Couch Potato Portfolio returns for 2014
It was hard to go wrong with any balanced portfolio in 2014 as the 10%+ returns show
Here are the 2014 returns for my Model Portfolios.
The data below are from the funds’ websites whenever available: otherwise I used Morningstar. All ETF returns are based on net asset value rather than market price. Performance of US-listed funds is expressed in Canadian dollars using noon exchange rates from the Bank of Canada.
| Global Couch Potato: Option 1 | % | Return |
| Tangerine Balanced Portfolio (INI220) | 100% | 10.4% |
| Global Couch Potato: Option 2 | % | Return |
| TD Canadian Index – e (TDB900) | 20% | 10.2% |
| TD US Index – e (TDB902) | 20% | 23.1% |
| TD International Index – e (TDB911) | 20% | 2.5% |
| TD Canadian Bond Index – e (TDB909) | 40% | 8.3% |
| 10.5% |
| Global Couch Potato: Option 3 | % | Return |
| RBC Canadian Index (RBF556) | 20% | 9.8% |
| TD US Index – I (TDB661) | 20% | 22.9% |
| National Bank International Index (NBC839) | 20% | 1.7% |
| TD Canadian Bond Index – I (TDB966) | 40% | 7.9% |
| 10.0% |
| Global Couch Potato: Option 4 | % | Return |
| Vanguard FTSE Canada All Cap (VCN) | 20% | 9.8% |
| Vanguard US Total Market (VUN) | 20% | 22.6% |
| iShares MSCI EAFE IMI (XEF) | 20% | 2.4% |
| Vanguard Canadian Aggregate Bond (VAB) | 40% | 8.8% |
| 10.5% |
| Complete Couch Potato | % | Return |
| Vanguard FTSE Canada All Cap (VCN) | 20% | 9.8% |
| Vanguard Total Stock Market (VTI) | 15% | 22.8% |
| Vanguard Total International Stock (VXUS) | 15% | 4.5% |
| BMO Equal Weight REITs (ZRE) | 10% | 8.7% |
| iShares DEX Real Return Bond (XRB) | 10% | 12.8% |
| Vanguard Canadian Aggregate Bond (VAB) | 30% | 8.8% |
| 10.8% |
| Über–Tuber | % | Return |
| PowerShares FTSE RAFI Cdn Fundamental (CRQ) | 12% | 6.5% |
| iShares S&P/TSX SmallCap (XCS) | 6% | -2.7% |
| Vanguard Total Stock Market (VTI) | 12% | 22.8% |
| Vanguard Small-Cap Value (VBR) | 6% | 20.6% |
| iShares MSCI EAFE Value (EFV) | 6% | 2.9% |
| iShares MSCI EAFE Small Cap (SCZ) | 6% | 3.6% |
| Vanguard FTSE Emerging Markets (VWO) | 6% | 9.7% |
| SPDR Dow Jones Global Real Estate (RWO) | 6% | 29.9% |
| BMO Mid Federal Bond (ZFM) | 20% | 8.7% |
| Vanguard Cdn Short-term Corporate Bond (VSC) | 20% | 3.4% |
| 9.8% |
Lessons from 2014
It was hard to go wrong with any balanced portfolio in 2014, with both equities and fixed income enjoying excellent years. Small caps were the only real laggards, though international equities also delivered lower-than-average returns. Looking back on last year’s performance offers a chance to reinforce some basic investing principles:- Bull markets can last a long time. In 2013, US stocks returned over 40% in Canadian-dollar terms. I know many investors scaled back their US equity exposure after that huge year, but the US was the best performer again in 2014, topping 22%. (Much of those gains were thanks to a 9% appreciation in the US dollar relative to the loonie.) It’s tempting to wait for a pullback before investing, but the last three years have demonstrated that a pullback might not come for a long time. Opportunity costs can’t be ignored.
- People need to stop saying “interest rates have nowhere to go but up.” Interest rates can also go down, or they can stay flat for a long time. The broad Canadian bond market returned over 8% last year as rates fell—again.
- The big picture is more important than the fine details. Of the four versions of the Global Couch Potato, three saw almost identical performance. The Tangerine Balanced Portfolio lagged the TD e-Series and ETF versions by less than 0.10%, despite an MER of 1.07%. (The main reason is that the underperformance of small-cap stocks benefited the Tangerine fund, which includes only large-cap indexes.) The point is not that cost is unimportant. But if you’re just getting started and you’re intimated about building an ETF portfolio (and I’ve heard from many readers in this boat), a balanced fund is great choice, even if it isn’t the absolute-lowest-cost option. The price of siting on the sidelines over the last few years has been a lot higher than 1.07%.
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