Its time for another quarterly update to the One-Minute Portfolio (the last was on April 13, 2009). In a nutshell, the second quarter extended the gains of the first quarter to raise the portfolios return sinceDecemberto about 17%.
The One-Minute Portfolio (OMP) is a member of the lazy-portfolio species, consisting of just two exchange traded funds: iShares S&P/TSX 60 IndexETF (XIU) and the iShares Canadian Bond Index ETF(XBB). It was created in early 2003 and has been rebalanced annually since, as described in articles on the MoneySaverand Canadian Businesswebsites. The average annual gain since inception is now about 8%.
As a member of the lazy portfolio species, the unique feature is how the allocation between equities (XIU) and bonds (XBB) is determined. It doesnt rebalance back to a fixed asset allocation as most lazy portfolios do buttakes into account whether the stock market is under or above its long-term average annual return. For more details on the method, check out the December 18, 2008 Canadian Businessarticle.
During the last rebalancing (in December of 2008) the allocation to equities (XIU) was raised from 40% to 60% because stock markets were then noticeably below their long-term average return. By default, the allocation for bonds (XBB) went from 60% to 40%.