Rationalizing my Portfolio

I wrote recently that I have parted ways with my Financial Adviser.  This has prompted me to reassess my portfolio.  As long ago as May 2012 I saw that my portfolio was not performing as well as a simple portfolio of indexed ETFs, which I refer to as the TI Index.  Since then I have persevered with investing in individual stocks, but the overall performance has been marginal: my portfolio was beating the TSX by 3%, but lagging the TI Index by 7% (see chart below).

Screen Shot 2013-02-21 at 12.24.53 PM

So the logical conclusion is to actually adopt the TI Index, or something like it.  The TI Index is:

  • 30% weighting in SPY: An S&P 500 ETF, denominated in US$
  • 25% weighting in XBB.TO: A broad bond fund
  • 35% weighting in XIU.TO: A TSX ETF
  • 10% weighting in PHY-U.TO: A gold trust

I propose something similar, but more diverse:

  • 20% weighting in Canadian equity ETF
  • 20% weighting in US equity ETF
  • 20% weighting in Global equity ETF
  • 25% weighting in bonds
  • 5% weighting in gold
  • 10% in speculative investments

I have included an allocation of 10% for speculation.  I have discussed my approach to speculation before: I am comfortable with a controlled amount of speculation.  This will be used to buy a broad range of equities that are either:

  • Small Cap (e.g., smaller Canadian firms such as StanTec or WiLan);
  • Special Situations (e.g., troubled stocks such as BP or SNC-Lavalin); or
  • High Growth (hot stocks such as Whole Foods or Lululemon).

Implementing this portfolio will require a lot of buying and selling, which I will attempt to conclude before the end of the month.  Happily one side effect of parting with my Financial Adviser is that my investments are now with TD Waterhouse’s Direct Investing services, which charges only $10 per trade; rather than TD Waterhouse Institutional Services, which charged $25 or $29 per trade.

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