Well, another year is in the books and it’s time to review how investors fared if they used one of my model portfolios during 2021. Overall, the past year was very different from 2020: we didn’t experience any gut-wrenching market declines, for one. Moreover, while stocks and bonds both delivered excellent returns in 2020, they diverged widely in 2021.

This was the second year in which my model portfolios included one-ticket asset allocation ETFs from Vanguard and iShares, as well as options for combining two ETFs (one for stocks and one for bonds). So we’ll start by looking at the individual components of these portfolios, and then we’ll review how they fared when you fitted them all together.


Canadian equities rebounded from a mediocre showing in 2020 to post their strongest returns since 2009:

Vanguard FTSE Canada All Cap Index ETF (VCN)25.65%
iShares Core S&P/TSX Capped Composite Index ETF (XIC)25.06%
Source: Vanguard, BlackRock

U.S. equities also turned in another outstanding year in 2021, matching the returns on Canadian stocks almost exactly. The returns were driven entirely by the stocks themselves, and not by currency appreciation: the US dollar ended 2021 half a penny lower than where it started. The return of ITOT below is in Canadian dollars, but it’s only slightly lower than the ETF’s return in its local currency.

Vanguard U.S. Total Market Index ETF (VUN) 24.47%
iShares Core S&P Total U.S. Stock Market ETF (ITOT) in CAD25.10%
Source: Vanguard, BlackRock, Bank of Canada

International equities were the laggards in 2021: overseas developed markets didn’t keep up with North American stocks, and emerging markets just spun their wheels and went nowhere.

Remember, you need to be careful when comparing the Vanguard and iShares ETFs in these asset classes. The two index providers treat South Korea differently: Vanguard treats it as a developed country and iShares includes it as an emerging market.

Vanguard FTSE Developed All Cap ex North America Index ETF (VIU)9.03%
iShares Core MSCI EAFE IMI Index ETF (XEF)10.05%
Vanguard FTSE Emerging Markets All Cap Index ETF (VEE)0.15%
iShares Core MSCI Emerging Markets ETF (IEMG)  in CAD–1.07%
Source: Vanguard, BlackRock, Bank of Canada

When we combine Canadian, US, and international stocks in the all-equity ETFs from Vanguard and iShares, the returns were virtually identical:

Vanguard All-Equity ETF Portfolio (VEQT)19.66%
iShares Core Equity ETF Portfolio (XEQT)19.57%
Source: Vanguard, BlackRock

Fixed income

It was a much different story for bonds in 2021. Interest rates rose significantly during the year: for example, the yield on five-year Government of Canada bonds went from 0.41% at the end of 2020 to 1.56% by November 2021 before heading back down slightly. As a result, broad-market bond ETFs had their worst year since 1994.

If you’re using one of the two-fund model portfolios, all your bond exposure came from one of these ETFs tracking the broad Canadian market:

Vanguard Canadian Aggregate Bond Index ETF (VAB)–2.85%
iShares Core Canadian Universe Bond Index ETF (XBB) –2.65%
Source: Vanguard, BlackRock

If you’re using an all-in-one ETF portfolio, then you also had exposure to other fixed income asset classes, including foreign bonds and (in the iShares portfolios) short-term corporate bonds. But there was no help to be found:

Vanguard U.S. Aggregate Bond Index ETF (CAD-hedged) (VBU)–2.03%
Vanguard Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) (VBG)–2.92%
iShares U.S. Treasury Bond ETF (GOVT) in CAD–2.96%
iShares Broad USD Investment Grade Corporate Bond ETF (USIG) in CAD–1.71%
iShares Core Canadian Short Term Corporate Bond Index ETF (XSH) –0.62%
Source: Vanguard, BlackRock, Bank of Canada

Balanced portfolios

You’ve probably figured out that in 2021, you were rewarded for taking risk: the more you allocated to equities, the better your performance. Here are the annual returns for the balanced asset allocation ETFs, as well as the combined performance for the portfolios that combine a bond ETF with an all-equity ETF.

Note that in the table below, we’ve assumed the two-ETF portfolios were not rebalanced during the year. By comparison, the asset-allocation ETFs are likely to remain closer to their targets year-round.

Asset allocationVanguard ETFsReturniShares ETFsReturn
80% bonds / 20% equitiesVCIP1.46%XINC1.97%
70% bonds / 30% equitiesVAB + VEQT3.90%XBB + XEQT4.02%
60% bonds / 40% equitiesVCNS5.80%XCNS6.57%
50% bonds / 50% equitiesVAB + VEQT8.41%XBB + XEQT8.46%
40% bonds / 60% equitiesVBAL10.29%XBAL11.06%
30% bonds / 70% equitiesVAB + VEQT12.91%XBB + XEQT12.90%
20% bonds / 80% equitiesVGRO14.97%XGRO15.17%
Source: Vanguard, BlackRock

The small differences in performance between the Vanguard and iShares portfolio can be safely ignored, as the portfolios have slightly different asset mixes. For example, although VBAL and XBAL both hold 40% bonds and 60% stocks, the fixed income and equity components vary slightly, so short-term variation is to be expected. Over the longer term, these are likely to be trivial.

Finally, a reminder that these returns might differ significantly from your own, even if you tried to emulate the model portfolios. Your personal rate of return would have been influenced by the timing of any contributions or withdrawals, trading commissions, the reinvestment of distributions, the amount of uninvested cash in your account, and whether you also had a side hustle. Consider these model portfolio returns a benchmark rather than a reflection of your own performance.