Here are the 2013 performance figures for my Model Portfolios. Last year was one of stark contrasts: huge returns in stocks combined with dismal bond performance. But for anyone who had a balanced index portfolio, the returns would likely have been in the double digits.
As it turns out, the Global Couch Potato and the Über-Tuber performed almost identically in 2013, which can only be attributed to coincidence, since their asset mix is very different. The Complete Couch Potato, on the other hand, dramatically underperformed. That’s easy to explain: the Complete includes three asset classes absent in the Global Couch Potato—real-return bonds, real estate and emerging markets—and they were all duds in 2013.
There were a few other remarkable events in the markets in 2013:
- The long-predicted rise in interest rates finally came in the spring, leading to the first negative year for the DEX Universe Bond Index since 1999. It’s easy to say this wasn’t a surprise, but let’s remember commentators have been forecasting rising rates since early 2010 and were wrong for three-and-a-half years.
- Real-return bonds had their second-worst year since they were created by the Government of Canada 22 years ago. Only 1994 (–13.7%) was worse, and not by much. Rising rates on long-term bonds and lower-than-expected inflation was a double whammy that dragged their prices down.
- The extraordinary returns in US stocks (over 33%) coincided with a strengthening US dollar, which gained almost 7% against the loonie. The result was a once-in-a-generation return of almost 43% in the broad US market for Canadians. I have data for the Wilshire 5000 Index going back to 1975, and there has never been a year with higher returns when measured in Canadian dollars.
| Global Couch Potato (ETF Option) | Â % | Â Return |
| BMO S&P/TSX Capped Composite (ZCN) | Â 20% | 12.8% |
| iShares MSCI World (XWD) | Â 40% | 33.9% |
| iShares DEX Universe Bond (XBB) | Â 40% | -1.5% |
| 15.5% | ||
| Global Couch Potato (TD e-Series) | ||
| TD Canadian Index – e (TDB900) |  20% | 12.5% |
| TD US Index – e (TDB902) |  20% | 40.3% |
| TD International Index – e (TDB911) |  20% | 29.6% |
| TD Canadian Bond Index – e (TDB909) |  40% | -1.6% |
| 15.9% | ||
| Global Couch Potato (Mutual Funds) | ||
| RBC Canadian Index (RBF556) | Â 20% | 12.2% |
| TD US Index – I (TDB661) |  20% | 40.0% |
| Altamira International Index (NBC839) | Â 20% | 28.1% |
| TD Canadian Bond Index – I (TDB966) |  40% | -2.0% |
| 15.3% | ||
| Complete Couch Potato | ||
| BMO S&P/TSX Capped Composite (ZCN) | Â 20% | 12.8% |
| Vanguard Total Stock Market (VTI) | Â 15% | 42.7% |
| Vanguard Total International Stock (VXUS) | Â 15% | 23.1% |
| BMO Equal Weight REITs (ZRE) | Â 10% | -4.6% |
| iShares DEX Real Return Bond (XRB) | Â 10% | -13.4% |
| iShares DEX Universe Bond (XBB) | Â 30% | -1.5% |
| 10.2% | ||
| Ãœber-Tuber | ||
| iShares Canadian Fundamental (CRQ) | Â 12% | 15.6% |
| iShares S&P/TSX SmallCap (XCS) | Â 6% | 7.2% |
| Vanguard Total Stock Market (VTI) | Â 12% | 42.7% |
| Vanguard Small Cap Value (VBR) | Â 6% | 46.0% |
| iShares MSCI EAFE Value (EFV) | Â 6% | 31.1% |
| iShares MSCI EAFE Small Cap (SCZ) | Â 6% | 38.1% |
| Vanguard FTSE Emerging Markets (VWO) | Â 6% | 1.6% |
| SPDR Dow Jones Global Real Estate (RWO) | Â 6% | 10.0% |
| BMO Mid Federal Bond (ZFM) | Â 20% | -2.4% |
| BMO Short Corporate Bond (ZCS) | Â 20% | 2.1% |
| 15.0% | ||
The data above were gathered from fund websites whenever available: otherwise I used Morningstar. Returns for US-listed funds are expressed in Canadian dollars using exchange rates from the Bank of Canada.
Update: The returns for the the two versions of the TD US Index Fund (38.6% and 38.4%, respectively) are incorrectly reported on the TD website. After a reader tipped me off to the fact they appeared very low compared to the index, the intrepid Justin Bender noticed that TD’s numbers did not include all dividends in the fund’s total return. I’ve updated the tables above with numbers from Morningstar.
With Justin’s help, I am updating the long-term Couch Potato performance report card now: we have expanded the report card to include 20 years of data using a combination of actual fund returns and index data. Stay tuned.
Hi,
Any chance you have a list of transactions for each different portfolio that you are tracking? Could you share them? I am looking for deposit/buy/sell transactions, so I can build portfolio performance reports.
@PS: These numbers simply take the published fund returns for the year and weight them according to the target allocation. No cash flows or buy/sell transactions are considered.
I’d like to suggest a single fund alternative to your model portfolios. “Mawer Balanced Fund”, is a globally balanced mutual fund with outstanding long term performance since it’s inception in Feb. 1988. It’s a fund of funds comprising many of the other funds Mawer offers. The MER is 0.95%.
The fund is well diversified with roughly equal proportions of Canadian, U.S. & Int’l equities comprising 65% of the fund,. Fixed income makes up 30% of the asset mix and cash/short term about 5%.
The 1, 3, 5, 10, 15 & 20 year performance returns are 20.2%, 11.3%, 12.0%, 7.8% & 8.0%. These returns exceed the “International Balanced Benchmark” numbers and all of the “Couch Potato” portfolio performances.
@ Bernie
That was addressed in the last article….
Canadian Couch Potato January 9, 2014 at 8:16 am
@vanbc: Mawer has a long record of prudent low-cost active management and I have a lot of respect for them, but these portfolios are designed for index investors. It’s like asking a vegetarian restaurant why they don’t have steak on the menu. The point is not that steak is bad: it’s just not vegetarian.
There’s also a practical issue to consider. I generally present the Streetwise Portfolios as an option for new investors with small portfolios. The Mawer funds either require you to open a discount brokerage account and invest a minimum of $5,000 or so (varies with the brokerage) or invest directly with Mawer with a minimum of $50,000. Neither arrangement is ideal for the beginning investor.
@CCPC
I think it’s important to put a disclaimer somewhere in the article that the return is calculated by assuming you buy one of the model portfolios in proper weighting, on the first trading day of 2013, and not add any new money for the entire year.
I had the same misconception as PS, until I realized that everyone buys and rebalances at different time, so no two portfolios are alike.
@Dabid L: This is the way all portfolio and fund returns are calculated. Clearly every investor’s personal rate of return will be different. I will be following up soon with a post about how to calculate your personal rate of return in a way that accounts for cash flows.
@Ben: Right you are! I obviously missed reading the last article’s comments.
After looking over these numbers and the possibility that interest rates may rise this year does a person bail out on XRB and put it all in XBB instead?
@gerald: No you do not bail out. Keep calm and carry on, i.e. rebalance and stick to your investment policy.
How do you explain the step lag between TDB911 and NBC839?
[I may be missing the obvious] Do these returns look at capital gains/losses, or do they include distributions?
Dan, how is in Complete Couch Potato portfolio annual return on VTI 42.7%? According to data on Vanguard website 1 year NAV is 33.51% as of 31/12/2013. With 15% asset allocation how did you arrive to 42.7%??
Thank you
@Francis: No way of knowing that until the reports are published in February or March. The Altamira fund uses index futures rather than holding the stocks directly, which may have resulted in higher tracking error.
https://canadiancouchpotato.com/2011/07/14/why-do-index-funds-use-derivatives/
@David: Published fund returns always include price changes and distributions, which are assumed to be reinvested. So even if you held all of ETFs funds in the right proportions on January 1 you still would not have received the exact return the funds unless you had DRIPs set up on everything (and even then it would be off slightly because only full shares can be DRIPped).
@Gordon: The returns on US-listed ETFs are given in Canadian dollars, and the appreciation of the US dollar boosted returns for Canadian this year. The math is explained here:
https://canadiancouchpotato.com/2013/01/07/calculating-foreign-returns-in-canadian-dollars/
The total return at the bottom of each portfolio (in bold) is the weighted average of the individual fund returns. So in the case of VTI, the return was 42.7% and the allocation was 15%, so VTI contributed 6.4 percentage points to the Complete Couch Potato’s return (42.7 x 0.15 = 6.4).
This is the standard way of reporting portfolio performance.
@ Gordon – That 33.51% is the performance in US$. But as Dan noted in the post, there was also a significant strengthening of the US$ vs. the C$.
@Gerald – Think of XRB as being on sale – you should be thinking that you want to buy more of it, rather than bailing out! You do this by rebalancing the portfolio which forces you to sell what has increased and buy what has decreased.
I know, USD is up 6.9% relative to CAD over the course of the year. 33.51% is return in USD if you held 100% of VTI. However, only 15% is allocated to VTI in Complete Couch Potato portfolio which would make return to be 5.026% in USD. Am I doing something wrong??
OK I got it now. Thank you Dan.
@Gordon: No worries, glad it makes sense now. I updated the post with the allocations, which may help make things clearer.
Hi Dan
Is there any way of checking how much room we have in our TFSA? I want to top up my husband’s TFSA but he can’t remember how much room he has left.
thanks!
Cheers, here’s to a great year. I’m a new newer Couch Potato / more recently reformed investor, and psycologically, this was certainly a pleasant, smooth year in which to invest. I recognize they won’t all be that way, so wishing myself and all you fellow Potatoes the calmness and fortitude to ride out any storms ahead.
@newb: You can check this with CRA:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/cntrbtn-eng.html
@Mike D. Thank you for the advice of thinking of XRB as “on sale” I’m coming up on my first year with the Complete Couch Potato. My plan is to contribute and rebalance once a year. All I can think of is dumping XRB, but now it looks like I will be investing more in it! Scary, but I will stick with the plan.
For some anecdotal/real-world data, I follow the Complete Couch Potato and achieved an XIRR of 15.5% in 2013.
Dan – thanks so much for everything you do to advocate on behalf of, and promote the usage of the Couch Potato Portfolio. Your site has been an invaluable resource over the years.
@David: Nice result: it means you executed your plan with discipline.
@Arthur and others concerned about XRB: The usual advice about rebalancing always applies. If you bought RRBs in 2012 when their real yield was about 0.3% it’s hard to imagine why you would avoid them now that it has moved up to about 1.2%.
https://canadiancouchpotato.com/2013/09/16/ask-the-spud-should-i-fear-rising-interest-rates/
But this might be a good time to remind investors that real-return bonds have a very long duration (15+ years), so they are only appropriate for long-term savings. They’re not something you’d buy in an RESP that will be redeemed in five years, for example.
Hi CCF,
With regard to “newb” above, it has been an ongoing minor frustration that I
am not able to get my remaining TFSA space available at any given point of the
year. For 2013, the only way to obtain this information is to have kept track of
it yourself, to contact the brokerage you deal with, or wait until possibly February
for this information to be mailed to you for tax purposes. Since the brokerage is
only required to supply this material in 2014, do you not think that it might make
more sense to require the brokerage to supply this data immediately and regularly
to the government? This would make it easier to make your new 2014 contribution
at the beginning of January and avoid any 1% penalty.
Thanks,
Ross
Hello Again CCP and thanks for posting these numbers. For someone starting out, how should I go about deciding between the Complete and the Global CP portfolios? The difference is adding in some REITs and RR bonds, and that seems to make a difference when looking at the long term values. If someone is over $50,000 in assets are they better off in the global, while under is better in the complete? Or is it all due to the experience level and comfort of the investor?
I maxxed out my TFSA and followed the Global Couch Potato. Now its time to put another 5500 in and I am wondering about rebalancing. When setting it up I did a 25% split between all 4 indexes, to get everything back to 25% I will need to basically invest half of that $5,500 back in the bond fund. Just wanted to make sure this is what should be done, or should I be weary of putting anything in to the bonds? The whole bond situation is confusing me a bit, I am showing a loss, will this continue to worsen?
Also, does anyone know how through TD I can view historical data? For example I cant see go back into early last year and see what I paid for each equity.
@MoneyMatters: Someone just starting out is generally better off keeping things nice and simple with the Global CP. Once you’re very comfortable with managing the portfolio you can always add a couple of additional asset class later.
@ninian: If you’re investing for the long term and following a disciplined rebalancing schedule, you will always be buying whatever has gone down or underperformed, and occasionally selling what has gone up. It’s difficult, no question. But there are only two alternatives: chasing performance by buying whatever has gone up recently, or trying to forecast future returns. Neither of those alternatives are kind to investors.
Bonds experienced negative returns this year, and that could happen again next year. But you should be aware that just because the price of your bond fund is declining you aren’t necessarily losing money, because this ignores the interest payments you’re receiving:
https://canadiancouchpotato.com/2013/08/07/is-your-bond-fund-really-losing-money/
Dan, this is a bit off topic, but … I just noticed that this CCP blog is four years old today. Through this time, you’ve researched and posted over 400 educational gems and responded thoughtfully to thousands of reader comments. Your tireless efforts have have had a big impact on improving the financial awareness and knowledge of countless Canadians, including me. I’m sure I speak for many – a heartfelt Thank You for your commitment to maintaining this most excellent forum!
@TJ: Many thanks for that. 400 articles? Geez, no wonder I never get enough sleep. :) Glad to be able to help, and many thanks to all the readers who have posted so many thoughtful comments and asked so many great questions.
I second TJ… I’ve been investing since 2009 and without this blog, I would be a far less knowledgeable investor. Plus, this blog is truly well run with a solid followup on comments that include all kinds of questions, so it’s priceless.
Overall, thanks CCP !
Your perfect portfolio book been a true revelation for me back in 2010. I was looking for a book to teach me about how to built a portfolio and I don’t think a could buy a better book than your. Because of that book my portfolio when from expensive active mutual fund to passive mutual fund then ETF when my portfolio got bigger. Since 2010 I came from a low 5 figures portfolio to a low 6 figure portfolio and you deserve almost all the credit for it. The strategies that you teach are so simple a release most of the second guessing when put new money and facilitate action toward accumulating wealth.
I like your blog so much that would pay to see it but please leave it free. ;)
Great Post!
I’ve had the Global Portfolio since 2007 (after reading some of Daniel Solin’s books). A few years ago, I was tempted to move to an Uber Tuber model after meeting an advisor who uses DFA funds. Although I learned that I prefer to invest by myself (and that I specifically would not gain value from the management fees if I used her services), I still left the meeting thinking I might be missing some of the value and small cap tilt in my portfolio.
However, this blog continues to answer my questions and provide guidance to keep it simple. For interest, I am looking forward to the comparisons of the portfolio performances over a longer time period. But even then, I’m sure I’ll stick with the simple 4 iShares ETFs that I started with.
I agree with TJ!
This blog (and the related MoneySense guide that I bought) is the single biggest reason I fired my advisor and moved entirely to a self managed couch potato portfolio. I have no regrets at all.
A big thank you to CCP.
I was wondering why there is over a 2% difference in returns between tdb902 and say VTI or VFV and TDB911 and say XEF? These funds definitely had a great year but it seems that what small amount I have saved through commission free trades, (I don’t trade often) was far surpassed by the ‘tracking’ error… I was thinking of selling my e-series and paying capital gains tax and buy efts that have better tracking to avoid the possible long term drag. My portfolio is large enough that I don’t need to use mutual funds any longer for cost savings.
Any thoughts?
Francis I share your story! Yes this is a fantastic blog CCP.
@Phil : I done the move and never look back, at the first it a little bit more stressful because you need to calculate your share that you purchase and it is a lot more tempting to time the market on the ETF price the day you trade.
If you think you can handle a little more complexity do it, if you value simplicity a lot stay with mutual fund.
I’m looking at RWO’s return on SPDR website, and the return for the year is only 2.78%. I’m curious how you arrived at 10% return? Since pretty much all REITS were hammered in 2013.
Also, I’d like to repeat TJ ‘s sentiment. Without CCP, I’d still be picking stocks à la Jim Cramer, and buying high selling low. I started passive investing since 2013 based on the Uber Tuber with some minor tweak,
Thanks to everyone for the kind words. That kind of positive feedback really does make the work worthwhile.
@Phil: VTI includes mid-cap and small-cap stocks, which outperformed in 2013, so that explains the difference between that fund and the S&P 500 funds. (Over the last decade or so, VTI has outperformed the S&P 500 significantly, which is one reason I like total-market funds.) But I’m not sure why the index mutual funds underperformed by so much. Will have to look more closely at that when the annual reports come out. XEF is too new to comment on (less than a year), and it too tracks a different index from the index mutual funds.
RE: Selling your e-Series funds to buy ETFs, think it over carefully, especially if you’ll take a tax hit to do so. Maybe a hybrid approach would work?
https://canadiancouchpotato.com/2012/12/06/ask-the-spud-combining-e-series-funds-and-etfs/
@David L: The 2.78% return is in US dollars. With the significant appreciation in the USD in 2013, Canadians enjoyed a much higher return:
https://canadiancouchpotato.com/2013/01/07/calculating-foreign-returns-in-canadian-dollars/
Excellent returns for such low fees and minimal effort to administer!
Looking forward to the longer term 20 year data :).
But now, comes the discipline…. rebalancing and selling those juicy ever increasing equities (esp. on a day like today!), and buying those negative return bonds :(.
Discipline :|.
Reviewing the performance above and in the 1998-2012 data, do you feel that the amount of outperformance generated by the Uber-Tuber is worth the extra work required to balance so many funds?
@ninian
If your TFSA is with TD Waterhouse, you can go to the eservices tab, click on statements and can view each monthly statement back 7 years (or since account opening). You can print the statements for your future reference.
@Ted : My opinion about Uber-Tuber is yes it worth the extra work but only over some condition
1- How much you have in your portfolio? I think return is only really important only if you got a large portfolio like 200 000$ and over, who care about getting 1% less on 50 000$ portfolio it only +/- 500$, cut your spending, save more keep it simple at this level.
2- You have to handle complexity, take mean to simplify it by using a spreed sheet and buy what is lower in your target allocation when you put new money in instead of contently re-balance.
My opinion multiple asset allocation boost return because is allow you more opportunity to buy low when you add money and smooth the ride because all asset are not perfectly correlated.
That just my 2 cent on this subject
CCP,
Thanks for all the great info!
I’m using the global couch potato portfolio. I’m wondering if it’s important if my indexes be balanced within each investment vehicles (ie RRSP, TFSA, etc.) or if I simply need to maintain an overall balanced ratio for the whole of my investment portfolio?
Congratulations on completing 4 years of blogging! I came across your blog about 3 years ago, and I don’t think I’ve missed a single post since! The comments section is great too — stimulates thinking :)
I have 10% of my portfolio in REITs — Canadian only. I think I know the answer, but I’ll ask all the same: should I include Global REIT in the mix — say 2.5% of total portfolio (25% of all REITs)? RWO probably trades in US dollars on New York exchange so currency conversion must be a consideration..
Once again, thanks for your insightful blogs!
Dan, thank you for the work in keeping this website up to date with new content.
I have a questions about investing using one of your model portfolios. I have read your book as well as have done some reading on your website. I am very much interested in implementing the whole strategy of index investing using ETFs. One thing I have not come across in your book or on your blog is actually how one would get started.
Let’s say I am interested in using the “Complete Couch Potato” portfolio as my template. I have $300,000 total to invest. Using that example, that would mean $60,000 (20%) would be used to purchase ZCN. My question is: to get started, would you recommend that I make a one time lump-sum purchase of $60,000 of ZCN? Or would I spread that purchase out over time? So for example, making 3 separate purchases for $20,000 each spread out over 4 month intervals?
Thank you!
Thanks for your work.
In 2013 I followed my nose and achieved a return of 6.12%. My 10-year track record is consistent.
Before people get smug, my risk was much lower than CP portfolios, and suited well my situation.
Reporting returns without a risk assessment is a misleading to say the least.
@Ted: There will always be investors who are attracted to more complex portfolios because they believe simple is simplistic. For those people, the Uber-Tuber can offer the potential for slightly higher returns. But unless you genuinely enjoy the additional maintenance and are able to keep transaction cost low, I would stick to a simple approach.
@Chris: You should think of all your accounts as a single large portfolio. This doesn’t make a big difference if all your accounts are registered, but if some are taxable than paying attention asset location is much more important:
https://canadiancouchpotato.com/2012/03/12/ask-the-spud-investing-with-multiple-accounts/
@Sue: I understand the reluctance to invest in new ETFs, but Vanguard is the largest fund company in the world and they have an extraordinary track record. Their Canadian operation is here to stay, and the chances of their ETFs shutting down or showing large tracking errors are remote. (For what it’s worth, PWL Capital is already using the new Vanguard ETFs with its clients.)
As for mixing ETFs with stock picks and active funds, or tweaking the asset allocation based on market forecasts, In my opinion this defeats the purpose of using a passive strategy is unlikely to add value.
@Be’en: Thanks for the comment. Adding an allocation to global REITs (either to replace or to complement Canadian REITs) is perfectly fine in a large portfolio. Indeed, there’s a good argument to be made that 10% to Canadian REITs is too large an allocation given the small size of the asset class. Global REITs will introduce more currency risk and transaction costs, and they are very tax-inefficient, so one needs to consider the overall portfolio mix and asset location.
@Ken: The short answer is that building the portfolio all at once usually turns out to be the better choice, but if the thought of doing so makes you paralyzed, then a disciplined DCA strategy is reasonable:
https://canadiancouchpotato.com/2013/05/28/ask-the-spud-should-i-buy-in-now/
https://canadiancouchpotato.com/2013/05/31/does-dollar-cost-averaging-work/
Hello Again CCP,
If I wanted to hold a smaller bond amount for now, but was able to consider upping my percentage (say 30% to 40%) if things look to be turning around in that direction, is this an approach you would advise against? This is just given my age, and comfort level looking at 70/30 with a bit of “active management” to move around to 60/40 if need be. Am I better off just sticking with the initial plan until I want to move fully to a 60/40 as I get older. More to the point, is it better to just “stick with the plan” until I’m ready to fully switch over vs having some flexibility.