2015 marks the third year in which I’ve been tracking our portfolio’s rate of return across all of our investment accounts. Our investments are held in TD e-Series index funds across registered mutual fund accounts. To borrow from Tim Ferris: “Investing is the act of allocating resources to improve one’s quality of life.” In his opinion, if an investment has an amazing return of 20% yet keeps him up at night, the speculative future gain is not worth the time and effort.
Investing in index funds comfortably diversifies our investments among 1664 companies spread across industries and geographies. It also comes at a low cost and requires a minimal effort to maintain. To calculate our return on investments, I’ve taken to the habit of using the approximate time-weighted rate of return calculation using a monthly Modified Dietz method. Without further ado, read on for a breakdown of our investment returns for 2015.
“Investing is the act of allocating resources to improve one’s quality of life.”
The RESPs
It’s been four calendar years since we first began investing in little brother’s education. We started the year at a balance of $10,806 and deposited the requisite $2,500 to trigger the Canadian Education Savings Grant (CESG) contribution of $500. For the sake of calculation, I factored in the CESG as a contribution, rather than investment gain, which resulted in a total rate of return of 9.59% for the year.
Little Sister’s account was opened and funded towards the end of September and was sitting at $3,141 at year’s end; good enough for 6.23% growth over three months.
Combined, the total rate of return on our RESP investments works out to a 9.65%.
The TFSAs
One of our goals for 2015 was to maximize the $5,500 contribution to both of our TFSA accounts. When the government announced an increase to the contribution limit for the year, we contributed $10K to one account and the $7K to the other.
Across two accounts, the total rate of return on our TFSA investments in 2015 was 9.62%.
Related: The Beginner’s Guide to the TFSA
The RRSPs
We have four RRSP accounts between the two of us. We contribute to our company defined contribution plans, where contributions are matched up to a set percentage of our salary. We each also have a RRSP account with the bank, though mine was opened as part of an ongoing experiment.
At the beginning of 2014, I invested $1,000 in an account alongside several prominent bloggers to see how the passive indexing approach using TD e-Series funds compared to other styles of investing. At the end of the first year, it grew to $1,133 and was good enough for a 3rd place finish among 20 participants. As of 2015 year end, the account sits at $1,295.62. It’ll be interesting to keep an eye on the account and will serve as a good reminder of how much $1,000 can grow as the years continue.
Across four accounts, the total rate of return on our RRSP investments in 2015 was 10.30%.
Related: The Beginner’s Guide to the RRSP
The Last Word
Including fees, our investment return for 2015 was 9.91%.
The portfolio was able to post a gain for the year despite the slump in oil prices, greek crisis and giant fluctuations due to swings in the chinese market. This growth can neither be attributed to superior timing or skill on our part, but rather an understanding in a fundamental tenet of our capitalist economy- that the market will continue to grow over time.
That’s not to say that our portfolio will experience positive growth every year. There are inherent risks after all but a broadly diversified, low cost portfolio paired with the right behaviours to weather the ups and downs are the best tools to keep our financial future on the right track.
How did your investments perform in 2015?
