It’s easy to build a core ETF portfolio. And Cut The Crap Investing offers portfolio construction examples, with models available at various risk levels. By building an ETF portfolio you can hold a superior portfolio compared to actively managed mutual funds. You’ll also cut your fees by some 90% or more. Fees are an incredible drag on returns. Cutting the fee cord might be one of the most advantageous financial events of your life. Heck, given that wealth can lead to personal and family security and happiness, it might be one of the best things you do in life, period. Let’s have a look at the returns for the core ETF portfolios for Canadian investors.
First, check out the ETF Model Portfolio page. You’ll find an outline and blog posts for the four core ETF portfolio models. On the all-in-one asset allocation ETF portfolio page, you’ll find a table that can help you create the most appropriate portfolio that will match your time horizon and risk tolerance level to the appropriate model. The asset allocation portfolios offer a one-ETF solution for global, well-diversified managed ETF portfolios.
sign up with Questrade (a top-ranked discount brokerage) through this partnership link. You can buy ETFs for free!
And of course, ensure that you have done the necessary research or have taken advantge of an advice-only planner.
The core ETF Portfolios
Here are the 4 core ETF models. Keep in mind that these are Canadian Dollar ETFs. You can hold a U.S. Dollar ETF in a U.S. Dollar RRSP or RRIF account to avoid withholding taxes on dividends. You may also be able to file to retrieve U.S. withholding taxes in a non-registered account (taxable). Here is a good withholding tax guide from iShares.
The greater the allocation to stocks, the greater the risk (mostly and typically). That said, the greater allocation to stocks typically leads to better returns over time. There is a greater risk / greater returns proposition.
Always ensure that you understand and invest within your risk tolerance level.
I will run total return (including dividends and dividend reinvestment) charts from March of 2015 to the end of September 2023. That is based on the inception date of the ETFs available. The portfolios are rebalanced annually. While it is only several years, it is a time period that offers a relevant evaluation as we had a period of growth and then many risks arrived; the world changed in 2020. We moved through a bear market and a period of higher inflation.
The returns of ETF portfolio assets from 2015
The above period based upon the availability of ETFs, and runs from March of 2015 to the end of September 2023.
Bonds stopped working in 2021 and in 2022 as rates were increased in the attempt to battle inflation. International stocks have been a laggard. My “call” to limit that international exposure has been a good one. For retirees and near-retirees I am a fan of adding some dedicated inflation-fighting assets.
Keep in mind that the models are not advice. You will have your own reasons for developing the portfolio that’s right for you, and it will likely include your own biases and reasons for shaping the portfolio to fit your goals.
The core ETF portfolio returns
Here’s the returns history. The period is from March of 2015 to the end of September 2023. The charts and tables are courtesy of portfoliovisualizer.com. CAGR represents the Compound Annual Growth Rate. Stdev is a measure of volatility. I can only run 3 portfolios on Portfolio Visualizer, so the Balanced Portfolio with more bonds is not shown in the first chart.
Here’s a table with the more conservative Balanced Portfolio With More Bonds in the mix.
Our first observation might be that the returns for the portfolios have been quite good, especially for the Balanced Growth and All Equity portfolio models. An investor would have certainly built some generous wealth over the period. Also, even given all of the scary headlines and risks, not much has really happened. The core portfolios have delivered and there has been no apocalyptic collapse. Simple and consistent investing has worked.
You will also notice that investors were rewarded for taking on more stocks and more risk.
Also, it is likely not wise to chose a conservative portfolio such as Balanced Portfolio With More Bonds over high interest savings or GICs for a 3-5 year time horizon.
Check out the GIC rates at EQ Bank. There are 6 terms with rates at 5.0% or higher.
If your time horizon for a pot of money is under 3 years, you should definitely be in cash and GICs or ultra-short bonds.
Looking longer term thanks to Tangerine Portfolios
Tangerine Investments offers managed index-based portfolios. They are similar to the above models, though they are mutual funds and have fees (all in) of 1.06%. I was an advisor and trainer with Tangerine Investments from 2013 through 2018.
Keep in mind that the following table is to the end of July 2023.
This gives us a longer look (from 2008 for the Balanced Models). The Tangerine Equity Growth Portfolio was launched in November 2011, meaning the Equity Growth Portfolio did not start before the recession of 2008. The Tangerine Dividend Portfolio was introduced in November 2016.
From the 2008 time period we moved through the financial crisis when stock markets fell by some 50% or more. The inception period for the Balanced Portfolios (Income, Balanced and Balanced Growth) will include that long bear market. It was a terrible start date for portfolios.
Given the difference in fees compared to the Tangerine Portfolios and the Core ETF Portfolios on Cut The Crap Investing, you can add nearly 1% (annual) to the returns for the Core ETF portfolios vs Tangerine Core ETF portfolios.
Net, net, some solid returns have been available, even for those who invested a lump sum at the worst time over the last 30 years – 2008. Of course dollar cost averaging would have boosted your returns as you would have been adding monies during the market downturns. You would have been buying stocks as they went on sale.
You can also go Robo
If you want a managed ETF portfolio and advice, you might consider one of the Canadian Robo Advisors. Here’s a post that compares the returns of Canada’s leading Robo Advisors. Justwealth leads the way in returns, portfolio offerings and advice. You will have your dedicated advisor that can also offer financial planning.
Other ETF portfolio posts worth a look
While core portfolios can be wonderful for the accumulation stage you might consider more ETF assets and greater diversification. Have a read of …
Historically a core Balanced ETF Portfolio would have done the trick for retirees, but you might be able to do better, and better manage the risks. Please have a read of …
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Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.
RETIREMENT FUNDING PLANNING
The self-directed investor might consider the service provided by Mark Seed from My Own Advisor. He runs Cashflows & Portfolios where they will provide options for that optimal retirement funding strategy. That service is provided for a very reasonable fee.
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