Mr. Market is the imaginary investor described in Benjamin Graham’s book, The Intelligent Investor. Driven by fear, greed, or apathy on any given day, Mr. Market invests according to his mood rather than rational analysis. It’s fair to describe Mr. Market as manic-depressive, randomly swinging from optimism to pessimism.

Last year’s wild stock market ride could also fit that narrative. From all-time highs in February, to the fastest and deepest market crash in March, to the just-as-speedy recovery in the spring, 2020 ended up delivering shockingly high returns for those with the patience and discipline to stay in their seats. 

Here’s a look at the performance of some balanced and growth portfolios in 2020:

• Vanguard’s balanced (60/40) ETF portfolio (represented by VBAL) posted returns of 10.24% for the year.
• Vanguard’s growth (80/20) ETF portfolio (represented by VGRO) posted returns of 10.89% for the year.
• Vanguard’s all-equity (100/0) ETF portfolio (represented by VEQT) posted returns of 11.29% for the year.
• Horizons balanced (70/30) TRI ETF portfolio (represented by HBAL) posted returns of 14.86% for the year.
• Horizons growth (100/0) TRI ETF portfolio (represented by HGRO) posted returns of 17.29% for the year.

Vanguard ETFs are weighted by market capitalization, with the exception of their allocation to Canadian equities.

Horizons TRI ETFs take a different approach, allocating about half as much to Canadian equities while also including a 20% allocation to technology through the NASDAQ 100. That asset mix led to their funds’ outperformance as technology stocks soared in 2020.

Those are time-weighted returns, which don’t take into account the effect of an investor’s contributions or withdrawals. A money-weighted return includes the impact of any inflows or outflows from the portfolio.

My own portfolio saw the following ‘money-weighted’ investment returns:

• RRSP (100% VEQT at WS Trade) – 10.24% (<– as of Jan 16, 2020)
• TFSA (100% VEQT at WS Trade) – 12.10% (<– large deposit April 25, 2020)
• LIRA (100% VEQT at TD Direct) – 22.53% (<– as of May 1, 2020)
• RESP (100% equity TD e-Series) – 10.69% (<– contribute $500/month)
• Corporate (100% VEQT at Questrade) – 9.04% (<– as of July 3, 2020)
• Wife’s RRSP (80/20 at Wealthsimple Invest) – 8.50%

As you can see, the timing of your contributions can have a significant impact on your portfolio returns.

Also, if you’re taking a more active approach with your investments, it’s important to compare them to a risk-appropriate benchmark (like the index-tracking portfolios above) to see whether your active decisions are adding any value over a low cost, globally diversified, passive indexing approach.

How well did your investments perform this year? Were you able to ride out the volatile markets and stick to your plan?

This Week’s Recap:

My beloved Cleveland Browns made the NFL playoffs for the first time since 2002. I may have shed a tear or two. I’ll be cheering them on against the Steelers this Sunday night.

At the end of the year I shared my latest net worth update where I reached the million dollar milestone. Onward and upward.

Earlier this week I updated and re-published my TFSA overview and contribution limit guide.

I’ve also updated and re-published my guide to CPP payments and how much you will receive from Canada Pension Plan.

Promo of the Week:

If you find your investment returns lacking and you’re ready to make a switch to low cost index investing, here’s what I’d recommend:

Wealthsimple Invest (robo advisor): Get a $50 bonus when you open and fund your first Wealthsimple account (min. $500 initial deposit).

• Here’s exactly how to transfer your RRSP or TFSA to Wealthsimple.

Wealthsimple Trade (self-directed): Canada’s first and only zero-commission trading platform where investors can trade stocks and ETFs for free in an RRSP, TFSA, or non-registered account. Sign up for Wealthsimple Trade today and get a $10 cash bonus.

• Read my Wealthsimple Trade review.

Questrade (self-directed): For most robust investing needs, including for LIRAs, Margin, and Corporate accounts, Questrade is still the king of low-cost investing in Canada. You can purchase ETFs for free and trade stocks for as little as $4.95. Take your savings further with a registered account at Questrade.

• Here’s exactly how to transfer your RRSP or TFSA to Questrade.

Weekend Reading:

Time to switch rewards credit cards? Our friends at Credit Card Genius share 2021’s best credit cards in Canada.

Erica Alini looks at when you are actually allowed to travel (and how will the government check?).

Rob Carrick and Tom Drake had a great conversation to recap the year on the Maple Money Show.

Morningstar looks at the stocks that soared in the pandemic.

The price of Bitcoin has exploded in recent months, reminiscent of its last run-up at the end of 2017. Ben Carlson explains why Bitcoin is a call option on human nature:

“I laugh when I hear people talk about the “fundamentals” of bitcoin. Fundamentals?

There are no fundamentals. Trust, faith, hope, technology and human nature are the only true fundamentals of cryptocurrencies.”

Ben Carlson also updated his favourite performance chart for 2020. The periodic table of investment returns:

Another great year for large-cap stocks, which have led the way for the second consecutive year (and for the past decade). Commodities have been the biggest loser over the last 10 years. 

Congratulations to Kerry Taylor for launching SquawkfoxTV and The Cash and Kerry Podcast. Her first episode was dynamite, with world renowned behavioural economist Dan Ariely.

The Get Smarter About Money website shares an important message about where to find information about your annual investment fees.

My Own Advisor Mark Seed interviews Mark Noble from Horizons ETFs about their tax efficient TRI ETFs.

Patrick Sojka says this very popular Canadian travel rewards credit card is due for a major overhaul.

The Globe and Mail reports how the COVID-19 pandemic has fuelled a boom in Canadian stock promotion scams (subscribers):

“Since the global outbreak of COVID-19 last winter, there has been a boom in pump and dump scams, in which shady promoters use any means necessary to push up the price of a company’s shares, then sell their stakes at huge profits just before the stock collapses. Those promoters often focus on a hot sector, be it mining, bitcoin, cannabis – and now, bogus coronavirus therapies.”

Finally, Michael Kitces looks into Monte Carlo analysis and explains why a 50% probability of success is actually a viable Monte Carlo retirement projection.

Have a great weekend, everyone!

Back in 2012 I decided to start sharing my net worth updates twice a year. I’ve always been transparent with my finances because I think it’s helpful for readers to know where I’m coming from and how I manage my own money. I’m a real person and wrestle with financial decisions just like everyone else. This blog has been a great outlet for me to share my thought process and get valuable feedback from readers.

Somewhere along the way I made a goal to achieve $1M in net worth by the end of 2020. I accept that it’s a vanity metric that doesn’t really mean anything. When people dream of being a millionaire they’re likely thinking about spending $1M rather than having $1M in wealth.

Still, I thought it was a stretch goal worth striving for along the road to financial freedom.

When I shared my mid-year review at the end of June I didn’t think I had much of a chance to reach the $1M mark. Stocks had dropped 34% in March and hadn’t quite recovered those losses by mid-year. What a difference six months can make! My own RRSP surged in value by nearly $30,000 while my TFSA grew by $10,000 (with no new deposits).

Meanwhile, we’ve lived on the cash payout from my pension and so we were able to save and invest inside of our corporation to the tune of $100,000.

All of this meant that our total assets grew to $1.2M while our only liability – our mortgage – dipped below $200k. We made it!

Here’s how our net worth breaks down as 2020 comes to a close:

Net worth update: 2020 year-end review

Now let’s answer a few questions about the way I calculate net worth:

Credit Cards, Banking, and Investments

We funnel all of our purchases onto a couple of different rewards credit cards to earn points on our everyday spending.

Our go-to card is the Scotia Momentum Visa Infinite Card, which we use for non-Costco groceries and gas. I’m also using the HSBC World Elite MasterCard, which came with an incredible 100,000 point welcome bonus. Finally, we look for the best credit card sign-up bonuses and time our large annual spending (car and house insurance) around these offers.

Our joint chequing account is held at TD, along with our mortgage and kids’ RESPs. My wife has her own chequing and savings accounts at Tangerine. Our high interest savings account is held at EQ Bank, which pays 1.5% interest.

My RRSP and TFSA are held at the zero-commission trading platform Wealthsimple Trade. My LIRA is held at TD Direct, and the new corporate investment account is held at Questrade. My wife’s investments are held at Wealthsimple. You know all of this from my post about how I invest my own money.

RRSP / LIRA / RESP

The right way to calculate net worth is to use the same formula consistently over time to help track and achieve your financial goals.

My preferred method is to list the current value of my RRSP, LIRA, and RESP plans rather than discounting their future value to account for taxes and distributions.

I consider a net worth statement to be a snapshot of your current financial picture, so when it comes time to draw from my RRSP/LIRA and distribute the RESP to my kids, my net worth will decrease accordingly.

Principal Residence

We bought our home in 2011 for $425,000 and developed our basement a few years later, increasing its value to $450,000. The next year I bumped up the market value by 2% (which is still less than its city-assessed value), but the local real estate market has since flattened – with nothing selling in our price range – and so I’ve left the value at $459,000 for the past three years.

Final thoughts and a look to 2021

It’s an immense privilege to be able to work from home and prosper in the middle of a pandemic when so many people have lost so much. I acknowledge this privilege and I’m incredibly grateful for everything we have.

What’s next after reaching the $1M milestone? They say the first million is the hardest, so why not aim for $2M by the end of 2025 (my age 46 year)?

We had big plans for 2020 after I quit my job. Since I can truly work from anywhere we planned to travel more and put that location-independence theory to the test. That obviously didn’t happen.

We’ll see what 2021 brings, particularly in the last half of the year. I’m forever an optimist so I’m hopeful there’s a return to ‘normal’ somewhere on the horizon. Until then, we’ll focus on our family and make the most of our time at home. We’ll continue to save and grow our business. And we’ll continue to dream of better days ahead.

How did your finances fare in 2020? Did you stay invested through the ups and downs? Let me know in the comments below.

I wasn’t sure what to expect when I quit my job last year to focus on blogging, freelance writing, and my fee-only financial planning business. My top priority was to make sure we were able to maintain our current spending and savings rate. In other words, I didn’t want this transition to have any negative financial impact to our lifestyle. 

The pandemic threw a wrench into our spending plans as we weren’t able to travel. Instead, we made the most of our time stuck at home by upgrading our backyard experience (new patio furniture and a hot tub). No regrets.

Our savings goals got a boost when I decided to take the commuted value of my pension in March. I had originally planned to max out the small amount of RRSP contribution room I had, plus top-up my TFSA and max out the kids’ RESP. Instead, I received a taxable payout of $156,000, plus got to put $134,000 into a LIRA. I used the cash to immediately max-out my unused TFSA room.

The cash payout also changed the way we planned to pay ourselves from our small business. We lived on the remainder of the proceeds this year and kept more money inside our business. I also opened a corporate investment account at Questrade to invest the excess cash inside our business.

Speaking of investing, it was a crazy year for the stock market. My stomach was in knots when my 100% global stock portfolio fell by 34% in the fastest decline in history. Who would have known stocks would come roaring back just as quickly? As of this writing, my RRSP is up 8.56% on the year while my TFSA is up 13.72% thanks to a large April infusion.

My big hairy audacious goal was to reach $1M in net worth by the end of this year. That milestone was in doubt earlier this year, but is now in reach thanks to a rising stock market. Stay tuned for my year-end net worth update to see if I made it.

Finally, the biggest unknown was how well our business would perform. I left a job that paid ~$50 an hour to focus on work that was paying closer to $200 an hour. Could that number be scaled with more hours and effort?

That did turn out to be the case. With my wife handling more of the administrative duties I was able to focus on what I do best, which is writing, financial planning, and promoting the business. We doubled our revenue from last year!

2021 Financial Goals

Next year will be more ‘normal’ from a financial perspective. You might even say boring, which is fine with me. These are our top financial goals for 2021:

1). Catch up on my wife’s TFSA contributions

We’ve neglected my wife’s TFSA to focus on our RRSPs in recent years. Now that our RRSPs are maxed out we’ll turn our attention to my wife’s TFSA and aim to contribute a whopping $50,000 to it this year.

We’re able to make such a big contribution because we don’t have any RRSP room left and I have caught up on my unused TFSA room. Filling up my wife’s TFSA is the number one savings priority now, and we should be all caught up in two years.

My wife moved her RRSP to Wealthsimple a few years ago and will continue to use the robo advisor platform for her TFSA.

2). Max-out my TFSA

I’m “current” with my TFSA contributions for the first time since 2011. This goal will be achieved when the markets open on January 4, 2021.

My $6,000 contribution will be invested in Vanguard’s VEQT (as I described in this post on how I invest my own money).

3). Add to Corporate Investment Account

We’ve got a pretty good handle on the monthly cash flow inside our business and how much cash we feel comfortable holding as an emergency buffer. Anything over and above that amount will be invested in our corporate investment account.

We plan to add $48,000 ($4,000 per month) to this account in 2021. This account is also invested in VEQT.

4). Continue to max out RESPs (and rebalance)

We’ll continue our contributions of $416.66 per month into TD e-Series funds for our kids’ RESPs.

Our kids will turn 12 and 9 this year and so we’re getting closer to our target education date for when the kids will need to access this money. I’ve described RESPs as being like mini-RRSPs in that you need to de-risk the portfolio in a short amount of time as you get closer to needing the funds. 

We find ourselves in the middle of that comfort zone when it comes to risk, since it no longer feels appropriate to be invested in 100% equities. To combat this I’ll add the TD Canadian Bond Index Fund (TDB909) to the portfolio and rebalance to a 75/25 stock/bond allocation.

The portfolio is already worth $65,000, so that should buy them a couple of semesters of post-secondary education 🙂

5). Forego extra mortgage payments

I’ve thought about using our extra cash flow to put a bigger dent into our mortgage balance. But when rates fell earlier this year, our variable rate mortgage dropped to 1.45%. It just makes more sense to prioritize my wife’s TFSA over paying down the mortgage faster.

For now, we’ll forego any extra mortgage payments while we focus on other financial priorities. 

Let me know about your financial goals for 2021.

This Week’s Recap:

It was a pleasure chatting with Tom Drake on the Maple Money podcast earlier this month. Check out the episode to hear about my journey from hobby to side hustle to self-employed.

I also wrote about how our food spending has changed during the pandemic.

Remember travel? Here’s a look back at our only trip of 2020 and how much it costs to go to Maui.

I’ll be back next week with my year-end net worth update, plus our investment returns for 2020.

Weekend Reading:

Our friends at Credit Card Genius share how to get FREE checked bags when flying.

Here’s a trifecta from Ben Carlson at A Wealth of Common Sense:

First, Ben takes a shot at ARK ETFs with a short history of chasing the best performing fund.

Next, Ben looks at what happens when you invest in stocks at all-time highs:

“According to my calculations, there have been more than 600 all-time highs since the start of 1988, or roughly 7.3% of all trading days.”

Finally, Ben looked at what happens if you only invested at market peaks. Spoiler: it’s not that bad.

Dan Bortolotti takes a thorough look at some of my favourite investing products with this asset allocation ETF showdown between Vanguard and iShares.

Dan’s colleague Justin Bender accompanies that post with this video comparison of Vanguard and iShares asset allocation ETFs:

Cameron Passmore and Ben Felix put together a terrific year-end recap show for the Rational Reminder podcast. A must-listen over the holidays.

Michael James reviews and recommends Annie Duke’s new book, How to Decide. I also enjoyed this book, along with her previous best seller, Thinking in Bets.

Global’s Erica Alini explains what to expect from your 2021 taxes and how to prepare.

We’re not done with Ben Carlson, as he shares the 20 most important personal finance laws to live by in this Fortune column.

Rob Carrick on why people resist delaying CPP benefits – they think the risk is dying early but it’s actually the opposite.

Finally, here’s Jason Heath on what you need to know if you plan to keep working into retirement.

Happy Holidays, everyone!