Since my previous update roughly three months back, the Sleepy Mini Portfolio has lost 6.4% of its value due to sizable corrections experienced by stock markets around the world. Every stock fund in the portfolio dropped in value but bonds fulfilled their role of providing a ballast. Recall that the portfolio started out with an initial investment of $1,000 in August 2007 and $1,000 was added to the portfolio every quarter ever since:
TDB909 – Canadian Bonds – $3,701 (22%)
TDB900 – Canadian Equities – $3,342 (19.9%)
TDB902 – US Equities – $4,953 (29.5%)
TDB911 – International Equities – $4,792 (28.5%)
Total – $16,789
Total Invested – $16,000
Despite the market volatility, the whole point of a portfolio such as this is to simply add money periodically while resisting the urge to divine which way the markets are headed. With that in mind, we’ll now add another $1,000 to the portfolio and rebalance it according to our original asset allocation — 20% bonds, 20% Canadian stocks, 30% US stocks and 30% international stocks — using this rebalancing spreadsheet. Here are the results:
TDB909 – TD Canadian Bond Index (e-Series) – Sell units for $143.63.
TDB900 – TD Canadian Index (e-Series) – Buy units for $215.43.
TDB902 – TD US Index (e-Series) – Buy units for $383.48.
TDB911 – TD International Index (e-Series) – Buy units for $544.72.
Notice how rebalancing requires selling an asset class that has increased in value (bonds in this case) and buying asset classes that have declined in value (stocks in this case). It happens to be the mirror image of what we were doing earlier this year when the bulk of our contributions went to bonds which was the laggard asset class.