Have you ever wondered what an ETF portfolio might look like?
In this blog post, I’ll show you how simple an ETF portfolio can be. And to do so I’m going to introduce you to my friends, John, Jane, and Jimmy.
John likes to play things safe. He’s always on the lookout for what could potentially go wrong and he shares the same attitude when it comes to investing. Volatility makes him uncomfortable so he likes to invest his money primarily in bonds.
Jane, on the other hand, accepts that volatility in her portfolio is necessary to achieve the higher returns she wants. She’s a sensible lady so she elects to invest in a 60/40 split of equities to bonds.
And Jimmy, well he doesn’t care what the market throws at him right now cause he’s in it for the long haul and he wants every bit of return he can squeeze out of his portfolio. This is why he chooses to invest 100% in equities.
Each of my friends have managed to accumulate $50,000 in their mutual fund TFSAs and have just discovered my blog. They are eager to switch over to an ETF strategy and are curious which ETFs they should invest in.
Being a fan of the iShares core etf funds I point them to Blackrock’s website and suggest they start by looking into the asset allocation ETFs, which Dan Bortolotti offers an excellent introduction to here.
After some careful consideration John settles on a single holding using XINC for his entire investment. He thinks the global diversification is worth the little bit of volatility he may experience with 20% in equities.
Jimmy, the polar opposite of John, falls in love with XEQT, a 100% equity portfolio split over several broad market indexes. He faithfully allocates his entire $50,000 to the new ETF strategy.
And somewhere in between John and Jimmy’s selections, we see Jane decided to put her $50,000 solely in XBAL, a healthy mix of 60% equities and 40% bonds.
Just One Fund?
That’s right my friend. You can be a DIY investor and enjoy a globally diversified portfolio, with an asset mix that lets you sleep at night, by holding a single ETF.
And the best part?
Each one of these portfolio ETFs comes with a tiny MER of just 0.2%, and does all the rebalancing work itself.
When the asset mix of these funds start to sway from target allocations, they will automatically sell off holdings that have increased and purchase ones that have decreased, re-aligning itself with your chosen strategy.
The only thing you need to do is make the purchases, and stick to your plan.
On July 15th 2021, John, Jane, and Jimmy coincidentally all made a purchase for their chosen fund at the median price for the day. Let’s see how they did it.
The median price for XINC on July 15th was about $21.30, letting John purchase 2,347 shares for a total purchase price of $49,991.10.
Jane was able to purchase 1,842 shares of XBAL, as the median price on July 15th was about $27.14. This led her to a final purchase price of $49,991.88.
All the while Jimmy snagged 1,897 shares of XEQT totalling $49,985.95 due to the median price being about $26.35 on July 15th.
You may have noticed that I didn’t account for commissions on their purchases and assume they likely would have had to buy 1 less share each to pay for their trades. But don’t forget, these friends have read every post on this blog twice, and have followed the steps to open an account with Questrade here, so they are taking advantage of the commission free ETF purchases that Questrade offers.
As you may have guessed, John, Jane and Jimmy are fictional characters. In an effort to showcase some real-life scenarios, I am going to track my imaginary friends’ portfolios each month and share the results.
As the months go by the three Js will consistently contribute money into their accounts, and their investment situations will grow relatively more complicated.
This will give me an opportunity to weave new concepts that I write about in other posts, into the lives of my three pals, and hopefully give you more insight into how to apply the DIY techniques in your own life.
Here’s where my friends stand today:
|Friend||Fund||Contribution||Shares *||Share Value +||Cash =||Portfolio Value|
If you have any suggestions or feedback about John, Jane or Jimmy I would love to hear about it!
Just comment below or reach out through my contact page, and don’t worry, my feelings won’t be hurt if you’d rather just call me lame.