Your Complete Guide to Index Investing with Dan Bortolotti

Couch Potato Portfolio Returns for 2013

2015-03-16T08:09:58+00:00January 9th, 2014|Categories: Indexing Basics|101 Comments

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:

  • 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)  %  Return
BMO S&P/TSX Capped Composite (ZCN)  20% 12.8%
iShares MSCI World (XWD)  40% 33.9%
iShares DEX Universe Bond (XBB)  40% -1.5%
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%
Global Couch Potato (Mutual Funds)
RBC Canadian Index (RBF556)  20% 12.2%
TD US Index – I (TDB661)  20% 40.0%
Altamira International Index (NBC839)  20% 28.1%
TD Canadian Bond Index – I (TDB966)  40% -2.0%
Complete Couch Potato
BMO S&P/TSX Capped Composite (ZCN)  20% 12.8%
Vanguard Total Stock Market (VTI)  15% 42.7%
Vanguard Total International Stock (VXUS)  15% 23.1%
BMO Equal Weight REITs (ZRE)  10% -4.6%
iShares DEX Real Return Bond (XRB)  10% -13.4%
iShares DEX Universe Bond (XBB)  30% -1.5%
iShares Canadian Fundamental (CRQ)  12% 15.6%
iShares S&P/TSX SmallCap (XCS)  6% 7.2%
Vanguard Total Stock Market (VTI)  12% 42.7%
Vanguard Small Cap Value (VBR)  6% 46.0%
iShares MSCI EAFE Value (EFV)  6% 31.1%
iShares MSCI EAFE Small Cap (SCZ)  6% 38.1%
Vanguard FTSE Emerging Markets (VWO)  6% 1.6%
SPDR Dow Jones Global Real Estate (RWO)  6% 10.0%
BMO Mid Federal Bond (ZFM)  20% -2.4%
BMO Short Corporate Bond (ZCS)  20% 2.1%

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.


  1. Canadian Couch Potato January 11, 2014 at 12:32 pm

    @MoneyMatters: If you want to keep your bond allocation low now because if your age and risk tolerance, that’s fine. If you’re doing so because you’re forecasting interest rates, that’s a problem. Going down that road leads to a dark place. There is no disciplined strategy here, only hunches about when things “look to be turning around.”

  2. Oldie January 11, 2014 at 12:33 pm

    @CCP: A comment from @Francis resonated with me “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.” LOL !!!

    Indeed, a week ago I did my first major rebalancing on a 2 component TFSA, after a year, and (despite purchasing the international equities component without missing a beat) for some reason I scanned the intraday trading prices for VAB (my bond component, which my allocation re-calculater committed me to buy) and noticed that the price had jumped significantly since opening time that morning. This led to me scanning the 5 day graph, then the 15 day, then the 3 month…you get the picture,…so much so that I decided to wait a bit and see if the prices would drop again before the end of the day. I dithered for so long that I missed out purchasing by the end of the TSE trading day.

    I kicked myself over the waiting weekend for falling into this Newbie trap — for despite my rationalizations that this was an educational exercise and I was only trying to learn something from the pattern of the price fluctuations, the real ugly truth was that I was hoping to get a (trivially) cheaper price, based, as always, upon absolutely no knowledge of the future. I had cured myself by Monday morning, and I just made my bid (with the usual 2 cent upper price limit buffer) and purchased at the market price, like I should have in the first place.

    Question: But aside from my now-obvious Newbie error, I wondered, is there EVER any temporary market condition in the middle of a trading day that would caution you, as an experienced CP investor to temporarily avoid or delay purchasing your calculated rebalancing allotment of ETF? Or is it always really as simple as that — calculate the amount, then BUY. Now. Always.

  3. MoneyMatters January 11, 2014 at 12:44 pm

    One more question CCP, when I’m comparing VUN to VTI, why are the YTD and daily/weekly performance numbers so different?

  4. Canadian Couch Potato January 11, 2014 at 1:01 pm

    @Oldie: As long as you place limit orders properly, you’re doing all you can. Trying to arbitrage pricing anomalies is futile and probably counterproductive.

    @MoneyMatters: Because VTI expresses its returns in USD and VUN expresses its returns in CAD. This is the same reason VTI reported a return 33.5% in USD and I reported it above as 42.7% (in CAD).

  5. Sleepy January 11, 2014 at 1:39 pm


    Want to echo the other posters and thank you for all your efforts in educating the public about index investing.

    The advice on this website has been excellent and has made it much easier for me to take control of my own portfolio and made me appreciate that I have options that are better than those given to me by investment advisors at my local bank.

    Excellent job!

  6. MoneyMatters January 11, 2014 at 5:17 pm

    Hey Dan,
    I would like to agree thanks for all that you do. I wish I had found your site sooner it has helped me out a lot and got me getting into shedding my underperforming bank mutuals. I’m opening my discount brokerage account next week and been doing some planning and I’m wondering as someone who is new to it how would you go about determining going etfs and indexing versus a low cost mutual like mawer? This is sort of where u am right now and I’m having a hard time answering this. Also I keep going back and forth between the complete and the global couch potato. Either way I’m looking to go a 70/30 split and using the American version of the funds. Can you explain the decision of adding in the reits and the extra bonds? When do the reits usually perform well?

  7. Andrew B January 11, 2014 at 5:35 pm

    @CCP Where would you suggest holding global REITs? I’d love for you to make a post discussing them. Of course they should be held in a TFSA/RRSP, but which is best, given that they have very high return (but is mostly dividends/income)? I’m referring to CGR, VNQ, and VNQI. I presume that because of their return they would be the last thing before bonds to be taken out of a registered account if you had not enough room (because you are bond-heavy or whatnot.)

    My hunch is that VNQ and VNQI are best in a RRSP, and CGR is best in a TFSA, but I didn’t do any thorough calculations to take into account how they work with foreign withholding taxes or how generally you keep your higher-growing assets out of the RRSP and in a TFSA if possible.

  8. John January 12, 2014 at 9:31 am

    Hi Dan,
    As others have stated, the articles and blog are extremely helpful – thank you.

    I am following the complete couch potato and have 6 funds.

    I would like to know how much money I need before I would invest it in all 6 funds (simultaneously rebalancing). For example, if I have $500 to invest, it would be silly to pay $60 in fees ($10 per trade) to invest a portion in all 6 funds. If I had $500,000 (I wish! :) ), it would make sense to pay the $60 in fees and invest in all 6 funds, rebalancing at the same time. But at what point is it worthwhile to invest a portion in all 6 funds – e.g. $2,000? $5,000?,.. $10, 000? At what point is it best just to buy the two lowest performing funds (according to my asset allocation) – say, -one in bonds, one in stocks?

    Thank you in advance.

  9. Canadian Couch Potato January 12, 2014 at 9:48 am

    @John: If you are paying $10 per trade, I wouldn’t ever invest less than $1,000 per transaction. Even that represents a 1% transaction cost, which will erode your returns over the long term. This is why index mutual funds are usually better when investors have relatively small portfolios and make regular contributions.

    As you anticipate, if you’re not able to rebalance the portfolio by making a trade in all six funds, a good compromise is making one stock trade and one bond trade to get as close as you can to your overall stock/bond target.

  10. Louise January 12, 2014 at 10:23 am

    Like the others above, I would also like to thank you Dan for your book, your blog and the excellent information you provide to guide us on the investment path. I switched over from high priced mutual funds a year ago today and never felt better about my financial plan. I also kept track of my old (woefully expensive and undiversified) portfolio that my advisor had devised and pleased to see that my couch potato portfolio actually did better than the old portfolio. But I think much of that is attributed to the high fees I was paying. My only regret is that I did not switch over sooner. Thanks again and hope you keep up the good work!

  11. Bernie January 12, 2014 at 10:28 am

    @John: You could go with Questrade where any Canadian or U.S. listed ETF is commission free.

  12. Ted January 12, 2014 at 10:48 am

    @John. Over the long term a broker with commission-free ETF purchases could save you a lot of money. On a 6-fund portfolio that’s $30-$60 per rebalance depending in your commission fee.

    @CCP Maybe it’s not worthy of an article but it’d be great to compare discount brokers and see the effects of trade comissions on the execution of the various portfolio strategies. Most interesting would be the effect of having your cash equitized for longer since you could purchase as soon as you had enough money for a single share rather than wait to accumulate $1000 or so each time. It might be a small difference but if we are debating 10 basis points of MER and F/X fees, this could make a big difference also.

  13. jamie January 12, 2014 at 12:34 pm

    Just want to add my thanks to everyone else’s. Not surprised you find yourself tired! Though I seldom enter the fray I read all your posts and the ensuring comments. I’ve learnt so much from The Canadian Couch Potato!!

  14. Anh January 12, 2014 at 2:31 pm

    Hi, I was wondering if Questrade was a reliable brokerage. I had heard many negative comments on them and is hesitant in signing up with them. Currently, I have a TDW account but looking to purchase a couple of stocks to collect dividends along with my couch potato strategy. Moreover, TDW or TD Direct Investing will charge me 29.99 per trade and I’m looking only to invest 10 000 into a non-register account. Any advice?

  15. Oldie January 12, 2014 at 3:08 pm

    @Bernie, @John: Just a clarification for those who don’t know — the “commission-free” is only for purchase of ETFs (selling is subject to a very reasonable commission.) However, purchasing for free is ideal for those on the early phase of the investment lifetime cycle, allowing for small monthly purchases from regular salary percentage contributions at no cost to the investor. @Anh: My daughter uses Questrade for this, seems to find no problems with them.

  16. Anh January 12, 2014 at 3:59 pm

    @Oldie: I heard they sometimes mess up with taxes paperwork and that if you wanted to transfer your money out of Questrade, it can be quite difficult. That why I’m hesitant.

  17. Anh January 12, 2014 at 8:20 pm

    Would anyone know if Virtual Broker is a reliable brokerage? I have been reading the comparison of VB vs other brokerages and they seem to be good.

  18. Oldie January 12, 2014 at 8:26 pm

    @Anh: Oh, I will have to keep that in mind as a possibility to find out about, thanks. As it turns out, she is invested in a TFSA, so the possible taxes paperwork screwup is irrelevant. I’ll try to find out what the transfer fee out of Questrade is, for future preparedness, but right now she has no plans to switch.

  19. Bernie January 12, 2014 at 9:22 pm


    Questrade often does well in ratings against other on-line brokers. They’re frequently rated #1 such as in this attached article.

  20. david toyne January 13, 2014 at 11:25 am

    Dear Money Matters and your inquiry about comparing low fee active fund companies like Mawer with ETF’s – you might like to check out our report on this from a year ago (we will update it in the next 6 weeks).

  21. Tinu January 13, 2014 at 10:01 pm

    First-off, congrats on the continued excellence of your blog! I’ve been reading
    since 2012.

    A future post on personal rate of return and cash flows would be great! I have
    a Global Couch Potato portfolio using VT, XBB, XIC. It’s not quite the same ETFs, but I don’t get anywhere near 15.5% for the year. Just wondering if I’m doing something wrong?

    Using the PWL Capital spreadsheet (Modified Dietz Method) and referring to my monthly statements, I plugged in figures for purchases, dividends, and my one-time yearly re-balance.

    Drumroll… looks like I’ve achieved a 6.5% return (which I’m pleased about)!

  22. Canadian Couch Potato January 14, 2014 at 8:48 am

    @Tinu: Unless you were only invested for part of the year or your bond allocation is huge, its hard to imagine how your return could have been as low as 6.5% with the funds you’ve mentioned. It seems likely you’ve made errors with the spreadsheet. For starters, entering dividends and adjusting for rebalancing transactions is incorrect: you should only record contributions and withdrawals from the account.

  23. Rahim January 14, 2014 at 5:08 pm

    Thanks for the update, CCP! I’ve been a couch potato for exactly a year now. I just downloaded my annual mutual fund (RRSP) report for 2013 and my RBC-based “Global Couch Potato” portfolio (25% Cdn Gov’t Bond Index + 25% Cdn Equity Index + 25% US Equity Index + 25% Int’l Equity Index) had a rate of return of 17.3% (net; after MER).

    I previously owned the “Select Growth Portfolio” from RBC, which although had similar returns, would have resulted in a lower rate of return because it has a higher MER (~2.2% if I remember correctly). This shows you how a simple, diversified, and low-cost index fund based portfolio can provide better net returns than actively managed portfolios. Stretch the couch potato concept over the life of a 30-year portfolio and you’re talking big bucks in your pocket (and less in the pockets of your bank/financial institution).

  24. Bernie January 14, 2014 at 7:33 pm

    Mawer Balanced Fund, a global balanced mutual fund had a return of 20.2% in 2013. It regularly beats index based balanced portfolios. It’s an actively managed fund of funds with a MER of 0.95%.

  25. […] Bortolotti revealed the 2013 performance figures for the model portfolios on his Canadian Couch Potato blog.  The two Global Couch Potato […]

  26. Edward January 17, 2014 at 12:04 pm

    Dan, I’d just like to echo what David, Mike, Phil, Francis and others have said here. Before I found CCP, my portfolio was just a huge floundering mess of GICs, saving accounts, sector mutual funds, and other cr@p that I’d choose based on recent performance. Began reading about index funds (somewhere online) in late 2011, found this site and slowly began aligning everything towards it. Because my investments were mostly with TD, I chose the “Global Couch Potato – Option #2” and haven’t looked back since. (And never will.) I’m so extremely happy with the simplicity and performance of it. (Even if we had a few down years now, I’d still be happy.) I have one more stupid market-linked GIC come due in early March, then I’ll be 100% potato. Can’t wait! Many, many thanks for all your advice here.

  27. Canadian Couch Potato January 17, 2014 at 3:19 pm

    @Sue: I will probably write something about the RBC ETFs in a future post. Right now there is very little information with which to make any assessment.

    @Edward: Many thanks for the kind words, and I wish you continued success!

  28. Chris January 18, 2014 at 12:50 pm

    I noticed a 7.2% return listed for XCS. Since I own XCS and recorded a smaller return for the fund in 2013 I checked the ishares website because I thought it was perhaps a typo. Turns out it’s not. So I tried to see why my return didn’t match…and I’m still confused. If XCS was worth $15.01 on Jan 1/13 and $15.40 on Dec 31/13 how does it produce a 7.2% return. Even if you include the distributions I just can’t get there? Can you explain the 7.2% return?

  29. Canadian Couch Potato January 18, 2014 at 2:17 pm

    @Chris: A few things going on here. First, the annual return for 2013 is properly measured from a start date of December 31, 2012, when the price was $14.72. You also need to include the final quarterly dividend, which was paid January 6, 2014, but to shareholders of record as of December 31. By my calculations that brings us to almost exactly 7%. My guess is the rest comes from the compounding of the dividends: published returns assume all dividends are immediately reinvested.

  30. Bob January 21, 2014 at 11:57 pm

    Hi folks,

    Been following this site and others for a few months. I am totally new to investing. I have read a few books, including the Money Sense “Perfect Portfolio”. I believe my wife and I will start investing very soon and we are leaning toward the Global Coach Potato e-Series. But, think we will not purchase the bond component of that portfolio. We will just stick with the 3 equity funds. We are fairly young and 25 years away from retirement (hopefully less!) with DB pensions and VERY VERY secure employment and decent salaries.

    So, unless someone can convince me otherwise, I believe we will stick with equities only – for now… perhaps in 8 to 10 years we will buy some bond funds. I want to start with indexing b/c we will only invest about $6000 or so. We plan to contribute my entire $5500 TSFA allotment per year for now (on a monthly basis) and perhaps increase this amount later. Our savings is tied up in TFSAs and some HISA and GIC stuff as we are renting now and plan to buy in a few years. ETFs will come later once we get tat portfolio over $50K.

    I hope to buy my funds using my RSP room then contribute with TFSA room.

    That TD returns look great!! Do you folks think I should consider adding another one of those equity funds from the e-Seies lineup? Perhaps an emerging market? Does that even exist in e-Series?\\


  31. Willy January 22, 2014 at 9:08 am

    @Bob: Welcome! I don’t think there’s any problem with your proposal (100% equity) in principle. In my mind, the two primary reasons why one would NOT want to go 100% equities are as follows: (1) Your time horizon is short – but you have already said this is not the case for you. The second, probably more important reason is (2) You have some intolerance to volatility, especially psychologically. A 100% equity portfolio will be much more prone to volatility – it will move up and down more wildly, there will be periods of high returns and periods of substantial losses. You have said that you have the time to ride this out, but you would also need to have the psychological fortitude. Can you watch your portfolio drop by 50% in a year without panicking, selling, or otherwise changing course? Will watching that happen disrupt your sleep at night? Try to be honest with yourself about those sorts of questions. IF you have the fortitude to withstand all those, and you have a very long time horizon, and you have secure other “assets” like DB pensions, then you may be a good candidate for a 100% equity portfolio.

  32. Bernie January 22, 2014 at 10:25 am

    @ Bob: As Willy said expect much more volatility with an all equity portfolio. An equally weighted Cdn/US/Emerging Mkt mix would have returned ~ 33% in 2008. That said, it was the worst drop since the depression era. You have a lot of years on your side. If you don’t mind the wild ride & save consistently in good times & bad you should be fine. I personally have 95% equity in my RRSP, all in Cdn & US stock. I experienced a drop near -23% in 2008. Since then I’ve gone to lower beta dividend growth stocks to cushion the drops. My present portfolio would have only lost -8% in 2008. Like you, I also have a decent pension & consider it as my fixed income content. Best of luck to you!

  33. Bob January 22, 2014 at 2:12 pm

    Yes, I’m treating our DB as my “fixed income” portion…and it amounts to about 70% of our best earning years (we’re teachers).

    I have prepared myself and realize it could drop 20, 30 or more in a year or less… I think I am okay with that. But only time will tell! We have a 25 year investment horizon. Perhaps a bit less if we retire a little earlier… which doubt.

    What is “lower beta dividend growth stocks”??

    So are you fans of the TD e-Series? ING is also being considered but the Streetwise is more expensive (albeit not much difference after 5 years of investing) and it’s less flexible… I think the holdings are similar in the two funds.

    And one last Question: Should we stick the the dollar-cost averaging strategy? contribute the same no matter what?

    Thanks folks!!

  34. Bernie January 22, 2014 at 3:03 pm

    @Bob: Sorry that figure should have read -33% in 2008 not +33%.

    Dividend growth investing is investing for income growth with stocks that regularly raise their dividends. It is a hands on style that I wouldn’t recommend for someone just starting out. For a primer on this type of investing you could start with reading here:

    There’s also a wealth of info on this site:

    As for beta, in relation to investments, check here:

    There are many knowledgeable folks on here that can give you ideas for index investing and dollar cost averaging.

  35. Willy January 22, 2014 at 3:47 pm

    @Bob: I firmly believe the best time to invest money is NOW. If you have a lump sum to invest, invest it now. If you can make monthly contributions, start today. I think trying to “time” investing offers limited upside (and downside as well) and is likely just wasted energy. Especially if you’re going to go with a 100% equity portfolio and can handle the ups and downs, there’s no reason to delay or time anything.

    The TD funds are great. ING Streetwise are good too. Very simple, easy to use, and no setup fees (good), but a bit less flexible and more expensive (bad). ETFs are on the other end of the spectrum. Very flexible and inexpensive (good) but harder to set up and use (bad). For someone starting out. K.I.S.S. and go with whatever works for you.

  36. Bob January 22, 2014 at 5:40 pm

    Great info. Thanks, Bernie, for the links. Willy, I will avoid those ETFs for now… everything I’ve read so far advises to wait til portfolios reach $50+ due to the costs.

    As for the rest of our cash (the bulk) we maxed out our TFSAs at People’s Trust (3%) except I didn’t contribute my $5500 for 2014 b/c I want to put that into e-series. We also have a good amount of cash just sitting in a poor yielding HISA that we want to put into GICs also at Peoples. Not the highest yield at 2.35% for 3 years but we need to ensure that cash is safe.. at least it’ll outpace inflation. My wife will use up a par tot her RSP for the HBP when we do buy (I won’t qualify for HBP since I sold a property under my name). What do you folks think of this strategy?

  37. Bob January 22, 2014 at 5:47 pm

    Also, would you distribute the cash evenly (33%) between the three funds (US, CDN, INTL’ indexes)?


  38. Ted January 24, 2014 at 4:20 pm

    Hi CCP,

    A great site for Canadian investors and a huge wealth of knowledge here. Thank you for this blog and your books; it is a real service to Canadians and passive investors.

    I did have two questions:
    1) on the subject of defined benefit pensions, a lot of people treat these as a “fixed income” portion of their portfolio and as a result increase their equity exposure. These DB pensions may or may not have a large bond holding percentage and may actually have a high volatility and/or stock market beta. This is somewhat off topic as related to couch potato investing and portfolio construction, but how can one determine the “safety” of a DB pension in order to arrive at an asset allocation that reflects an investor’s risk tolerance? It doesn’t seem right to say that the value of the assets in the DB pension are equivalent to bond holdings.

    2) looking at your performance figures for the model portfolios is quite curious and very informative. Could you elaborate a little bit on the out-performance of the Uber-Tuber? It is hard to tell based strictly on the performance table, but it appears that while pure returns may not be as high, the standard deviation and downside risk are both lower which seems to indicate a higher risk-adjusted return. Would you say there is real alpha being generated and is it worth the additional complexity of the portfolio?

  39. Canadian Couch Potato January 24, 2014 at 8:37 pm

    @Ted: Thanks for the comment.

    1) It might be time for a blog post about this idea. I don’t think it makes much sense to think of a DB pension as part of one’s fixed income allocation. I’m not even sure how that could be done in any practical sense: it would be difficult or impossible to put a valuation on it, and it can never be rebalanced, for example.

    With our clients, we simply include the expected income from the pension when we create the financial plan and do the risk assessment. See this post about assessing your ability, willingness and need to take risk:

    A solid pension could mean you have the ability to take more risk with your investment portfolio, but it could also mean you don’t have the need to take any risk at all. It all depends on the clients goals and temperament.

    2) There is no alpha in the Uber-Tuber. Research has long shown that value stocks and small-cap stocks have delivered higher returns over the long run, but often with greater volatility, and the Uber-Tuber is designed to capture those risk premiums:

    The differences in returns and volatility between the various portfolios in our backtest is extremely small over that 20-year time frame, and it may not even be statistically significant. The complexity appeals to some investors, but personally I prefer to keep things simpler.

  40. Noel February 2, 2014 at 4:04 pm

    Dan, I’ve been looking at the long term returns for your model portfolios. Would it be possible for you to calculate the returns if one invested a fixed amount per month from the beginning and then did an annual rebalancing?

  41. Canadian Couch Potato February 2, 2014 at 7:21 pm

    @Noel: Someone else made a comment about these returns being very different if you made monthly contributions, but this isn’t true as far as performance reporting goes. A time-weighted return is specifically designed to remove the effect of cash flows and measure only the return of the underlying investments. And if you calculated a money-weighted return, monthly contributions would have an effect only when they are large relative to the overall portfolio: e.g. $1,000 a month into a $10,000 portfolio. But after a few years even that impact would be negligible.

    And for the record, the multi-year returns do include annual rebalancing at the beginning of the year.

  42. Noel February 3, 2014 at 3:47 pm

    What you are saying would be the case when comparing time-weighted returns using differing monthly cash flows but not when comparing such returns where in the one case they are yearly cash flows (ie once a year) and in the other case they are monthly cash flows.

  43. Canadian Couch Potato February 3, 2014 at 7:29 pm

    @Noel: If the cash flows were very large relative to the size of the portfolio, it would make a difference to the money-weighted return. But I’m not sure how this would be at all useful. If I were to calculate such a money-weighted return I would have to know what values you wanted to use for the original portfolio and the amount of the monthly cash flow. Are we starting with $10,000 and investing $1,000 a month? Or starting with zero and investing $5,000 a month? And how would each monthly contribution be spread across the funds in the portfolio? Not only would this be enormously time-consuming, it would be completely meaningless to anyone who didn’t actually invest in this way.

  44. Noel February 4, 2014 at 5:22 pm

    I understand what you are saying and agree. But, where I am coming from is that some think they would have gotten the exact same returns that you have posted for the model portfolios if they had invested in them, but the fact is that their actual returns might be a bit different because of the factors you point out. I think it could differ as much as 10, 20 or 30+ basis points over a 15-20 year period (depending on their investing pattern, size and timing of monthly cash flows relative to initial amount, etc) ie as much as the difference between the returns on your model portfolios over the long-term. That is all I was trying to point out, but I didn’t explain myself very well.

    The only way to know though would be to do some sensitivity analysis using a spreadsheet. It usefulness would only be to prove that there is a difference and the possible magnitude of that difference depending on inputs.

  45. Noel February 4, 2014 at 5:23 pm

    That is 10, 20 or 30+ basis points per annum, not overall.

  46. Ted February 5, 2014 at 12:49 pm


    What’s your position on using leverage for a passive portfolio? As an “efficient” portfolio, the Couch Potato should post superior risk-adjusted returns over an active or stock picking strategy. Wouldn’t this make it a good candidate for leverage as this would increase the potential gains while downside risk is mitigated?

    If people use leverage for individual stocks, why not for index etfs as a portfolio?

  47. Canadian Couch Potato February 6, 2014 at 12:05 am

    @Ted: I would not recommend leverage for anyone except perhaps the most disciplined, experienced investor. Most investors have a hard enough time with normal stock market volatility, and to magnify that is usually asking for trouble. An index portfolio eliminates single-stock risk, but it can still be extremely volatile.

  48. Jas February 27, 2014 at 11:02 pm

    It would be interesting to get the performance of the Couch Potato portofolio over the last 20 years but using different bonds/equities %. How did a 100% equity portfolio compared to a 60/40 allocation?

  49. Bernie February 28, 2014 at 1:00 am


    You can calculate that yourself easily. The “Periodic Table of Annual Returns for Canadians” for years 1970 to 2013 can be found here:

  50. Rodster March 24, 2014 at 9:53 am

    Hi, I was wondering if you had any compartive data on performances for the streetwise portfolio from ING.

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