# G&M Two-Minute Portfolio?



## chantl01 (Mar 17, 2011)

I was wondering if anyone had given any thought to the two-minute portfolio that Rob Carrick has written about in the Globe and Mail today:

http://www.theglobeandmail.com/glob...love-the-two-minute-portfolio/article16282259 (paywall)

I don't recall ever reading about this idea before, but the concept of simply diversifying across each of the ten sectors of the S&P/TSX composite index by buying the two largest dividend-paying stocks in each of the sectors is intriguing. 

Has anyone on CMF done any more in-depth analysis on this approach? The number one reason promoted for this approach is that it has consistently beaten the index over time - at least back to 1986 according to the article.


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## CanadianCapitalist (Mar 31, 2009)

Here's the link to Rob's column that is outside the paywall:

https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20140111/GICARRICKPORTSTRAT0110ATL


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## humble_pie (Jun 7, 2009)

so which of these 20 are crossed to the moneysense list, not to speak of the rob carrick list, the scomac list, the gibor list, the pie list, the argonaut 5-pack list, etc.

i mean, this is canada. You go to the grocery store, they have only 35 grocery items including produce, although hardly any otc drugs.

you say, I'll take 20 of your top sellers.


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## Eclectic12 (Oct 20, 2010)

.... I think I first read about it around 2002 in the G&M.


Cheers


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## richard (Jun 20, 2013)

humble_pie said:


> so which of these 20 are crossed to the moneysense list, not to speak of the rob carrick list, the scomac list, the gibor list, the pie list, the argonaut 5-pack list, etc.
> 
> i mean, this is canada. You go to the grocery store, they have only 35 grocery items including produce, although hardly any otc drugs.
> 
> you say, I'll take 20 of your top sellers.


And five of those products are just the same thing in different colors... blue, green, red, red/gold, and blue/red. Another 7 are just lumps of metal, not an actual product. The shopping around here is not exciting.

Back to the original question, this is my new favorite way to evaluate active strategies: if it underperforms for the next 5 years do you believe in it enough to stick with it? No matter how good something is it will be useless if you keep switching so you have to really believe in it before you do it.

This looks like a dividend investing strategy with no research, forced diversification, and a restriction to only buy Canadian companies. If that's what you want it probably isn't the worst thing to do. Without actually doing statistical correlations I would guess most of the reduced volatility comes from rebalancing into industries like utilities and away from things like energy. You could do this with one fund for each industry (I'm not sure if Canada has jumped into the craze for micro-specialized ETFs yet). Or you could just buy funds in other countries that are more diversified.


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## swoop_ds (Mar 2, 2010)

I'm sure that this would work fine for the Canadian component of your portfolio, just don't forget about the rest of the world and other asset classes.


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## doctrine (Sep 30, 2011)

I have been following this portfolio for a while. It's really a great idea. Diversification is the biggest problem of the TSX Composite; if you move towards more diversification and equal-weights you are bound to lower your risk (as this has proven over the last 10 years).


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## GoldStone (Mar 6, 2011)

humble_pie said:


> so which of these 20 are crossed to the moneysense list


Not a single one.  MoneySense list is mostly mid and small caps. SLF and HSE are the only large caps on the list.


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## Quotealex (Aug 1, 2010)

Why is the real estate sector excluded from their list?


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## GoldStone (Mar 6, 2011)

doctrine said:


> I have been following this portfolio for a while. It's really a great idea. Diversification is the biggest problem of the TSX Composite; if you move towards more diversification and equal-weights you are bound to lower your risk (as this has proven over the last 10 years).


I agree. I really like the idea.

The only reservation I have: you can't DCA 2MP. The fees will quickly add up. The idea is more suitable for large, static portfolios.


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## My Own Advisor (Sep 24, 2012)

Agreed. You'd need a good $100k (if not double) to run this portfolio, that's one downside I see. The other, mentioned above, no REITs like RioCan, HR.UN, CUF.UN, etc. 

For diversification, own VTI, an ex-US ETF and some bonds and you're pretty much there.


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## doctrine (Sep 30, 2011)

Quotealex said:


> Why is the real estate sector excluded from their list?


Real estate, under GICS, is considered Financials. 

http://en.wikipedia.org/wiki/Global_Industry_Classification_Standard



> You'd need a good $100k (if not double) to run this portfolio


The turnover is lower in this portfolio than you might think. As stated in the article, on average 5 buys and 5 sells are required per year. In a Questrade account, that would be ~0.1% in fees on a $50k portfolio. 

If nothing else, it's good to take a look at the smaller sectors on the TSX, like medical and technology, to see what the largest companies there are even though they aren't in the TSX 60.


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## fatcat (Nov 11, 2009)

doctrine said:


> I have been following this portfolio for a while. It's really a great idea. Diversification is the biggest problem of the TSX Composite; if you move towards more diversification and equal-weights you are bound to lower your risk (as this has proven over the last 10 years).


agreed on diversification over the 10 sectors, i do this by using usa stocks for staples, health care, tech and cons discretionary and i get financial, energy, utilities, telecom and industrials from canada

but i certainly don't equal weight since these sectors vary widely as a percent of total stocks

do you actually equal weight or just come close ? ... if you actually equal weight why do you do so ?

i cannot understand equal weighting say financials with say utilities since they represent such different percents of the total stock universe


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## Argonaut (Dec 7, 2010)

Like the initial theory somewhat, but it lacks in execution. The hard and fast rule of the two largest companies is bringing it down. It will probably pick up Telus over Rogers next year, but only after years of outperformance by the better company is missed. Myself, I would of course cut it down to one per chosen sector and not every sector at that. Which I've done; practice what you preach and all that.


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## GoldStone (Mar 6, 2011)

Argonaut said:


> The hard and fast rule of the two largest companies is bringing it down. It will probably pick up Telus over Rogers next year, but only after years of outperformance by the better company is missed.


2MP track record speaks for itself. One cherry-picked example doesn't invalidate the idea. Hindsight is 20/20.



Argonaut said:


> Myself, I would of course cut it down to one per chosen sector and not every sector at that.


Ummm, sorry, I like 2MP idea much better


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## protomok (Jul 9, 2012)

2014 was another fantastic year for the 2M portfolio, outperforming the TSX in 2014. Here's a quote from the G&M article (http://www.theglobeandmail.com/glob...s-not-likely-to-happen-again/article22387835/):


> The 2MP is an ongoing experiment in quick and dirty portfolio building that requires you to do nothing more than invest equal amounts in the two largest dividend-paying stocks in each of the 10 sectors in the Canadian stock market. This strategy produced a return of 23.95 per cent this year, while the S&P/TSX composite index made 10.55 per cent.


I would even argue that the 2M portfolio is less risky than a TSX index fund since 2M carries only the largest companies in each sector and is more diversified across the various sectors.

I'll be sticking with indexing but I would not be surprised to see the 2M portfolio turn into an ETF one of these days.


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## Argonaut (Dec 7, 2010)

Still could use a little common sense application. Like I said last year, it was bound to pick up Telus over Rogers this year and it has. Brief analysis shows that Rogers is a garbage stock compared to Telus. All said, not a bad portfolio for 2015 but too many stocks for my liking.


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## MrMatt (Dec 21, 2011)

Argonaut said:


> Still could use a little common sense application. Like I said last year, it was bound to pick up Telus over Rogers this year and it has. Brief analysis shows that Rogers is a garbage stock compared to Telus. All said, not a bad portfolio for 2015 but too many stocks for my liking.


But what about Telus vs BCE.

My only Telecom is Cogeco, which looks like it was a good bet.


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