With the stock markets continuing to trend higher since our last update, the Sleepy Mini Portfolio, a simple, passive portfolio constructed with low-cost, index funds, is now just shy of the break-even point — as of August 31, 2009, the Sleepy Mini Portfolio is less than 0.5% from its book value.

TDB909 – Canadian Bonds – $1,529.72 (19.2%)
TDB900 – Canadian Equities – $1,508.23 (18.9%)
TDB902 – US Equities – $2,442.00 (30.7%)
TDB911 – International Equities – $2,481.05 (31.2%)
Total – $7,961
Total Invested – $8,000

It is time to put another $1,000 to work in the Sleepy Mini Portfolio and rebalance it back to the target asset allocation — 20% bonds, 20% Canadian stocks, 30% U.S. stocks and 30% International stocks. We’ll use the nifty rebalancing spreadsheet to divvy up the new money between the four index funds.

Transactions:
TDB909 – TD Canadian Bond Index (e-Series) – Buy units for $262.48.
TDB900 – TD Canadian Index (e-Series) – Buy units for 283.97.
TDB902 – TD US Index (e-Series) – Buy units for $246.30.
TDB911 – TD International Index (e-Series) – Buy units for $207.25.

Investing so simple, you could do it with your eyes closed!

[Chart of Sleepy Mini Portfolio as of Aug. 31, 2009]

This article has 26 comments

  1. So, you have finally recovered from last October, ready for another go at the hand in the meat grinder???

    I have a feeling the bottom’s gonna fall again, but I’ve been wrong before.

  2. I think the fact he is back to even shows the power of sticking to a plan through good times and bad. IF the bottom falls out, his regular investments will simply buy more.
    I’ll put my odds on this plan versus outguessing the masses anyday.

  3. Canadian Capitalist’s Sleepy Portfolio record simply shows the predictable advantage of quarterly dollar cost averaging has during a drop, followed by a rise in the markets. Had CC invested $8000 in this portfolio in September 2007, or $4000 in September 2007 and another $4000 in September 2008, he’d still be upside down, as the markets have not yet recovered.

    To look at it another way, $1000 invested quarterly in an ING account would still be ahead of the portfolio over this period. The challenge is making the determination. Lots of folk stood on the sidelines since last September watching the fall in the market (I was not among them), but few could offer the best time to jump in ( I’m now predicting March 9, 2009 as the best time to enter the market).

    It would be nice if there was something to easily compare the Sleepy Portfolio against, but the regular contributions make direct comparisons against other products more challenging.

    DAvid

  4. Canadian Capitalist

    @Connie: Wish I knew! There is something to be said for making regular investments — provided, of course, that the basics are covered: emergency funds, upcoming expenses, wills, insurance etc.

    @Rob: It sounds simple enough but there is something about sticking to a plan that is extremely difficult. I suppose we are wired to guess which way the markets will trend even though evidence suggests that we guess wrong more often than not.

    @DAvid: Yes, by making mechanical regular investments, the Sleepy Mini Portfolio takes away the guesswork of timing the markets. For me, the Sleepy Portfolio started out as my personal benchmark since I had a portfolio of common stocks. But now, the Sleepy Portfolio is pretty much my portfolio.

  5. CC, what are you using to track this portfolio and generate the graph? I like that it displays the amount invested along with portfolio value…

  6. An alternative is to use SMA200 and SMA50. Using the SMA200 helped you to avoid the stock market crash in both 1974, 1987, 2001 and 2008.

    I have not found any argument suggesting that SMA200 would no longer be useful in the future. SMA200 won’t allow you to sell exactly at top and buy exactly at the bottom and you might need to use SMA50 to determine the exact entry and exit points. If you can miss 30% to 40% correction, you are better off financially and psychologically. I am also certain in the next 50 years that we will experience at least two major stock market corrections of 40% to 50%.

    Dollar cost averaging is great, because it forces you to buy low. However, dollar cost averaging also forces you to buy high. Buying both low and high is definitely better than buying high and selling low.

    It has been a difficult time for all investors. However, learning from past mistakes is important. The mistake I learned in 2008 is that do not long stocks in a bear market that can get a lot worse. I feel that stocks are still one of the best investments available due real earnings and liquidity, but I need to adjust my strategy depending on the kind of market like cyclical bull market, cyclical bear market, secular bull market, and secular bear market. My own controversial perspective is that we are in a cyclical bull market, which is a part of a larger secular bear market.

  7. Is there an advantage or disadvantage of splitting the us equity portion of the portfolio between TD Dow Jones Industrial Average SM Index TDB903, TD Nasdaq® Index TDB908, and TD U.S. Index TDB902 ?

  8. I have an almost identical portfolio, but with a slightly more aggressive allocation of 30/30/30 on Can/US/Int and 10 in bonds (I’m in my mid 20’s).

    I started in June 2008 with ~$5000 initial investment (pretty poor timing :P) and put another $400 every month. I’m showing a 4.7% return since June 2008, so I’m quite pleased.

    Love the sleepy portfolio!

  9. missnb20: I would stay away Dow Jones Industrial Average Index, since it holds only 30 stocks and it is price weighted vs market capitalization weight.

    Buying the Nasdaq 100 can be justified if you believe large technology companies like Microsoft, Intel, and Google will outperform the broader market.

  10. great stuff cc. My portfolio also uses td e-funds and I’m slightly above breakeven now after almost 2 years of DCA’ing. I love how I don’t have to worry about “timing” the markets and still beating most active managment over the long term.

  11. @Henry “However, dollar cost averaging also forces you to buy high.” … I never liked that about DCA… so I’ve been using a Value Averaging approach to minimize this effect (based on the book by Michael Edleson). I like it so far and it has been working great.

  12. Matt S (Vancouver)

    On a different topic, what ever happened to this guy:?
    http://www.four-pillars.ca/2009/03/17/is-dividend-investing-dead/

  13. ghandy: Value Averaging sounds a bit better than DCA. I personally prefer trendline analysis at this point because I feel asset allocation may not provide negative correlation when things go bad and asset rotation makes more sense to me. The idea of asset rotation is to long whatever asset has the highest expected return. What fits for me is a combination of asset allocation and asset rotation as necessary.

  14. Value averaging sounds good on paper, but accurately predicting the average future return would be difficult. It would also be difficult for a retirement account as eventually, if the market fell, it would be difficult to make up the shortfall if your account was very large. Also, say you have $400 a month to invest. If you only needed to add $100 as per your value averaging, where do you put the other $300 dollars.

    Wouldn’t DCA in combination with re-balancing your portfolio have a similar effect as value averaging, since that also forces you to buy high and sell low to maintain a desired ratio between stocks and bonds, while still putting all your money to work for you, and without predicting future returns?

  15. “Investing so simple, you could do it with your eyes closed!”

    Eyes closed indeed!

    What I don’t understand is your willingness to get slammed if the market retreats. Not telling you to time the markets, but where is your protection against loss?

    http://blog.mdwoptions.com

  16. Mark, it’s called “asset allocation”. You should try it sometime – it’s far cheaper and easier than any option strategy.

  17. @xenko – I wouldn’t consider DCAing with rebalancing the same as value average. Value averaging works on the premise of knowing exactly what the dollar value of your portfolio will at some point in the future and choosing a growth rateto reach taht value. Once you have that then you buy and sell at intermediate points so that your portfolio value maintains the growth rate that you choose to meet that dollar value in the future. Buying and selling has less to do with maintaining a stock to bond ratio and more to due with hitting those dollar values.

  18. I’m looking at your graph and had your portfolio been bigger it would have taken longer to get back to par. Since the addition of 1000$ was a large addition to your portfolio it helped boost you back into the green quicker as most of the gains have occurred recently. Had it been the case that you had say 100,000 portfolio to start in sept 07 and were dollar cost averaging 1000$ each quarter you would still be deep in the red. However, the gains seen recently with re-balancing of your bond’s to stocks would have been significant. I have a similar style of portfolio and am still seeing a lot of red myself but with healthy gains each month returning me to break even. Regardless, this is an excellent way to invest without putting too much time in it. I just wish there was a way to automatically withdraw that xxx$/month and have it allocated effectively to your portfolio of ETFs bearing in mind your percentages and transaction fees etc. without having to do anything.

  19. Hi, I’d like to open an ING Streetwise account, however, I’m not sure which to choose. I’m 37 and hubby is 46, so would it be better to choose the one that allocates 70% to Can. Bonds/30% distributed equally to Can. , U.S., and Intern. stocks. Or, should I choose the 40% Can. Bonds, and 60% distributed equally to Can., U.S., and Intern. stocks. This potfolio will be held for the long run of 10-15 yaers at least. Thanks.

  20. Canadian Capitalist

    @Matt: Oh, Derek is out there, apparently working on a comeback:

    http://blog.canadianbusiness.com/derek-foster-working-on-a-comeback/

    @mfd, @ghandy: I haven’t read up on value averaging, so I can’t comment knowledgeably on it. Maybe, I’ll pick up that Edleson book.

    @Mark: I think we’d agreed that an option strategy still doesn’t sever risk and return. If I’m willing to settle for a lower return, I could reduce risk by boosting fixed income. I’m not convinced that options have to enter the picture.

    @cs: Fair enough. In my own portfolios, which were quite large compared to additions since late summer of 2008, the values have recovered and far surpassed their previous peaks. Two reasons: frequent additions through the bear market and one rebalancing late last year helped the portfolio recover.

    @Lina: I can’t comment on your specific financial situation. I’d recommend reading up on asset allocation to decide what’s best for you.

  21. Hi, i am just getting started with td e-funds. I am wondering why or if the other e-funds should be considered to part of my rrsp’s?
    Can anyone let me know why the others are not included or if any others should if one is exclusively using e-funds to hold all of one’s rrsps?
    thanks

  22. sorry, for any confusion and I look forward to your comments. I noticed there are 11 e-funds
    http://www.tdcanadatrust.com/mutualfunds/prices_EF.jsp

    some i think are redundant in a way if it is the same fund but in US dollars? I don’t think i need to carry the same fund in USD or have the currency neutral version of the same fund as i believe from other posts stats suggest simply holding the CAD fund is preferred anyway.
    So, in summary i believe i am just as to why the japanese, european, nasdaq, and dow jones e-funds are not included in the sleepy portfolio. Then also, depending on your response, if using the e-funds to totally make up one’s rrsp holdings, how would it be recommended to allocate funds across all e-funds?

    thanks very much

  23. Good job CC! Simple, steady index investing will win the race.

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