The Sleepy Mini Portfolio returned 4.7 percent since my previous update. The portfolio was started with an initial investment of $1,000 in August 2007 and I assume that savings of $1,000 are added to the portfolio every 90 days. Here’s how the portfolio components were valued as of November 30, 2010:

TDB909 – Canadian Bonds – $2,633 (19.0%)
TDB900 – Canadian Equities – $2,890 (20.8%)
TDB902 – US Equities – $4,260 (30.7%)
TDB911 – International Equities – $4,094 (29.5%)
Total – $13,877
Total Invested – $13,000

We’ll add another $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 up the new money between the portfolio components.

Transactions

TDB909 – TD Canadian Bond Index (e-Series) – Buy units for $328.18.
TDB900 – TD Canadian Index (e-Series) – Buy units for $100.00.
TDB902 – TD US Index (e-Series) – Buy units for $202.84.
TDB911 – TD International Index (e-Series) – Buy units for $454.48.

The Sleepy Mini Portfolio does not end up with a precise 20-20-30-30 asset allocation because the TDB900 requires a minimum investment of $100 but the amount to buy came out to $85.50. Therefore, I bumped up the Canadian stock allocation slightly at the expense of Canadian bonds.

[Sleepy Mini Portfolio as of Nov. 30, 2010]

A formulaic approach to investing such as this helps to mitigate much of the emotional traps that await investors. And you can get it done in less time than it takes to shop for a couple of Christmas gifts.

NB: I picked 5 entries at random for The MoneySense Guide to Retiring Wealthy giveaway. I haven’t heard back from two of the winners, Catherine and Stella. Can the winners please check their email accounts and send me a reply? If I don’t hear from you soon, I’ll be picking out two new winners. Thank you.

This article has 15 comments

  1. Hi, many articles mentioned to rebalance no more than once per year. I am wondering if one could do better with a monthly deposite and rebalance once a year.

    • @Helen: Great question. And one I don’t have a very good answer to. In my own portfolios, I rebalance by adding new money but I don’t know if that’s better than investing according to the original asset allocation and rebalancing every year or rebalancing based on deviations from target. I’ve been thinking about this for a while now but I’d be interested in opinions that our readers might have.

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  3. RE: Rebalancing, I’d suggest the key issue here is cost. If you’re using mutual funds in a tax-sheltered account, then there are no brokerage fees or capital gains taxes to worry about, so frequent rebalancing is probably fine. With ETFs in an unregistered account, on the other hand, rebalancing should be kept to a bare minimum.

    As CC suggests, rebalancing with cash inflows is an easy way to keep your asset allocation consistent, especially in a small mutual fund account.

    IMHO, rebalancing is generally overrated. It makes a lot of sense after dramatic moves in the market like the crash of 2008–09, but worrying about whether your bond allocation is 37% or 40% is really not worth sweating about.

  4. If you use pre-authorised purchases, the minimum of $100 per fund is waived….I put in less than $100 in these funds biweekly and because it’s preauthorized the minimum per fund doesn’t applied.

  5. Re: rebalancing… Personally, I think rebalancing should be done by allocation deviation, but not blind to the costs (if any) involved. If the costs involved would increase your expenses to a proportion of a mutual fund, you’ve lost all the benefits of low-cost DIY investing.

    IIRC, in Bersteins ‘Four Pillars’ book, he said that rebalancing every two years provided superior returns, primarily because typically equities provide higher returns, and you allow those returns to work for a longer period prior to protecting the gains through rebalancing. By that logic it makes sense to rebalance at larger intervals during bull markets.

    I check my allocation annually, since I have no idea when a bull market will turn into a bear. Some may say that by my thinking, a quarterly rebalancing similar to CC’s makes more sense. I opted to go with a balance between the two, but I don’t act on what my allocation check reveals unless it shows a deviation significant enough to support a cost-efficient rebalancing. As all of my investments are either held in a TFSA or RRSP, I rebalance with impunity regarding taxation.

  6. @CCP, @AKA: Most of our investments are in ETFs. I keep a spreadsheet that shows the current asset allocation and the delta from the target. Once I accumulate enough cash, I simply invest it in the lagging asset class.

  7. I was just buying some e-series funds for the first time. I see that you wrote when buying the TD909 that “Buy units for $328.18″. Where do I look to see the unit cost? I couldn’t find it while looking on the site, but then again this is my first time.
    THanks

  8. Have been following your site for years and really enjoy it. When did you change to TD e-series funds in the sleepy portfolio? I already hold the ishares and vanguard etfs that used to make up the portfolio. What were the reasons for the change?

    Thanks and have a great holiday season!

  9. Thanks – I have a 15-20 year time period before my “sleepy” money will be withdrawn. I am a true believer in the superior long term returns of stocks over bonds, so convincingly presented in Jeremy Siegel’s book, “Stocks for the Long Run”. I also don’t mind seeing extreme volatility in my portfolio with market swings, and have been successful by buying during dips in the markets. Taking these factors into account, what are your thoughts on eliminating the bond portion of the sleepy portfolio?

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