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Ideal Portfolio

That is one of the questions that I have been asked by many folks, and as most of my regular readers know, I am not that sophisticated when it comes to investing. I borrow ideas from folks who seem smarter than me, for the concept of ideal portfolios.

The first sample portfolio I started with and the one I base a few of my Investment Vehicles on, is the Sleepy Mini-Portfolio which I first read about on the Canadian Capitalist (under its previous editor). This is an easy enough portfolio to start with, but you need to open either an account with TD/Waterhouse or an E-Series Mutual Fund account with TD.  The basis of this is the following TD Mutual Funds

TDB909 TD Canadian Bond Index (e-Series)
TDB900 TD Canadian Index (e-Series)
TDB902 TD US Index (e-Series)
TDB911 TD International Index (e-Series)

As the CC mentioned in his article:

The initial asset allocation will be quite simple: 20% bonds, 20% Canadian equities, 30% US equities, 30% International equities.

Now, that is a straightforward portfolio for those who don’t know much but want to start learning about investing. Do you have to follow those breakdowns? Of course not, but if you don’t know your elbow from a hole in the ground, this is a nice ground-floor Couch Potato-like passive investment portfolio. Rebalance in some fashion every year, and that’s it. Also, note that the CC has moved on to BMO Investorline as his investment house.

Think that is sissy kids’ stuff, you could look at the CC’s Sleepy Portfolio which has more aspects to it, and does rely on having a real trading account. It uses Exchange Tradeable Funds (ETF’s) but follows the same kind of Couch Potato concepts.

Other folks have their ideas too, friend of this site Larry MacDonald has his own One Minute Portfolio which he boasts only needs about a minute’s attention every year (fighting words in the investing world). What is in this Miracle Portfolio? To quote Mr. MacDonald (noted former Economist and current Financial Writer):

Consisting of just two exchange-traded funds (ETFs), one tracking stocks and the other tracking bonds, the portfolio requires little time or effort.

Sounds simple enough that even I might understand it!

What’s that you said, are these portfolios not Macho enough for you? Visit our old friend Mr. Dan Bortolotti at the Canadian Couch Potato.  He has remodelled many of his Couch Potato Portfolios for 2014, and has a plethora of different ideal portfolio choices:

  • Global Couch Potato
  • Complete Couch Potato
  • Or the Ultra-Macho Uber-Tuber Portfolio

All you need to do if you want to start DIY investing is look at a few of the better writers out there who specialize in Fund Analysis and Portfolio discussions. Start with one of their examples. You would be surprised how much you will learn just from doing this. You can even “Ask the Spud” a question if you wish (Dan will answer most of the time).

Yes, you can go to a financial analyst if you wish, but you might end up with a similar portfolio, or worse, a bunch of funds with much higher MERs, in areas you don’t understand.

Ideal Portfolio Addendum

This was written many years ago. I didn’t know about some great ETF’s out there. How big or small your portfolio ends up being, is up to you. It is possible to have the greatest couch potato portfolio, which is a two Index Fund.

Feel Free to Comment

  1. Personally, I found sleep (and ~12% CAGR) somewhere between a basket of ETF’s and scouring the ‘net for solid advice and analysis: relying on the top 5 dividend yielding issues of the TSX60 – excluding recent income trust conversions and miners – re-investing dividends and re-balancing yearly. Rinse, repeat … 🙂

  2. I would recommend looking at Vanguard Canada ETF’s. The Canada Index ETF has an expense ratio of 0.09%. I use Vanguard a lot in the USA, they are big, cheap, owned by their unit-holders, and have always done a good job for me over 20 years.

    1. Yes, I hold the Vanguard VTI fund in another RRSP account, very solid performance. These were just simple examples to start with, to point out the importance of finding funds with very low MER and expense ratios.

  3. @Bet Crooks – I wouldn’t suggest doing nothing when the markets are down. That would be the best time to add more! I realized my greatest gains with my purchases made during the 2008-09 recession. That said, it would be best to take all the guess work out of “when to buy” by simply adding on a regular basis.

    1. @Bernie
      Yes, investing more when markets are down can be very profitable–and steady investing ensures you catch some of those low cost situations. Unfortunately, I’ve met quite a few people who sold low instead.

  4. A couple of other low cost index options for someone starting out…
    PC Financial offers CIBC index fund at a 0.1% discount and ING Direct has its own index balanced funds.

  5. Thanks for the kind mention Alan. I have pretty much the Sleepy Portfolio setup for our retirement portfolio and the Mini for our kids’ RESPs. All these couch potato portfolios are easy to set up, ultra-cheap and simple to maintain as long as one can resist the temptation to tinker and chase returns.

  6. Can I add just one bit of advice for new investors?

    If so, it’s: don’t panic and sell if your e-funds or ETFs plummet. If you just wait, usually within 1-2 years they will regain what they’ve lost. But if you sell, you’ve permanently lost that money. (This applies to ETFs and e-funds that try to represent an entire stock exchange like the NYSE or the TSX, not to funds that only hold some small group of stocks.)

    There’s a pretty good possibility that the markets will “pull back” 10-25% in the next year or two. The fact that I’m investing pretty much guarantees that will happen. When a pull-back happens a few days or months after you first invest in stocks, it can be pretty upsetting. Try to just shut your eyes and wait it out.

  7. I am more of a one minute investor and I have already decided to put all my money in the Vanguard Canadian high dividend ETF and think about something else for 2015.

    I will continue to think about where the money goes but what I already have in that ETF is there for the long run and what I add to it this year (trying to put $10 000 to it) will be sitting there for the long run too.

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