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moneysense.ca, 2/06/10
Sleepy Mini Portfolio Q2-2010 Update
Since my previous update the Sleepy Mini Portfolio has slipped a little and now has a small loss of 0.7% over book value since inception. If you recall, I started the Sleepy Mini Portfolio with an initial investment of $1,000 in August 2007 and have been adding $1,000 to the portfolio every three months. Here’s how the portfolio components were valued as of May 31, 2010:
TDB909 – Canadian Bonds – $2,246 (20.6%)
TDB900 – Canadian Equities – $2,277 (20.8%)
TDB902 – US Equities – $3,309 (30.3%)
TDB911 – International Equities – $3,090 (28.3%)
Total – $10,922
Total Invested – $11,000
As per plan, it is time to once again add $1,000 to the portfolio and rebalance it to the target asset allocation — 20% bonds, 20% Canadian stocks, 30% US stocks and 30% International stocks. I use this spreadsheet to divide the new money between the portfolio components. You might notice that International equities are currently slightly below plan, so that’s where a higher proportion of the new money will be added:
Transactions
TDB909 – TD Canadian Bond Index (e-Series) – Buy units for $138.00.
TDB900 – TD Canadian Index (e-Series) – Buy units for $107.46.
TDB902 – TD US Index (e-Series) – Buy units for $267.59.
TDB911 – TD International Index (e-Series) – Buy units for $486.96.
![[Sleepy Mini Portfolio as of May 31, 2010]](http://www.canadiancapitalist.com/wp-content/uploads/2010/06/sleepy_mini_2010_Q2.png)
That’s it. Investing may not be easy but it sure can be simple.
moneysense.ca, 2/06/10
Thanks for posting this info. I’ve been researching my own portfolio and it helps to see how others get it done.
It doesn’t seem to be making any money at all.
When you factor in inflation you’re losing much more than it seems
@slacker: I don’t think any money has been made.
@CC: I too have the same portfolio with $8000 originally invested and I am behind also. I’m waiting for the fruits of index investing to show their face.
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It’ important to remember that the time period we’re looking at here is extremely unfavorable. August 2007, when this portfolio was created, came on the heels of a four-year bull market and turned out to be close to the market top. A year later we had the worst market meltdown since the Depression. And still, after all that, the portfolio is essentially at break-even. I think that’s pretty good evidence that buy-and-hold, diversification, dollar-cost averaging and indexing work.
Of course you can look back back and say you should have done this or that, but that’s meaningless hindsight. How many people who were fully invested in the markets (not sitting in cash, which historically is a terrible investment strategy) can report that they did not lose money from August 2007 until today?
Like Canadian Couch Potato says, patience is the key in long-term investing. Of course, investors would like markets to provide a smooth 6% every year but that’s not how markets work. Trust me, I’d love that as well. But such expectations are unrealistic. A portfolio that is mostly invested in stocks will fluctuate in value, sometime quite dramatically. Returns will be lumpy — down 20% one year, up 20% the next and so on. The Sleepy Mini Portfolio is 80% in stocks. It is not even three years old — a time frame that is nowhere near the 20 years that is usually considered “long-term”. Over the long-term, I expect a portfolio such as this to return about 4% in real terms.
When I look at the components of the Sleepy Mini, the returns breakdown as follows: Canadian stocks: +9.6%, Canadian bonds: +7.7%, US stocks: -0.8% and International stocks: -11.8%. In hindsight, we could have avoided International stocks altogether and ended up with respectable returns. But exactly how many could claim to have done that successfully?
I’m confused. Given that this portfolio began at the end of the bull, then went through the crash and came out again, shouldn’t this result be much higher given that the bulk of the investments must have happened while the market was on its way down, at rock bottom, and then back up again? I want to love the Couch Potato, but I feel confused by how lackluster its performance is.
Wow – I have seen fruit flies with more patience!
I prefer active investing for myself, but guys who like passive need to remember that you have to allow your strategy – whatever it is – some time to work.
It has only been 2.5 years! The benefits of this strategy are low costs, and disciplined un-emotional re-balancing. That will work…. but it will take more like 10 years to really show the benefits this stratgy will deliver. 2.5 years and $11K means what it is delivering is too small so far to be noticable – but it is there.
You have to stick with it if it is going to work. It will work fine IF YOU SITCK WITH IT. I know CC understands this, but the comments show many do not.
Rob
@Newbie: Not sure why why you would expect the performance to be better. The period covers 2.5 years, starting with a terrible downmarket and ending with a big recovery. The order of those two events is important. Remember, if you lose 50%, you need to make 100% on the back end to get to even.
It all comes back to the same question: if you reject index investing, you need to explain how you expect to do better, and you need to do it ahead of time, not looking back and describing what you could have done differently. I can tell you who won the Stanley Cup last year, but that doesn’t make me a hockey genius.
I don’t think I could have done better with mutual funds or stock picking. This is afterall, a “get rich slowly” method.
Hi!
I’m pursuing this strategy and asset allocation myself. Question though, is it better to use a DRIP type strategy, purchasing every 2 weeks or wait until a sizeable investment is available to invest in? There are no fee’s associated with buying,
Thanks.
When dealing with portfolios, 10 years is a decent time horizon, but thirty years even better! A portfolio usually smoothes out over 10 years, but one can also have a very bad decade (e.g. 2000-2010). Those of us who are quite a few years out from our retirement dates should be praying for a nice, long, savage bear market so we load up on equities.
Cheers.
@AQ4U: If there’s no cost to purchase, then one can simply buy shares as funds become available (maybe automatic purchase program?). What you give up is the ability to time the market.
@slacker
but doesn’t it give me the chance to dollar-cost-average? (in a sense timing the market?)
@AQ4U: My understanding is that dollar cost average (regular interval purchase without regard for market condition) is the opposite of market timing. I personally have been pulling back from regular purchase (dollar cost average), and started piling up cash and waiting for opportunity to buy.
@slacker
That makes sense, thanks!
[...] Canadian Capitalist updates the Sleepy Mini Portfolio [...]
[...] a recent post, I provided an update on the performance of the Sleepy Mini Portfolio. The portfolio was started in August 2007 with an initial investment of $1,000 and $1,000 was added [...]
There is no absolute rights and wrongs. Investment strategies are totally as per individual investor risk profile. The Sleepy Mini Portfolio is obviously for the conservative non-aggressive investor.
My personal opinion : Sticking to fixed percentages in the 4 areas over the years may not be a good strategy as this does not help take into account industry and economic positions. (For example, for the current quarter)If it were left to me, I would reduce contributions to international equities and boost up on Canadian equities. When the market turns confirmed bullish, I would go down on my bond contributions and spread it to the other 3 after doing a due diligence.
Conservative strategy is good, but loosing flexibility in the process is not.
My 2 cents
[...] Sleepy Mini Portfolio Q2-2010 Update [...]
[...] Sleepy Mini Portfolio Q2-2010 Update [...]