The One-Minute Portfolio is down approximately 12% year to date. That smarts but it could be a lot worse considering how much the stock markets have tumbled over the same time.
The One-Minute Portfolio is a passively indexed portfolio, one that runs with a minimum of effort. It was set up in 2003 and has been rebalanced annually. It consists of just two exchange-traded funds (ETFs): iShares Canadian Bond Index ETF(XBB) representing bonds, and iShares S&P/TSX 60 Index ETF(XIU) representing equities.
The idea is to keep it really simple and just allocate funds across the two ETFs as guided by a comparison of the three-year average return on stocks to the historical average on stocks. The January 4, 2008 updateexplains the portfolio and its approach more.
The reason the decline hasnt been worse was the large weighting given to bonds — the iShares Canadian Bond Index Fund (XBB) has a 60% allocation. The equity component, the iShares S&P/TSX 60 Index Fund (XIU), has a 40% allocation.
Portfolio allocations have strayed quite far from the desired allocations. So we are looking forward to the annual rebalancing exercise in December or January. Indeed, with equities far below their long-run average annual rate of return, we anticipate raising equity exposure from 40% to 60%.