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moneysense.ca, 21/03/05
Introducing the Sleepy Portfolio
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:
- 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.
- The initial investment will be $100,000, invested in different asset classes on Jan 3, 2005.
- Every year, in the first week of July, $10,000 will be added to the portfolio. The portfolio will be rebalanced to the original asset allocation at the same time.
- 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.
- The portfolio is assumed to be in a tax-deferred, self-directed account.
Annual Sleepy Portfolio report cards:
In 2005, the Portfolio was up 12.9%.
In 2006, the Portfolio had another stellar year and was up 14.7%.
In 2007, the Portfolio returned a minuscule 0.2%.
In 2008, the Portfolio had a bad year, losing -19.9%.
In 2009, the Sleepy Portfolio returned 16.8%.
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.
moneysense.ca, 21/03/05
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.
Micheal: Very good question. I will make a post on this topic.
[...] The Sleepy Portfolio had a stellar year returning 12.9% in total returns. The biggest winners were Canadian large-cap equities (up 25.3%), Canadian mid-cap equities (up 20%), EAFE (up 11.2%), Canadian REITs (up 16%), Emerging Markets (up 33%) and US mid-cap equities (up 12%). Surprisingly, none of the major asset classes in the portfolio had a negative year. [...]
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
[...] Larry MacDonald, columnist for Canadian Business magazine, has kindly included the Sleepy Portfolio in an article on Canadian “lazy” portfolios. While the Sleepy Portfolio is very simple to assemble, there are some pitfalls to be aware of: [...]
[...] The Sleepy Portfolio, which I use to benchmark the returns of my own portfolios, had an excellent quarter gaining 3.2% over the previous quarter. The gains were across the board in all asset classes. Bonds, EAFE equities and REITs performed especially well. [...]
[...] The Canadian Capitalist once again posted the results of his sleepy portfolio, the portfolio he constructed using only passive index funds, which he uses as his own personal benchmark to which he can compare his own performance. Based on the sleepy portfolio’s stellar performance, I wonder if he’ll stop investing in individual stocks so much in the future and invest in more passive index ETFs instead. [...]
[...] time flies! It is already time to check how the Sleepy Portfolio is doing now that a quarter of the year has passed. The portfolio had a decent quarter increasing [...]
[...] my masterly inaction, the Sleepy Portfolio, which I use to benchmark our personal portfolios is up 34% since its inception in 2005. As you [...]
My New Passive Index ETF Portfolio…
Unfortunately this is the second time my portfolio has changed in the past two years. The first change was when I moved from a TD Mutual Funds account to Clearsight last year. My advisor had great plans for my portfolio. He wanted to eventually have me…
[...] The Sleepy Portfolio posted gains of 2.2% and 4.4% during the past quarter and year-to-date respectively. It is surprising to see positive gains with the recent volatility in the markets but only bonds and REITs ended up in the negative column. [...]
[...] 1st, 2005 · No Comments The Sleepy Portfolio had a really sleepy quarter, advancing just 0.7%. Income of $440.28 or 0.4% from dividends and [...]
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?
[...] Sleepy Portfolio is an aggressive portfolio with 25% in bonds and cash. The portfolio is down 24% over the past [...]
[...] The Sleepy Portfolio [...]
[...] 18th, 2009 · While I have repeatedly written about my preference for passive, low-cost investing using ETFs or index mutual funds and that, in my opinion, the vast majority of mutual funds are hazardous to [...]
[...] 1st, 2009 · I’ve been tardy in keeping the Sleepy Portfolio in line with the target allocation (cash — 5%, bonds — 20%, stocks — 70% and [...]
[...] Canadian Capitalist took his inspiration from other lazy portfolios and created the sleepy portfolio (a “fire and forget” portfolio for large sums of money, if you get a surprise [...]
[...] I took early October off to attend to personal matters, I forgot to provide an update on how the Sleepy Portfolio performed in 3Q of 2009. Not that it matters. The entire point of a Sleepy Portfolio is that it [...]
[...] Canadian Capitalist took his inspiration from other lazy portfolios and created the sleepy portfolio (a “fire and forget” portfolio for large sums of money, if you get a surprise inheritance this [...]
[...] exposure to US and EAFE stocks, you earned real returns that, albeit modest, are positive. Even the Sleepy Portfolio, which has a 45% combined allocation to US and EAFE markets, managed to return 2.4% over the past [...]
[...] also: canadiancapitalist’s sleepy portfolio and its performance for several [...]
[...] Sleepy Portfolio started out with a 22.5% allocation to US and EAFE markets and a 5% allocation to Emerging Markets. [...]
[...] your take? Is the 70% allocation to US, EAFE and International stocks in the Sleepy Portfolio too much diversification? Or is it too little, considering Canada makes up less than 4% of global [...]
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.
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. [...]
[...] also: canadiancapitalist’s sleepy portfolio and its performance for several [...]
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.
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”.
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. [...]
[...] used to be quite religious about tracking portfolio performance. In fact, the Sleepy Portfolio started out as benchmark for my active portfolio but after a few years, I determined that I’d [...]
[...] used to be quite religious about tracking portfolio performance. In fact, the Sleepy Portfolio started out as benchmark for my active portfolio but after a few years, I determined that I’d [...]
[...] I started the Sleepy Portfolio, I intended to track it as my personal portfolio benchmark and as such the portfolio allocations [...]
[...] I started the Sleepy Portfolio, I intended to track it as my personal portfolio benchmark and as such the portfolio allocations [...]
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
@Tim: YTD of TD Canadian Index (e-Series): 5.4%.
http://www.tdcanadatrust.com/mutualfunds/prices_EF.jsp
TD Canadian Index (I-series): 5.3%.
Can you link to the page where you got the data for the normal index fund?
my portofolio :
cash : 5%
stocks : 30%
bonds :20%
gold :45%
a fair compsition i guess……
Thank you for the repsonse Canadian Capitalist. I double checked and you are correct. Thanks for clearing up, i was a bit confused.
[...] started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, the bulk of which was then invested in individual [...]
[...] started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, the bulk of which was then invested in individual [...]
Interesting portfolio, very similar to the lazy portfolios over at http://assetbuilder.com/lazyPortfolio/
[...] started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, the bulk of which was then invested in individual [...]
[...] realize now that there’s a problem with the terminology used by passive investors. Couch Potato, Sleepy, Lazy, Easy Chair, Gone Fishin’, Coffeehouse, Rip Van Winkle—if you miss the irony, it’s [...]
[...] asset classes from the ETFs in it. For example, one could assemble a portfolio similar to the Sleepy Portfolio out of the Claymore 1-5 Year Laddered Govt. Bond ETF (TSX: CLF), Horizons S&P/TSX 60 Index ETF [...]
[...] Portfolio is much higher at 0.59%. If the portfolio were constructed with the same products as the Sleepy Portfolio, the weighted average MER would be just 0.18%. According to the useful Claymore Portfolio Index [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, the bulk of which was invested in individual stocks at [...]
[...] I really like about CC’s blog is that he has been providing Sleepy Portfolio Report Cards to his readers since 2005 and we can all be a part of watching the progress of such a [...]
[...] Capitalist’s ‘Sleepy Portfolio‘, one in which I highlighted in a post earlier this week, offers investors the ability to [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which at that time was mostly invested in individual [...]
[...] I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which at that time was mostly invested in individual [...]
[...] started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which at that time was mostly invested in individual [...]
[...] started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which at that time was mostly invested in individual [...]
[...] started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which at that time was mostly invested in individual [...]
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.