Last year, with the help of Justin Bender from PWL Capital, I went back and calculated the rate of return from my portfolio of dividend stocks since I started buying shares in 2009. Why? Because it’s important to calculate and compare your portfolio returns to an appropriate benchmark so you can figure out whether active management is really adding value over a passive investing strategy.
Related: How to get started with dividend investing
If it’s not, then you should consider passive management, which is to simply buy low-cost index funds and ETFs and hold them for the long term, rebalancing your allocation when appropriate.
“Too many investors believe they are beating the market, but you need to back it up with facts before you have any bragging rights whatsoever,” said Bender.
My portfolio rate of return
So I’ve been diligently tracking my portfolio rate of return using this method described on Justin’s blog. Since my portfolio consists of Canadian dividend stocks and REITs, the benchmark I compare it to is the iShares Canadian Dividend Aristocrats Index Fund (CDZ). I also want to compare my portfolio to the overall Canadian market, which is best represented by iShares S&P/TSX 60 Index Fund (XIU).
Here are the results:
| 1-Year (2013) | 3-Year (Annualized) | Since 08/2009 (Annualized) | |
| Robb Engen Portfolio | 13.62% | 11.92% | 16.25% |
| CDZ | 13.49% | 9.59% | 13.25% |
| XIU | 13.03% | 3.41% | 6.96% |
Sources: BlackRock Canada, Robb Engen, Dimensional Returns
Canadian stocks did not perform as well as U.S. and International stocks last year, but they still had a great year – returning 13 percent. My portfolio barely eclipsed both index funds in 2013, but the results look much better over the last three-to-five years. It’s beating the CDZ benchmark by a full 3 percent and trouncing the XIU benchmark by nearly 10 percent.
Related: Why I Became A DIY Investor
The following graph shows how much $1 invested in my portfolio would have grown to, compared to $1 invested in iShares CDZ and iShares XIU:
Growth of $1: August 2009 to December 2013
Sources: BlackRock Canada, Robb Engen
Final thoughts
The results are impressive, but the question is – how much of the performance is due to superior skill and how much is just being in the right place at the right time? Only long-term results can answer that question.
Related: Score One For Active Management? Check Out These Market Beating Funds
How did your investments perform last year? Do you track your portfolio rate of return?
