Friday, January 10, 2014


This is a post I should have had up in late December. Two weeks ago the best time to assemble one or more benchmarks was passing. It's not too late though. Finding the closing prices of stocks and ETFs is still easy. A lot of sources will post closing values for 30-days before dropping them into historical files.

I have a number of benchmarks that I like to best. The first three benchmarks are ones created for the Financial Post. I've talked about these in the past.

The following is not a true benchmark but as a retired fellow living partially on his investment income, I like to judge how well my portfolio is doing compared to the TD Monthly Income fund. TDB622 is a balanced fund heavily weighted to the financials, followed by energy and utilities. At the moment, fixed income is the fund's biggest component. If I were designing the ideal couch potato portfolio, the TDB622 mix of investments would just about hit the mark. For that reason, my next benchmark is:

There are a number of popular approaches to personal investing. One approach often mentioned is a version of the couch potato portfolio. The goal here is either an ETF mix or mutual fund mix that gives one a balanced portfolio that after buying is held and allowed to appreciate and compound. This is the buy it and forget approach to investing. Many claim this is a winner.

Using the TD Waterhouse Portfolio Manager, I've set up a number of phantom portfolios. Each one emulates a couch potato derivative. I have five imaginary portfolios:

  • Barbell (not so much a benchmark as a canary in the coal mine)
  • Classic No Work
  • Hi-Yield Lazy Dude
  • Strategy for Retired Canadians
  • TD e-funds Classic

I am not going to say too much here as you can come up with your own faux portfolios that you, for whatever reason, believe represents a successful approach to auto-pilot investing and which mimic the approach you aim for with your actual portfolio allocation . I will say this: A classic, conservative approach is a balanced portfolio with approximately 40% bonds and 60% equities. The equities are split between Canadian, American and International investments. Some folk weight this towards the Canadian equities and some weight this towards the American equities. It is your call.

My retirement strategy puts a lot of attention in dividend paying investments. From 10% to 20% may be invested in REITs. For more insight into retirement portfolio management, google David Swensen, manager of Yale University's endowment fund. I don't have 20% of my retirement money in REITs but I do have a lot. Certainly more than 10%. When I get concerned, I think of Swensen and then I feel I am in good company.

So, are there any surprises hidden in my benchmarks? As a matter of fact, there is. My Barbell Portfolio is a mix of one ETN (exchanged traded note) and two ETFs: 15% MORL ETN, 30% REM ETF, 50% XMI ETF, plus about 5% in a cash saving fund paying 1.25% interest today. I simply picked a couple of the riskiest investments with the highest paying dividends and mated these with a classic conservative ETF plus a little cash. And the surprise? The surprise is how well this benchmark is doing. It is already up more than 4% in the first ten days of 2014.

I'm going to an investment meeting sponsored by TD Waterhouse and I'm going to inquire about both MORL and REM. They are both, I believe, based on the mREIT market in the States. I own REM and enjoy the 15% dividend but it worries me. I don't own MORL. The 30% payout really frightened me. Until I know more, when it comes to MORL I am keeping my distance.

Having benchmarks sharpens one critical eye. A portfolio might look like it has a winning mix but if it is not rising in value as fast as a no-brainer portfolio, the portfolio has problems. On the other hand, one's portfolio might be losing value, but if it is falling slower than one's benchmarks, then one might want to put one's concerns on hold.

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