Phantasmix (aka Re: money)

This is the year end result of my hypothetical portfolio I started on May 1: -1.3% (including dividends).

It’s not especially spectacular or particularly bad, but it is much worse than the Canadian, American and EAFE markets did. In addition to the negative performance, had I actually bought these ETF’s, I’d also be hit with a tax bill for the distributions. Here’s more information on this topic.

Overall I’m unhappy with this passive portfolio. If not for these distributions I would give this setup a chance and track it for at least a couple of years longer. However this complete lack of control over the buys and sells of holdings within the ETF - and tax implications of this - makes me want to continue stock picking on my own.

So this is the end of the ETF Portfolio v. 1. I will work out a new passive hypothetical portfolio. This time I’ll make it a benchmark against which I’ll track my own results, as opposed to making random picks across the regions.

Click to enlarge the chart

Components

CDN Composite (XIC) - 45%
CDN S&P 500 (XSP) - 25%
CDN MSCI EAFE (XIN) - 30%

Initial Investment

Approximately $10,000 one-time.

Performance for period ending November 30, 2007: -0.1% (including dividends).

All previous gains have been wiped again, however -0.1% is pretty much even and a heck of a lot better than my Juniors portfolio performance. Performance ending Dec 4 (today) stands at -1.2% however the purpose of this portfolio is not to look at daily performance. I’ll stick with the “lazy” approach with only monthly updates.

Click to enlarge the chart

Components

CDN Composite (XIC) - 45%
CDN S&P 500 (XSP) - 25%
CDN MSCI EAFE (XIN) - 30%

Initial Investment

Approximately $10,000 one-time.

Performance for period ending October 31, 2007: +5.4% (including dividends).

Click to enlarge the chart

Components

CDN Composite (XIC) - 45%
CDN S&P 500 (XSP) - 25%
CDN MSCI EAFE (XIN) - 30%

Initial Investment

Approximately $10,000 one-time.

I’m skipping August since it’s not that interesting on its own, and here’s the Lazy Porfolio performance May to September 30, 2007.

Last update was up to end of July. Since then all the losses have been completely erased, and overall stands at +2.4%.

My penny stock investments are very disappointing, they didn’t recover along with the rest of the market. I stopped tracking them daily; vacation sure helped with the obsession.

Components

CDN Composite (XIC) - 45%
CDN S&P 500 (XSP) - 25%
CDN MSCI EAFE (XIN) - 30%

Initial Investment

Approximately $10,000 one-time.

Here’s my Lazy Canadian iShares portfolio performance to August 3rd (inclusive).

All the gains since May has been wiped out and it now stands at -2.54%. This is the second losing month in a row. Please keep in mind this table doesn’t account for the dividends, so actual performance is better. I only track share price.

CHART UPDATED to reflect dividend re-investment. Performance now stands at -1.8%, truly, dividend is a powerful thing.

UPDATED!

Hattip to Four Pillars Mike for showing me GlobeFund for easier dividend tracking.

Click to enlarge

Components

CDN Composite (XIC) - 45%
CDN S&P 500 (XSP) - 25%
CDN MSCI EAFE (XIN) - 30%

Initial Investment

Approximately $10,000 one-time.

“Lazy” portfolio, started tracking results on May 1, 2007.

June Results

Portfolio shrunk by 0.55% in relation to the previous month, but was still up 3.26% overall.

Components

CDN Composite (XIC) - 45%
CDN S&P 500 (XSP) - 25%
CDN MSCI EAFE (XIN) - 30%

Initial Investment

Approximately $10,000 one-time.

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.

Components

CDN Composite (XIC) - 45%
CDN S&P 500 (XSP) - 25%
CDN MSCI EAFE (XIN) - 30%

Initial Investment

Approximately $10,000 one-time investment to match my current trading account amount.

Results

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.

Click to enlarge

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.

Pro-Index Fund arguments.

Excerpt:

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.