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moneysense.ca, 4/06/12
Sleepy Mini Portfolio Q2-2012 Update
With the world stock markets in much turmoil these days, it won’t be surprising that the equities-heavy Sleepy Mini Portfolio lost 5.6 percent over the past quarter (see previous update). The Sleepy Mini Portfolio was started in August 2007 with an initial investment of $1,000 and like clockwork, $1,000 is being added to the portfolio every quarter since then. A total of $19,000 has been invested in the portfolio so far and as of June 4, 2012, here’s how it looks:
TDB909 – Canadian Bonds – $4,320 (21.7%)
TDB900 – Canadian Equities – $3,842 (19.3%)
TDB902 – US Equities – $6,119 (30.7%)
TDB911 – International Equities – $5,652 (28.4%)
Total – $19,934
Total Invested – $19,000
Since, the entire idea behind the Sleepy Mini Portfolio is to follow a mechanical investment strategy of committing savings to the portfolio regularly, we will add another $1,000 to the portfolio and rebalance it to the original target 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 $133.53.
TDB900 – TD Canadian Index (e-Series) – Buy units for $345.17.
TDB902 – TD US Index (e-Series) – Buy units for $160.87.
TDB911 – TD International Index (e-Series) – Buy units for $627.49.
The list of transactions provides a clue to which markets are hardest hit. Most of the new addition will go to buy International stocks, which have been hit hard by the debt crisis in Europe. The sell transaction reflects the role that bonds have played in providing ballast to the portfolio.
moneysense.ca, 4/06/12
hi,
i have started this portfolio with 25% in each 4 categories with initial $4000. i am also doing once montly of $1000 towards it in TFSA.
please advise if rebalancing once a year will be sufficient?
also, does this percentage recomendable, i am doing this as a long term investment.
thanks
[...] Canadian Capitalist updated the Sleepy Mini Portfolio for Q2 2012. [...]
CC – An IRR would be an interesting piece of data with these updates if you are inclined to add this.
5 years and you only have a return of 934 dollars? that sounds just terrible. I am amazed you were not able to do better
harris,
When you are contributing that much, you can rebalance strictly through buying underweight components.
The research on rebalancing frequency seems to show that rebalancing often or infrequently doesn’t make much difference, as long as you rebalance at some point. Once a year is just fine, especially for a small portfolio in the accumulation phase.
Dopper the sleepy portfolio is meant to match market returns so one shouldn’t be surprised at the actual returns.
Lastly when you suggest CC could’ve done better what is the benchmark of “better” that we should compare the sleepy portfolio to?
@harris: I second Andrew’s suggestion. I almost always end up rebalancing when adding new money. I also have thresholds that trigger rebalancing but these events are very rare.
@Rob: Yes, I was lazy to do the IRR for this update. I’ll try and update the post with the IRR as well.
@Dopple: First off, the average dollar in the portfolio was invested for 2.5 years, not 5. In the early years, one would expect the rate of return to jump around a lot. Just in my previous update, I noted that the rate of return was 5.3%. It is probably 1/2 that now but that’s the nature of a portfolio with high allocation to equities.
@James: One can’t extract blood from a stone. A passive portfolio hopes to make market returns and if the markets do not perform well, it will suffer. One has to be careful that in pursuing a better plan one doesn’t end up with poorer results.
I really like the sleepy Mini portfolio with its asset allocation set points. Is it not a form of coach potatoe investing that is the “in style” of investing lately ?
It makes investing so easy. You dont have to know anything about investing only know that most do not like money & will lose money in the market.
I just have to do the opposite to make money. Instead of going long bonds & stocks is to short bonds & stocks & keep readjusting portfolio so Iam 40% short bonds & 60% short stocks. (But instead of using stocks as most do I will use options but not with a negitive delta curves like most do but I will use a positive delta curve)
When the time comes that CC & followers & the rest of the herd never want to hear the word stocks or bonds again. I will then do the opposite & go long
@darren: Most investors follow the active approach. Passive or couch potato investing is definitely not “in style”. In fact, David Swensen titled his book Unconventional Success to reflect the low take up of passive investing approach.
I personally hold the opposite opinion. Most investors are disgusted with stocks. Mutual fund investors are fleeing stock funds and young investors who have seen nothing but low returns are staying away from stocks. Sure, stocks could get even less popular but it is hard to argue that investors are wildly enthusiastic about them these days.
Dopple: Russell Asset Management’s Balance Growth wrap account, one of the best performers in Canada and with a similar mandate as the sleepy portfolio (and actively managed), has a 5-year annual average return of -0.98% (menaing it’s down approx. 5-percent over the five years) while the above portfolio has a postive return. Like many retail investors, you may be missing the fact that a proper portfolio’s goal should be to protect capital in weak markets while remaining positioned to make money in the better times; I’d argue that the sleepy portfolio has done just that. I would argue also, however, that CC may want to concede that a tactical asset allocation overlay strategy (as oppossed to totally passive) can add value; in other words, overweighting and underweighting asset claases based on an outlook going forward (i.e. being underwieght Europe and equites the last 18-months and overweight bonds and income producing assets: reits, preff’s, high yield). That’s the one problem with a completly passive strategy, there’s no room to move with fairly strong looking trends (still following passive investment, just a little active asset allocation). My humble thoughts…
@Jim: I think a tactical asset allocation *can* add value. I have doubts that most investors can successfully implement such a strategy. In fact, evidence suggests otherwise. Mutual fund flows indicate that retail investors more often than not are notoriously bad in their timing. They chase winners and dump lagging investments often at the most inopportune moments.
Most people when you ask them where there monies are invested will say Mutual Funds, ask what comprises those mutual funds, you will get a deer in the headlights stare.
Intelligent people but too lazy to learn the basics of money, too easy to give to a stranger, then get mad when the assets go down.
ETF’s are so diverse now, they are in effect low MER Mutual Funds.
[...] my previous update, the Sleepy Mini Portfolio has gained 4.95 percent due to a rally in the stock markets over the [...]