By: Larry MacDonald
It’s time for another quarterly update to the One-Minute Portfolio (the last was on April 13, 2009). In a nutshell, the second quarter extended the gains of the first quarter to raise the portfolio’s return since December to about 17%.
The One-Minute Portfolio (OMP) is a member of the lazy-portfolio species, consisting of just two exchange traded funds: iShares S&P/TSX 60 Index ETF (XIU) and the iShares Canadian Bond Index ETF (XBB). It was created in early 2003 and has been rebalanced annually since, as described in articles on the MoneySaver and Canadian Business websites. The average annual gain since inception is now about 8%.
As a member of the lazy portfolio species, the unique feature is how the allocation between equities (XIU) and bonds (XBB) is determined. It doesn’t rebalance back to a fixed asset allocation as most lazy portfolios do but takes into account whether the stock market is under or above its long-term average annual return. For more details on the method, check out the December 18, 2008 Canadian Business article.
During the last rebalancing (in December of 2008) the allocation to equities (XIU) was raised from 40% to 60% because stock markets were then noticeably below their long-term average return. By default, the allocation for bonds (XBB) went from 60% to 40%.
7 Responses to “ One-Minute Portfolio update ”
Next challenge for you would be to make a simple graph to show the value since 2003. Good stuff!
By CanadianInvestor on Oct 7, 2009
CI
I have been thinking about doing stuff like that. I’m aiming to do it in the CBO column that appears every December or January on the annual rebalancing exercise.
By Larry MacDonald on Oct 7, 2009
Thank you for the “1-minute” update Larry.
Perhaps some of your readers will be interested in your thoughts on the following: What should Canadian investors be doing, if they are invested in US holdings? A year ago, I invested part of my RRSP portfolio in NYSE: ARCA ETFS, using CAD funds. There appears to be conflicting internet views* on whether CAD/US exchange impacts Canadians, if their US-based investment is in other currencies (e.g. iShares MSCI EAFE Index Fund (ETF).
* http://www.canadiancapitalist.com/currency-effects-of-buying-foreign-stocks-or-etfs-on-us-exchanges/#comments
By Brock on Oct 7, 2009
I would like to know how this portfolio would have preformed if the mix was 80% in bonds and 20% in stocks, as I am a senior male over 80 years old. Thank You. Ralph
By Ralph Levine on Oct 7, 2009
Brock
I remember reading the post by CC and agreeing with the point made. I wasn’t aware of conflicting views on this issue.
By Larry MacDonald on Oct 9, 2009
Ralph
At your age, you might consider investing in bonds directly and holding them to maturity to reduce risk. As for the return on an 80% bond and 20% stock portfolio, a quick answer is provided by the portfolio index allocator tool on the Claymore website (http://claymoreinvestments.ca/resources/tools/allocation-tool/). When I plug in 20% into the S&P/TSX Composite Index (Core Canada) and 80% into the DEX Universe Bond Index (Broad Canadian Bond Income) with annual rebalancing, the total return is calculated as 5.67% annually over past five years (to end of 2008) and 6.24% annually over past ten years (to end of 2008). These results don’t adjust for annual MERs (lower than 0.35%)
By Larry MacDonald on Oct 9, 2009