The Two-Minute Canadian Portfolio


Rob Carrick Image Rob Carrick Columnist, The Globe and Mail

Data shows this conservative stock group has an annualized return of 9.8%...that's better than the TSX Composite index, writes Rob Carrick, reporter and columnist for The Globe and Mail.

Roller coasters belong in amusement parks, not your investment portfolio.

If you agree, have a look at the latest results from the Two-Minute Portfolio, an ongoing experiment in quick, super-simple stock picking for conservative investors. If you combine both share price changes and dividends into a total return, the S&P/TSX composite index fell 8.7% last year and the Two-Minute Portfolio gained 1.2%.

Years like 2011 define the Two-Minute Portfolio. Data going back 26 years show it has a consistent pattern of far outperforming the index in bad years and not rising as much in great years. What you're left with is an annualized total return of 9.8% for the Two-Minute Portfolio, compared to 8.3% for the index.

That's a pretty fair result from an investing strategy requiring just a few minutes of work every year. You start by investing equal amounts in the largest two dividend-paying stocks in each of the ten sectors of the Canadian stock market, as measured by market capitalization. That's share price multiplied by the number of shares outstanding.

Then, at the beginning of each subsequent year, you adjust the portfolio to ensure you're holding the latest market cap leaders in more or less equal proportion. You'll incur some brokerage commissions to set up and maintain the Two-Minute Portfolio, but they will ideally take no more than a small bite out of your returns.

The Two-Minute Portfolio was introduced back in 1999, but data going back to 1986 have been compiled by CPMS, a division of Morningstar Canada that provides North American equity research and portfolio analysis.