Your Complete Guide to Index Investing with Dan Bortolotti

Couch Potato Portfolio Returns for 2016

2018-05-29T21:30:54+00:00January 6th, 2017|Categories: Asset Classes, Indexing Basics|Tags: |80 Comments

If you believe the media, 2016 was an annus horribilis: some even dubbed it the worst year ever. I think there were a few years during the Great Depression or World War II that might have been worse, but maybe I’m just being a crank.

In any event, it was actually another solid year for investors—the Canadian equity market soared, and despite the surprising Brexit vote and the election of Donald Trump, foreign equity returns where respectable as well, at least in Canadian-dollar terms. Bonds just inched along, but anyone with a diversified index portfolio—whether conservative or aggressive—saw a nice gain last year.

Here’s an overview of how the major asset classes performed in 2016:

  • The year started very well for bonds, but interest rates rose late in the year and the broad bond market ended up delivering modest returns. The broad-based FTSE TMX Canada Universe Bond Index finished the year at about 1.7%.
  • After a sharply negative 2015 and several years of lagging the US and international markets, Canadian equities rebounded with a monster year, topping 20% for the first time since 2009.
  • The US bull market just keeps rolling: despite a slow start and a whole lot of doom and gloom around election time, US equities returned close to 12%, though this was reduced to about 9% in Canadian dollar terms.
  • International developed markets (Western Europe, Japan, Australia) saw the only loss of the year, falling about 2% in Canadian dollars. However, emerging markets (China, India, Brazil, and so on) picked them up with a gain of more than 6%.


How the model portfolios stacked up

In this context, let’s see how my model portfolios fared in 2016, starting with the Tangerine Investment Funds, the simplest of the three options. Tangerine offers three balanced portfolios, which correspond to the Conservative, Balanced and Assertive versions of the TD e-Series and ETF portfolios discussed below.

Tangerine Balanced Income Portfolio
Tangerine Balanced Portfolio
Tangerine Balanced Growth Portfolio
30% equities 60% equities 75% equities
3.05% 4.96% 6.19%

Now let’s review how the TD e-Series and ETF versions performed. We’ll start by looking at the individual fund returns:

TD e-Series Funds

TD Canadian Bond Index – e (TDB909)  1.11%
TD Canadian Index – e (TDB900)  20.63%
TD US Index – e (TDB902)  7.47%
TD International Index – e (TDB911)  -2.66%

Vanguard ETFs

Vanguard Canadian Aggregate Bond (VAB) 1.32%
Vanguard FTSE Canada All Cap (VCN) 21.46%
Vanguard FTSE Global All Cap ex Canada (VXC) 4.71%

Now let’s combine these returns according to the five different asset mixes in my models, ranging from Conservative (30% stocks, 70% bonds) to Aggressive (90% stocks):

TD e-Series funds

Conservative Cautious Balanced Assertive Aggressive
30% equities 45% equities 60% equities 75% equities 90% equities
 3.2%  4.2%  5.5%  6.2%  7.2%

Vanguard ETFs

Conservative Cautious Balanced Assertive Aggressive
30% equities 45% equities 60% equities 75% equities 90% equities
 4.0%  5.4%  6.7%  8.1%  9.4%

Teasing out the differences

The first point to make is that the Tangerine funds performed exactly as one would expect. They lagged the comparable e-Series portfolios by about 0.2% to 0.5%, which is entirely explained by the higher fees. Remember, however, that anyone who held one of the Tangerine funds for the whole year achieved that published return. On the other hand, the return on the e-Series portfolios assume the investor had a perfectly balanced portfolio on January 1 and didn’t make any clever moves during the year. So that additional 0.2% to 0.5% wasn’t guaranteed.

The more surprising result is that the ETF portfolios significantly outperformed the e-Series versions in 2016, even more than one would expect from the difference in fees. Interestingly, the exact opposite was the case in 2015, when the e-Series portfolios edged out the ETFs. It turns out the reasons for the diverging performance was similar in both years: it came down to the different index benchmarks these funds use.

Canadian equities. Although Vanguard’s VCN and the TD Canadian Index Fund both cover the broad Canadian market, they use different benchmarks: the former tracks the FTSE Canada All Cap Index, while the latter tracks the S&P/TSX Capped Composite.

Although both indexes hold roughly the same number of stocks and use a traditional cap-weighted strategy, they have slightly different rules for selecting and weighting stocks. Over the long term, these differences have evened out, but the year-by-year performance can vary significantly. In 2015 the S&P index edged out its FTSE counterpart, while in 2016 they traded places. These differences are completely random and should be ignored by long-term investors.

Small caps had a big year. The foreign equity exposure in the ETF portfolio comes from Vanguard’s VXC, which tracks US and international markets, including large, mid and small-cap companies. By contrast, the TD e-Series funds track only larger US and international companies, with no exposure to small caps.

In 2016, smaller companies outperformed large caps in both the US and international markets, so the broader exposure in VXC gave it a significant boost. While it is may be reasonable to expect a slightly higher long-term return from an index fund that includes small companies, this is not at all consistent.

Emerging markets. Perhaps the biggest difference between the ETF and e-Series portfolios is that the former includes emerging markets: this asset class makes up about 9% to 10% of Vanguard’s VXC. There is no e-Series fund tracking emerging markets, so it’s absent from the TD model portfolios, which therefore have a higher allocation to international developed markets.

This had a significant impact in 2016, because international developed markets was the worst performer of the year, while emerging markets did very well. As a result, the foreign equity portion of the ETF portfolios got another boost compared with the e-Series. Again, this will vary a lot from year to year: in 2015, emerging markets were the laggards that dragged down the ETF portfolios.



  1. Roy January 14, 2017 at 9:26 am

    Thanks for the great information. My question is does the TD Cdn Index e-series fund include dividends? I don’t have the numbers in front of me but when I compare calendar year returns to those of Canadian dividend funds such as RBC’s for example, the eseries lags significantly and consistently. I am only taking about true Canadian dividend funds, not those that say Canadian but have 25% in US equities for example.

    Also, the problem with the TD bond eseries is the total lack of global diversification. If I’m not mistaken it is completely Canadian bonds many of which are government bonds which are poor holdings with rising rates. What would be a good global alternative?

  2. Canadian Couch Potato January 14, 2017 at 11:12 am

    @Roy: Then returns presented here include all dividends. In any given year there will always be many funds that outperform the e-Series, and in the last few years dividend funds have done very well in Canada. Over the last 15 years, according to Morningstar, the TD Canadian Index Fund outperformed its peers by an average of 1.19% annually and ranked 12th among the hundreds of funds in that category.

    My take on global bonds:

  3. J-Wo January 24, 2017 at 2:43 pm

    I have been using the TD e-series balanced portfolio on here for the last 3 years now. I only buy RRSPs in one lump sum around Feb, at which point I reblance to achieve 60% in equities. Comparing my balance from Feb-2016 (when I last purchased RRSPs) to today (just before purchasing RRSPs), my market value has increased by 7.5%! Is there a reason I made 2% more than you did? Should I be looking at the Book Value instead?

    FWIW, I’ve been working for the last 13 years and have about $60k in RRSPs, plus another $18k repayable balance for the HBP. I like the convenience of the e-series funds, as all my other banking is through TD. I’m also really bad at investing, and prefer only having to rebalance and buy RRSPs once a year. Not sure if I’m ready to take the plunge to ETFs yet!

  4. Canadian Couch Potato January 24, 2017 at 4:09 pm

    @J-Wo: Unless you measure the performance from the exact same dates (December 31, 2015 to December 31, 2016) the comparison won’t mean anything. In this specific case, January 2016 was a terrible month, so if you skip that and measure your performance from February that probably explains the difference right there.

  5. J-Wo January 24, 2017 at 5:29 pm

    Thanks @CCP! So based on my portfolio, would you recommend I stay the course and rebalance my e-series once a year, at tax time? Right now I’m following the balanced model portfolio, and I’m really not certain when one should switch to assertive or aggressive. Note that I have a little under 30 years left until retirement.

  6. Canadian Couch Potato January 24, 2017 at 6:50 pm

    @J-Wo: I can’t comment on which portfolio is right for you, but I can confirm that staying the course and rebalancing regularly (regardless of what time of year that happens to be) is definitely the right idea. :)

  7. JD January 24, 2017 at 6:54 pm

    what recommendation for $600,000 languishing in low interest rrsp acct, and 100k in tfsa doing nothing and $250k just sitting making the banks rich…. should i move all in or dollar-cost avg by buying in slowly over months?…. couch potato inside rrsp and outside? horizon is 10+ years before i might start drawing down at 60. is this too specific a question for this forum? many thanks either way.

  8. Canadian Couch Potato January 24, 2017 at 8:09 pm
  9. Rockinon January 30, 2017 at 11:08 am

    One of my simple portfolios delivered 13.232% last year and yet still held a lot of fixed income. I’ve followed you for years and I must say I have learned a lot from your postings. That said, I’ve been disappointed by the Couch Potato returns and yields. Not greatly disappointed but not bowled over either. You can still take some well earned bows but over the years, watching my own investments, has made me think there may be other approaches to creating a simple but successful portfolio. What do you see wrong with the following: 60% TDB3085 (the D-series version of the well respected TD Monthly Income fund (Cdn), 20% TDB3086 (the D-series version of the well respected TD Monthly Income fund (US), 7.5% XRE and 12.5% XUT? This mix delivered 13.232% in 2016. I have held the TD Monthly Income fund for years. I originally bought the investor series and when the D-series was created I switched. This gives me exposure to not only equities but fixed income as well. I now have some of the US version. This gives me exposure to the US and also more fixed income holdings. The XRE and XUT are there to add needed income in retirement. Since retiring in 2009, the REITs and utilities have played an important role in balancing my books in retirement. What is your opinion? I respect you and look forward to hearing your thoughts.

  10. Jake February 4, 2017 at 9:36 pm


    Not sure how you can compare your portfolio to the diversified index portfolio. You have a lot of canadian equity which did great in 2016 compared to rest of world and even the past decade canadian equitys have done better than rest of world. Gosh TDB3085 has around 55% canadian equity along with xre and xut you have a lot of canada content when the couch potato has only 20% cdn equity.

    It looks like your portfolio has 12% outside of canada equity, mostly USA while the CCP portfolio is 40% equity outside of canada.

    So if you would have used vanguard etfs of vab, vcn and vxc with the same proportion of fixed income, canadian and US/Int equity as your portfolio the 2016 return would have been around 13.5%:which actualy is more return than your mostly managed portfolio.

    Not sure why you would say the CCP results have disappointed you. You can’t make a fair comparison between your portfolio and CCP’s, you are concentrated on mostly canada.

  11. Don February 5, 2017 at 12:11 am

    I am moving $200k in mutual funds in 4 RRSP portfolios (personal and spousal for my wife and I) to ETFs using your model portfolios for the most part. We make contributions annually and retirement is 3-5 years away.

    Plan is to use the same ETFs in each portfolio, but with a large weighting on the Bond ETFs, does diversifying into different Bond ETFs make much difference on risk and reward? It doesn’t seem like it based on low returns when not in a bear market.

  12. Canadian Couch Potato February 5, 2017 at 1:30 pm

    @Don: There really is no meaningful way of diversifying a broad-based bond ETF: these funds already contain government and corporate bonds of all maturities. You can choose to make the bonds shorter or longer, or use more corporate bonds and fewer governments, but this isn’t about diversifying, it’s about making an active decision to take more or less risk.

  13. Rockinon February 5, 2017 at 5:31 pm

    @ Jake: I appreciate your reply and I agree with much of what you said. The fact that the Canadian market has performed so well in the past decade or so has meant that I have done quite nicely since retiring. What is important to me is the bottom line and a lot of that bottom line must be available for paying bills in retirement. I’m not as hung up on following rules as I once was. Why? My time frame is not what it once was. Breaking the rules, as I started doing in 2009, seems to have delivered benefits. Note, I say “seems.” I’m going to back test your portfolio suggestions. Again, thank you for taking the time to reply. Cheers!

    Oh, one last thing. I recall reading some comments on investing by a retirement fund manager who said buying more REITs and utilities than is usually prudent can prove wise in retirement when income is so important. This is an example of how my investing has changed with retirement, I bought D.UN when it dipped below $16, I have some REITs in ETF holdings and some utilities in ETF holdings plus I have a bit of money in REM (an iShares US ETF). It pays from 12 to 15% in dividends. I would never have owned REM when I was saving for retirement but now I do. I have collected enough in dividends that I have gotten my full investment back and today it is still pumping out the dividends and is responsible for a nice bump in my income. I have never come across anyone recommending a purchase of REM. A few years back, I talked with a TD rep about REM. He could not recommend its purchase. REM is a weird duck, a mortgage REIT, and yet it has proven to be a very good holding for me — weird or not.

  14. Alex February 7, 2017 at 1:58 pm


    I’m a new immigrant, want to try to invest money to 4 e-series funds:
    TD Canadian Bond Index (TDB909)
    TD Canadian Index (TDB900)
    TD International Index (TDB911)
    TD U.S. Index (TDB902)

    I have USD on my CIBC account. Do I need to convert the money to CAD or is it OK to invest USD to TD US Index – e U$ (TDB952), not TDB902?

    Thank you.

  15. Canadian Couch Potato February 7, 2017 at 2:43 pm

    @Alex: Thanks for the comment. You cannot purchase the TD e-Series funds through CIBC. However, if you are investing with TD and you have US dollars, you could use the USD version of the US equity fund if you want to avoid converting the currency.

  16. Alex February 8, 2017 at 9:31 am

    Thank you for replying. Is it better to withdraw cash at CIBC? And then open a Cash Account at TD Direct?

    I’ve just tried to open an account online, but got this: “We require 3 years of address history to complete your application. Please enter your previous address details.” I entered my old (non-Canadian) address and got the following error: “The Online application is limited to Canadian & United States residents. Please visit our website at to learn more about the products and services we offer for residents of other countries.”

  17. Jeff February 26, 2017 at 1:51 pm

    Great article. One of the first times I’ve seen you outline the differences between “similar” indexes and how they can result in very different returns. I.E FTSE vs S&P

    I’ve seen dramatic differences in emerging market indexes and made mistakes switching from one to another (to reduce fees) and unwittingly going from one low return to another while the other index rose. Perhaps obvious to most but a lesson learned for me…

    Important to have a clear asset allocation strategy, stick to it long term, and even compare your own asset allocation to others to compare and understand why you are getting certain returns vs other portfolios.

    Just wanted to say it was a good article.

  18. CR February 28, 2017 at 12:17 pm

    Now that the model portfolio has switched to mix up iShares and the BMO bonds, I was wondering if you could comment on HOW to switch a large portfolio. I am currently tied up in VXC, VCN, and VAB. Do I sell it all and then buy the alternative in the same day? Do I not risk getting dinged on market fluctuations by doing so? Thank you very much for your time.

  19. Canadian Couch Potato February 28, 2017 at 1:34 pm

    @CR: It almost certainly does not make sense to switch at all.

  20. Sandy March 30, 2017 at 9:05 am

    Just looking for info. I do a lot of reading but get really overwhelmed with all the different options for stock, bonds, diversification, etc. I just really don’t know where to start, and how to set up. I currently have some with wealthsimple, doing well even considering fees, so I would like to continue . I have more and would like to invest as they come due all within the next year. I really like the ease of wealthsimple, and the fact they rebalance, I don’t have to continually be doing anything, which I really wouldn’t know exactly how and what to do anyway. I have had stocks, but in a employee savings plan, so never needed to do anything. I had opened a brokerage act, they had a training mode so you could buy and sell things and get a “pretend feel” for how it works, in regards to buying, selling, how they would have performed, well I bought 1 to try and lost. Besides that, I’ve had just Canadian bonds, GICs, treasury bills years ago when they did well, a few mutual funds years ago through my bank, but they just lost money. I would like to branch out, increase my knowledge, not lose my shirt, although I know the performance can go up and down, timeframe is 10+ years, and looking for mid risk range. Just not satisfied with anything I can get within my bank, in regards to return. I think I need an investment for dummies book, Canadian addition, although in general savings, and easy investing, where someone else etc. sales advisor helps you, I really good at, it’s just the do it yourself and know exactly what to do and how to do it, and what’s best is another thing. Thanks for any info, you all can share.

  21. Manny April 14, 2017 at 1:47 am

    If the VCN did much better than the VXC last year, should I go 50% and 50% on those two ETF? or should I put more into VCN? I know the VXC has approximately 55% US stocks so if I go 50% & 50% then the VCN would be double than the US stocks in my set up. is that a good idea or should I always invest more into the US stocks?


  22. Philippe May 2, 2017 at 11:50 pm

    Can someone kindly explain to me, like if I were a normal 5-year old, why I should or shouldn’t move my current investments with Tangerine (approximately $750K in non-registered, TFSA, LIRA and RRSPs) to something better like TD e-series funds or Vanguard ETFs, bearing in mind I have, obviously, little practical investment knowledge?

  23. Canadian Couch Potato May 3, 2017 at 12:08 am

    @Philippe: You can save fees by switching to e-Series funds or ETFs, but only if you are prepared to manage these portfolios on your own, included occasional rebalancing. Not everyone is willing or able to do this, and mistakes cab be more costly than fees:

  24. Marie June 11, 2017 at 6:31 pm

    I’m getting ready to invest in TD e-series. I already own some TDB030 from a long time ago when I let someone choose for me where to park a locked RRSP. Is TDB030 comparable to TDB909? Looking at Morningstar information for each fund, the return since inception seems better with the TDB030 than TDB909. Is that return after MER? I’m also not clear on the TAX tab what the tax-adjusted return means and if it includes the MER or not. I’m trying to figure out if it is worth it to move my money from TDB030 to TDB909 (it’s only about 10,000$). Would it make a difference if either fund were used for a TFSA, RRSP or Non-registered account?


  25. Canadian Couch Potato June 12, 2017 at 7:37 am

    @Marie: TDB030 is an actively managed bond fund. A few notes:

    – It’s similar to the index fund but has more corporate bonds (i.e. more risk), which is the only way it can have a meaningful chance of outperformance
    – Fund performance is always reported net of MER (i.e. after fees have been taken)
    – Comparing performance since inception is meaningless unless the two funds have the same inception date
    – TDB909 has outperformed TDB030 over the last one, three, five and 10 years

    Neither of these funds should be held in a taxable account. They are fine in RRSPs and TFSAs.

  26. Marie June 12, 2017 at 8:36 am

    Thanks for the quick reply and the information! It makes my decision easier.

  27. T. Nathan July 9, 2017 at 1:21 pm


    I’ve registered investments in the Tangerine Balanced Fund ($23,500) and Tangerine Equity Growth ($12,600) portfolios. I will be 40 this year and have a Defined Pension Plan at work. I would like to consolidate my investments into the less riskier balanced fund. Do you agree?


  28. Enzo July 30, 2017 at 4:51 pm

    I am happy to have come across this site. All the participants are making such a valuable contribution to make me hopeful again,that some day I may actually do better than I have done each and every time I modified my investment portfolio. Great guys!

  29. PoshMoggy October 3, 2017 at 3:24 pm

    Hi there – First of all I have no idea really what I’m doing but I did take the advice here and got some TD e-Series Funds, exactly as per the recommended balanced model portfolio. I started in October 2015 (at least I think so but the TD website is so terrible, I can’t go back farther than 18 months). I was putting money towards it monthly but stopped because it appeared to be a waste of time. The book value is $31,697.31 and the current market value is $33,565.86. Can someone please explain to me why this isn’t making any money? Sorry, I don’t get it.

  30. Canadian Couch Potato October 5, 2017 at 8:47 am

    @PoshMoggy: “The book value is $31,697.31 and the current market value is $33,565.86. Can someone please explain to me why this isn’t making any money?” If the book value is lower than the market value, then your portfolio has seen a positive return. In fact, it has grown by almost 6%.

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