Comments on: Improving the Sleepy Portfolio

By: Mutual Funds | Quest For Four Pillars

Mutual Funds | Quest For Four Pillars — Fri, 01 Feb 2008 10:03:01 +0000

[...] instead – pointing him towards Canadian Capitalist’s “Tour of ETFs” and “Sleepy Portfolio” (as well as Money Sense’s couch potato portfolio). When I told him that a diversified [...]

By: Doug

Doug — Tue, 22 May 2007 01:35:29 +0000

re: Dave and XIC. Go Dave!

re: RRBs. I am debating this very situation and trying to understand the info provided at http://www.bylo.org/rrbs.html before procceding. Avoiding fund expenses certainly sounds appealing.(ie. holding the issues directly) Avoiding semi-annual interest payments sounds appealing as well (ie. stripped RRBs). I suspect its probably going to be XRB (mer 0.35%) until I feel more educated.

By: Dave

Dave — Wed, 18 Apr 2007 03:58:05 +0000

“If a person is going to get involved with ETF’s they must also read about how to trade”

Bull. See below.

“since these trade like stocks, and there is a bit of skill to making sure you get the appropriate price for your ETF.”

I have no stock trading skill. I bought 38 shares of XIC on March 26, 2007 at $83.84. It looks like the range that day for XIC was $83.56 and $84. Closed at $83.90. That’s just one data point.

Show me some references or data to back up your point.

“A liquid stock protects you from a lot of the sharks out there, and you won’t get hosed as bad if you buy or sell an odd lot.”

Sharks? Who are the sharks? Are you trying to say that XIC is so much less liquid than XIU that it really makes a difference. Explain why.

Define hosed. Do you mean paying too much for an ETF? How much are we talking here? And if I hold that ETF for 10 years how much of an impact will it have on my final value? I’m pretty sure the Sleepy Portfolio is designed as a long-term investment portfolio.

“Non-liquid ETF’s can be used, but require a lot patience, and careful use of limit orders.”

Sorry I have a hard time believe this is the case for XIC.

By: Canadian Capitalist

Canadian Capitalist — Wed, 18 Apr 2007 02:11:31 +0000

Mike: Simple. VGK and VPL are new ETFs and when I assembled the Sleepy Portfolio, they were not in the market yet. I already own EFA in my RRSPs and it would be a hassle for me to sell them and buy VGK and VPL. Perhaps when my portfolios are large enough, I would do that.

Suz: You have a point about the XRB – most of its holdings are in four real return bonds. But XRB should have a similar risk and return characteristics as buying the underlying bonds if you don’t care about maturity. My understanding is you should bother with individual bonds only if you want to match the maturity date with a future obligation. Otherwise, a mutual fund or ETF is a suitable option.

By: Mike

Mike — Wed, 18 Apr 2007 01:41:49 +0000

I’m just re-reading this since I’m actually getting inspired to do the sleepy ETF thing myself.

Question – You mentioned that you would use EFA to track the MSCI EAFE index but that VGK + VPL = same thing for half the cost so why did you choose EFA?

By: Suz

Suz — Wed, 18 Apr 2007 00:45:51 +0000

XRB — I would really appreciate some comments on this one. I totally understand your interest in Real Return Bonds. I’m totally flumoxed as to why you would suggest XRB could substitute for holding the actual RRBs. My personal experience with anything that is a grab bag of bonds (mutual fund, index or whatever with no specific maturity date) is that, over time, the aggregated instrument behaves quite differently from holding an actual RR bond for eventual sale or to maturity. Maybe I’m missing something here.

By: Neil

Neil — Tue, 17 Apr 2007 18:26:39 +0000

I like the improvements you have proposed to the sleepy portfolio. I don’t like XIC though. The concept of this ETF is good (ala the Nortel problem in 1999), but this stock is not very liquid, and you will save a lot of money in spread costs by using XIU which is, from a passive prespective, pretty much the same thing. If a person is going to get involved with ETF’s they must also read about how to trade since these trade like stocks, and there is a bit of skill to making sure you get the appropriate price for your ETF. A liquid stock protects you from a lot of the sharks out there, and you won’t get hosed as bad if you buy or sell an odd lot. Non-liquid ETF’s can be used, but require a lot patience, and careful use of limit orders. Generally people using an ETF passive approach aren’t interested in spending a lot of time on their investments.

By: Canadian Capitalist

Canadian Capitalist — Tue, 17 Apr 2007 17:41:55 +0000

Damir: I read somewhere that currency rate fluctuations would balance out interest rate differentials in free market economies over the long-term. So, it is debatable if bonds denominated in foreign currency are a core asset you’d want to hold in your portfolio.

By: Canadian Capitalist

Canadian Capitalist — Tue, 17 Apr 2007 17:17:16 +0000

Joe: VWO does have a 10.2% exposure to Russia. Actually, the top holding is Gazprom. Vanguard changed the mandate in fall of 2006 to track the MSCI Emerging Markets Index by including Russia and Malaysia. You can find the press release on the Vanguard website. VWO is now a cheaper apple than EEM!

By: Damir

Damir — Tue, 17 Apr 2007 15:48:31 +0000

CC – your portfolio has international(global) exposure in stock ETFs but your bonds are Canadian only. Is there a reason for that? Do you, or your readers, know an ETF to track a kind of “global bond index”?