I wrote about the target asset allocation for my portfolio, a little while ago. To recap, it looks like this:

Cash: 5%
Bonds: 20%
Equities:
Canada: 20%
US: 22.5%
EAFE: 22.5%
Emerging Markets: 5%
Real-Estate Income Trusts: 5%

Inspired by several “lazy” portfolios, I want to call mine the sleepy portfolio. You can also check out earlier posts about the original couch potato portfolio and the Canadian version. My main aim for this portfolio is to benchmark performance and compare it to my actual results. Over the next few days, I will post the actual mutual funds, bonds and ETFs that make up the portfolio.

I am making the following assumptions about the portfolio:

  1. The portfolio currency is the Canadian dollar. All foreign-currency denominated assets will be converted to C$ at the prevailing exchange rate for performance tracking.
  2. The initial investment will be $100,000, invested in different asset classes on Jan 3, 2005.
  3. The investments will be in actual mutual funds, index funds, ETFs etc. When purchasing ETFs, a commission of $10 will be assumed for each buy and sell.
  4. The portfolio is assumed to be in a tax-deferred, self-directed account.
  5. All currency conversions (CAD converted to USD prior to purchasing USD ETFs, USD converted to CAD prior to purchasing CAD ETFs, USD dividends) will be assumed to cost 1.5 percent.

Annual Sleepy Portfolio report cards

:

Year Return Notes
2005 12.9% Report card here
2006 14.7% Report card here
2007 0.2% Report card here
2008 -19.9% Report card here
2009 16.8%  
2010 9.6% Report card here
2011 -1.2% Report card here
2012 10.0% Report card here
2013 20.3% Report card here

Updates

:
The other posts in the series: Portfolio Building Blocks — cash, bonds, stocks and REITs and summary.

The blended cost of the Sleepy Portfolio is just 0.22%!

A note of caution: the Sleepy Portfolio has a large allocation to equities and is a benchmark for a young, aggressive investor. Older investors may want to boost the allocation to fixed income.

This nifty spreadsheet simplifies the rebalancing process.

The Sleepy Mini Portfolio is more suitable for investors just starting out and adding a bit to the portfolio every now and then.

In 2007, some of the components of the Sleepy Portfolio were changed. The portfolio was simplified by adding VTI, VEA and VWO and the bond component was split between XSB and XRB.

In 2013, some of the Canadian components of the Sleepy Portfolio started to change to take advantage of lower-cost offerings flooding the market. The first change was replacing the iShares S&P/TSX Capped Composite ETF (XRE) with Vanguard FTSE Canada Capped REIT ETF (VRE).

This article has 62 comments

  1. How did you arrive at this allocation? I’m thinking about making a passive portfolio of index funds, but I don’t know what asset allocation I should have, and Vanguard’s Investor Questionaire only differentiates between stocks and bonds.

  2. Canadian Capitalist

    Micheal: Very good question. I will make a post on this topic.

  3. Pingback: Canadian Capitalist » The 2005 Sleepy Portfolio Report Card

  4. CC,

    Not sure if you were aware but a July 20, 2006 article about Lazy Portfolios on Canadian Business online linked to you.

    I’m always watching out for media about investments and finance… but I just picked it up today. Congrats!

    Here’s the link for anyone interested: (the link is on page 2)
    http://www.canadianbusiness.com/markets/stocks/article.jsp?content=20060720_150409_4148

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  13. You have 20% in Canada? That is more than what you have tracking the MSCI EAFE even though the MSCI EAFE has a much larger market cap. I don’t get why so many indexers have a home bias. If you want marker cap weighting within an index, why not demand it between indexes?

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  23. Pingback: Stock Market Weightings excluding Canada | Canadian Capitalist

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  25. I find it amazing that bright investment minds advocate diversification, but fail to count investments in some Canadian stocks toward international exposure. Half of TD’s assets are invested in the United States. Thomson Reuters is more international than Canadian. Invest in Canadian resources and you automatically have international exposure to economies outside Canada. It’s certainly not the only way to diversify, but a little credit is due.

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  33. Uh, ya.

    So let’s assume you carry at least one ETF to cover each of your major asset allocations… That’s 7 x $29.95 = $209.65 every year to “rebalance”.

    Also, why is a “young aggressive investor” invested in 25-30% CASH & BONDS? My grandmother drives more “aggressively” than that. Also, 26% in Canada when it only represents about 3% of the global market? Nice domestic bias. Give this a read, honey: http://www.efficientmarket.ca/article/RRSP_Foreign_Asset_Allocation

    Lastly 10-15% in EM — lol, for a “young aggressive” investor, this is where the bulk of your chips should be if you truly want to invest “aggressively”. Risk is your friend when time is on your side… Right now, you have 85-90% in developed markets (assuming the mysterious “Other” is in there), most of which probably amount to Large Cap Growth. For every bit of risk you avoid, you also avoid return.

    Have fun with your 7-12% returns. Sure, it’s safe, and you’ll cross the finish line… But if you are “young” (< 35), you are literally squandering the most lucrative element you have on your side: time.

    Don't be such a p*ssy. Get into EM, Small Cap Value and Frontier markets… Place your chips and hold onto your sh*t.

  34. As a former so-called financial advisor (mutual fund salesman), I can honestly say that diversified “portfolios” are a bunch of horse-hooey.

    Invest in Small-Cap…ETFs, Mutual Funds, Individual stocks….doesn’t really matter. Doesn’t really matter what age. If you’re young….just leave them alone and let it ride the ups and downs. If you’re older (I retired at 54), then any money you won’t need for the next 3 or 4 years, throw it into Small Caps and let it ride.

    It’s surprising how after a market correction, things just bounce right back in a year or two. Only the people that “panic” and sell their investments at a low are the real losers.

    And foreign or emerging markets…forget about it. Why invest in something that’s an unknown (and at usually a higher MER)….they call it “foreign” for a reason. O.K so Canada is only 3% of the global economy, so what. For an investor like me of only several $M, everything is invested in several Canadian Small-Cap ETFs and MFs and doing fine thank you very much. And as an added bonus, by reading and reading (and my moving averages converging) I was able to avoid most (got hit for about 5%) at the market melt and even made up for the losses by investing even more when the market was at it’s lowest.

    It’s not rocket science. It may not be sexy, It may not be avante-guard. But it’s inexpensive to maintain and I’ve been doing this ever since my university days (35 years ago). I’ll challenge anybody with their fancy diversified portfolio to beat me…….good luck to them.

    The only smart advice is to never rely on a financial advisor, they have their own agendas. An educated investor managing his own funds is the way to be. There isn’t a single advisor that will ever tell you to pull your money out because the market will likely crash in the next several months…..just doesn’t happen. Advisors get trailer fees and they won’t make a dime by pulling customers and switching to Money Market or other cash vehicles. Plus they’d get fired pretty fast. It’s just not the way it works.

    And KEEP IT SIMPLE….the idea is to make money…..not to have a “sexy portfolio”.

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  40. Hello a question about the TD E-Series. I have opened TD Mutual fund account and based on my reading here i want to convert it to an eseries account to benefit from the low MER. My question is, why has te normal Canadian Index out preformed the E Series Canadian index on a year to date basis? I compared all the ESeries against the equivalent mututal index fund and the normal funds are all one point lower which makes since given the higher MER. But the Canadian Equity Eseries is has only returned 5.4% versus 8.5% for the normal index fund. Any thoughts?Thanks

  41. my portofolio :
    cash : 5%
    stocks : 30%
    bonds :20%
    gold :45%
    a fair compsition i guess……

  42. Thank you for the repsonse Canadian Capitalist. I double checked and you are correct. Thanks for clearing up, i was a bit confused.

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  45. Interesting portfolio, very similar to the lazy portfolios over at http://assetbuilder.com/lazyPortfolio/

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  58. 22.5% for EAFE? Really? I don’t recall when the European debt crisis began, I suppose before then – but I don’t think it was really doing great well before either. It seems to me to be far better risk/reward to put much more into Emerging (not just BRICs – all of them) and REITs in particular. This should not be seen as risky in my view as pensions invest this way.

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