Investment Returns for 2024
Global stocks continued the positive momentum from a strong performance in 2023 to deliver another banner year for investment returns in 2024.
The gap between the NASDAQ and the rest of the market shrank, but technology stocks once again led the charge, with the tech-heavy NASDAQ gaining 24.10% (XQQ). That mark was nearly equalled by the S&P 500 posting a 23.40% (XSP) gain of its own in 2024.
Not to be outdone, Canadian stocks rallied and delivered a 21.53% return (XIC), while emerging market stocks awoke from their slumber and returned an impressive 19.20% (VEE) in 2024.
International stocks were the laggard last year, posting a “measly” return of 12.58% (XEF).
On the fixed income side, Canadian aggregate bonds (VAB) were up a modest 4.00%, with most of that gain coming from higher bond yields. Short-term bonds (VSB) had a more impressive 5.50% return in 2024, from a more balanced mix of price growth and interest.
You know that I’m a big fan of asset allocation ETFs as a sensible way for many Canadians to invest. For around 20 basis points (0.20%) in fees, you get a globally diversified and automatically rebalancing portfolio that you can set and forget.
Indeed, if investing has largely been solved with low-cost index funds, then investing complexity has been solved with these asset allocation funds. They’re a true one-stop shop for your investing needs.
Investing passively through index funds allows investors to capture the aforementioned returns, minus a very small fee. That’s a surefire way to beat 90% of investors who invest more actively, incur higher fees and are prone to behavioural issues like performance chasing.
With that in mind, here are the 2024 investment returns for various asset allocation ETFs offered by Vanguard and iShares:
Vanguard Asset Allocation ETFs
Vanguard offers a suite of asset allocation ETFs ranging from 100% global equities (VEQT) to 20% equities and 80% bonds (VCIP).
I’m including the calendar year returns of VEQT, VGRO, VBAL, and VCNS to show the results from their most popular asset allocation ETFs:
| ETF | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| VEQT (100/0) | 24.87% | 16.95% | -10.92% | 19.66% | 11.25% |
| VGRO (80/20) | 20.24% | 14.86% | -11.21% | 14.97% | 10.83% |
| VBAL (60/40) | 15.63% | 12.69% | -11.45% | 10.29% | 10.20% |
| VCNS (40/60) | 11.19% | 10.55% | -11.78% | 5.80% | 9.36% |
Interestingly, each step up the risk ladder earned you an extra return of about 4.5% last year, and about 2% in 2023. Even the traditionally conservative 40/60 portfolio posted double-digit gains again thanks to strong stock AND bond performances in 2023 and 2024.
iShares Asset Allocation ETFs
iShares offers a similar suite of asset allocation ETFs with ticker symbols of XEQT, XGRO, XBAL, and XCNS.
The differences between iShares and Vanguard are slight – iShares’ ETFs cost just 0.20% MER compared to Vanguard’s 0.24% MER, and iShares’ asset allocation ETFs come with a bit more US and International equity, while Vanguard’s asset allocation ETFs have more Canadian and emerging market representation.
Here are the five-year returns for iShares’ asset allocation ETFs:
| ETF | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| XEQT (100/0) | 24.67% | 17.05% | -10.93% | 19.57% | 11.71% |
| XGRO (80/20) | 20.46% | 14.92% | -11.00% | 15.17% | 11.42% |
| XBAL (60/40) | 16.12% | 12.78% | -11.08% | 11.06% | 10.58% |
| XCNS (40/60) | 11.99% | 10.56% | -11.19% | 6.57% | 10.33% |
You can see the returns are nearly identical. XEQT enjoyed a slight performance advantage in 2023 due to its tilt towards the higher performing US and international markets, but VEQT had the edge in 2024 thanks to strong returns from Canadian and emerging market stocks.
Vanguard vs. iShares 3-5 Year Averages
Now that these asset allocation ETFs have been around for at least five years we can start to look at their three-and-five-year average returns for a better cumulative comparison.
After two years of stellar returns, we may have forgotten exactly how bad returns were in 2022, especially for more conservative portfolios. That’s why looking at average annual returns over multiple years can give us a more realistic look at a typical investor’s experience (ideally we have data from 10+ years but here we are).
Vanguard asset allocation ETF 3-and-5-year averages:
| ETF | 1-year | 3-year | 5-year | Inception |
|---|---|---|---|---|
| VEQT (100/0) | 24.87% | 9.16% | 11.61% | 12.37% |
| VGRO (80/20) | 20.24% | 7.04% | 9.34% | 8.29% |
| VBAL (60/40) | 15.63% | 4.89% | 7.80% | 6.52% |
| VCNS (40/60) | 11.19% | 2.74% | 4.64% | 4.74% |
These five-year average annual returns are still well above the return assumptions I use in my financial planning assumptions for clients (6.10% for global equities, after fees).
You could say that we’ve pulled forward a few years worth of expected returns. That means we should probably lower our expectations for future returns so that the 10-year average will look more like the 6.10% assumption.
iShares’ asset allocation ETF 3-and-5-year averages:
| ETF | 1-year | 3-year | 5-year | Inception |
|---|---|---|---|---|
| XEQT (100/0) | 24.67% | 9.13% | 11.66% | 12.46% |
| XGRO (80/20) | 20.46% | 7.04% | 9.59% | n/a |
| XBAL (60/40) | 16.12% | 5.21% | 7.42% | n/a |
| XCNS (40/60) | 11.99% | 3.22% | 5.27% | 5.46% |
*Note that XGRO and XBAL were different ETFs with different mandates prior to 2019 and so the “since inception” returns are not a true representation of the new asset allocation mix.
If you can’t decide between the two, hedge your bets by putting a Vanguard asset allocation ETF in one account type, and an iShares asset allocation ETF in another (or have one spouse pick Vanguard and one spouse pick iShares for a little friendly competition).
Whatever you do, don’t drive yourself crazy switching back and forth between the two chasing past performance.
My Investment Returns for 2024
I’ve been investing in Vanguard’s all-equity ETF (VEQT) since March 2019. It’s a perfect solution for someone like me who wants to buy the entire market for as cheap as possible and move on with my life.
I hold VEQT inside my RRSP, LIRA, TFSA, and corporate investing account. I did not make a contribution to my RRSP (or LIRA, of course) in 2024, but I did actively contribute to my TFSA and our corporate investing account.
As you know, the timing (and amount) of your own contributions will affect your own personal rate of return. So, while I expect my RRSP and LIRA to have a nearly identical return to VEQT’s 2024 calendar year return of 24.87%, the returns on the corporate account and TFSA may be different due to the timing of contributions. Let’s check it out:
- Corporate = 27.05%
- RRSP = 24.80%
- LIRA = 24.80%
- TFSA = 10.86%
Indeed, the corporate account benefited from significant contributions early in the year, while I didn’t start contributing to my TFSA until May.
I switched up the kids’ RESP account at the beginning of 2024 to be more conservative as they enter their age 15 and 12 years. I added short-term bonds and changed the overall mix to about 35% equities and 65% bonds.
We contributed $7,500 to the account in January to catch-up on one year of missing grants for our oldest child.
- RESP = 11.38%
Not bad for going conservative with this portfolio in 2024.
Final Thoughts on 2024 Investment Returns
Most Canadians still invest in actively managed mutual funds through their bank or another investment firm. These funds have a huge hurdle to overcome – their high fees – to match (let alone beat) a passively managed portfolio of index funds.
Your job this month is to pull up your investment statement and look at last year’s returns, along with the returns over the past five years, and see if your portfolio is keeping pace with the returns of an asset allocation ETF.
Make sure you’re comparing apples-to-apples, that is you’re matching up your portfolio’s asset allocation with the returns from a similar asset allocation ETF (i.e. 60/40 to 60/40) to get the full story. No sense comparing your 60/40 portfolio to the NASDAQ 100. It likely wouldn’t be appropriate to invest in 100% tech stocks.
If you’ve reviewed your investment statement and find your returns aren’t measuring up, it might be worth switching to a self-directed investing platform and buying a risk appropriate asset allocation ETF.
I truly believe that pairing low-cost index investing with on-demand financial planning advice at key life stages can lead to successful outcomes for many Canadians. Put that on your New Year’s resolution list for 2025.
What are your thoughts on TD eSeries Funds and 2024 performance versus Vanguard?
Hi Janice, the e-Series funds are excellent and when I used them in our kids’ RESP I found the returns very closely matched VEQT.
That said, it really depends on the funds you’re using and in what proportion. For instance, we had 1/3 in each of Canadian equity, US equity, and international equity so that was a pretty good proxy for VEQT.
Nothing wrong with those funds, I just switched because I needed a better way to track each child’s contributions, grants, and investment growth.
And you’re standing pat? No fear of a correction or bubble bursting?
Hi Rob, yes I’m standing pat (as should most investors).
Stock prices are high, yes, especially in the US. That’s why I diversify globally with VEQT.
While high prices today should lead to lower expected returns going forward, there’s still a positive expected return for global stocks. We just shouldn’t get used to big double digit gains.
For what it’s worth, I’ve been asked this question since I started blogging in 2010. Stock prices were high then after soaring when the financial crisis ended. There will always be a reason to worry about the future, but global stocks should continue marching higher, on average, over the long-term.
Good day Robb, thanks for sharing all of this. I’m a big fan of XEQT as well. I’m just curious which bonds did you use for your kids RESP account? TIA
Hi Nachelle, thanks. I’m using VSB for my oldest child and XSB for my youngest child – following the excellent glide path outlined in the article by Justin Bender: https://canadianportfoliomanagerblog.com/how-to-invest-your-resp/
Hi Rob,
Since RESP time horizon is generally very short. Would it not make sense to move Bond portion of the investment in ISA or GIC, to reduce the risk. Bonds have been loosing money due to macro trends?
Please share your thoughts on this general statement made by Federal employees “Why invest in RRSP cause we have federal pension plan and most likely our income will be higher in retirement”
Looking forward to your feedback
When I saw your lower TFSA return, it made me think of DALBAR, who would say your lower return is due to poor investor behaviour. Of course, the real reason is that you invested the money when you had it.
Maybe I was waiting for a dip 😉
In 2022 I’m surprised to see the 100% equity ETFs still outperformed any of the other funds that contained varying portions of bonds. The bonds did not do their supposed job of moderating the downside of the returns in 2022. 100% equity still led even in a down year.
Hi Jim, 2022 will go down as one of the worst years ever for bonds – and a terrible year for balanced and conservative portfolios.
But I worry investors are taking the wrong lessons from that year. I think of it as more of an anomaly than anything. Interest rates spiked to combat unexpectedly high inflation.
In “normal” times, I’d expect bonds to do the job they’ve mostly done well over the years.
The good news is that we’re getting some decent yields from bonds again (finally), and there’s some wiggle room for rates to fall, which would lead to some price appreciation.
Rob, you always reference IShares and Vanguard. What are your thoughts on the similar ETFs offered by BMO – ZEQT, etc.?
Hi John, good question. The asset allocation ETF suites from Vanguard and iShares have simply been around longer so I can do a proper comparison over five years.
BMO launched ZEQT in January 2022.
It’s too heavy on the S&P 500 (47.10%) for my liking, but that allocation has probably served them well over the past three years.
I also don’t want investors to get analysis paralysis when it comes to these very similar funds. Pick one that matches your risk tolerance and move on with your life.
Thanks. Good points.
As always a very informative article Rob. I hope you achieve all your goals in 2025 and a bit more 🙂
Hi Robb
I see that your return is lower on the TFSA using VEQT
Is that because the 15% withholding tax on the dividends?
Can you clarify please, if is OK to invest in the TFSA using VEQT, VGRO or VBAL
Hi Fausto, I only started contributing to my TFSA in May so I was only able to capture VEQTs returns from May to December.
Foreign withholding tax would amount to an additional cost of about 0.22% in the TFSA.
Investors fret about foreign withholding tax because they see a big number like 15%. But it’s a 15% tax on foreign dividends. If the yield on VEQT is 2%, a 15% on that amount would equal 0.30%.
And a good chunk of VEQT is in Canadian equities with Canadian dividends not subject to the FWT. So the total cost is a bit lower.
If there is a 15% withholding tax on U.S. dividends held in a TFSA from XEQT, does that mean that a U.S. tax return needs to be filed to show that income?
Hi Karen, no – a Canadian investor wouldn’t need to file a US tax return. The withholding taxes are all taken care of at the fund level (you see the after fee, after withholding tax return in your brokerage account).
Hi Robb
Just FYI
I use TD ETFs for RRSP and TFSA, very happy
TPU 50%
TTP 25%
TTE 25%
I found your use of VEQT very interesting and simple
Hi Fausto, I used to use the TD e-Series funds and they are excellent – likely similar to what you are doing with the Canadian, US, and International equity funds and if I’m not mistaken TD lets you trade those ETFs for free on their platform. All good!
I just like VEQT for the one-click simplicity.
Hi Robb,
What are your thoughts on a retiree using a blend of VEQT/VSB ( similar to your RESP strategy). As I approach the point where I start to withdraw funds, my timeline to access funds would be shorter and might benefit from the reduced volatility of short term bonds. Is there an RRSP glidepath similar to the RESP glidepath?
Hi Dave, I think that’s a perfectly sensible approach. I’d rather use short-term bonds (duration of 3 years) than an aggregate bond index (7-10 years) as it will be less sensitive to interest rate movements.
Personally, I find the HISA ETF more appealing to act as a cash wedge for 1-3 years’ worth of withdrawals.
But a three-fund solution with buckets for equities (VEQT), bonds (VSB), and cash (CASH) would absolutely work as well.
I think the challenge of adopting the RESP glidepath for your RRSP is that in the RESP you WANT to run out of money within a fairly short period of time, whereas in the RRSP you likely do not want to run out of money.
That’s why holding the same equity mix throughout retirement is probably a better approach than a declining equity glidepath. Just rebalance once or twice a year to refill each bucket back to its original mix.