Taking advantage of low cost exchange traded index funds and developing a responsible portfolio allocation, our friend Harry sets a nice precedent for others to follow.
In August, 2008, he started his account. The Canadian stock market is roughly 10% lower today (March 14, 2010) than it was in August, 2008. Likewise, the U.S. and international markets are still down more than 20% since August 2008, when measured in Canadian dollars.
With the rising Canadian dollar, investments in the U.S. market and the International markets were albatrosses to many Canadian investment accounts between August 2008 and mid March, 2010.
But Harry, as a smart investor, didn’t try to second-guess where currencies were going to go. He knows that very few people are ever successful trying to do that.
Instead, he maintained a diversified account with both the EAFE international index (ticker XIN-to) and the American S&P 500 index (XIC-to).
Yet, despite the drumming that the U.S. and International markets have taken (in Canadian dollars) Harry’s account is up $7,914.60 Canadian since August, 2008.
As mentioned in previous posts, Harry rebalanced his account back to his desired allocation when the markets kept falling in January, 2009. This allowed him to sell some of his bonds to buy cheaper equities.
From Harry’s Qtrade account (www.qtrade.ca) you can see his recent performance below.
PORTFOLIO PERFORMANCE VIEW
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Considering that the world’s stock markets are still much lower than they were in August, 2008, Harry has done very well to record nearly an $8000 profit.
But was he just lucky? I don’t think so. He followed the tenets of sound investing:
- He kept his costs low with exchange traded indexes instead of actively managed mutual funds.
- He kept a balanced allocation of bonds and stocks, allowing his account to hold steadier during the 2008/2009 market collapse.
- He was then able to rebalance as the stock markets fell, selling some of his bonds to buy cheap equities.
When selling some of his bonds to buy stocks, Harry wasn’t able to “time the bottom”. He didn’t even try. But he knew that he needed to rebalance, so that’s what he did.
To see Harry’s account holdings, look below:
|
Description |
Symbol |
Quantity |
Currency |
Current Price |
Market Value |
% |
|
Cash |
|
|
CAD |
|
$209.89 |
0.1% |
|
ISHARES CDN D/J SLCT DIV IDX |
XDV |
1,660 |
CAD |
$19.60 |
$32,536.00 |
11.8% |
|
ISHARES CDN MSCI EAFE IDX FD |
XIN |
1,735 |
CAD |
$18.32 |
$31,785.20 |
11.5% |
|
ISHARES CDN S&P 500 HEG CAD FD |
XSP |
2,500 |
CAD |
$13.31 |
$33,275.00 |
12.0% |
|
ISHARES CDN S&P/TSX CP CMP IDX |
XIC |
1,130 |
CAD |
$18.94 |
$21,402.20 |
7.7% |
|
ISHARES CDN UNIV BD IDX FD |
XBB |
1,520 |
CAD |
$29.59 |
$44,976.80 |
16.3% |
|
ISHARES SHORT BD IDX FD |
XSB |
3,850 |
CAD |
$29.19 |
$112,381.50 |
40.6% |
|
Totals |
|
$276,566.59 |
100% |
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…continue to track the progress of Harry’s Account from the right menu
