The One-Minute Portfolio (Q2 update)

The One-Minute Portfolio (OMP) decreased 2% during the second quarter of 2011. Nevertheless, its average annual rate of return since inception in 2003 remains above 10.5%.  

As described in year-end columns and quarterly blog updates on Canadian Business Online (and its predecessor website), the OMP consists of just two exchange-traded funds (ETFs): iShares S&P/TSX 60 Index Fund (XIU) and the iShares Canadian Bond Index Fund (XBB).

The other main feature is the annual rebalancing at the end of the year. Instead of the usual method used in passive investing,  ETF weights are adjusted with regard to the stock market’s performance.

Specifically, if the average annual return on stocks (three-year moving average basis) is below the long-run average annual return on stocks (7% to 9% according to studies), the weight for equities is increased. Vice versa, it’s lowered if the average annual return is above the historical average annual return for stocks.

This rule gave the equity ETF a 40% weight in 2007 and 2008. The weight was raised to 60% in 2009 and to 70% in 2010. It continues at 70% in 2011.

Note:

1. The average annual compound rate of return of over 10.5% for the OMP is an exact calculation whereas this figure in 2009 and 2010 was based on imputations.

Here are some past updates:

Q1 2009 update

Q2 2009 update

Mid-2009 update

Mid-2010 update

Q3 2010 update

2011 update

Q1 2011 update