The first half (H1) of 2021 is in the books. It’s no surprise that as we look to the other side of the pandemic, investment returns are robust. Economies are opening up in North America and around the globe. Earnings are improving. Business leaders and consumers are in a good mood. Investors are going along for the ride. Today we’ll have a look at the performance of the core ETF model portfolios for the first half of 2021.
In my most recent MoneySense weekly I touched on the exuberance of business leaders and the consumer. In fact, positive business sentiment set a new record. The consumer is not far behind. That post also looks at what it takes to make a million investing from various start dates. Other topics include the ‘retirement’ of Jeff Bezon, the Amazon founder and CEO. Also, Canadians have built a wall of wealth. The net worth creation of Canadians over the last 2 decades is more than surprising.
And while we’re all excited about getting back to normal, this post looked at the potential of ‘close-quarters hesitancy’ or reopening anxiety. Will our reluctance to huddle in large groups of strangers affect the performance of certain business types such as flight, hotels, restaurants and other venues? Old pandemic habits might be hard to break.
The pandemic wild card.
In the world that we live in today, the virus is always the wild card. COVID could put the breaks on any recovery. That said, my opinion recently has been that Canada has turned the pandemic corner thanks to the highest vaccination rates in the developed world. We have very high first-vaccination levels and we’re ramping up for that second-dose Summer.
Canadians are flush with pandemic savings, and investment returns have also helped the cause. Here’s the performance of the core ETF portfolios in 2021.
Check out that link for the ETF portfolio assets and the asset allocation. The core portfolios invest in developed market stocks and Canadian bonds. An investor can certainly add greater diversification. You might have a look at the new balanced portfolio for ideas.
All said, the core portfolios have performed. Here’s a comparison of the balanced portfolios from 2016. That’s the earliest start date given the ETF availability.
The ratio is stock to bonds. For example the Balanced 40/60 is 40% stocks and 60% bonds.
Here’s the annual returns.
For the first half of 2021 …
Here’s the asset returns for the full period from 2016.
And the asset returns in 2021. Yes, bonds have been a drag. Though bonds have rallied greatly in recent weeks as many fear we’ve reached the earnings peak, and there are fears of the virus variants putting a lid on global economic recovery.
On this site I recently looked at the Canadian stock market and sector performance in 2021. You’ll see that we greatly outperformed U.S. and International developed markets.
What about that all-equity portfolio?
Investors who are early in the accumulation stage might be ‘all stocks all the time’. That’s fair, if you have the time horizon and are the owner of an incredible risk tolerance level.
As expected, the all-equity approach has bested the balanced portfolios from 2016 and in 2021. I’ve charted all-equity vs the 60/40 and 75/25.
While the COVID correction was a great equalizer, the more stock-heavy portfolios lead the way to the (perceived) other side of the pandemic.
You can use the above returns to benchmark your own returns. I have a balanced growth model (in my RRSP accounts) that is closer to the 75/25. The returns were above 11% in H1. I do more of that new balanced portfolio ‘thing’.
My wife’s conservative TFSA is in the 7.5% range, she has the energy producer kicker in there – the best performing sector in 2021.
- She also has a balanced portfolio 70/30 near 11% return in 2021.
- A Canadian stock (mostly VDY ETF) balanced 80/20 delivered 15.5%.
- Her U.S. dollar balanced 65/35 is up just 9.6%.
That U.S. stock portfolio is the perennial portfolio leader for us, but it has cooled off a bit. I’ve been trimming her big winners. I also added the electric vehicle ecosystem ETF BATT at an inopportune time (recent peak). I love that sub sector theme but it will take a while to play out.
The ETF is now moving back up …
That is a long, long term hold.
How did you make out in the first half of 2021? We’ll see you in the comment section.
Another good option is the Tangerine Portfolios.
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Consider Justwealth for RESP accounts. That is THE option in Canada.
At Questrade, Canadians can buy ETFs for free.
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.25%. You’ll find some higher rates on certain GICs. They now also offer U.S. dollar accounts.
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