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My 2014 (and final) Portfolio Rate of Return

My DIY investing journey began after the global financial crisis in 2008-09.  It wasn’t until markets crashed by as much as 50 percent that I started to take notice of my investment statements and performance. Aside from the significant decline in my portfolio, the most alarming number was the 2.7% MER being paid on a global equity mutual fund.

Enough was enough and so in mid-2009 I opened a discount brokerage account at TD, transferred my portfolio there, and bought individual stocks with a focus on dividend growth.

The timing couldn’t have been better: dividend stocks were out of favour and trading at extremely discounted valuations. In just five-and-a-half months my new strategy paid off handsomely – returning over 35 percent over the remainder of 2009.

I suspect that most DIY investors have similar stories – underperformance and high fees caused many to dump their advisors, sell their mutual funds, and strike out on their own.

Related: 5 challenges that DIY investors face

And if the initial results were anything like mine, what followed was a lot of self-congratulating and back patting. DIYs like me were brimming with overconfidence. But what was lost on me at the time was the old John F. Kennedy aphorism, “a rising tide lifts all boats.

Indeed, anyone who stayed invested after the great crash of 2008 was amply rewarded by the five-year bull market run that followed. DIY investors like me falsely took credit – attributing the success to their ability to pick winning stocks – instead of recognizing that we were all benefiting from a rising stock market and that our fortunate timing could be explained as simple luck.

Dividend stocks have outperformed the broader market for a few years, but the tide is starting to turn. Value stocks are harder to come by today and I don’t have the patience to wait on the sidelines until they become more attractive, nor do I have the ability to unearth the hidden gems that are often overlooked by analysts and institutional investors.

Related: How behavioural biases kept me from becoming an indexer

I diligently track the rate of return on my investments and compare the results against two appropriate benchmarks. All active investors should do the same; otherwise it’s impossible to tell if your strategy is working.

Outside of that glorious run in 2009 my portfolio has barely topped its benchmarks of CDZ (the iShares dividend aristocrats ETF) and XIU (the iShares S&P/TSX 60 index fund). This year my portfolio badly under-performed those funds – by 4.38% and 3.50% respectively.

2014 Portfolio rate of return

Month-end Return (%) Value ($) New cash
Dec 2013 $83,086.47
Jan 2014 -0.45% $82,711.71
Feb 2014 2.84% $85,064.30
Mar 2014 2.11% $95,521.18 $8,507.45
Apr 2014 1.69% $97,135.12
May 2014 -0.12% $97,023.22
Jun 2014 2.48% $99,427.12
Jul 2014 0.81% $100,230.00
Aug 2014 2.22% $102,456.10
Sep 2014 -2.96% $99,426.63
Oct 2014 -0.02% $99,409.50
Nov 2014 1.30% $100,699.26
Dec 2014 -1.52% $100,646.89 $1,500.00
YTD return % 8.53%

Performance versus benchmark

  My portfolio CDZ XIU
1 year (2014) 8.53% 12.91% 12.03%
3 years 11.48% 11.81% 10.96%
5 years 11.69% 11.37% 7.10%
Since Aug 2009 14.79% 13.41% 7.88%

Okay, this year aside it hasn’t been all that bad.  But lately I haven’t felt that the time and effort spent managing my portfolio has been worthwhile. My last few stock picks were flat-out terrible (Rogers Sugar, Canadian Oil Sands) and I drifted away from the core ideas behind dividend growth investing, which is to buy blue-chip stocks when they are value-priced and hold them for the rising dividends.

Related: How to get started with dividend investing

That’s not to say that I lost faith in the dividend growth strategy – but you need extreme discipline and dedication to stick with this approach for the long term. That means keeping new cash and dividends on the sidelines – often for years – until better stock prices come along.

I no longer wanted to worry about market timing, analyst reports, and researching ideas for new companies in which to invest. I wanted a simple strategy that required minimal maintenance while still giving me the opportunity to reach my investing goals.

That strategy, as you now know, is an easy two-fund solution built with Vanguard’s All World ex-Canada ETF (VXC) and its Canada All Cap Index ETF (VCN). That’s it.

Here’s been the best part:

You can track your rate of return using these handy calculators developed by PWL Capital’s Justin Bender. Thanks to Justin for helping me put together the past returns for my portfolio and its benchmarks again this year.

How did your investments perform last year?

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30 Comments

  1. Dan @ Our Big Fat Wallet on January 11, 2015 at 8:19 pm

    Thats actually a very respectable rate of return. I can see the value of index investing – less time researching the individual companies and worrying if you’ll pick the ‘right’ stock. Personally Id like to strike a balance between 100% index and 100% dividend – somewhere in the middle involving a small core of dividend stocks along with some ETFs

    • Wh Corbett on January 12, 2015 at 7:11 am

      you make a case for indexing and ETFs thought why not dividend ETF such as IDV the Vig and CDZ?
      You can’t get the benefit of compounding without a decent dividend return. Good dividends and compounding are the only reliable’s over time.

      • Dan @ Our Big Fat Wallet on January 12, 2015 at 12:33 pm

        @ Wh Corbett I already own CDZ and plan to buy more dividend ETFs in the future

      • Grant on January 12, 2015 at 1:42 pm

        Wh Corbett, from the point of view of the benefits of compounding, it doesn’t matter if you get them in the form of dividends or capital gains. Returns are returns. If the stocks are in a taxable account, you are better off getting capital gains, as the capital gains are deferred until you sell the stocks, whereas with dividends, taxes have to be paid every year.

        • Echo on January 12, 2015 at 10:28 pm

          This.

    • Echo on January 12, 2015 at 10:23 pm

      Hey Dan, I like that you and Mark have that balance between the two strategies. I’ll post more about my two-fund approach as the year goes on to remind people that this strategy is not appropriate for everyone.

  2. CanadianDaniel on January 12, 2015 at 7:14 am

    Thanks Robb. I chose Fortis (FTS) about 2 yrs ago based on your earlier analysis (and the fact that it has a long history of raising its dividend yield). It’s doing super but with all the red flags about Canadians’ debt levels, impending interest rate increases and the fact that Canada is a net exporter of oil while the US is a net oil importer primed to benefit from lower oil prices, my thoughts are to transition my FTS holdings to a blue-chip US index ETF. Alison Griffiths once told me that the couch potato approach can bring superior returns — provided you head in the right direction. What do you think about focusing on the Dow Jones rather than a TSX index?

    • Echo on January 12, 2015 at 10:27 pm

      Hi Daniel, I’d rather not speculate on which market will outperform. Any rational argument about the direction of the economy can be rendered useless by market exuberance and irrational investor behaviour.

      I will say that if you’re making a choice between one stock (Fortis) and an index ETF, I’d take the ETF every time.

  3. Bob Turnbull on January 12, 2015 at 7:48 am

    Volumes for VXC are very low. Liquidity may be a problem if you have to sell. I have been caught with this type of scenario in the past so in Canada, I will not buy a stock that trades less than 50,000 shares on average per day.

    • Grant on January 12, 2015 at 12:07 pm

      Bob, the liquidity of an ETF is determined by the securities in it, not the trading volumes of the ETF itself. Market makers create (and destroy) more units of the ETF as the market demands.So if the stocks in an ETF are liquid so is the ETF holding those stocks, regardless of trading volumes of that ETF.

      • Bob Turnbull on January 14, 2015 at 6:11 am

        Makes sense Grant. Never looked at it that way.

  4. Barry @ Moneywehave on January 12, 2015 at 9:55 am

    Great return!

    I index and have a 90/10 split and pulled a return of 13.3% for 2014 which was awesome considering how little work I did. Glad you’re now also on the index train.

  5. Robert on January 12, 2015 at 10:24 am

    Interesting stuff, but I have 3 thoughts

    1. I am not sure what makes a calendar year a good evaluation date. For me it is close to my corporate year end is Sept 30 so all taxes outflowing are done by Jan 15. The governments use March 31, so I find that date more interesting. Budgets can move the ground beneath us, and I can see how CPP is doing with its investments, which influences whether I tip more money into CPP. Morever I usually know my personal taxes at that time.
    I think as long as March 31 controls our world it will be the most natural evaluation date for me.

    2. I see the reasoning to calculating and comparing a rate of return, however it sounds very complex. I suppose you can compare starting balance, add contributions, and compare it to ending balance + withdrawls. But then there is the complication of tax efficiency varying between corporate, sheltered, and unsheltered holdings and different types of investments.

    3. I am interested in gradually moving toward indexing, but what are the long term stats on it including bear markets? It has to perform well in a bear market to be a good long term strategy.

    • Echo on January 12, 2015 at 10:40 pm

      Hi Robert, thanks for sharing your thoughts. Great point about the March 31st date being a better focal point. My employer uses a March 31st year-end. Our annual salary increase (if any) gets implemented July 1st. I just think December 31st is more widely used and so it’s easier to get data when everyone’s using the same yardstick.

      Calculating the rate of return is not difficult at all. I simply download the RoR calculator and then enter the portfolio value at the end of every month (once I get the statement from TD), and make note of any new contributions (as well as the date)…the calculator does the rest. As for the benchmarks, iShares and Vanguard do a great job keeping up the performance date on their websites.

      It’s quite common to think that index funds perform badly in bear markets, but dividend stocks can go down by just as much as the broad market, companies can cut or eliminate their dividend, and I have no confidence in my ability to avoid or somehow profit from a tumbling market.

    • Richard on January 16, 2015 at 10:45 am

      #3 depends on your goals. If you want to maximize your long-term assets index funds always recover from bear markets so they tend to do very well in the long run. If you aren’t a very aggressive investor, or you need to make withdrawals in the next few years, the right asset allocation (using index funds) will reduce the cost of bear markets. There are many other strategies that will perform well in specific situations but indexing is great for covering all your bases.

  6. Charlie on January 12, 2015 at 11:09 am

    Hi,
    My 1 year return (for both my wife and I), was exactly 20% (November to November). All my stocks are part of a DRIP program with the exception of one (AW.UN) and most are mainly blue chip. I have 19 stocks total, 2 of which are US (PEP, JNJ). The remainder are listed on the TSX. There are a few dogs in my group (JE, FAP, PGF), a few are flat, but patience is the name of the game. As an example, several years ago I bought Thompson Reuters (TRI) and it promptly went down $10. But I hung on to it and collected more shares through the Drip plan at a lower price. Today the stock price is up over $14 what I paid for them originally. Some people might say I was lucky to earn %20 return, but I say people make their own luck. My whole strategy is to eventually collect my dividends in cash to supplement my retirement income. I only started investing through a discount broker 5 years ago and so far I’ve been very pleased with the results. I could supply a complete list of my holdings if anyone is interested. Charlie

    • Robert on January 12, 2015 at 11:49 am

      It is nice to start investing in a strong bull market!

    • Echo on January 12, 2015 at 10:46 pm

      Hi Charlie, congratulations on your stellar investment performance over the last five years. Your story sounds similar to mine – hopefully you can stick with your strategy through the ups and downs of the market. Good luck!

  7. darren on January 12, 2015 at 1:18 pm

    I have td e-funds and had 20%international equity, 20%canadian equity, 20%us equity and 20% Canadian bonds and did 12% overall which I was happy with

    • Echo on January 12, 2015 at 10:48 pm

      Nice work, Darren! I’m a big fan of the e-series funds.

  8. Tawcan on January 12, 2015 at 6:54 pm

    That’s actually really good returns. I’ve been lucky with my investments where one of them has increased over 50% in 2014. 🙂

    • Echo on January 12, 2015 at 10:53 pm

      @Tawcan – No complaints about the returns, just taking a different path to get there going forward.

  9. My Own Advisor on January 12, 2015 at 6:54 pm

    Congrats on the move Robb, good on you. I think the two-fund solution will serve you well and I look forward to your indexing articles 🙂

    I have not lost faith in the dividend growth strategy, but my approach is modified, I just buy and hold top stocks in XIU and other ETFs for dividends, period. If they are not dividend growers, that is OK, since my focus is a blend of ETFs and dividend stocks to replace my salaried income (at some point).

    Will you be putting both VXC and VCN in RRSP and TFSA? Just RRSP for now?
    Mark

    • Echo on January 12, 2015 at 11:00 pm

      Thanks Mark! I’ll be using these funds for my RRSP and TFSA (once that gets going again).

      I think I’ll avoid specific articles on index investing and focus instead on investor behaviour and advocacy.

      Like I said to Dan, I like your balanced approach when it comes to investing.

  10. unbalanced on January 13, 2015 at 4:45 am

    Keep up the great blog and congrats to alot of good contributors. A quick question and I know its kinda vague but here goes. If you were going to buy a certain ETF, what criteria do you use for price? Is the price to high or just buy it and let it do its work. Thanks in advance.

    • Echo on January 13, 2015 at 7:53 am

      @unbalanced – Thanks for the kind words. I’m going to address this in a future column, but I’d suggest that the ETF price should have little bearing on whether or not you should invest. If it fits the criteria of helping you build a low cost and broadly diversified portfolio, and you don’t need the money in the short-to-medium term, then buy it and let it do its work 🙂

  11. david toyne on January 13, 2015 at 7:05 am

    Robb, I was pleased to see you move outside of Canada with the All World ex Canada ETF. Your 100% Canadian portfolio previously had me quite worried!!

    What precipitated the move?

    • Echo on January 13, 2015 at 8:00 am

      Hi David, thanks for stopping by. I’m sorry that my portfolio kept you up at night! To be honest, I’ve been waiting for a product like VXC to come along – something that is market-cap weighted so that I get just enough exposure to the global markets without having to tinker with too many funds to try and find the perfect allocation.

  12. Richard on January 16, 2015 at 10:37 am

    Great points Robb – it’s such a relief to realize that you don’t need to worry about daily news and your portfolio can do just as while when you ignore it 🙂 (provided that you’re investing in broad funds that are stable)

    It’s also great that you’re getting a lot of exposure to other markets now. Once again that reduces the worry factor and does all the work for you.

  13. bericm on January 26, 2015 at 3:37 pm

    Thanks for keeping us in the loop; its a beautiful thing when a plan keeps paying off, isn’t it?

    For me, I didn’t discover DGI until fairly recently, but in ’98 I started playing with Dogs of Dow variations. Keep in mind, that was a time of tech stocks, ‘growth investing’, even ‘ momentum investing’ was big. I devised a model portfolio (paper money) of 5 top-yielding TSX100 stocks, re-balanced annually, re-invested all dividends, and even across the height of the tech boom, these stocks turned in a 98% total return over 5 years.

    Solid, dividend paying stocks rule.

    After my 5 year test I jumped in with real money and haven’t looked back since. In 2009 my rebalancing put my in deep with banks; a couple of years ago it was LifeCos and this year it’s oils (I steered clear of Talisman). I’ve no illusion – or is it delusions – of being able to time my purchases. I just try to stay all in. Maybe I’ll get spanked one of these days …

    Just not today, not today 🙂

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