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Discussion Starter · #1 · (Edited)
Hi CMF,

Over the past few years I've read numerous articles and academic studies which point out most actively managed funds under perform the index.
I'm convinced a couch potato/lazy portfolio is the best way my family can secure financial independence.

And yet, for all the media and internet chatter touting the benefits of this investment strategy, I find there are few real-world users who publicly share their results.
As such I want to share my progress to inspire others who are thinking about following a similar approach, and to learn from veterans who have been doing this for a while.


About us
My wife and I are in our early 30s with a young child [follow her RESP account]. We make a decent household income and have no debts other than our mortgage.
We put aside ~15% of our net income towards our investment accounts.

Portfolio setup
We're following the Complete Couch Potato Portfolio that was previously detailed on CanadianCouchPotato.com (before newer portfolios were created, and this older portfolio was removed from the website), with some modifications:
  • We're using XIC as our Canadian ETF instead of the recommended ZCN. The six ETFs we hold are: XIC.T, VTI, VXUS, ZRE.T, XRB.T, and XBB.T.
  • Our bond allocation % is: [(my age) - 10]. i.e., when I'm 30 the bond allocation is 20% of the portfolio.
  • I've made adjustments to the weightings based on which account type (RRSP, TFSA, Margin, etc.) holds the ETF.
  • I make no attempts to time the market. I rebalance quarterly by buying the ETFs we're underweight in; for now I'm not selling anything to rebalance.
  • All distributions/dividends/return-of-capital received are set to DRIP additional ETF shares.

Portfolio tracking
We started our portfolio in Dec 2012 - around the same time there was talk of a U.S. government shutdown and assurances from experts that the U.S. market was doomed in 2013. :). Here's how we've done so far:

Month -- Monthly growth (decline)

December 2012: 1.09%

January 2013: 2.84%
February 2013: 2.06%
March 2013: 0.29%
April 2013: 1.07%
May 2013: 0.85%
June 2013: -2.62%
July 2013: 1.83%
August 2013: -0.20%
September 2013: 1.71%
October 2013: 4.28%
November 2013: 1.18%
December 2013: 1.38%

January 2014: 1.29%
February 2014: 3.14%
March 2014: 0.55%
April 2014: 0.74%
May 2014: 0.71%
June 2014: 1.26%
July 2014: 0.59%
August 2014: 2.10%
September 2014: -1.64%
October 2014: 1.09%
November 2014: 1.64%
December 2014: -0.81%

January 2015: 6.23%
February 2015: 2.71%
March 2015: -0.63%
April 2015: -0.85%
May 2015: 0.79%
June 2015: -1.94%
July 2015: 3.15%
August 2015: -4.52%
September 2015: -1.73%
October 2015: 2.81%
November 2015: 0.71%
December 2015: -0.04%

January 2016: -2.20%
February 2016: -1.71%
March 2016: 3.45%
April 2016: -0.04%
May 2016: 2.81%
June 2016: 0.13%
July 2016: 3.68%
August 2016: -0.12%
September 2016: 0.73%


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View attachment 11882

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Thanks for sharing. How are you tracking and doing the calculation of the "Overall account growth" (I presume that's a total return number?)

I ask because you mention you're regularly adding to these portfolios. The only feasible approach I have found to calculate returns properly, when there are cashflows in/out of the account, is a spreadsheet with XIRR formula.
 

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Discussion Starter · #3 ·
Overall account growth is total return; I've updated my post to that terminology.

I'm not expecting any outflows of cash from these accounts - doesn't XIRR require at least one negative number in the data?

The calculation I'm using for total return is: [(total equity - net deposits) / net deposits].
 

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I think when you're adding money like that you really have to use XIRR to get the correct rate of return (it will spit out an annualized rate of return number) rather than the equation you have

Writing this in a hurry, someone else please correct me if I'm wrong

With XIRR the last line in your spreadsheet (the negative one) is just the current value as of today. Think of it like an action to liquidate the whole portfolio.

Code:
2012-01-01  1000
2012-08-01  1000
2013-03-01  1000
2013-09-13  -3200

XIRR        5.90%
Where the 1000's are cash additions to the (total) portfolio and 3200 is the total value today. I get 5.90% annualized rate of return with this example. For this to work properly you have to record any cashflow into or out of the accounts along with the date. Things that happen internal to the account (like dividends or interest) don't have to be recorded as long as they stay within the portfolio.

If you have only been adding cash, and never withdrew, then the only negative number will be your current value on the last line.
 

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Just so you know come Jan 1 there is a thread on here and financialwebring.org where people share their investment returns. So you get a more real world idea of how everyone's doing. I discovered this a few years ago and it inspired me to track our performance.

And usually for the most part people are posting their XIRR and not just the best stock pick.
 

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Discussion Starter · #9 ·
I've updated the first post based on September and partial October results.

September was a good month as the portfolio was up 1.71%.
October is so far equally good as the portfolio is up 1.78%.

Overall return is: 9.25%.
XIRR (annual rate of return) since inception is: 12.67%.


The portfolio was rebalanced in September. The next quarterly rebalnacing is going to take place in December.
 

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Discussion Starter · #10 ·
Looks like a system restore on the board wiped out my 1st post, so here's the re-post:

I've updated the first post based on October's and partial November results.

October was the best month ever for the portfolio, as it was up 4.28%.
Thus far November is looking like another positive month, up 0.54%.

Overall return is: 12.33%.
XIRR (annual rate of return) since inception is: 15.08%.


The portfolio was last rebalanced in September.
The next quarterly rebalancing is going to take place in December.
 

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Discussion Starter · #13 ·
A late November update.

November was a positive month for the portfolio as it was up 1.18%.

I'll post a conclusive December/end of year update once I receive the final statements.
Tentatively, in 2013 the portfolio XIRR was 15.55%, and the overall return was 13.34%.


Overall XIRR (annual rate of return) since inception [Dec 2012] is: 14.86%.


The portfolio was rebalanced in December.
The next quarterly rebalancing is going to take place in March.
 

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Discussion Starter · #14 · (Edited)
December update

To cap off 2013, in December the portfolio was rebalanced and grew by 1.38%.


Final 2013 portfolio update

In 2013 the portfolio XIRR was 15.56%.
Yearly % growth was 13.36%.

Overall my portfolio size increased 56.75% from Jan 1 to Dec 31, 2013.
67.5% of the increase came from new deposits, and 32.5% came from growth.

View attachment 390


Overall growth

Since the inception of the portfolio in December 2012 (i.e., 13 months of growth) the portfolio XIRR is 15.65% and the total % growth is 14.25%.
Yearly portfolio yield (on market value) is: 2.74%


On an individual position basis, my stock-index-tracking ETFs have provided all the gains as my REIT and bond funds are in a loss.


XIC.TO (Canadian equities):
- Capital gain of 10.01%
- Net gain (including dividends): 12.82%
- XIRR: 14.04%

VTI (U.S. equities):
- Capital gain of 29.66%
- Net gain (including dividends): 33.46%
- XIRR: 32.65%

VXUS (international equities):
- Capital gain of 11.92%
- Net gain (including dividends): 15.59%
- XIRR: 17.54%

ZRE.TO (REIT):
- Capital loss of (5.77)%
- Net loss (including dividends): (2.13)%
- XIRR: (2.57)%

XRB.TO (Real-return bonds):
- Capital loss of (10.79)%
- Net loss (including dividends): (9.86)%
- XIRR: (12.77)%

XBB.TO (Canadian bonds):
- Capital loss of (3.85)%
- Net loss (including dividends): (1.54)%
- XIRR: (1.86)%


--------

I had a request from a forum member to share the spreadsheet I use to track my portfolio & positions.
Look for something over the coming months after I make a few modifications.
 

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Discussion Starter · #15 ·
First update of 2014:


January was a very volatile time in the markets and with the portfolio.
For the month the portfolio finished up 1.29%.


Commentary

Compared to previous months the return was perfectly average (1.29% v. simple monthly average of 1.22%).
Most of the portfolio gains were from the strengthening U.S. dollar v. the Canadian dollar.

My REITs and bonds funds all had a good month, with my XBB ETF finally showing a positive net return (XIRR of 1.42%).


XIRRs

2014 XIRR = 16.88%
Total XIRR (since December 2012) = 15.70%


Growth chart
View attachment 411
 

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Just looking at your calculation on VTI and you have given your results in USD I think. You also gained a fair bit on the drop in the CAD. Same would be true on VXUS. I tend to look at returns in CAD for better or worse. You can do it anyway you want of course.
 

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Discussion Starter · #17 · (Edited)
uptoolate: in my end of year summary detailing the capital gains, XIRR, and total returns by each position, I valued my U.S. positions (i.e., VTI and VXUS) in U.S. dollars.

For my monthly calculations and in the chart that details my gains/losses, I value my U.S. positions and cash in Canadian dollars using the end of month exchange rate.
 

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Discussion Starter · #20 · (Edited)
February was the second best month ever since the inception of the portfolio.
For the month the portfolio was up 3.14%.

In 2014 the portfolio is up 4.45%.
Since inception the portfolio is up 18.80%.


Commentary

February started off quite volatile, but throughout the month it picked up strength and had a string of several positive days to close out the month.
February's return topped the previous 2nd-best return from January 2013 (3.14% vs. 2.84%), but fell well short of the all-time high from October 2013 (4.28%).

My REIT fund (ZRE.TO) is back to showing a positive net return (1.19%). The fund has been at a loss since about June of 2013.
My real return bond fund (XRB.TO) is the only ETF still in the negative (-3.8% net loss).


XIRRs (annualized rates of return)

2014 XIRR = 31.84%
Total XIRR (since December 2012) = 17.89%


Growth chart
View attachment 449
 
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