[Eder]

I've run my daughters 6 pack for years now....its 6 figures with a CAGR over that period of ~21%. Concentrated on the best in class on TSX will produce outsized returns if your horizon is appropriate.
Don't buy individual bonds...the juice will negate the returns. Don't buy a bond ETF...same reason.
Better to get an EQ account and buy a GIC there at least it matches Canada's imaginary inflation rate.

 

[james4beach]

Think of it. Each stock in a 5 pack represents 20%. Full stop. We don't need to go any further. The 5-Pack could be used for "walking around money", but shouldn't be seriously considered for anything else.

It can't be the whole portfolio. I would never put all my equity in the 5-pack. I have mentioned it before way back on the first page of this thread from five years ago: I have many other equities in addition to my 5-pack.

Each position in my 5-pack is about 6% of my overall equities and only 2% of my total investments.

So that's how concentrated I am ... each position such as ENB is just 2% of my overall. Everyone has to watch out for their concentrations and diversifications.

 

[scorpion_ca]

I've run my daughters 6 pack for years now....its 6 figures with a CAGR over that period of ~21%. Concentrated on the best in class on TSX will produce outsized returns if your horizon is appropriate.

Would you mind to share the name of stocks in her 6 pack?

 

[Eder]

Atm she has Royal Bank,CNR,BCE,PBH,TRP, Brookfield Renewable Partners along some BEPC due to that split awhile ago.Hope no one takes any of these as a recommendation.

 

[james4beach]

Here's the YTD performance:

5 pack: +22.1%
XIU: +22.8%

Smart, because the "5-Pack" is a disaster waiting to happen in my opinion

I disagree about disaster waiting to happen. These are the largest weights in the TSX and they tend to be a stable bunch. In my historical back test, the worst disaster was Bombardier crashing 94% in 2001/2002... a total wipeout. But the 5-pack actually outperformed the TSX in those years, thanks to its good sector diversification.

What you're missing is that if one of the top TSX holdings (like Bombardier in 2001) gets wiped out, then the TSX is in crisis and the whole thing is crashing. When the whole market is in crash mode, the largest caps are still more stable than the rest of the market. Add the equal sector weighting and you gain even more stability. The same was true during the 2020 crash, when my 5-pack didn't fall as much as the broad market.

So I don't lose any sleep over this. If the method was able to handle Bombardier crashing 94%, it's probably going to be OK.

Everyone should do their own research and come to their own conclusions though. I'm just saying that I'm comfortable with it.

 

[james4beach]

Full year 2021 performance for my 5-pack (RY, ENB, CNR, BCE, FTS)

5 pack: 25.1%
XIU: 27.9%

That's a bit of underperformance versus my benchmark XIU but the performance is actually identical to XIC which was 25% as well. So the 5-pack continues to perform on par with the TSX. I did a bit of rebalancing on my positions and got them back to equal weights across the 5 stocks.

 

[Covariance]

Full year 2021 performance for my 5-pack (RY, ENB, CNR, BCE, FTS)

5 pack: 25.1%
XIU: 27.9%

That's a bit of underperformance versus my benchmark XIU but the performance is actually identical to XIC which was 25% as well. So the 5-pack continues to perform on par with the TSX. I did a bit of rebalancing on my positions and got them back to equal weights across the 5 stocks.

Looks good James. As a matter of interest do you systematically consider the 5 components or is this more of a permanent, set and rebalance type strategy?

 

[james4beach]

Looks good James. As a matter of interest do you systematically consider the 5 components or is this more of a permanent, set and rebalance type strategy?

Thanks! I should add that it skews to the largest caps in Canada, by design.

Yes it's fully systematic and comes straight from the TSX 60 composition. The entire procedure is described in post #190 of this thread, linked below. This results in very low turnover, so positions are mostly long term, but there is a provision there to kick out a failing stock.

In this post you can also see the historical 5 pack composition. I think you will see that it was always a sensible looking collection of top TSX stocks. For example in 2005 it would have held: ECA, RY, CNR, BCE, TA

"5 Pack Approach"

I personally don't like the idea of clinging to a stock once XIU says otherwise. It's definitely a matter of personal taste, but I'm in the camp of mirroring XIU (passive indexing) rather than diverging the portfolio from it. Already in this methodology, even with the occasional swapping or...

www.canadianmoneyforum.com

 

[Covariance]

Thanks! I should add that it skews to the largest caps in Canada, by design.

Yes it's fully systematic and comes straight from the TSX 60 composition. The entire procedure is described in post #190 of this thread, linked below. This results in very low turnover, so positions are mostly long term, but there is a provision there to kick out a failing stock.

In this post you can also see the historical 5 pack composition. I think you will see that it was always a sensible looking collection of top TSX stocks. For example in 2005 it would have held: ECA, RY, CNR, BCE, TA

"5 Pack Approach"

I personally don't like the idea of clinging to a stock once XIU says otherwise. It's definitely a matter of personal taste, but I'm in the camp of mirroring XIU (passive indexing) rather than diverging the portfolio from it. Already in this methodology, even with the occasional swapping or...

www.canadianmoneyforum.com

Thanks James appreciate the link to the detail. Most interesting.

 

[MrBlackhill]

@Covariance Other documented strategies to beat the TSX are

1) BTSX (Beat the TSX, basically the Canadian "dogs of the Dow")

• Sort the TSX 60 by dividend yield
• Pick the top 10 highest dividend yields
• Repeat every year

Beating the TSX - finiki, the Canadian financial wiki

www.finiki.org

2) The 2-minute portfolio, which is similar to this 5-pack approach, but instead it picks the top 2 in each of the 11 subgroups.

The simple stock-picking strategy that beats the TSX long term by playing good defence

It’s time to make changes to the Two-Minute Portfolio

www.theglobeandmail.com

 

[Covariance]

@Covariance Other documented strategies to beat the TSX are

1) BTSX (Beat the TSX, basically the Canadian "dogs of the Dow")

• Sort the TSX 60 by dividend yield
• Pick the top 10 highest dividend yields
• Repeat every year

Beating the TSX - finiki, the Canadian financial wiki

www.finiki.org

2) The 2-minute portfolio, which is similar to this 5-pack approach, but instead it picks the top 2 in each of the 11 subgroups.

http://[URL]https://www.theglobeand...king-strategy-that-beats-the-tsx-long-term-by

/[/URL]

Mr Blackwell; Thanks for this. In this case I'm intrigued with James portfolio for one of my projects which has a slightly different objective. From time to time I add market/beta exposure to use excess cash that's built up. As cash is zero beta it's a drag on performance so with a trade or two I put it work until I invest in a target name, or go risk off. Since late last year I switched to a 50/50 SPY/TSX for beta with the Canadian component meant to increase cyclical/commodity exposure. It's not really ideal because of the tech exposure that comes with the TSX. So, I've been assembling a carve out module. Hope this makes sense.

 

[james4beach]

It's not really ideal because of the tech exposure that comes with the TSX. So, I've been assembling a carve out module. Hope this makes sense.

Interesting concept. Well as you may have detected, I hand picked the TSX sectors I like, and didn't include tech. The main reason is that Canada does not have a mature enough tech sector to provide well established, mature or rock-solid tech companies.

At times I've asked myself if I made a mistake by excluding tech, but I think it was the right move. Look at how SHOP sticks out in the TSX as a single, abnormally high weight. I'm glad that I'm excluding it.

 

[hfp75]

Who won the tortoise or the hair ?

 

[Covariance]

Who won the tortoise or the hair ?

The hare.

 

[james4beach]

Since the TSX peak of November 15,
XIU is down 3.3%... possibly due to the heavy position in SHOP which alone is down 43% at this point

Meanwhile my 5-pack over the same period is up 2%. It's definitely faring better during this market volatility. In the past two months, we seem to be seeing a rotation out of the "get rich quick" stocks. If things continue like this, my 5-pack should outperform the TSX this year.

 

[james4beach]

Crazy times in markets, but the Canadian stock market is holding up very nicely so far and the 5-pack is beating the market.

YTD: the 5-pack is +3.3%, vs XIU -0.3%
1 year: the 5-pack is +27.5%, vs XIU +22.5%

This outperformance may be happening because there's no tech in the 5-pack. And I like this stability during the market turmoil.

I have about 120K in my 5-pack.

 

[james4beach]

My 5-pack is still holding up better than the TSX index. Though, we should keep in mind that the whole TSX index has held up quite well this year and isn't crashing like American and European stocks.

This year so far (YTD), XIU down -1.7% while the 5 pack is up +4.6%