- Comments (12)
- Text Size: Down Up
moneysense.ca, 3/12/08
Sleepy Mini Portfolio Q4-2008 Update
With stock markets in a deep funk, a portfolio heavy in stocks isn’t likely to escape the carnage. So, it is with the Sleepy Mini Portfolio, which lost about 22% over the past quarter. The current portfolio holdings are:
TDB909 – Canadian Bonds – $972 (25.6%)
TDB900 – Canadian Equities – $595 (15.7%)
TDB902 – US Equities – $1,146 (30.2%)
TDB911 – International Equities – $1,083(28.5%)
Total – $3,796
While the market downturn isn’t pleasant, the current low(er) prices should benefit a strategy that regularly adds money to a portfolio. As usual, we’ll add another $1,000 to the portfolio and rebalance it to the original asset allocation — 20% bonds, 20% Canadian stocks, 30% US stocks and 30% international stocks. The rebalancing spreadsheet shows how much of each holding should be purchased (or sold) to bring the portfolio to target. The spreadsheet calculates that we need to sell $12.98 of bonds but the minimum transaction amount for TD e-Series funds is $100. So, we’ll simply buy a bit less of one of the other funds instead.
Transactions:
TDB900 – TD Canadian Index (e-Series) – Buy units for $351.64.
TDB902 – TD US Index (e-Series) – Buy units for $292.87.
TDB911 – TD International Index (e-Series) – Buy units for $355.49.
Investing so easy, you could do it in your sleep!
moneysense.ca, 3/12/08
What is the performance of the Mini Portfolio since inception?
Rob: The portfolio is down 24% on contributions totalling $5,000 before the current $1,000 contribution.
My current % in my TD efunds is
17% cdn index
20% us index
17% euro index
28% cdn bond
18% int’l index
Do you think this is a good time to rebalance to 20% each?
I took a hit this year. Would rebalancing help for the future now that the index prices are down? I’m 33 and not planning to retire for 25+ years
I am just wondering whether you took the devaluation of the canadian dollar into consideration when you were calculating how much your portfolio was down or are you still treating it as a paper gain?
Instead of rebalancing quarterly, how would the Portfolio fared if you balanced annually?
The reason I ask is that today I have a mixed bag of funds at TD inside my RRSP and I’m down over 40% (I contribute bi-weekly) without any real allocation strategy. I like what you have done with this Portfolio but rebalancing bi-weekly would be more difficult so I’d consider quarterly or annually.
Thanks in advance for your answer.
Rob B – I would suggest getting at least some kind of idea of your target asset allocation. How did the 40% loss make you feel? You seem pretty unruffled, suggesting that volatility does not concern you, and a high equity allocation is thus appropriate. I do not believe that it is absolutely necessary to have a fixed schedule for rebalancing. Personally I track my portfolio and only rebalance when the deviation from target asset allocation is ‘large’ enough in some sense, which may be a very subjective measure.
I think when rebalancing occurs will have huge effects on the return.
Certainly if you were overweight one asset during its rise, your portfolio will fare better, however this is a form of market timing. I think the key to maintaining asset allocation closely to your target will reduce risk and lower volatility and variance.
I suppose a big part of rebalancing strategy is deciding if you will only buy to rebalance and if so, how often you can make contributions.
For me, I need to sell to rebalance and the key for me is to not sit on the cash, sell then buy right away so that I don’t feel the effects of the volatility we are currently experiencing.
NN – I’m not too concerned about my RRSP as I’m 37 and plan on working at least another 20 years as I enjoy what I do for a living.
My interest is that I was thinking of moving my emergency funds to a TFSA and using this type of Portfolio (or a more conservative one). I’m also thinking of just opening a TFSA and contribute monthly and using a portfolio as described in this post.
TJ: Professor Malkiel does his annual rebalancing every January. I thought you might want to know that.
John Bogle says one rule of thumb is to think about owning the same percentage of bonds in your retirement portfolio as your age. Depending on how much volatility that you are comfortable with, 20% target bond may or may not be appropriate. Even with 28% bond right now, one can argue that you are not overweight in bonds. However, you definitely do not go below 20% in bond allocation.
A concern that I have with your portfolio allocation is that you are heavily overweight in Europe. TD Int’l fund is based upon MSCI EAFE Index. EAFE stands for Europe, Asia, and Far East. However, EAFE has a 70% weighting in Europe (http://www.msci.com/licensing/eafe_factsheet.pdf), which overlaps with TD Europe fund. One thing that you can do is that use TD Japanese Index to represent Asia allocation and complement European allocation instead of using TD Int’l Fund.
[...] Canadian Capitalist updated us on the Sleepy Mini-Portfolio, which I am actually using in one of my investment vehicles, very useful for lazy investors like [...]
TJ: It is impossible to say if rebalancing today would turn out to be a good move. Personally, I found that bonds are now more than the 25% target of the portfolio, so I rebalanced it down to 20%. It may not turn out to be the best move timing-wise, but market timing is next to impossible to get it right (though I’m sure many will disagree).
Rob B: The Sleepy Mini portfolio rebalancing is done using contributions and not funds already invested. Since money is added quarterly, rebalancing is done at the same time. I suspect this is how most people starting out will be rebalancing. It is only when the portfolio grows to a significant size compared to the regular contributions that investors would have to worry about selling to rebalance. At that time, once a year might be enough (or even only if the percentages deviate significantly).
Hello CC,
I have been been followed your MINI portfolio for a while, you have make it so simple I have also decided to open up a TD E-series account sometime next month and putting maybe $1000 or more each year depending on how much extra money I have. I have never done any investing beofore, and I do not have an RRSP account as well, but since I have 2 kids, I always get refund anyway. Do you recomend me to set up this account as regular investment account or for RRSP(I’m 29 right now)?
also, because I have no investment knowledge, will I be ok just follow your percentage investing stategy or I better do more homework and studying?