The numbers are in and no one is shooting the messenger this year. If 2018 was disappointment—returns were negative even for balanced portfolios—2019 had investors popping the champagne, as every major asset class was up on the year, and equities delivered double-digit returns both at home and abroad.

Below are the 2019 returns for the various versions of my model portfolios. But before we get to the data, let’s review the performance of the major asset classes last year:

  • Is there anyone who left who still believes they can forecast interest rates and bond returns? The yield curve got run over by a truck in 2019, and it ended the year essentially flat, meaning the spread between short- and long-term interest rates was much narrower than normal. As those longer-term rates declined, bond prices soared and the asset class everyone loves to hate had its best year since 2014: the FTSE TMX Canada Universe Bond Index was up 6.9%.
  • Canadian equities lagged the US in 2019 for the ninth consecutive year, but at least this time it was a photo finish. The S&P/TSX Capped Composite Index rebounded from a dismal 2018 by delivering a 22.9% return, its best showing since the huge recovery of 2009.
  • The bull run in US equities continued in 2019, and the S&P 500 topped 25% in Canadian dollars. In a reversal of 2018, hedging the currency would have worked in your favour this year, as the index returned 31.5% in its native currency.
  • In overseas markets, international developed and emerging markets joined the party, too. The MSCI EAFE Index (Western Europe, Japan, Australia) returned just over 16% for the year, while the MSCI Emerging Markets Index (China, Korea, Taiwan, India, and so on) grew 12.7%.

OK, on to the real-world performance. Below are the returns of the individual funds, as well as the performance of the portfolios made up of those holdings. As always, these returns include all distributions (dividends and interest), which are presumed to be reinvested. The portfolio returns assume you started the year with the target asset allocation and made no transactions.

Option 1: Tangerine Investment Funds

The Tangerine Investment Funds are balanced portfolios that offer ease and convenience for investors who prefer not to open a brokerage account. They are available with three different asset mixes, ranging from the conservative Balanced Income Portfolio (30% stocks) to the more assertive Balanced Growth Portfolio (75% stocks):

FundAsset Allocation2019 Return
Tangerine Balanced Income Portfolio30% equities / 70% bonds9.97%
Tangerine Balanced Portfolio60% equities / 40% bonds14.06%
Tangerine Balanced Growth Portfolio75% equities / 25% bonds16.10%

Option 2: TD e-Series Funds

The TD e-Series funds allow you to assemble your own portfolio using four funds as the building blocks: one for each of the major asset classes. Here are the 2019 returns for the individual mutual funds:

TD e-Series Fund2019 Return
TD Canadian Bond Index – e (TDB909)6.34%
TD Canadian Index – e (TDB900)22.68%
TD US Index – e (TDB902)24.32%
TD International Index – e (TDB911)15.25%

My model portfolios combine these funds in five variations, ranging from 30% to 90% stocks. Here’s how they performed in 2019:

Model e-Series PortfolioAsset Allocation2019 Return
Conservative30% equities / 70% bonds10.50%
Cautious45% equities / 55% bonds12.63%
Balanced60% equities / 40% bonds14.79%
Assertive75% equities / 25% bonds16.99%
Aggressive90% equities / 10% bonds19.22%

Option 3: Individual ETFs

The first of my ETF models uses three individual funds (including one that combines US, international and emerging markets) to build a globally diversified portfolio. Here are the individual ETF returns for the year:

Fund2019 Return
BMO Aggregate Bond Index ETF (ZAG)6.78%
Vanguard FTSE Canada All Cap Index ETF (VCN)22.06%
iShares Core MSCI All Country World ex Canada Index ETF (XAW)19.37%

In 2019, these combined to deliver the following portfolio returns:

Model ETF PortfolioAsset Allocation2019 Return
Conservative30% equities / 70% bonds10.75%
Cautious45% equities / 55% bonds12.89%
Balanced60% equities / 40% bonds15.02%
Assertive75% equities / 25% bonds17.16%
Aggressive90% equities / 10% bonds19.29%

Option 4: Asset Allocation ETFs

My only change to the model portfolios last year was the addition of the new one-fund portfolios from Vanguard and iShares. The iShares versions launched at the end of 2018, so 2019 was their first full year of performance:

FundAsset Allocation2019 Return
Vanguard Conservative ETF Portfolio (VCNS)40% equities / 60% bonds12.06%
Vanguard Balanced ETF Portfolio (VBAL)60% equities / 40% bonds14.81%
Vanguard Growth ETF Portfolio (VGRO)80% equities / 20% bonds17.66%

FundAsset Allocation2019 Return
iShares Core Balanced ETF Portfolio (XBAL)60% equities / 40% bonds15.19%
iShares Core Growth ETF Portfolio (XGRO)80% equities / 20% bonds17.96%

The fine print

When comparing the performance of the above four options, a good touchstone is the traditional blend of 60% stocks and 40% bonds. In this category, the iShares Core Balanced Portfolio (XBAL) was the leader at 15.19%, but the Individual ETFs (15.02%), the Vanguard Balanced ETF Portfolio (14.81%) and the TD e-Series portfolio (14.79%) were close on its heels. Only the Tangerine Balanced Portfolio lagged significantly at 14.06%, not surprising given the much higher MER.

But the difference in performance between the various options is only partly due to fees: indeed, costs are not even the biggest factor here. Most of the variation can be explained by subtle differences in the “asset subclasses” and in the specific indexes tracked by the funds.

Although all the portfolios are 40% bonds and 60% stocks, these broad asset classes are not subdivided in the same way in each portfolio. Some examples:

  • The TD e-Series portfolio (which changed its benchmark indexes mid-year) tracks only large-cap stocks in the US and large and mid-cap stocks internationally, and it does not included emerging markets. The ETF portfolios track large, mid, and small cap stocks, and they all include emerging markets.
  • The Vanguard funds use the FTSE Canada All-Cap Index for Canadian stocks, while iShares and TD (for part of the year) use the S&P/TSX Composite Index: the latter outperformed this year, but the longer-term performance of these two popular benchmarks is almost identical. Tangerine uses the large-cap-only S&P/TSX 60 Index, which slightly lagged both in 2019.
  • My model portfolios generally allocate one-third each to Canadian, US and international equities (as do the Tangerine funds). The iShares asset allocation ETFs (XBAL and XGRO) assign significantly more weight—about 45%—to US equities.
  • BMO, iShares and Vanguard and TD all use different bond indexes. And the asset allocation ETFs (Option 4) are the only ones that include non-Canadian bonds. Vanguard’s versions include global as well as US bonds.

The lesson here is that you can usually ignore short-term variations in similar portfolios, because the differences are random and likely to even out over time.

Finally, a reminder that your personal rate of return may have differed significantly from the above, even if you followed the model portfolios closely. Your own results could have been affected by trading commissions, foreign withholding taxes, mid-year rebalancing, or large contributions or withdrawals.