Toronto Escorts

Couch Potato and other Lazy Type Portfolio: Does it work? What's the best balance?

nosidam

Member
May 12, 2008
277
0
16
I hear that 33% bonds, 33% canadian index, 33% american index fund. Is that reasonable? 50/50? 60/40?
 

21pro

Crotch Sniffer
Oct 22, 2003
7,830
1
0
Caledon East
ETFs are probably the way to go for you... though, I don't use too many of them... they make up about 5% of my portfolio

my portfolio takes very little active participation.

it's 97% stocks, and 3% for bonds, I just hold a corporate bond ETF fund that gives you an exposure to corporate bonds yield. This is what many hedge fund managers do also. (Ishares HYG is the name of the bond fund) make around 12%-15% per year on it through good times and bad. Karen Finerman on CNBC's Fast Money always suggests it to her viewers as a hedge that always makes money...

the rest of my portfolio is based on bargain buyiing opportunity. right now it's 70% Canadian, 27% US, a small amount in Egyptian companies. I have exposure to many sectors- banking, semiconductors, automotive, death services, healthcare, internet search, advertising, technology, security, ticket printing, hot water tank rentals, auction and liquidation services, satellite tech, software, utilities, smart phones, GPS and insurance.

IMO, the bargains currently exist everywhere, but you do have to look. I'd consider sector ETFs and rotate them in April/May for rebalancing- ie, only ones that no longer suite a 'buy' according to your investment beliefs... do this every quarter along with some near guarantee high yield ETF and you should be fine. others will argue for different views, of course. I made over 96% aror from the same time last year and in 2009 as a year's return I did 84%, but to be honest I only average about 20% aror for the last 15 years. 2008 was painful. remember a -50% 2008 takes a +100% 2009 to get back to where you were in 2007!

and I do believe that there is a strong correlation to eating or getting pussy and stock market performances. not sure if it's the more i get the higher my returns or the reverse! good luck.
 
Last edited:

SkyRider

Banned
Mar 31, 2009
17,572
2
0
I hear that 33% bonds, 33% canadian index, 33% american index fund. Is that reasonable?
Sounds as good as any other investment idea floating out there. The great investor Warren Buffet rarely turns over his portfolio. His philosophy is that to be successful at constantly buying and selling means you have to make an awful lot of correct decisions, to be successful at buying and holding is that you have to make only one correct decision.
 

JohnLarue

Well-known member
Jan 19, 2005
16,157
2,147
113
No licensed broker would tell you that is a good allocation, for the simple reason that you have not outlined your investment objectives & risk tolerances.

If your 70 years old & need to preserve you pile, that is a risky allocation
If you are twenty years old & feel you have a long time to ride out any market correction, then it is probably too conservative.
If you plan on using the cash to buy a home in the next two years then it is far too risky.

That being said, assuming you are somewhere in the middle of the extremes & do not have near term cash flow needs 1/3, 13/ , 1/3 is relatively conservative.

I would caution you on buying the bond fund right now as interest rates have now where to go but up & therefore reduce the price of the bonds in the fund & your Net Asset value.
It might be better to buy 10% now, 10% in a year & 13% in two years.
In addition the short term bond fund has less downsize than a long term bond fund if interest rates go up

Some would argue that the equity markets are over-priced right now, so buying in three chucks over the next two years may be prudent.

I suggest you have a chat with a someone in the know that you trust before you plunk down you hard earned cash or switch your asset allocation.
If he / she steers you to-wards their over-priced mutual funds -run away
Stick with the ETFs
I have found success comes from managing the risk. A lose in the markets can take years to make up

I hope that helps
 

21pro

Crotch Sniffer
Oct 22, 2003
7,830
1
0
Caledon East
I agree with JohnLarue and that is probably how most financial advisors would explain risk allocation.

But, in my opinion, if you are in between the ages of 20 and 55 and this is money that you aren't needing for atleast 10 years, I wouldn't pay attention to conventional allocations. Though, some fee-based financial planners can help you decide on risk allocation if that is what you wish.

Me personally, I don't pay attention to allocating my portfolio like that at all. Only because, I am financially settled after selling a former business. Not to say I like to lose money!! absolutely not. but, I don't think allocation based on %exposure to market a, so much to b, etc. should not be rigid %ages. Otherwise, you will be rebalancing and thus 'turning over your portfolio' unneedingly excessive. It also breaks one of my investment beliefs to let your winners run to target sale prices. Everytime you have a home run in your portfolio, the allocation starts to weigh heavy in that one stock, sector or whatever it is... breaking the rule of risk allocation and thus, you need to sell a winner before you win and you eliminate momentus gains.

If I would have followed the allocation advise of my CFP from 1997 to today, I'd be minus 37% since then!

consider: $1,000 invested one time in 1997 in a portfolio under my rules would compound today to $7,696.70 not incl. taxes.
if I followed my CFP based on my stock picks, but his risk allocation rules for the same time, the balance would be $630.

However, there are many great couch potato portfolios out there, ETF risk management annual rebalancing, dogs of the dow, dogs of the tsx 20, etc... the good think is they all have EASY rules to follow.
 

ispank

Member
May 11, 2003
218
2
18
71
Central Toronto
So the answer to the original question is correct - It depends on YOUR situation. I have two portfolios, one for myself and one for my kids. The one for my kids I chose the Moneysence.ca High Yield portfolio 3 years ago.
The HighYield potato portfolio - rebalanced annually (i do it in September) - on a $200,000 original portfolio generated $37,000 in income (Jan 2007-Jan2010) and lost $5,000 in capital (all in the US$ Index as a result of US$ FX).
Remember the income is dividends so this is equivalent to $45,000 in Interest income - 7.5% interest. It is a simple portfolio that is appropriate for accounts too small to get proper diversification with individual holdings. Note if you had used XSP instead of DVY as the US index ETF the XSP hedging would have saved you the $5K loss and actually made the portfolio positive a bit. (XSP is currency hedged).

I was worried about interest rates, but this weeks announcements from BOC means our bonds are safe for 3 more months ... but all fixed income instruments will become risky by July.
 

hinz

New member
Nov 27, 2006
5,672
1
0
Bond ETFs based on your age and you split the bond components the following

XSB
XCB
XRB

Normally for fixed income component you should not take forex risk when the bulk of your liability, aka retirement income is in Canada. Still if it`s okay to take a little risk, you could add some of the following in addition to Canadian Bond ETFs,

BSV
TIP
WIP
BWX

For High yield Bond ETFs such as JNK or HYG, I treat them as equity because of risks and volatility.

As far as stock components are concern, the following should be adequate to cover most bases,

XDV
XRE
VTI
VEU
VWO
GLD + SLV

Make sure you rebalance the above ETFs at least once a year.
 
Last edited:

21pro

Crotch Sniffer
Oct 22, 2003
7,830
1
0
Caledon East
looks very workable hinz.
 

nosidam

Member
May 12, 2008
277
0
16
Thanks for the info. I was looking into XIC, why choose XDV over XIC? Also I want to get into the VTI for the US market. I don't feel that confident with VEA or VEU, what's the difference between them?
 

hinz

New member
Nov 27, 2006
5,672
1
0
Thanks for the info. I was looking into XIC, why choose XDV over XIC? Also I want to get into the VTI for the US market. I don't feel that confident with VEA or VEU, what's the difference between them?
XIC has 211 holdings listed at TSX, including 60 of the largest market cap companies.
XDV has 30 highest yielding, dividend paying companies listed at TSX

In terms of MER, XIC is cheaper than XDV (0.25% vs. 0.50%) but you get better deal on XIU in terms of cost (0.17%) and liquidity.

BMO may have new ETFs that have symbolic lower MER (2 basis point less if I could recall) but they are not that liquid since the products are so new.

As far as Vanguard ETFs are concern, low cost and indexing are what you expect from a pioneer founded by John Bogle. Blackrock may be the king of the world (AUM $3 Trillion, more than the Fed) after taking over Ishares, Vanguard (AUM $1.5 Trillion) is aggressive and stealing market from both Ishares and SSgt.

Regarding VEA or VEU, VEA is a lower cost competitor to Ishares EFA or XIN (CDN-hedged EFA). Both EFA and VEA tracks Europe and Pacific regions.

VEU on the other hand is ex-US and it tracks emerging, Europe and Pacific markets.

Simply put, VEU=EFA/VEA + EEM/VWO :p

Hope that helps.
 
Toronto Escorts