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moneysense.ca, 3/09/07
Sleepy Mini Portfolio
The Sleepy Portfolio is fine for a benchmark but not many people invest a lump sum and then hardly ever add to the portfolio. If you are like me, you save a bit of money regularly and invest it gradually over the years. I get a lot of e-mail of how to invest small sums of money or the best way to set up a regular investing program.
In order to better reflect how average people normally invest, I am introducing a “Mini” version of the Sleepy Portfolio. The Mini portfolio would differ from the Sleepy Portfolio (and in fact, other lazy portfolios) in the following ways:
- The Sleepy Mini Portfolio will start with an initial investment of $1,000. Every ninety days, another $1,000 would be added to the portfolio. Thus, a total of $4,000 would be invested annually in the Sleepy Mini Portfolio.
- Since we are starting out with a small portfolio, the portfolio will initially not be exposed to all asset classes. The initial asset allocation will be quite simple: 20% bonds, 20% Canadian equities, 30% US equities, 30% International equities.
- The portfolio will be rebalanced to the target allocation every time new funds are invested.
- The portfolio is assumed to be in a tax-deferred account such as a RRSP. However, the portfolio should be fairly tax efficient (except for the bond portion) as rebalancing is done by adding new money and not selling current holdings.
- The Mini portfolio would be constructed using TD e-Series Mutual funds. The minimum initial investment and the minimum subsequent investment for these funds is a low $100.
Transactions:
TDB909 – TD Canadian Bond Index (e-Series) – Buy 19.0839 units at $10.48 for a total of $200
TDB900 – TD Canadian Index (e-Series) – Buy 8.9726 units at $22.29 for a total of $200
TDB902 – TD US Index (e-Series) – Buy 10.89720 units at $27.53 for a total of $300
TDB911 – TD International Index (e-Series) – Buy 22.71 units at $13.21 for a total of $300
That’s it! Investing couldn’t be simpler.
moneysense.ca, 3/09/07
Hi CC, this is a great example for a new investor. Easy to use, well diversified and it doesn’t need much money to get in.
I agree with you that an individual that is not on the verge of retirement, should not put much into fixed income funds. 20% seems to be a good number.
However, I would be curious to know what would be the expected return of such portfolio (what is the historic yield of each funds?).
A simple portfolio, I follow the same, but I use TD eFunds instead, the four you mentioned are available with lower MER’s in e-series versions. I’m sure you where already aware of that though, is there a specific reason you choose the non e-series?
Stefan: These funds are TD e-Series mutual funds (that’s the name for the old eFunds). I should probably clarify that better in the post. I’ll update.
FB: Honestly, I don’t know what future returns are going to be like. I’ll take the easy route and accept John Bogle’s outlook:
4.5% for bonds.
7% for equities.
In that scenario, the portfolio has an expected return of 6.5% ignoring taxes.
Thanks for posting about this! I’m young and a relatively new investor and I’m setting up my RRSP for just this type of portfolio. These are exactly the funds I’ve been looking at. Just one question: The US & International are also available in a “currency neutral” e-series fund (TDB904, 905). Is there any reason why you chose these over the currency neutral versions of the same funds?
TD also offers managed index e-series portfolios. The MER is slightly higher, however they will charge you 125$ if you have less than $25k in your self-directed RRSP. So going with the managed portfolio that is closer to your desired asset allocation might be a good choice if you are just getting started.
Yannick: TD e-Series portfolios are far too expensive IMO. If you can do a bit of arithmetic, you can save yourself 0.75%. I discussed this in an earlier post:
Link
Looks to me to be a good starter portfolio. I’m going to keep tracking it in Quicken. I trust you will report re-invested dividends and interest as they happen.
Up $3.83 yesterday.
Down $8.57 today.
CRG
[...] three months since the Sleepy Mini Portfolio was launched and it’s time to add another $1,000 to the portfolio. The portfolio’s initial asset [...]
What are the difference between the 3 US index funds from TD e-funds are?: TD U.S. Index, TD U.S. Index ($US) and the TD U.S. Index Currency Neutral
As well, any idea how I can “switch” my existing RRPS’s with Royal Bank to TD E-Funds? Can they be switched as cash within an RRSP account?
Joe:
TD US Index tracks the S&P 500 in Canadian dollar terms. There is no hedging involved, so any change in value of the USD will affect your returns. The fund is denominated in CAD.
TD US Index (US$) is denominated in US dollars, so your transactions are in USD.
TD US Index Currency Neutral tracks the S&P 500 but hedges the USD exposure. So, you get the same return as the S&P 500 in Canadian dollars. Since hedging is involved this fund charges an extra 0.15%.
Is your existing RRSP with Royal Bank invested in cash or mutual funds or stocks?
I want to invest cad75.000 , i am a 63 yrs. old senior in Canada. and just want to make money on CAD 75.000 , so I can profit annually , not locked investment.
Pls. help me , thanksbv .
[...] the more confused you will probably get. I’ve concluded recently that maybe just picking a simpler asset allocation is probably the best approach since I’m not sure how much it really matters what your exact [...]
[...] 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 [...]
[...] from Ed, who wants to switch from index mutual funds to ETFs: Many years ago I set up my RRSP using TD’s low MER e-Series index mutual funds. I learned quite awhile ago that most actively managed funds cannot beat the indexes over the long [...]
[...] recovery in the equity 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. [...]
Hi,
Thanks for the great info. I’m interested in the TD Canadian Index Fund which comes as the e-series and the Investor or I series. The manager is the same, but the e-series MER is much lower. Is there a difference between the funds in regards to investment strategy or performance? They seem to match up historically.
Thanks!
Daniel
Daniel: e-Series funds are available only through the internet but they are exactly the same as any other index fund that tracks the same index. That’s the beauty of index funds — the cheaper the fund is, the better
I’m a huge fund of TD e-Series for precisely this reason. Even someone who is investing a few hundred dollars every month can build a fairly sophisticated portfolio at an extremely low cost — we’re talking less than 0.5% here.
Hi,
Thanks so much! That’s what I thought until I read a rather heated exchange about the funds on your blog about the difference in NAVPS in relation to a lower MER, etc, etc.
My one question now is whether an actively managed dividend fund (Td Dividend Growth Fund) with a higher MER would be better then an Index Fund like the TD Canadian Index E-fund. Is the higher MER worth it…..historically the Dividend Growth Fund did not yield significantly higher amounts then the index fund.
Thx!
Daniel
Daniel: I’m a big fan of index funds because with active management (1) it is hard to pick the winning funds in advance (2) Long-term investors face long odds of their fund doing better than the index.
You can improve the odds of picking a decent fund by keeping two factors in mind: (1) the lower the MER, the better and (2) the lower the turnover, the better. Given that index funds are clearly superior in (1) and (2), my feeling is why bother?
I’m definately a long term investor and I see what you mean by the long term vs the index in addition to the higher fees and taxation of distributions.
Hmm, looks like it’s the TD Canadian index e-fund for starters.
Thanks! Your site is great.
Daniel
[...] investor just starting out can build a fairly diversified portfolio using just a few index mutual funds and can switch to an equivalent ETF after accumulating sufficient funds. One thumb rule that could [...]
[...] Sleepy Mini Portfolio lost ground, falling 3.5% since our last update in May. The current portfolio holdings [...]
[...] 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 [...]
[...] While I have repeatedly written about my preference for passive, low-cost investing using ETFs or index mutual funds and that, in my opinion, the vast majority of mutual funds are hazardous to an investor’s wealth, [...]
[...] of money, if you get a surprise inheritance this might be a reasonable place to dump it) and the sleepy mini portfolio (for small sums of money on an ongoing [...]
I am investing almost one million dollars into ETF’s, primarily XCB,XSB,XRR,XDV, and CLF.
Iam with TD and wondered whether TD Efunds would be a better alternative??
HI!!
Thanks so much for the info.
I’ve read the smartest investment book you’ll ever ready and it was all about ETFs.
However, since I want to put money into my investment ever month the commission would hurt every time I buy.
My friend told me about mutual fund that can mimic the index to avoid the commission fee every month but I had no idea who offers this and where.
This is good information for someone who wants to start investing like me.
Thanks!!!
[...] 21st, 2009 · 6 Comments Since our last update, the Sleepy Mini Portfolio, a simple, passive portfolio constructed with low-cost index mutual funds, has made modest gains. As of November 30, 2009, the portfolio has a 2.8% gain over book [...]
[...] find out, my whole investing strategy is pretty much a poor man’s version of the one found at Canadian Capitalist, a favourite blog of [...]
Aggie – I sure could use some good personal finance reading. What book are you referring to?
I have found that prior to buying an ETF, it makes sense to compare all ETF’s in that space because some outperform others.
I am overweight in Dividend Stocks, but there are some that offer better value than others, likewhise with Corporate Bonds.
I have added India , 5%, I think this will do well.
[...] 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. [...]
[...] Mini Portfolio gained another 5.1 percent since my previous update approximately one quarter back. The portfolio was started with an initial investment of $1,000 in August 2007 and it is assumed that periodic savings of $1,000 is added to portfolio every [...]
[...] *insist* on getting the cash into the stock market, I’d follow Canadian Capitalist‘s sleepy-mini portfolio (or one of the other easy, passive investment [...]
Since this blog was posted over three years ago, has anyone taken the time time to find out if the returns have beaten the various indexes? Most of my fund portfolios have not performed that great since 2007, I think the average return is around 3%, which is only a little better than a term deposit.
The sleepy portfolio idea seems good for people who just want to make an investment and see modest returns later. I am more hands on so this isn’t really for me but I can use the value in this info.
If your going to use the sleepy portfolio make sure there is not so much money on the table that you are not able to sleepy @ night