Canadian versions of lazy portfolios
This article contains details specific to investors in Canada. However, it does not apply to residents of Canada who are also United States (US) citizens or US permanent residents.Lazy portfolios are designed to perform well in most market conditions. Most contain a small number of low-cost funds that are easy to rebalance. They are "lazy" in that the investor can maintain the same asset allocation for an extended period of time, as they generally contain 30-40% bonds, suitable for most pre-retirement investors.
Canadian versions of lazy portfolios
Below are a few examples of lazy portfolios (also called simple portfolios) that can be utilized by Canadian domiciled investors.
Three ETFs
The three-ETF portfolio is recommended for its simplicity and diversification.
Three-ETF portfolios consist of Canadian bonds, Canadian stocks and global stocks. Here we show an example[1] using TSX-traded ETFs from Vanguard Canada:
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Suitable alternatives from other vendors for two of the three ETFs in the table above are mentioned in the following pages: Canadian bonds and Canadian equities. For global stocks, VXC currently has few competitors on the TSX. There are US-listed options for the global equity ETF, such as VT, but they include a small percentage (3-4%) of Canadian equities.
This 3-fund portfolio may appear overly simplistic. Certainly the brokerage statements will look very boring. Yet this portfolio has the following characteristics:
- Exposure to over 500 Canadian bonds (terms of 1 to over 25 years; credit ratings covering the full investment grade spectrum, include government and corporate bonds)
- Exposure to nearly 250 Canadian stocks covering large-, mid- and small-capitalizations
- Exposure to thousands of large- and mid-capitalization stocks from other developed and emerging markets
- Will be very easy to rebalance
- Weighted average management fee of 0.14% (December 2014), full MER will be a few basis points higher
- No currency exchange fees for ETF transactions using Canadian dollars
- No currency hedging of global equities
Model portfolios maintained by Canadian Couch Potato use the same three ETFs as in the example above, with a range of fixed income from 10 to 70% of the portfolio. For equities, his Canadian:Global mix is 1:2 instead of 1:1.
Four index funds
The four index fund portfolio is recommended for investors not wishing to open a brokerage account.
Simple index portfolios with four index funds include Canadian equities, US equities, EAFE Equities, and Canadian bonds. The following table is an example of a simple index portfolio built with "FPX Balanced" allocations, using four TD e-funds as a example of low-cost index mutual funds:
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Further discussion of this example is found in Building a portfolio, including links to index mutual funds from other vendors.
Model portfolios maintained by Canadian Couch Potato use the same four index funds as in the example above, with a range of fixed income from 10 to 70% of the portfolio. For equities, his Canadian:US:International mix is 1:1:1. The model with 40% bonds is traditionally known as the Global Couch Potato portfolio from MoneySense[2][3]
Four ETFs
Simple index portfolios with four ETFs include Canadian equities; US equities; EAFE Equities; and Canadian bonds. Sticking with our 50:50 mix of equities and fixed income, using the FPX Balanced index to allocate equities, and using BMO etfs for illustration purposes, we get:
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Equivalent ETFs from other vendors could also be used, and are listed in the following pages: Canadian bonds, Canadian equities, US equities and International equities.
Canadian asset class returns
| Year | Nominal return | Inflation-CPI | Real return |
|---|---|---|---|
| 2018 | -8.40% | 1.99% | -10.68% |
| 2017 | 9.10% | 1.87% | 7.10% |
| 2016 | 21.10% | 1.50% | 19.31% |
| 2015 | -8.30% | 1.61% | -9.75% |
| 2014 | 10.60% | 1.47% | 9.00% |
| 2013 | 13.00% | 1.24% | 11.62% |
| 2012 | 7.20% | 0.83% | 5.53% |
| 2011 | -8.70% | 2.30% | -10.75% |
| 2010 | 17.60% | 2.35% | 14.90% |
| 2009 | 35.10% | 1.32% | 33.34% |
| 2008 | -33.00% | 1.16% | -33.77% |
| 2007 | 9.70% | 2.38% | 7.15% |
| 2006 | 17.30% | 1.67% | 15.37% |
| 2005 | 24.10% | 2.09% | 21.56% |
| 2004 | 14.50% | 2.13% | 12.11% |
| 2003 | 26.70% | 2.08% | 24.12% |
| 2002 | -12.40% | 3.80% | -15.61% |
| 2001 | -12.60% | 0.72% | -13.22% |
| 2000 | 7.40% | 3.20% | 4.07% |
| 1999 | 31.70% | 2.63% | 28.33% |
| 1998 | -1.60% | 1.00% | -2.57% |
| 1997 | 15.00% | 0.78% | 14.11% |
| 1996 | 28.30% | 2.16% | 25.59% |
| 1995 | 14.50% | 1.74% | 12.54% |
| 1994 | -0.20% | 0.23% | -0.43% |
| 1993 | 32.50% | 1.65% | 30.35% |
| 1992 | -1.40% | 2.17% | -3.49% |
| 1991 | 12.00% | 3.75% | 7.95% |
| 1990 | -14.80% | 4.99% | -18.85% |
| 1989 | 21.40% | 5.26% | 15.33% |
| 1988 | 11.10% | 3.88% | 6.95% |
| 1987 | 5.90% | 4.19% | 1.64% |
| 1986 | 9.00% | 4.21% | 4.60% |
| 1985 | 25.10% | 4.40% | 19.83% |
| 1984 | -2.40% | 3.72% | -5.90% |
| 1983 | 35.50% | 4.59% | 29.55% |
| 1982 | -5.50% | 9.27% | -13.52% |
| 1981 | -10.20% | 12.12% | -19.91% |
| 1980 | 30.10% | 11.06% | 17.14% |
| 1979 | 44.80% | 9.76% | 31.92% |
| 1978 | 29.70% | 8.60% | 19.43% |
| 1977 | 10.70% | 9.40% | 1.19% |
| 1976 | 11.00% | 5.63% | 5.08% |
| 1975 | 18.50% | 9.42% | 8.30% |
| 1974 | -25.90% | 12.65% | -34.22% |
| 1973 | 0.30% | 9.38% | -8.30% |
| 1972 | 27.40% | 5.16% | 21.15% |
| 1971 | -8.00% | 4.93% | -12.22% |
| 1970 | -3.60% | 1.00% | -4.55% |
| Year | Nominal return | Inflation-CPI | Real return |
|---|---|---|---|
| 2018 | 1.40% | 1.99% | -0.58% |
| 2017 | 2.50% | 1.87% | 0.62% |
| 2016 | 1.70% | 1.50% | 0.20% |
| 2015 | 3.50% | 1.61% | 1.86% |
| 2014 | 8.80% | 1.47% | 7.22% |
| 2013 | -1.20% | 1.24% | -2.41% |
| 2012 | 3.60% | 0.83% | 1.99% |
| 2011 | 9.70% | 2.30% | 7.23% |
| 2010 | 6.70% | 2.35% | 4.25% |
| 2009 | 5.40% | 1.32% | 4.03% |
| 2008 | 6.40% | 1.16% | 5.18% |
| 2007 | 3.70% | 2.38% | 1.29% |
| 2006 | 4.10% | 1.67% | 2.39% |
| 2005 | 6.50% | 2.09% | 4.32% |
| 2004 | 7.10% | 2.13% | 4.87% |
| 2003 | 6.70% | 2.08% | 4.53% |
| 2002 | 8.70% | 3.80% | 4.72% |
| 2001 | 8.10% | 0.72% | 7.33% |
| 2000 | 10.20% | 3.20% | 6.78% |
| 1999 | -1.10% | 2.63% | -3.63% |
| 1998 | 9.20% | 1.00% | 8.12% |
| 1997 | 9.60% | 0.78% | 8.75% |
| 1996 | 12.30% | 2.16% | 9.93% |
| 1995 | 20.70% | 1.74% | 18.64% |
| 1994 | -4.30% | 0.23% | -4.52% |
| 1993 | 18.10% | 1.65% | 16.18% |
| 1992 | 9.80% | 2.17% | 7.47% |
| 1991 | 22.10% | 3.75% | 17.69% |
| 1990 | 7.50% | 4.99% | 2.39% |
| 1989 | 12.80% | 5.26% | 7.16% |
| 1988 | 9.80% | 3.88% | 5.70% |
| 1987 | 4.00% | 4.19% | -0.18% |
| 1986 | 14.70% | 4.21% | 10.07% |
| 1985 | 21.20% | 4.40% | 16.09% |
| 1984 | 14.70% | 3.72% | 10.59% |
| 1983 | 11.50% | 4.59% | 6.61% |
| 1982 | 35.40% | 9.27% | 23.91% |
| 1981 | 4.20% | 12.12% | -7.06% |
| 1980 | 6.60% | 11.06% | -4.02% |
| 1979 | 2.50% | 9.76% | -6.61% |
| 1978 | 1.00% | 8.60% | -7.00% |
| 1977 | 5.90% | 9.40% | -3.20% |
| 1976 | 15.30% | 5.63% | 9.15% |
| 1975 | -0.20% | 9.42% | -8.79% |
| 1974 | 7.90% | 12.65% | -4.22% |
| 1973 | 2.40% | 9.38% | -6.38% |
| 1972 | 2.00% | 5.16% | -3.00% |
| 1971 | 9.60% | 4.93% | 4.45% |
| 1970 | 22.70% | 1.00% | 21.49% |
| Year | Nominal return | Inflation-CPI | Real return |
|---|---|---|---|
| 2018 | 0.00% | 1.99% | -1.95% |
| 2017 | 0.70% | 1.87% | -1.15% |
| 2016 | 2.90% | 1.50% | 1.30% |
| 2015 | 2.80% | 1.61% | 1.17% |
| 2014 | 13.20% | 1.47% | 11.56% |
| 2013 | -13.10% | 1.24% | -14.16% |
| 2012 | 2.90% | 0.83% | 1.30% |
| 2011 | 18.30% | 2.30% | 15.64% |
| 2010 | 11.10% | 2.35% | 8.55% |
| 2009 | 14.50% | 1.32% | 13.10% |
| 2008 | 0.40% | 1.16% | -0.75% |
| 2007 | 1.60% | 2.38% | -0.76% |
| 2006 | -2.90% | 1.67% | -4.49% |
| 2005 | 15.20% | 2.09% | 12.84% |
| 2004 | 17.50% | 2.13% | 15.05% |
| 2003 | 13.20% | 2.08% | 10.79% |
| 2002 | 15.30% | 3.80% | 11.08% |
| 2001 | 0.60% | 0.72% | -0.12% |
| 2000 | 16.60% | 3.20% | 12.98% |
| 1999 | 8.00% | 2.63% | 5.23% |
| 1998 | 6.00% | 1.00% | 4.95% |
| 1997 | 4.70% | 0.78% | 3.89% |
| 1996 | 11.70% | 2.16% | 9.34% |
| 1995 | 16.70% | 1.74% | 14.70% |
| 1994 | -13.70% | 0.23% | -13.90% |
| 1993 | 18.80% | 1.65% | 16.87% |
| 1992 | 3.90% | 2.17% | 1.69% |
Notes
- ↑ Canadian equities are represented by the TSE Composite Index. Asset returns source for all tables:Periodic Table of Annual Returns for Canadians, Stingy Investor; Canadian CPI data source:Historic inflation Canada – Historic CPI inflation Canada, inflation.eu, Retrieved 21 December 2012. See: Canadian asset class returns (finiki)
- ↑ Real return bonds are bonds issued by the Government of Canada and/or certain provincial governments that are indexed to inflation. See: Real Return Bonds (finiki). Conventional (also called nominal) bonds are not indexed to inflation. See: Conventional Bonds (finiki)
See also (finiki)
See also
- How to build a lazy portfolio
- Madsinger monthly reports, monthly returns for several portfolios
- Three-fund portfolio
References
- ↑ Re: Simple Portfolios 2014, Financial Wisdom Forum discussion.
- ↑ Duncan Hood and Ian McGugan, MoneySense, Couch Potato Portfolio: Introduction, April 5th, 2006, viewed December 31, 2014
- ↑ Duncan Hood and Ian McGugan, MoneySense, Couch Potato Portfolio: Meet the potato family, April 5th, 2006, viewed December 31, 2014
External links
- Canadian Lazy Portfolios, Google Sheets source file for charts.
- Canadian asset class returns, Google Sheets source file for returns.
 | Introduction to investing | |
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| Asset classes | ||
| Funds | ||
| Managing a portfolio | ||
| Financial advice | ||
| Non-US investors | ||
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 | Sample portfolios | |
|---|---|---|
| Portfolio management | GnuCash • How to build a lazy portfolio • Investment policy statement • Lump sum vs DCA (Dollar cost averaging) • Passively managing individual stocks • Prioritizing investments • Rebalancing • Short term portfolio management (6 months) • Short term portfolio management (1 year) • Short term portfolio management (5 years) • Using a spreadsheet to maintain a portfolio • Systematic investing • Tax loss harvesting • Using open source software for portfolio analysis • Value averaging | |
| Portfolio withdrawals | ||
| Asset classes | ||
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