Thursday, April 17, 2014

Like shooting fish in a barrel

This year investing has been like shooting fish in a barrel. Heck, it has been even better than that. I haven't even fired a shot, or done much buying and selling, and yet just by being in the market I've been raking in the gains and dividends. A big smile fills my face.

All that said, some of the ghost portfolios that I created in order to get a handle on index investing are wilting in the straight away. At a time that I would have theorized they would be charging ahead of the pack, they are pulling up lame.

Take my no-brainer portfolio containing a mix of XSB, XSP and XIC plus a chunk of cash. It is only up 2.97 percent for the year. It is thousands of dollars off the pace being set by my managed portfolio. Not good. And to make matters worse, it doesn't pay anywhere near the dividend income that my personally managed portfolio delivers.

My high-yield no-brainer composed of a  mix of FIE, XDV, XBB, XRE and XMD is running neck and neck with my personal portfolio but I ask, "Is that good enough?" I think I can do better but I know my high-yield no-brainer portfolio is running flat out. Maybe I could tweak the mix but I'd just be doing some jiggling based on what has been delivered in the past. We all know there is no reason to believe the past will be repeated.

Another portfolio, a balanced portfolio I put together using iShares ETFs (CBO, FIE, XMI, XMM, XUS,CDZ, XFN, XRE, XUT, CPD and XEI plus about 5 percent in cash) is another weak performer. Heck, if I wanted a balanced portfolio without any hands-on involvement, the TD Monthly Income fund beat my iShares creation by more than 3 percent.

Years ago an editor at the paper at which I worked gave me a book detailing a pension strategy for Canadians. I must admit that my own portfolio borrows some from that book and other by famous pension managers, many in the States. For instance, I have a big chunk of my retirement money in REITs. Still, the portfolio I put together using my take on the book's investment approach is not quite delivering the goods as well as my own personal portfolio.

I put together a balanced portfolio using TD e-funds and it is not performing anywhere near as well as the TD Monthly Income. Not a all. This surprises me a little but not a lot. A few years ago, when the TD e-funds first appeared I bought a few. When they failed to impress, I dumped them. The results from my phantom e-fund portfolio is not coaxing my back to the e-fund fold.

So far the TD Monthly Income is besting my personal portfolio by a few thousands dollars and the iShares ETF XTR is outperforming me. Both a takes on a balanced approach to investing. And finally and ETF is in the lead, XTR is ahead of TDB622 at this point. Me? I'm in third place in a field of eight.

There is one more phantom portfolio but this one is a true phantom. It contains a mix with a lot of weight in the mortgage REITs sector. MORL and REM are two ETFs that many question the wisdom of owning. That said, if you'd have built a portfolio with these two high-yielding ETFs forming the backbone of your portfolio, you'd have done quite nicely this year. You would have enjoyed growth more than double any of the other portfolios in my phantom lot. I confess I own some REM and have never been unhappy with the decision. I fear to buy more, it is up quite nicely from my entry point and it is yielding dividend well up into the double digits.

I'm sure you have noticed that I haven't given you the percentage mix of my phantom portfolios but just the investments. This is because I want to encourage you to take the time and set up your own phantom portfolio(s) and back test your own ideas on no-brainer investing. You'll be putting from 35 to 50 percent in bonds and the rest in equities. The lion's share will be in Canadian equities with another chunk headed for the States and a smaller amount in the international markets. I would think that you might keep from 5-10 percent in cash but that will be your call, too.

You might be surprised to learn that your no-brainer portfolios lived up to, or down to, their name.