Despite my masterly inaction, the Sleepy Portfolio, which I use to benchmark our personal portfolios is up 34% since its inception in 2005. As you might expect, the allocation between the major asset classes has diverged from the initial targets, during that time frame, as you can see in the following table:
| Asset Class | Current | Original | After Rebalancing |
|---|---|---|---|
| Cash | 8% | 5% | 6% |
| Bonds | 15% | 20% | 20% |
| Equities | |||
| Canadian | 24% | 22% | 24% |
| US | 20% | 22% | 20% |
| EAFE | 15% | 15% | 15% |
| Emerging Markets | 12% | 10% | 9% |
| REITs | 5% | 5% | 5% |
It is not surprising that bonds have fallen significantly from the original allocation because almost the entire returns from bonds over the past two years have come from interest payments that go into the cash component. Among equities, emerging markets have been red-hot, returning more than 80%, or more than twice the portfolio’s return.
Rebalancing an all-ETF portfolio to its precise original targets is not very cost effective because the hefty commissions incurred are likely to erode the benefits. We’ll settle for an approximation of the original targets with the following three transactions:
- Buy 310 units of Altamira T-Bill fund
- Sell 30 shares of EEM at $120
- Buy 225 shares of XBB at $29
That’s it! Apart from the initial set-up, we have spent just $60 in commissions over more than two years. Now we can go back to snoozing our way to investment success.
