A portfolio that favors Canadian low-volatility dividend-payers trading at bargain prices has delivered average annual gains of 14.4% over the past 26 years.

Long-term Performance

The portfolio has generated average annual gains of 14.4% over the past 26 years, outperforming the Canadian stock market which climbed at an average annual rate of 7.9% during the same period.

Diversification Strategy

Diversification in the Perch portfolio is achieved by starting with the largest 300 common stocks on the Toronto Stock Exchange by market capitalization. After removing the largest 50 of the 300 companies from consideration, the remaining 250 smaller names are scrutinized for dividend payers, volatility, and positive price-to-earnings ratios.

Risk Management

With a modest annualized volatility of 13.4%, the 20-stock portfolio stands out in terms of diversification and risk management. However, it's important to note that the market experienced a significant drop during the financial crisis of 2008-2009.

The 20-stock Perch portfolio held its ground while the 10-stock low-P/E and high-yield portfolios suffered losses of 37%, 49%, and 45% respectively compared to their former highs.

Investor Insights

Investors should remember that there are no guarantees when it comes to future returns. The Globe Investor newsletter provides the latest investing insights and details on the stocks in the Perch portfolio and the other alternatives regularly covered at the Globe and Mail.