On May 1st I started a very simple “lazy” portfolio, so I could measure how successful my trading is compared to this low-maintenance approach.
CDN Composite (XIC) – 45%
CDN S&P 500 (XSP) – 25%
CDN MSCI EAFE (XIN) – 30%
Approximately $10,000 one-time investment to match my current trading account amount.
The table doesn’t show the whole picture as I didn’t calculate the dividends or the expense ratio. Right now I just indicated the dividend (annual, per share) and will calculate final numbers including dividends, less MER at the end of the year.
Comments and Opinions
Not bad at all for a hands-off approach. My only complaint with this method would be that any kind of relatively passive investing requires a bull market to do well. The major argument against this is that if you invest for decades, you have nothing to worry about, because over time the market always moves up.
Bill Sharpe’s pioneering theory on the interplay between investment risk and return won him a Nobel Prize. Now he wants to help you use his work to make better financial decisions.
Answer: The only way to be assured of higher expected return is to own the entire market portfolio.
Question: You can easily do that through a simple, cheap index mutual fund. Why doesn’t everyone invest that way?
Answer: Hope springs eternal.
I do believe that I can make money by active trading, but the truth is most people just don’t want to do it. They’re either bored by it OR have genuinely bad instincts. So index fund approach probably is the best choice for an average investor. For now I’ll be in the ranks of the hopeful.