Blogs & Comment

One-Minute Portfolio Update

This being the half-way mark for 2010, its perhaps time for an update to the One-Minute Portfolio. Regular readers may recall that the One-Minute Portfolio is a member of the lazy-investing school. It consists 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. The unique feature is how the rebalancing is done: it takes into account whether the stock market is under or above its long-term historical average annual return. A December 31, 2009 Canadian Businessarticle on the last rebalancing exercise has more details.
Recent weakness has trimmed the strong stock-market gains recorded earlier this year, leaving the One-Minute Portfolio down by about -1.0% over the 6 months to June 30. The long-term annual average gain in the portfolio since inception is close to 8%.
Moving the equity allocation (i.e. XIU) from 40% to 60% during the 2008 year-end rebalancing turned out to be a good move. However, raising the equity allocation during the 2009 year-end rebalancing to 70% is not looking so good in 2010, especially given growing concerns over the sustainability of the economic recovery.
But if we are to remain faithful to the rebalancing rule, the portfolio needs to stick with this allocation in 2010. Perhaps thedark clouds will clear at some point and stocks will finish 2010 strong.