Why I Became A DIY Investor

I haven’t always been a DIY investor.  Like many Canadians, I started investing in mutual funds through a financial advisor at my bank.

I was getting matching RRSP contributions from my employer, up to 2% of my salary each year, but in order to get the match I had to invest through a specific bank – HSBC.

I went to the local branch and filled out the know-your-client form.  Because I was young and had a high tolerance for risk, I was steered toward their HSBC Global Equity Fund.  One fund, that’s it.

Since I was in early the accumulation phase, I didn’t pay much attention to the abysmal returns I was getting, or the high MER that I was paying.  I just set up automatic contributions to come off my paycheque every two weeks and started pouring money in.

Related: Mutual Fund Fees – The High Cost of Canadian Funds

After a few years, I had invested nearly $25,000.  But the markets started tanking in 2008, and when I checked my annual statement I saw the value of my investments had dropped below $20,000.

Becoming a DIY Investor

I made a career change the next year, and one of the first things I did was transfer my RRSP portfolio from HSBC to TD Waterhouse.  I had researched dividend growth investing and was ready to take control of my investments and become a DIY investor.

The in-kind transfer took a few weeks to set up.  Once the transfer was complete, I used the $20,000 to buy eight dividend stocks.

Over the last three years I’ve added $3,900 to my RRSP, and with that, along with the cash accumulating dividends, I’ve added five more stocks to my portfolio and added to existing positions.

Related: Using ETFs Inside Your RRSP

(Since I have a defined benefit pension at my new job, I no longer contribute that much to my RRSP)

Calculating Returns

I haven’t been very diligent in tracking my returns in the past.  I found this rate of return calculator from Justin Bender at PWL Capital, which made it easy to calculate my portfolio returns.

All I did was plug-in the total month-end portfolio value from my TD Waterhouse statements, which are available online, and add in my contributions.  I was impressed with the results.  My DIY investing portfolio has grown from $20,000 to just over $40,000 in a little more than three years.

  • 2009: +35.54%
  • 2010: +14.23%
  • 2011: +9.82%
  • 2012: +10.12% (YTD)


It’s a good idea to regularly track your performance, but unless you’re comparing it to an appropriate benchmark, you won’t really know where you stand.

I looked up the returns from my former HSBC Global Equity Fund to see how it’s done over the past three years.  According to Morningstar, this fund returned a total of 9.74% since 2009.  But wait, when you factor in the 2.7% annual MER, the fund returned -1.06%.

Related: How To Avoid These 4 Investing Mistakes

What about the S&P/TSX 60 Index?  Since July 2009, the main Canadian index had a total return of 20.39%, meaning $20,000 would have grown to just over $24,000 in three years.

The iShares dividend ETF (CDZ) had a total return of 57.58% since July 2009.  With this fund, my $20,000 would have grown to $31,516 in three years.  If you were to factor in the additional $3,900 in contributions, these returns are more in-line with the performance of my individual stock portfolio.

Final Thoughts

I realize not everyone is cut out for investing on their own, and so many people will look for help from a professional advisor.  But it’s important to understand what you’re invested in, and how much it’s costing you, even if you leave the details up to your advisor.

Related: Fee Only Financial Planner Vs. Commission Based Advisor

I’m happy with my decision to become a DIY investor.  I’m not saying my approach is perfect; I was extremely lucky to switch to dividend investing at the right time.

I doubt my personal rate of return will be this high going forward, but I know I’m better off now than I was with those expensive equity mutual funds.

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  1. My Own Advisor on November 12, 2012 at 7:41 am

    “But it’s important to understand what you’re invested in, and how much it’s costing you, even if you leave the details up to your advisor.”

    Perfect 🙂

    I enjoyed this one, and went the same route for largely the same reasons.


    • Echo on November 12, 2012 at 8:47 am

      Thanks for stopping by, Mark!

  2. Ron Suter on November 12, 2012 at 8:37 am

    I have invested like this for almost 40 years. I am curious as to why you decided not to automatically reinvest your dividends since most DIY brokerages offer this service, even buying fractional shares.
    I still hold my original investment in Royal Bank made in 1974. At that time, I purchased 400 shares and have benefited from the stock splits and consistent dividend reinvestment so that today my holdings are approximately 5000 shares.

    • Echo on November 12, 2012 at 8:54 am

      @Ron – that’s impressive! Really, the only reason I haven’t setup a DRIP with most of my stocks is that I prefer to control the point-of-entry.

  3. Michael James on November 12, 2012 at 10:04 am

    The rate of return calculator from PWL capital also allows you to enter in any deposits or withdrawals so that you can calulate your investment return each year independent of new contributions or any withdrawals. Have you considered adding in this information to get better data for comparing to an index? I know this is extra work, but it will give you a better idea of your performance.

    • Echo on November 12, 2012 at 10:11 am

      @Michael James – The returns include my $3,900 in contributions. Here’s a glance at 2011, where I added $2,500 in December – http://screencast.com/t/drcVFN9VxQMp

      • Michael James on November 12, 2012 at 10:28 am

        Perhaps I misunderstood your article. I thought you hadn’t entered the contribution data into the spreadsheet. But if you did, then you have already calculated your investment returns separate from your contributions.

        • Echo on November 12, 2012 at 10:37 am

          @Michael James –

          “All I did was plug-in the total month-end portfolio value from my TD Waterhouse statements, which are available online, and add in my contributions.”

          I thought it was pretty clear 🙂

          • Michael James on November 12, 2012 at 10:46 am

            It was later when you said something about factoring in $3900 in contributions before comparing to CDZ that made me think that “add in my contributions” meant just including them to your monthly account totals. I now understand that you meant that you were adding them to the spreadsheet, and that the $3900 had to be accounted for to compare your final account balance to what it would have been with CDZ.

  4. Bernie on November 12, 2012 at 10:22 am

    Re: “According to Morningstar, this fund returned a total of 9.74% since 2009. But wait, when you factor in the 2.7% annual MER, the fund returned -1.06%.”

    I once asked Morningstar if their mutual fund total returns were calculated before or after management fees were applied. They replied total returns do account for the expense ratio, which includes management, administrative, 12b-1 fees, and other costs that are taken out of assets.

    • Echo on November 12, 2012 at 10:29 am

      @Bernie – thanks for your comment. I got the 9.74% return from the big chart (growth of $10,000), but you’re right, the performance listed below the chart was inclusive of fees.

  5. Echo on November 12, 2012 at 11:00 am

    @Michael James – Right. And I’m not exactly sure how to simulate the benchmarks to also include my contributions. Any ideas?

    • Michael James on November 12, 2012 at 12:36 pm

      A frequent commenter on my blog named Gene told me once that he simulates an alternative portfolio invested entirely in the S&P 500 that has exactly the same pattern of deposits and withdrawals as his own portfolio. So, each deposit creates a simulated buy and each withdrawal creates a simulated sell at the S&P 500 level on that day. This way all he has to do is compare his real portfolio balance to the balance in the simulated portfolio to decide whether he is beating the S&P 500. You could do something similar for a few difference indices to decide which indices you’re beating.

  6. Justin Bender on November 12, 2012 at 2:09 pm

    Hi Echo – did you also type in the actual day of the $2,500 December contribution to the right of the amount? (this probably won’t make a huge difference in the return).

    i.e. if you contributed it on December 15th, 2011 – type “15” to the right of $2,500

    • Echo on November 12, 2012 at 3:30 pm

      @Justin – thanks for stopping by. I’ve updated the returns after including the date of the contributions. It did make a slight difference, so thanks for pointing it out.

  7. Canadian Budget Binder on November 12, 2012 at 4:22 pm

    I would really love to be a DIY investor. Since moving to Canada I’m still not convinced I’m learning everything I need to know from our advisor but we do put faith in him as most people do. I hope with education and talking to the right people I might start small and see where it takes me. Great post. Mr.CBB

  8. Be'en on November 13, 2012 at 1:08 am

    How is MER for an ETF/mutual fund calculated? Is it the percentage of the book value/adjusted cost base of an investment at the end of a fiscal year? It’s not the %age of the market value, is it?

    • Echo on November 14, 2012 at 7:49 am

      @Be’en – Mike Holman, from http://www.moneysmartsblog.com had this answer in the Canadian Money Forum:

      “For mutual funds, the MER is calculated daily, based on the daily average amount of the assets.

      i.e. A $100,000 of a fund with an annual MER of 2% will be charged 2%/365*100,000 = $5.47.

      If the next day, the value goes up to $105,000, then the charge will be $5.75.

      I assume ETFs do something similar, but since the ETF price will move around during the day, they must use some sort of average price to do the calculation.”

      • Be'en on November 14, 2012 at 10:31 am


        So the MERs change as per the market value of underlying securities.. if you have a growth oriented ETF, as the value of the ETF grows, one would be paying more in MER in dollar terms. If the original investment doubles, you’d be paying double in dollar terms towards MERs. Is that correct?

  9. Financialplanningguy on November 14, 2012 at 12:18 am

    Hey Echo,

    Found this post interesting. Thought I would weigh in on your blog for the first time with a couple of thoughts FWIW.

    First, one is a little inaccuracy that I think was pointed out in one of the comments but wanted to make sure was addressed because it is fairly significant. Whenever you see a rate of return for a mutual fund it is always net of fees. So when the HSBC fund shows a 9.74% it is net of fees already, no need to add the MER again. Another thing that may or may not be applicable, if you were holding it within a group RRSP through your hospitality company, there is a good chance that the MER could be significantly lower than 2.7%. It’s not uncommon for group funds to be discounted as much as .5-1% or more depending on the size of the company and the amount of assets they have in the group.

    I also have a DIY account at TD Waterhouse. I love working to understand companies and valuations and consider it part of my broader education. I think it is important that people are aware that just because you are doing it yourself that you may or may not be saving on fees. For example, if you are a dividend investor, but wait to reinvest your dividends every quarter so you can control your entry point, I imagine that you are not an active trader getting the $9.99/trade rate. It doesn’t take many trades at $29/trade to make up 2-3% worth of fees in a smaller DIY account. It wouldn’t surprise me to see that some DIY’s who are a little more active than you with a little smaller account pay 5-8% in fees in any given year. Just something to be aware of and watch as there is a lot of talk of MER’s and other fees in the world, but I’m not sure people always track their DIY accounts accurately.

    The last thing I always have conversations about surrounding DIY investments is a realistic understanding of how much risk one is exposing themselves to. Sometimes people look at there investment return in any given year and say, “Wow I got a 50% ROR! I’m an awesome DIY investor!” But when they look at the risk they are taking to get that ROR, they were exposed to way more risk than they thought. Unfortunately they usually only realize this when the market tanks and they take a large hit. An easy way to look at this is to look at the BETA of any given security or mutual fund. Here’s a quick link if some don’t know what that is.


    An example would be to look at a pretty comfortable Canadian bank TD. It has a dividend yield of 3.9% and BETA of 1.07 meaning it’s slightly more volatile than the TSX index it is traded on. Pretty decent bank that many dividend investors would be happy to own. Well if we compare that BETA to the HSBC fund you owned which is obviously not a very good fund (to say it mildly) that sits at the bottom quartile of it’s peers, it has a 10 year BETA of .96 (less volatile than the index it follows). Meaning you would be taking a good bit less risk owning it than the comfortable Canadian bank.

    One of the reasons for the lower risk is because of the number of securities that are held within the fund. I always caution people to be careful comparing a basket of 8-13 securities to a fund that has 100. They may seem like they follow the same indexes and rules but are completely different beasts with completely different expectations.

    All I’m really saying is, make sure you have the right information. Make sure you are properly tracking your fees so you don’t think you are getting a deal when you might not be. And most of all, make sure you understand the risks you are taking. There is nothing wrong with DIY investing except when you think one thing and end up realizing you were doing something completely different.

    • Echo on November 14, 2012 at 8:07 am

      @Financialplanningguy – thanks for your detailed response.

      As I mentioned in one of the comments above, the 9.74% return from the HSBC fund was taken from the big chart (growth of $10,000), but below that Morningstar lists the correct returns, including fees, which is -1.06%.

      We didn’t have a group-RRSP, I bought these funds directly from HSBC. I found an old paper statement and the MER was listed correctly.

      Good point that trading fees can add up for DIY investors. I make sure my trading costs are less than 1% of the transaction, so when I was paying $29, I’d buy $3k or more. I’m paying $9 per trade (fees drop to $9 when you have more than $50k total assets), so these costs are minimized, plus I trade infrequently.

      I understand what you’re saying about risk, but that doesn’t change the fact that the vast the majority of actively managed funds under-perform.

  10. W at Off-Road Finance on November 14, 2012 at 12:04 pm

    I’m not a big fan of investment as a whole because of demographics, at least in the US. The situation looks to be similar in Canada, although I haven’t researched it too deeply.

    That said, if you’re doing investing you definitely want to get reasonably knowledgeable and do it yourself. A few extra percentage points a year makes a big difference.

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