20.Feb.2017 Passive Portfolio 2016

I haven’t updated in a while; the story gets a little boring after a while. But, as I was asked for advice a few times this year, I think it’s finally time to do another update.

Past editions: 2009, 2010, 2011, 20122013

The last few years have been a little slower: +11% in 2014, +9.6% in 2015 and +6.3% in 2016. The difference is largely due to bonds: 2014 was a boom year and 2016 was a slow year. For me personally, the performance over this period was not a big deal; I bought a house in 2014 and now have a real estate-heavy portfolio.

Performance

Here’s the performance of my portfolio over the past several years, using the latest 2016 country weights. The table below shows the annual returns of each component of the portfolio, giving the “sequence of returns” for each piece.

weight 2007-
2011
annual
average
2012 2013 2014 2015 2016
Equities
   U.S.A. VTI 33.6% -2% 16% 43% 23% 19% 9%
   Europe / Pacific VEA 21.1% -7% 18% 30% 3% 19% -1%
   Emerging VWO 5.3% 0% 19% 2% 9% 0% 9%
   Canada XIC 15.0% 1% 7% 12% 11% -8% 20%
Subtotal 75% -2.3% 15.2% 28.5% 12.4% 11.8% 8.1%
Fixed income
   Mixed bonds XBB/VAB 20% 6% 3% -2% 9% 4% 1%
Subtotal 20% 5.8% 3.0% -1.8% 8.6% 3.6% 1.2%
Cash 5% 0% 0% 0% 0% 0% 0%
Total 100% -0.3% 12.0% 21.1% 11.0% 9.6% 6.3%

Same assumptions as usual:

  • Expressed in Canadian dollar terms (i.e., including all currency shift effects and using no currency hedging)
  • Includes all distributions/dividends
  • Rebalanced annually

Cumulative returns:

  • From Jan. 2007 to Dec. 2016: 76.9% (5.9% annually over 10 years)
  • From Jan. 2008 to Dec. 2016: 75.0% (6.4% annually over 9 years)
  • From Jan. 2009 to Dec. 2016: 117.9% (10.2% annually over 8 years)
  • From Jan. 2012 to Dec. 2016: 75.4% (11.9% annually over 5 years)

It’s always good to look at the longer term. While the 5-year performance looks quite good at 11.9% growth per year, as soon as the time window includes a major negative event — like the 2008 crash — the 10-year performance shows a more modest 5.9% growth per year: a more realistic expectation for the long run. It’s also interesting to see the benefits of a mix of stocks and bonds: during the first five years, bonds outperformed stocks and delivered a +6% annual return (+30% over 5 years) while stocks lost value. It’s a little hard to remember now, when bonds have ben so underwhelming recently, but great to see a reminder why a mixed stocks/bonds portfolio is worth while.  (As it happens, I started investing in Jan. 2009, just after the crash, so I haven’t actually yet been through a period where bonds seriously paid off.)

Other Notes

  • Currency exchange: I’m earning income in US dollars this year, and no have a sudden interest in better ways to exchange money. I did my first few Norbert’s gambit recently, and was pleased by the results. I’ll be doing that going forward. For those not willing to make the jump, I did also learn that TD Waterhouse offers a significantly better exchange rate (~1%) when swapping US$25,000 in a single transaction; but that’s still a $250 charge while Norbert’s gambit is closer to $20.
  • I’m still curious to know better strategies for managing a portfolio that includes real estate. I feel vastly overexposed to interest rate risk, not to mention the vagaries of the real estate market these days, and it feels to me that bonds may be a bit redundant when holding real estate. Oddly, I haven’t found anything that treats real estate as part of a normal portfolio.

10.Aug.2015 Another summer mix

coverWith the arrival of little H, I haven’t had a lot of time to scout out new music. At this point, anything under 5 years old counts as “fresh,” and I’m even breaking my taboo about including 1990s tracks. But you may enjoy it anyways. At least three of these artists are new to me in the last year, including one of the 1990s contributions.

Download here, for a few weeks only, or stream from Mixcloud.

David Pritchard – Mix 2015.07 by Drpritch on Mixcloud

In this era of easy streaming music… I feel pretty bad for the artists. If you like these tracks, please buy them individually on iTunes, or buy a few of the albums. Think of it like a tip jar.

  1. the weeknd. high for this. r&b, from house of balloons, 2011.
  2. the xx. islands. pop, from xx, 2009.
  3. antipop consortium. volcano [fourtet remix]. hip hop, from ninja tune xx compilation, 2010.
  4. gorillaz feat. mos def and hypnotic brass ensemble. sweepstakes. hip hop, from plastic beach, 2010.
  5. kid koala. skanky panky. turntablism / hip hop, from some of my best friends are djs, 2003.
  6. squarepusher. tetra sync [edit]. experimental / acid jazz, from ultravisitor, 2004.
  7. shadowy men on a shadowy planet. spy school graduation theme. rock, from sport fishin’, 1993.
  8. james. five-o. brit rock, from laid, 1993.
  9. basia bulat. the shore. folk, from heart of my own, 2010.
  10. tycho. from home. ambient, from past is prologue, 2006.
  11. burial. archangel. dubstep, from untrue, 2007.
  12. omar-s. oasis 13 1/2. techno, from fabric 45, 2009.
  13. der dritte raum. swing bop [acid pauli’s kosmik remix]. acid jazz, from future sounds of jazz 12 compilation, 2012.
  14. billie holiday. yesterdays [junior boys remix]. acid jazz, from verve remixed 3 compilation, 2005.
  15. death cab for cutie. i will follow you into the dark. rock, from plans, 2005.
  16. the smashing pumpkins. perfect. rock, from adore, 1998.

15.Jan.2014 Passive portfolio 2013

Once again, there’s nothing new to report on my investment portfolio; just an excellent +21% year!

Past editions: 2009, 2010, 2011, 2012

It was an incredibly good year to hold U.S. and European/Pacific stocks. This is clearly the time to rebalance, “sell high” and shift into bonds. Not that bonds are expected to do great in the near future, but still – that’s the hedge against a sudden drop.

The sinking Canadian dollar is a notable part of the returns here – the 6% drop in the currency this year added 6% to all of the non-Canadian stock portfolio. That’s just the luck of the draw – it went up 5% in 2009 and reduced returns that year.

So, +21% this year. Notice that the “legendary bad year” for the stock market, 2008, was a -20% return year. How many headlines did you read about a “new depression” in 2008 compared to the headlines about a fantastic boom in 2013? I think this just shows the asymmetry of the news, and the impact that has on our perception. The bad news in 2008 was given massive coverage – and rightly so – but the good news in 2013 is seen as just “business as usual.” Many people made changes to their investment strategy after 2008, but many will not even notice 2013.

Performance

Here’s the performance of my portfolio over the past several years, using the latest 2013 country weights. (Note that South Korea moved from “emerging” to “europe / pacific” category this year.) The table below shows the annual returns of each component of the portfolio, giving the “sequence of returns” for each piece.

2007 2008 2009 2010 2011 2012 2013
Equities
   U.S.A. VTI -9% -23% 11% 11% 6% 16% 43%
   Europe / Pacific VEA -6% -27% 10% 3% -8% 18% 30%
   Emerging VWO 17% -42% 52% 13% -15% 19% 2%
   Canada XIC 9% -33% 34% 17% -9% 7% 12%
Subtotal -2.2% -27.8% 18.9% 9.9% -3.3% 15.2% 28.5%
Fixed income
   Mixed bonds XBB/VAB  3% 6% 5% 6% 9% 3% -2%
Subtotal 3.0% 6.1% 5.1% 6.0% 9.1% 3.0% -1.8%
Cash 0% 0% 0% 0% 0% 0% 0%
Total -1.1% -19.7% 15.2% 8.6% -0.7% 12.0% 21.1%

Same assumptions as usual:

  • Expressed in Canadian dollar terms (i.e., including all currency shift effects and using no currency hedging)
  • Includes all distributions/dividends
  • Rebalanced annually

Cumulative returns:

  • From Jan. 2007 to Dec. 2013: 34.1%
  • From Jan. 2008 to Dec. 2013: 35.5% (5.2% annually over 6 years)
  • From Jan. 2009 to Dec. 2013: 68.7% (11.0% annually over 5 years)
  • From Jan. 2010 to Dec. 2013: 46.4%
  • From Jan. 2011 to Dec. 2013: 34.7%
  • From Jan. 2012 to Dec. 2013: 21.1%

05.Jan.2014 Good books about babies

As a few friends are now following us into parenthood, I thought it might be helpful to put down on paper some of the things we found most useful. In that spirit, here’s part 1: baby books that we liked. Many thanks to Nancy Kurylowicz, who first pointed us towards many of these books.

Pregnancy & First Months