Cut The Crap Investing ETF Portfolios. Why They Outperformed the Vanguard Portfolios in 2018.

In a recent post I offered The Investment Year in Review. 2018 Was Not Financial Armageddon. For all of the noise out of the financial media and from the prolific prognosticators known as active managers, the year was relatively tame.

That is, it was all quite tame for an investor in a sensible Balance Portfolio. As per my year in review post the returns would range from relatively flat at -.65% in a Balanced Income model, -1.64% in a Balanced model and -2.6% for a Balanced Growth model. For these benchmarks I used the wonderful One Ticket Solutions From Vanguard. Thanks to Jonathan Chevreau for that article.

The Balanced Portfolios on Cut The Crap Investing’s model portfolio page follow the same core framework as the Vanguard Portfolios. Of course many of the Canadian Robo Advisors and other portfolio designers will add around the core with assets such as REITs, foreign bonds, developing markets and smart beta offerings.


So let’s have a look at the Balanced Portfolios on Cut The Crap Investing. We’ll start with the Balanced Income model. Of course the term Balanced Portfolio means there will be a nice mix of stocks and bonds. Balanced Income suggests that there will be a more generous bond component, it is a more conservative portfolio. We expect it to under perform a more aggressive growth portfolio over longer periods. And on the flip side we expect it to hold up a little better in times of stock market stress.

CTCI Balanced Portfolio With More Bonds

  • 60% Canadian Bonds
  • 20% US Stocks
  • 10% Canadian Stocks
  • 10% International Stocks.

Here is the total returns of the assets for 2018. The returns do include the MERs(Management Expense Ratio); trading costs are not included. For free ETF purchases see Questrade

  1. Canadian Bonds XBB 1.26%
  2. US Stocks XUU 2.94%
  3. Canadian Stocks XIU -7.72%
  4. International Stocks XEF -6.62%

This portfolio is essentially flat for the year, down -.09%. 80% of the assets were in positive territory.

Vanguard Conservative ETF Portfolio was down -.65%

CTCI Balanced Portfolio With More Stocks 

  • 40% Canadian Bonds
  • 30% US Stocks
  • 20% Canadian Stocks
  • 10% International Stocks.

That portfolio model was down by -.82%. 70% of the assets, the Canadian bonds and US stocks are in positive territory for the year.

Vanguard Balanced ETF Portfolio was down – 1.64%

CTCI Balanced Growth Portfolio 

  • 25% Canadian Bonds
  • 40% US Stocks
  • 25% Canadian Stocks
  • 10% International Stocks.

This portfolio model has 65% of the assets in positive territory in 2018. That growth portfolio was down just -1.1% in 2018. That is surprisingly good.

Vanguard Growth ETF Portfolio was down -2.68%

Why Did The Cut The Crap Investing Portfolios Hold Up In 2018? 

The US stocks are in positive territory for 2018 as the ETF does not currency hedge. Once again Dan Bortolotti explains why Currency Hedging Does Not Work in Canada.

While the underlying US assets of XUU were in negative territory in 2018, Canadians enjoyed a currency boost that moved the fund into positive territory.

Compared to the Vanguard models the CTCI models have a more exaggerated allocation to US assets, and I underweight the international component. Keep in mind this is not a recommendation, we should each understand how we invest and why. Decide what is right for you, and again, why.

We know that Canada is not a very well diversified market. It is dominated by the financials and energy/resources. We do not enjoy ample sector diversification. And Canada makes up such a small percentage of the world economy.  The US market is well diversified across 11 major sectors. They cover the Canadian investor’s you-know-what.

The US stock market is the best performing stock market over the longer term by a very wide margin. They are simply the most productive and creative and hard-working individuals on earth. IMHO. The US dollar also works very well as a hedge given our oil and gas and resource based economy. Also many of the larger cap US companies also provide that broader global diversification beyond the North American borders. Many of these companies are multi-nationals that create a significant portion or their profits overseas. If we equal weight US and Developed markets, we would likely end up with a greater allocation to international markets compared to that more creative and enterprising US market. One might also receive more favourable tax treatment from US assets compared to International with respect to ETF income.

Of course in the developed market funds you will also gain access to wonderful geographic and sector allocation. You will be investing in many vibrant economies and many international powerhouse companies. Some exposure is likely prudent.

Keep all of that in mind. Decide for yourself. I like the mantra at Seeking Alpha where I write.

Read. Decide. Invest.

And here’s why the Cut The Crap Investing Portfolios held up better than the Vanguard one-ticket models.

Vanguard employs the developing markets ETF, those assets were down more in 2018 than the developed markets.

Vanguard also uses a US Bond market ETF (Currency Hedged). That fund delivered a negative -1.21% return.

The Vanguard fund also uses the FTSE Global Bond ETF (Currency Hedged). No problem there, the fund essentially matched the Canadian broad-based bond fund returns.

And on the high level asset allocation the Vanguard model has a greater allocation to International Markets (developed and developing).

Also in Canada I ‘suggest’ the TSX 60 XIU vs Total Market. XIU was slightly ‘better’ in 2018. Ironically for Canada, I like the greater exposure to the financials. That said the fund of course needs the counterbalance of US and International assets.

vanguard one ticket asset example

Chalk One Up For Meat ‘n Potatoes Index Models

Keep in mind this is only a one-year snapshot. What works one year might not work as well the next. I am a fan of some greater growth assets such as mid and small cap US funds, and those emerging markets. REITs can be a wonderful addition, and they (Canadian REITs) had a positive 2018. Those assets might deliver greater total returns over time. International bonds might also ‘do their thing’ over time.

Certainly, we’ll keep tabs on the longer term performance of simple models vs more complex models. The findings and trends will come into play as we compare the returns of the Canadian Robo Advisors. Some Robo’s keep it simple, a few others get more sophisticated.

But in 2018, simplicity worked. It’s looking like the very simple Tangerine Balanced Portfolios might also outperform those One Ticket Solutions even though the Tangerine Portfolios (a mutual fund construct) have an MER of 1.07%.

The fees for the Vanguard Portfolios is .22%. One would be able to save a few basis points with the CTCI portfolio models.

Please ensure that you understand all tax implications. Also, take into consideration currency conversion costs. Send any questions to me at

While I do not accept monies for feature blogs please click here for more about Dale and ‘how I might get paid’ disclosures.

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2 thoughts

  1. Dale,

    Dare I say Mawer’s two balanced funds outperformed all balanced funds and ETFs, once again.

    2018 Returns:
    Mawer Balanced Fund –> -0.30%
    Mawer Global Balanced Fund –> +3.45%


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