e-Series) – Buy units for $215.43.
TDB902 – TD US Index (e-Series) – Buy units for $383.48.
TDB911 – TD International Index (e-Series) – Buy units for $544.72.

Notice how rebalancing requires selling an asset class that has increased in value (bonds in this case) and buying asset classes that have declined in value (stocks in this case). It happens to be the mirror image of what we were doing earlier this year when the bulk of our contributions went to bonds which was the laggard asset class.

[Sleepy Mini Portfolio as of August 31, 2011]

Book Review: The Wealthy Barber Returns

August 29, 2011

19 comments

As I mentioned in an earlier post (See The Wealthy Barber is Returning Soon, July 6, 2011), I thoroughly enjoyed David Chilton’s The Wealthy Barber Returns (listed at $19.95 and available from Chapters). Instead of a regular review, I’m just going to list the ten reasons why I really liked this book:

#10. Dave ditches the “novel” format and goes with the pick-any-chapter-and-you’ll-be-done-in-20-minutes format.

#9. Stories such as the one in which race horses star in an investment plan or how two cookbook authors stalked Dave into making an investment in their venture. Facts are sometimes stranger than fiction.

#8. The Conclusion. A farmer tells Dave his financial plan: live below the means, save a lot, invest it wisely. That’s all there is to it, really.

#7. If it’s so simple, why can’t everyone do it? The answer, Dave explains, is in our minds. And he offers a number of tips on how to “nudge” ourselves into becoming more financially responsible.

#6. Lest you think this is yet another tome that repeatedly hammers the “save more” theme, Dave has some insights into how to spend more meaningfully too.

#5. Quality Control. Dave’s PF hacks are all extensively tested in the field. They may not all work for you but you are certain to find some that will.

#4. It’s hard to change one’s mind even in the face of overwhelming evidence but Dave has no such problem. What about the advice in the earlier book about picking a mutual fund with a good long-term record and successful management team, eh? Nope, doesn’t work, says Dave.

#3. Dave’s endorsement of low-cost, broad-market index funds will help in spreading the message among every-day Canadians. He’s even coined some slogans: “Average is the new fantastic!”, “Be the most average you can be!” and “Average is its own reward.”

#2. Personal finance is often, well, personal. Dave explains the nuances of perennial PF questions such as “pay down debt or RRSP” or “RRSP or TFSA” or “how much should I save?” brilliantly.

#1. Humour. The book has some really funny parts. One example: Dave explains how one a trip to cancun, a hot tub purchase or a finished basement can all be rationalized as “emergencies”. Yeah, I’ve done that too.

Other reviews:
Larry MacDonald praised the book for making “personal finance less intimidating for the average Canadian and may get many of them to save instead of borrow and spend”.

Ellen Roseman liked Dave’s “psychological insights and humour”.

Dave was kind enough to include my quote in the book: “Brilliant! I liked it even better than The Wealthy Barber. If we incorporate even a couple of Dave’s ideas into our financial lives, we’ll be much richer for it and not merely in monetary terms.”

This and That: Fatigued Investors, Building a Portfolio and more…

August 25, 2011

7 comments

Forget buy the dips. These days retail investors are on a buyers strike instead. The New York Times reported that between 2007-11, US investors added $104 billion to stock mutual funds but withdrew $448 billion. Writing in The Wall Street Journal Jason Zweig explored some of the reasons why investors have turned apathetic towards the stock market. And on the same topic, Preet Banerjee explained in his Globe and Mail column that market action in the recent past has been like Chinese water torture.

In this blog post, Larry Swedroe explained how to build a diversified portfolio.

Vanguard’s announcement of its initial ETF lineup attracted much commentary this week. Like me, Money Smarts Blog is not very pleased with currency-hedging in foreign equities. Canadian Couch Potato was disappointed that only one of Vanguard’s six ETFs is not already available elsewhere.

With Vanguard’s initial line-up featuring currency-hedged ETFs, Michael James explained why Canadians may want to take on foreign currency exposure. It is best to take on currency risk in the equity side of the portfolio.

Canadian Financial DIY on whether parents should save for their children’s education inside a RESP, TFSA or RRSP.

Canadian Financial Stuff is affected by gold fever and lists some of his favourite stories featuring the yellow metal. I think Gold Rush and The Treasure of Sierra Madre should also make that list.

Retire Happy Blog’s Jim Yih offers some strategies for dealing with market volatility.

Steadyhand’s Tom Bradley always has a reasoned take on the markets. He says that with so much fear ruling the markets these days, it may be time to provide a slightly aggressive tilt to the portfolio.

The Blunt Bean Counter weighs in on the common investment errors he sees in his clients’ investments.

A 40-something CMF member wonders if she has enough to fund her immediate retirement.