Laurie wants to start investing, and… (Part 6 of 6)

…she wants to know what she just bought (in Part 5). What does her investment portfolio look like?

Continuing with the assumption that we bought the June 30, 2019, 30%/70% CPM ETF Portfolio, $300 (30% × $1,000) of the investment portfolio would consist of bonds (the ZAG ETF). Almost 40% of these bonds are AAA rated, consisting largely of Government of Canada and Province of Ontario debt.

The five largest Canadian stock investments (in the VCN ETV), representing about 7.1% of the $1,000 portfolio, would be:

  • $18.87 in Royal Bank of Canada
  • $17.52 in Toronto-Dominion Bank
  • $12.74 in Enbridge Inc
  • $11. 18 in Canadian National Railway Co
  • $10.88 in Bank of Nova Scotia

Similarly, the five largest non-Canadian stock investments (in the XAW ETF), representing about 3.1% of the $1,000 portfolio:

  • $8.94 in Microsoft Corp
  • $7.53 in Apple Inc
  • $6.84 in Amazon.com Inc
  • $4.04 in Facebook Inc A
  • $3.61 in Berkshire Hathaway Inc B

The remaining approximately $600 is invested, in amounts of less than $10 per stock, across hundreds of stocks in Canada and around the world.

What else is important to note? Well, according to the June 30, 2019, 30%/70% CPM ETF Portfolio, the worst 1-year return in the last 20 has been -23.44%. If that’s too much to stomach, then perhaps you should consider a portfolio invested more in bonds and less in stocks.

On the other hand, over the past 20 years (a period which includes the Financial Crisis of 2008-2009), this particular portfolio has returned an average of 5.65% per year. And if the past is an indication of the future, there is about a 2/3 chance than any one year’s return will be between -2.53% and 13.83% (judging by the standard deviation number).

One last thing. The three components of the portfolio will, over time, drift away from their original 30%/23%/47% weightings of ZAG/VCN/XAW. One or two of these ETFs will perform better than another. Therefore, to keep the investment portfolio in shape, it would be wise to:

  • Check to see if your risk profile (see, Part 2) has changed during that period
  • And rebalance the portfolio to your current risk profile (not too frequently, but at a minimum, annually)