The One-Minute Portfolio update

It’s time for the 20th annual update

The One-Minute Portfolio (OMP) was launched 20 years ago, in 2003, as an experiment to illustrate how easy and low cost it would be for just about anyone to invest in a diversified portfolio. It was updated annually in various publications, such as the Globe and Mail, before moving last year to Investing Journey.

The OMP is made up of just two exchange-traded funds: the iShares S&P/TSX 60 Index Fund (XIU) tracking the top 60 large-cap stocks on the Toronto Stock Exchange and the iShares Canadian Universe Bond Index Fund (XBB) tracking the Canadian bond market.

With the purchase of these ETFs, OMP delivers in “one minute” a diversified portfolio at an annual management fee less than 0.2 per cent.

Here is the update for this year.

In 2022, the OMP returned -9.5%, its worst year yet. The stock and bond markets fell due to the unusually strong burst of inflation unleashed by the one-two punch of government overstimulation of the economy and supply-chain constraints during COVID-19. The loss in 2022 trims the OMP’s average annual return over the past 20 years to 7.1%.

In 2022, the OMP gave an allocation of 40% to XIU and 60% to XBB, based on the market rule discussed in the 2021 update. These allocations remain in place for the coming year.

In 2023, it is expected that inflation will moderate, which should enable XBB to deliver a positive return. This would be a welcome counterbalance to any possible weakness in XIU resulting from an economic recession that could be triggered by the government’s rapid hiking of interest rates to combat inflation.