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We had two model portfolios that were designed for people who want to reduce their risk in the event the stock market nosedives. The Defensive Portfolio was launched in March 2008 when the TSX was nearing its all-time record high. As of the last review in March 2017, it was showing an average annual compound rate of return of 8.3%, comfortably ahead of its target. This was despite the fact that just over 30% of its assets were invested in bonds.
In September 2011 I created a Conservative Portfolio for investors who were willing to accept reduced returns in exchange for lower risk. The goal was to preserve capital while earning a target return of two percentage points more than the yield on a five-year GIC from the major banks. It was last updated in April 2017 at which time it had an average annual compound rate of return of 7.8%, with a bond weighting of 55%.
Both these portfolios had roughly the same objective – to outperform GICs without burdening the investor with aggressive risk. Both succeeded.
However, some readers have expressed the view that we have too many portfolios. Upon review, I felt it would be best to combine these two, especially since both hold many of the same securities. So I am introducing the new IWB Low-Risk Portfolio. The goal is to protect assets against stock market losses while providing a return that is at least a point and a half better than the top GIC rate. Right now that is 2.9% so our initial target is 4.4%.
For this portfolio, we will select some securities from both the old Defensive and Conservative Portfolios, while adding some new ones. The initial investment will be $50,000. Commissions will not be factored in and the Canadian and U.S. dollars will be treated at par. – Gordon Pape