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%

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