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moneysense.ca, 3/03/08
Sleepy Mini Portfolio Update
The past three months have not been kind to the Sleepy Mini Portfolio. The sharp fall in equities has resulted in a 7.5% loss since inception. While it is hard not be queasy, falling markets is great news for investors who are going to accumulate assets for a long time since lower prices today imply higher returns in the future.
The current Sleepy Mini holdings are:
TDB909 – Canadian Bonds – $409.47 (22%)
TDB900 – Canadian Equities – $372.56 (20%)
TDB902 – US Equities – $536.91 (29%)
TDB911 – International Equities – $531.74 (29%)
Total – $1,850.68
As per plan, we’ll add another $1,000 to the Sleepy Mini portfolio and rebalance it back to the initial target allocation – Bonds 20%, Canadian Equities 20%, US Equities 30% and International Equities 30%. Using this simple rebalancing spreadsheet, we can easily figure out the transactions we need to make:
Transactions:
TDB909 – TD Canadian Bond Index (e-Series) – Buy units for $160.67.
TDB900 – TD Canadian Index (e-Series) – Buy units for $197.58.
TDB902 – TD US Index (e-Series) – Buy units for $318.29.
TDB911 – TD International Index (e-Series) – Buy units for $323.46.
Investing so simple, a fifth-grader could do it!
moneysense.ca, 3/03/08
Hi CC. That is precisely the problem right now, as the market has been taking a pounding. When will we find the bottom? I have the exact same dilemna as I’m sitting on almost 30% in a combination of cash, short term securities and credit. I’m waiting for the “right” time to “back up the truck” and load up on stocks. The problem is that I have absolutely no clue when we will find bottom.
Back in the 2002 bear market, I got trapped into the “false bottom”, as the market looked like it leveled out. After I loaded up on stocks and index funds, I watched in horror as the market dropped by another 20-25%.
About a month ago, I watched the markets plummet and I definitely had “itchy fingers” as my first reaction was to “buy, buy, buy”… But the crusty old investor in me who remembered my experience in ‘02 kept me on the sidelines. I want to see how bad this US economic recession and Global credit crunch is first before I decide. Unfortunately, the stock market usually leads economic data, so by the time we find out that we’re in the clear, it’s probably one business quarter after we’ve already hit the bottom on the stock market.
What to do? What to do?
Oh, I forgot to mention that it is only my Canadian portfolio which is 30% in cash & credit. My US portfolio is fully invested as everything seems to be going at fire sale prices on the NYSE and NASDAQ. Unfortunately, the fundamentals on the greenback is also pointing south, so I don’t think it’s quite the right time to convert my loonies to greenbacks to back up the truck on US denominated securities quite yet, either… What to do? What to do?
Hi Phil: I personally have some powder dry hoping for some juicy opportunities. I don’t play the game of picking the bottom. Who knows what stocks will do in the near term? But, with VTI sporting an earnings yield of 6.25%, VEA even cheaper at around 7% compared to bonds which yield 3.5%, I think stocks are a good deal right now.
Hi CC. I agree to some extent, like I said, the NYSE and NASDAQ are at total fire sale prices right now. For example, when was the last time in the USA that a 6 billion dollar REIT with 50% government office buildings and long term leases was trading at an 11% yield? I can’t remember EVER seeing that in my investing history. But if you ignore yields and trailing earnings and look at everything from a purely macro-economic point of view, everything is still pointing south. So, despite the juicy prices, I’m still kind of on the sideline.
Ever remember a major Canadian bank yielding 6% like BMO is currently, with intereste rates falling…? People thought leveraged investing into BMO was attractive last year…
MG: I share your opinion that BMO is a great bargain at these prices, though I wish I had waited some more. But that’s how these things go. You can’t time the exact bottom.
Good point MG. I got into BMO a couple of years ago at $51 and I thought it was a steal – today it’s fast approaching $46. The problem is, that on a fundamental level, I don’t think all of the cockroaches have been chased out of that stock yet! I think there is still more bad news to come!
I see that Scotiabank missed their earnings target as well and took a bit of a beating. Eventually I think it will be time to pick up these bank stocks, but there’s still economic storm clouds brewing off in the distance and the ominous sounds of thunder and potentially dangerous flashes of lightning on the horizon…
I should have been a novelist!!!
The trouble is that by the time the storm blows over the stocks will likely be back on their feet.
Exactly my original point. I can’t tell you when we’ve hit bottom until about 3 months after we’ve hit it.
CC, maybe a noob question, but how are you determining the yield on VTI and VEA?
I am looking to make my first purchases into the ETF and equities markets. My portfolio is currently in mutual funds.
I have been reading yours and others (MG etc) blogs and reading the suggested books from the library.
I think I have hit a great time to broaden my portfolio!
Thanks.
but there’s still economic storm clouds brewing off in the distance and the ominous sounds of thunder and potentially dangerous flashes of lightning on the horizon…
Phil, if you remove the word “economic” it sounds like something out of the Lord of the Rings….
For the record – I agree with MG and have been buying quite a bit – in small parcels which is part of my NEW strategy to be more patient with my purchases.
Mike
Market beating is right. I’ve also been doing a sleepy style portfolio. Sigh.
Sport11can: The yield on VTI and VEA is earnings yield (the inverse of the usual P/E ratio). I picked the numbers from Yahoo Finance because it sounded about right. The dividend yield on these ETFs is lower – around 2%.
Thanks, we see where the number is coming from now.
Talk about about storm clouds… not sure where you guys are, but here in Ottawa we are getting 35 cm of snow today and another 30 or so in the next 4 days !
Thanks again and I am going to be watching these things carefully as well.
Sport11can: I live in Ottawa as well and I’m totally disgusted by the snow this year (don’t have a snow blower). I just dug out part of the driveway… back breaking… and then the car got stuck in the street. Fortunately, I can work from home.
I should clarify what I meant by “sounded about right”. Vanguard published year-end trailing P/E ratios and for VTI they noted it is 17.7 or 5.65%. Since, markets are down from then 6.25% sounds about right.
It’s generally foolish to try and call the bottom on a downtrend. If you are going to make investing decisions based on technicals, which incidentally doesn’t make a whole lot of sense for retail investors, you shouldn’t try and call the bottom but wait for a clear signal that the downtrend is broken. Typically that means buying into upward momentum when a prior recent high gets broken. Another sign would be a double bottom: the failure to break a new low in the downtrend, which can signal its end.
Phil S,.
What is that REIT ?
“For example, when was the last time in the USA that a 6 billion dollar REIT with 50% government office buildings and long term leases was trading at an 11% yield”
Thanks
A REIT is a real-estate investment trust. It’s akin to a mutual fund but typically owns rental properties instead of stocks and bonds.
Thank you Robillard .
?
I actually meant what is the name of that REIT
I might be tempted to buy it.
“For example, when was the last time in the USA that a 6 billion dollar REIT with 50% government office buildings and long term leases was trading at an 11% yield”
[1989-93 is the latest worst year of US Real Estate Business- I believe. ]
Robil, where can I locate those information?
[...] markets is reflected in the Sleepy Mini Portfolio, which swung from a 7.5% loss at the time of the last update to a gain of 1.1% at the end of May. The current portfolio holdings [...]
@ phil S. You were right. Early 2008 (pre september) was definately a false bottom….
Oh, hindsight….