Benchmarking and Analysis on the Dividend and Market Cap Based Two-Minute Portfolio Investment Strategy

Two-Minute portfolio aims to be a heuristic investment strategy for conservative investors who prefer a well-diversiVed and less volatile portfolio. The portfolio rebalances to hold top 2 Canadian dividend-paying stocks (by market capitalization) in each of the 10 GICS sectors at 5% weight. Despite the claim that Two-Minute portfolio consistently outperforms the TSX Composite Index in most of the recent 26 years, quiet a few ambiguity is left undeVned by the author. The intention of this project is to backtest the return of the Two-Minute portfolio and compare the strategy with traditional mean-variance optimization framework. This project has shown that 1) although per-year return may be higher for the Two-Minute portfolio, holding the Two-Minute portfolio for a prolonged investment period may not be better oU than holding the TSX Index, 2) risk-adjusted return in the Two-Minute portfolio is not as desirable as the risk-adjusted return in the TSX market portfolio, and 3) the weight in Two-Minute portfolio is not mean-variance optimal when dealing with the correlation between diUerent portfolio securities.