[Note: I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which was then invested mostly in individual stocks. The portfolio started off with an initial cash infusion of $100,000 but no new money has been added since. The portfolio has the following asset allocation: 5% cash, 15% short bonds, 5% real return bonds, 20% Canadian stocks, 22.5% US stocks, 22.5% Europe and Pacific, 5% Emerging markets and 5% REITs. The entire portfolio (apart from the cash portion) is invested in broad-market, exchange-traded funds (ETFs) trading in the Canadian and US stock exchanges. The cash portion is invested in the Altamira T-bill Fund.]

The Sleepy Portfolio had a somnolent first quarter — it advanced just 1.3%. A big culprit was the rapid appreciation of the Canadian dollar from $1.05 to parity with the US dollar. The dollar’s rise negated the significant advances in US stocks and emerging market stocks in the portfolio. Gains were made in Canadian stocks (up 3.9%), US stocks (up 2.7%), Emerging Markets (up 1.49%) and REITs (up 3.62%). Bonds (down 1.1%) and EAFE markets (down 2.18%) found themselves in the losing column. Distributions from portfolio components have boosted the cash position close to 7%, some of which should be channelled into the asset class that is well below target: EAFE stocks captured through the Vanguard Europe Pacific ETF (VEA):


VEA: Buy 60 shares at $35.12 (plus $9.99 in commissions).

Here’s how the portfolio looked at the end of 1Q-2010:

Sleepy Portfolio snapshot as of April 6, 2010

This article has 10 comments

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  2. is transacting in futures more expensive than ETF’s?

  3. What’s the argument for keeping such a high proportion of the portfolio in cash? Wouldn’t it be more efficient to have it invested? Is it in case there’s a significant dip, so that you can take advantage of cheaper assets?

    • Canadian Capitalist

      @Steve: Cash is a drag on a portfolio and the normal course of action is to keep as little of it as possible in a long-term portfolio. But the reality is that most investors will hold some cash. For example, I keep our household’s emergency savings in a TFSA high-interest savings account. Cash also accumulates from dividend payments until it is enough to redeploy into long-term assets. One of my lessons from the last bear market was to build up a cash cushion, especially when the opportunity costs of cash is low (i.e. when stocks are not expected to return much more than cash). For all these reasons, I think cash has a role in a portfolio.

  4. @CC: What has been the avg rate of return on portfolio to date and since Im not sure of the proper term to use for net ROI or profit when it comes to investments I will just say what was the bottom line avg rate of return? There is a lot of talk on various shows and websites about the figure of about a 5% return on investments by the average person for retirement but most articles I read show a more modest longterm return of about 2% once fees, taxes etc. are taken into account which makes me wonder why bother with building a portfolio when you could just invest in GIC’s or TFSAs and get a similar rate? Am I missing something?

  5. BTW we may be in a position shortly to decide how to invest a large amount of money in the short and longterm with both a primary home and investments. Im very interested in the TD series you recommend for this possibility but my concern is based on my question above.

  6. Canadian Capitalist

    @freebird: It all comes down to expectations. Today, stocks are yielding roughly 2%. Add another 2% to 3% for earnings growth and you are looking at inflation-adjusted returns of between 4% and 5% over the long-term. Add another 2% for inflation and you are looking at nominal returns from stocks in the neighbourhood of 6% to 7%. Since bonds are yielding less than 4%, stocks are more attractive today for long-term investors. Naturally, if investors are paying 2% to 3% in fees, they might be better off sticking to GICs or bonds. But it is possible for DIY investors to pay much less — certainly less than 0.5%.

    This portfolio was started in 2005 with $100,000 in seed money. It was worth approx. $120,000 at the end of 2009. The 5 year CAGR is 3.71%. Keep in mind that 5 years is a really short time frame to analyze a portfolio such as this, which is 75% in equities. One more caveats: the portfolio incurred a 1% exchange rate hit when C$ were converted to US$, which dragged down returns somewhat.

  7. Thanks CC. Will continue my journey of self-education. Even if after a few years it’s still confusing at times.

  8. Dale Rathgeber

    I’m writing an investment manual and want to tout the benefits of your Sleepy portfolio. What was your 2009 calendar return?

    Secondly, would you like the opportunity to review my sub Chapter on your approach before publication?

    • Canadian Capitalist

      @Dale: The 2009 calendar year return was 16.8%. I’d be happy to take a look at your write up on the Sleepy approach. You know where to find me. Cheers!