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Guide to the 2-Minute Portfolio

Too busy to manage your own investments, but unfulfilled by ETFs and mutual funds?

A surprisingly simple investment method will protect your time and produce rewarding returns


Dilemma

For many years I managed my modest stock market investments. I learned two lessons from doing that.

Lesson 1. Busy with a family and an interesting non-financial career, I didn’t have time to capably handle my investments.

Lesson 2. I had lots of ideas about what to buy, but I agonized about when to sell. I made lots of mistakes.

Eventually, I abandoned this personal approach and outsourced investment decisions to fund managers. Their fees seemed low and a good value in terms of saving my time.

However, over the years I slowly came to some disquieting realizations about outsourcing investment management.

-- My fund investments didn’t do badly, but they always seemed, well, average at best.

-- I missed features of owning individual stocks, such as reduced taxes on dividends, and feeling involved.

-- Monthly reports, if I took the trouble to read them, were opaque and uninformative.

-- Even when the fund lost money I had to pay management fees.

-- Those small-percentage management fees, when expressed in dollars, were surprisingly large.

-- Management fees were largely determined by the amount under management; the value added by fund performance was small.

Even so, I didn’t abandon managed funds because of my misgivings. I was still too busy to manage my own investments -- until I read a newspaper article.


Alternative

In that article, financial writer Rob Carrick reviewed the prior year’s results for a stock ownership method he called the 2-Minute Portfolio, or 2MP for short.

It’s not a product that you can buy, but an investment system for owning stocks in a diverse portfolio of large, publicly owned companies.

It provides guiding principles for what to buy and when to sell. For me, selling was the hard part.

It can be started quickly, adjusted annually, and mostly left alone.

It fits in the passive investing tradition, which emphasizes diversification, minimal trading, and holding stocks for a long time.

The 2MP offered the positives of individual stock ownership without demanding too much time. That was what I was seeking.


Performance

Rob Carrick first articulated the 2MP method in 1999 and applied it to the Canadian stock market.

Every January he reports on the Portfolio’s annual performance with independent analytic help from Chicago's Morningstar investment research firm.

In 2019, Carrick reported Morningstar’s analysis of 30 years’ of Portfolio’s performance through 2018. They compared it to that of the average managed fund and to a key market index, the Standard & Poor’s composite index for the Toronto Stock Exchange.

It bested both benchmarks with an average 10-year rate of return of 9.9%.

In his next update Carrick reported on 2019, which was an unusually good year for the Canadian market. 2MP’s performance that year, +19.4%! Good, but not as good as the overall market index, 22.9%.

However, the 2MP outperformed the composite over 3-, 5-, and 10-year time spans.

Such results support the conclusion that you can do very well over the long term with the 2-Minute Portfolio.


Roadblocks

Despite the Portfolio’s good performance, some practical factors have discouraged adoption of the 2MP.

-- Access to necessary stock selection information has not been easily available except in Carrick’s January column.

-- Trading stocks through a broker is unfamiliar and daunting to most prospective 2MP investors.

-- Fixed per-trade brokerage fees add up. They could total more than $200/year for the 2MP, which greatly reduces returns for the small investor.

Such roadblocks have probably limited the number of potential 2MP investors in the past.


Solutions

The investment world has changed dramatically since 1999. Computerization has revolutionized market trading, so it’s now both easier and cheaper.

The following specific changes have made it easier to adopt the 2-Minute Portfolio.

-- Free, but somewhat obscure, online tools for screening stocks are now available.

-- Competing online brokers make it very easy to set up a brokerage account and make trades by the glow of your computer screen.

-- Free stock trading is now offered by some brokers, which eliminates the only cost of the 2MP.

Free trading, online stock screening, and low-friction brokerage services bypass the roadblocks.

Now your only cost is time, the time it takes to set up and administer your Portfolio.


Needed

Implementing a 2-Minute Portfolio sounded simple, but it took more time than I expected.

Someone, I thought, should create a do-it-yourself guide about the 2MP method. Such a guide would save the beginner a lot of time.

That someone, I then realized, is me. The result is the Guide to the 2-Minute Portfolio.

Interested in inexpensive do-it-yourself investing?  Read on. The method has Canadian roots, but its principles can be applied elsewhere.

The Guide explains how to set up the method on your own.

It can be started quickly, adjusted annually, and left alone.

It fits in the passive investing tradition, which emphasizes diversification, minimal trading, and holding stocks, often for a long time.


Trust

If you’ve read this far, you should be asking, “Who is this guy and can I trust his information?”. Well, you can. Learn more about me here.

If you checked, you know that I’m not a finance professional.

That lack of expertise isn’t crucial because well-qualified finance geeks developed the 2MP method.

More crucially, the method has been back-tested over 30 years by an independent research organization.

If it’s so great, why haven’t I heard of 2MP before?

You haven’t because there’s nothing to sell, no maintenance fees, and no incentive to promote it.

I’m not rich, nor trying to become so (translation: not trying to rip you off).

My personal goal is to earn a good return so that I have time for other interesting pursuits. The 2MP has helped me towards that goal.

It must be the educator in me. I enjoy sharing useful information, so I created this Guide.


Risk

Want to get rich quickly?   The 2MP is not a good choice. Quick wealth usually requires wealthy parents or riskier bets. Go elsewhere. Good luck.

The 2MP limits risk through diversification, but it won’t prevent losses if there’s a broad market decline.

The previous 30-year graph shows years where the 2MP lost value. That will almost certainly happen again.

Only try the 2MP if you can wait out market dips and believe that successful companies will grow more valuable over the long run.

Lastly, don’t invest in 2MP without first paying off debts and having savings to cover unexpected emergencies like ... hmm … a pandemic.


Fit

It’s nice that you’re still here. To make a decision about 2MP, ask yourself the following questions:

-- Do you want to invest money for your future?

-- Are you cautiously optimistic about your country’s economy?

-- Can you tolerate downturns in the stock market?

-- Do you like to do things yourself?

-- Are you willing to spend a few hours on your portfolio annually?

-- Are you OK with opening a discount brokerage account?

-- Will you be satisfied if you don’t get rich, but obtain solid, investment results?

If all -- or most -- of your answers are Yes, You should buy the Guide to 2-Minute Portfolio.


Deliverables

If you do buy the Guide, you’ll learn the following:

-- What you need from a broker (not much, just basic trading);

-- The five simple rules to guide your stock investment actions;

-- How to use a free online tool to apply those rules to company selection;

-- The minimum investment amount needed for your 2MP;

-- How to screen stocks based on your portfolio’s size;

-- Implementation of any ethics-based company exclusion criteria;

-- How to save your screening criteria for later updates;

-- The necessary calculations needed for your initial purchases;

-- Tips for when and how to place your buy orders;

-- Creation of a watchlist to minimize errors and facilitate data entry; and

-- Specific steps needed for successful rebalancing; and

-- The use of an included calculator for annual rebalancing trades.

The Guide’s pages are filled with comprehensive, illustrated instructions for exactly what you need to do.


Conclusion

The 2-Minute Portfolio follows a DIY investing tradition that emphasizes low costs, diversification, and holding stocks for a long time.

It’s an investment method that has low or no fees, can be implemented quickly, reviewed annually, and mostly ignored. Most importantly, it has a 30-year track record of very good performance.

2MP concepts can be quickly grasped, but their implementation will be trickier than you expect. Believe me; I know from firsthand experience.

Serious about starting a 2MP?

Buy the Guide.

The hours you save will be well worth its price.

To your success,

Warren

Warren Eaton, Winnipeg, Canada

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  • This DIY stock investment method has averaged a 10.4% annual return (gains + dividends) for more than 30 years. Using this book and free web tools, you’ll learn how to select, buy, and sell large, successful publicly traded stocks to create a diversified portfolio. You’ll need to spend a few hours per year, and your trading costs will be negligible or free.
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    Thanks for your support. I hope you find the information useful.

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    If you have any questions, suggestions, or concerns, contact me at woe@warreneaton.com.

    Regards, Warren Eaton

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