The Champagne portfolio invests in the Canadian stock market after it hits new all-time highs and hides out in Canadian bonds the rest of the time
The Canadian stock market bounced off its October lows and is tantalizingly close to being in the black for the year. So, instead of lumps of coal, investors might dream of new all-time highs while they sip their bubbly this holiday season.. It invests in the Canadian stock market after it hits new all-time highs and hides out in Canadian bonds the rest of the time. I was particularly interested to see how it fared during this year’s unusually bad market for bonds.
The Champagne portfolio invested in the stock index about 28 per cent of the time over the period. It sat in bonds the other 72 per cent of the time. Despite being in bonds for most of the time, the portfolio gained an average of 7.6 per cent annually over the period, which is a big premium to the returns from the bond index.
The stock index generated the worst downside by far. It fell by more than 40 per cent from its prior peak twice. The first time was after the internet bubble popped in 2000, and the second was in the 2008-2009 crash, based on monthly data. The worst downturn for the Champagne portfolio also occurred this year. It fell 15 per cent by the end of October, largely due to the bond market’s decline. On the other hand, the stock index fell 14 per cent from its prior peak this year.
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