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Discussion Starter #1
From the CRA website, I was able to do a VERY disturbing exercise:

I was able to see my Taxable income (from 1990-2009), and the RRSP contributions I made each year. I started my RRSP in 1994 with a whopping $200.

From there, I went in fairly 'heavy', some years were better than others. If I look at the ACTUAL cash-value of my contributions, it was $116K. Current market value is 100.8K. Yes, I realize there was a huge dip in 2008, and in 2001 and 2002. But, there were also huge swings the other way.

To go a bit further, I said "ok, what did the TSX do over that period of time"? On average, the TSX returned 5.08% between 1994 and 2009. If my RRSP performed just HALF AS WELL (or bad during the bad years), my current market value would be 156K. If I had matched TSX the current market value would be 197K.

I'm VERY close to just saying "to heck with it" and putting it all in a pillow case. I've become anti-mutual funds.:mad:

Any suggestions out there on what my next move should be?:confused:

Thanks!!!!
 

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From the CRA website, I was able to do a VERY disturbing exercise:

I was able to see my Taxable income (from 1990-2009), and the RRSP contributions I made each year. I started my RRSP in 1994 with a whopping $200.

From there, I went in fairly 'heavy', some years were better than others. If I look at the ACTUAL cash-value of my contributions, it was $116K. Current market value is 100.8K. Yes, I realize there was a huge dip in 2008, and in 2001 and 2002. But, there were also huge swings the other way.

To go a bit further, I said "ok, what did the TSX do over that period of time"? On average, the TSX returned 5.08% between 1994 and 2009. If my RRSP performed just HALF AS WELL (or bad during the bad years), my current market value would be 156K. If I had matched TSX the current market value would be 197K.

I'm VERY close to just saying "to heck with it" and putting it all in a pillow case. I've become anti-mutual funds.:mad:

Any suggestions out there on what my next move should be?:confused:

Thanks!!!!
Your experience is not unique at all. It is common for investors to badly underperform the market averages. Instead of avoiding stocks altogether, wouldn't a better option be to try and match the benchmarks as much as possible? That would suggest index funds.

This is an exercise all investors should be doing. I applaud you for undergoing the exercise of how you have performed in the past. Most investors don't even bother with that step.
 

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I second what CC said.

Also - can you describe your investing activities over this period? Did you do any switching of funds (ie sell one and buy another). Did you increase your contributions when the market did well and vice versa? Any performance chasing? (ie did you ever buy the "hot" fund?).

That sort of activity can really impact the performance, and not usually in a good way.

Were you mostly invested in the TSX or other areas as well?
 

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I also think you need to ponder the issue of risk tolerance, and keep in mind that understanding the nature of risk may cause your risk tolerance to change.

Personally, and I know this is an extreme view, I approach any non-secure investment with the philosophy that I could lose every penny. I ask myself if I'm willing to take that risk in order to obtain the potential higher payback if things turn out well. During my 20s, 30s, and 40s I felt perfectly comfortable taking these risks, in part because I knew I was investing for the long term and the current value of my portfolio was irrelevant, and in part because I hadn't invested all that much to begin with.

Now in my early 50s, as retirement age is only about 15 years away, I'm starting to feel a little more risk-averse. I still have 80% of my investments in market index funds but am starting to shift the balance slightly toward less risk.

Another thought-trick that has helped me is to avoid thinking that I've "lost money." Once your money goes into the market, all you own is the shares. If their value goes up you haven't gotten any richer, and if their value goes down you haven't gotten any poorer. You only get richer if you cash in those shares after they've grown in value, and you only lose money if you cash them in after they've lost value. I don't plan to cash in any of my shares until 2025 at the earliest, so their current worth really doesn't matter to me.

You have to avoid thinking of the market as a big savings account that should be constantly giving you compounding interest. The market can give you growth, but it's dynamic growth -- which means a long-term trend of growth marked by many fluctuations up and down. The fluctuations should be more of a concern as you get closer to the point where you're going to cash in your shares, but if you're still decades away from that point then they don't matter.
 

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Ashby: I don't know who is managing your investments now, but the (rational) alternative to where you've ended up today is not your pillowcase, it is managing your investments yourself using an index ("couch potato") strategy.

In this way, you can essentially match the returns of the TSX and other relevant indexes.

It must be a horrible blow to realize where you are now. But now you know, and you are able to take informed action to ensure you don't wake up in the same or worse place sometime in the future. Much better today than tomorrow!!!

If you need help on how to figure out how to transfer your assets out of your funds now, there are lots of people here (including me) who can work through the calculations with you.
 

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Discussion Starter #6
further info....

I haven't sold much.

Over the last ~6 years or so I've been with CIBC wood gundy. Each time I would change jobs, and the employer RRSP would "go with me" (usually sun life), the wood gundy dude would take over.

each time a mutual fund would start to...really underperform, I'd have a "that's it!" moment, and tell my guy "don't sell this stuff, but don't buy any more...let's try something else". For the last couple of months, I've just said "park it in money market until we can do something intelligent".

It's a mix of mutual funds (Sprott, Brandes global equity, CIBC canadian real estate fund, hartford canadian stock fund, Trimark Canadian bond fund, etc.) The only things that I chose were the real estate fund, and a couple of Class B Berkshire funds (which are now 100 shares after the split--they are currently worth a bit more than I paid for them).

I probably have "too many" mutual funds, but don't want to sell while they're still under water.
 

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I would say that it may not be exactly fair to compare your portfolio to the TSX as a benchmark depending on what your holdings are/were.

You also said that the average return on the S&P/TSX Composite Index was 5.04%, but if this was the average return on investing a lump sum at the beginning of the time frame, instead of the regular investments that you made over time, again, this is would not be a fair comparison. A better comparison would be to compare the internal rate of return (IRR) of your portfolio against the the IRR that you would have earned by investing in a comparable set of benchmark indices (dependent upon your asset mix; for example, it could be a mix of the TSX Composite Index, the DEX Universe Bond Index, the S&P 500 Index and the MSCI EAFE Index).

Also, no one has yet mentioned the effects of fees. Typically what were you paying in management fees each year? These can seriously dent fund performance.
 

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Well, Ashby's poor results are probably a combination of high fees, timing mis-matches, and performance chasing (principally by his advisor).

What's important is not so much to account for the exact "cost" of these missteps but to implement a strategy that corrects for them. (Not that you are suggesting anything different!)
 

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Discussion Starter #9
Yes...I realize that it's difficult to compare apples with oranges...some of it was monthly contributions, some were lump sums. That's why the exercise was "ok, what if I did HALF as well as the TSX".

even if I had done the pillow case method, I'd have a better return: 0% is better than -~13%.

I appreciate all the comments and suggestions. Really glad I did the exercise, and glad that I 'aired' it publicly.
 

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You can account for the cashflows in a portfolio. The standard method (for advisors) is the Modified Dietz method. You can run this function in Excel...another "fun" exercise for you to try...
 

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Yes...I realize that it's difficult to compare apples with oranges...some of it was monthly contributions, some were lump sums. That's why the exercise was "ok, what if I did HALF as well as the TSX".

even if I had done the pillow case method, I'd have a better return: 0% is better than -~13%.

I appreciate all the comments and suggestions. Really glad I did the exercise, and glad that I 'aired' it publicly.
I agree with Robillard. The TSX may not be an appropriate benchmark if you add bonds and global equity to the mix. Also, your returns will depend on your sequence of investments. For example, if the majority of your investments were added just prior to the 2008 meltdown, it won't be surprising if your portfolio is underwater.

However, it seems to me that ashby has invested regularly over 20 years. Assuming the RRSP contributions were more or less maximized every year, I agree that the past returns are quite poor, however you measure it.
 

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Discussion Starter #12
Here's the year contributions were made, and the value. Some were "lump" sum, some were monthly payments, some were transferred from Sun Life (employer plans) to wood gundy:


YEAR ACTUAL CONTRIBUTIONS
1994 200.00
1995 730.00
1996 2,709.00
1997 9,932.00
1998 3,304.00
1999 324.00
2000 940.00
2001 3,987.00
2002 4,439.00
2003 25,471.00
2004 13,978.00
2005 9,794.00
2006 11,755.00
2007 8,768.00
2008 12,000.00
2009 8,000.00

Some anomolies: 1997: RRSP catch up loan. 2003: I sold rental property, and contributed to RRSP to avoid tax (I had some capital gains that I wanted to avoid). 2009 will also be 12k (assuming 4 k went in yesterday, but nobody can confirm or deny that it happened yet).

80% of the above was as a result of 'normal' monthly contributions.
 

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I'm not sure but it sounds like you ended up with mediocre performing mutual funds plus your advisor takes a fee too. If that is the case it could definitely account for the -13%.

If you have high Mer mutual funds they take 2.5% even if they lose value.

The your advisor takes a percentage... in fact he may take a percentage on the initial balance invested even though he hasn't done his job.

In any case now that you know what you know the real question is what do you want to do now?
 

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Discussion Starter #14
what I want to do now:

stop the bleeding.:)

Right now I'm contributing 1K/month into my RRSP plan (no employer match, just me). To continue to put in 12K/year to see no growth? I've lost my taste for it.

I don't expect 20% year over year returns. I'd like to think that some years I could gain ten, others lose ten...if I could make 5%/year on average, I think I'd be pretty happy.

Maybe put 'er all into bank stocks is the answer? They make money every year. Tobacco companies? Insurance companies?
 

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Thanks for your post, ashby. I'm in the same situation. I started in 2001 and have only recently gained back what I have lost these past 9 years. Like you, I feel the money would be safer in my mattress rather than in the hands of others to mismanage and use for their personal gain. Sure, some will disagree and tell me that short term gain is better than long term pain, but given our results I would have to disagree. I think those who are saying that are on the receiving end of our money.

Constructively, might I suggest taking money you would have contrbuted in future RRSP years and maxing out your TFSAs? You can put $5K per year in there, leave it as cash and get 1% (right now) with the bank. That rate goes up as do interest rates so when the recession ends in 2-3 years the returns will be better. The money is not taxable, readily accessible and then you don't have to deal with all this stock market nonsense. Unless you want to (in the TFSA).

Just my opinion, I realize it's controversial, but oh well, it's my money lol.
 

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Hmmmm. Why would you use TSX as your benchmark for returns and then propose a highly concentrated portfolio allocation for yourself?

You need to sort this out before you go any further, in my not-so-humble opinion: either you are fine with enhanced risk (but you must manage your portfolio closely then, which it sounds like you haven't been doing), or you want index returns, in which case you are going to diversify broadly and leave everything alone except to rebalance. (Or, I guess, some mixture of the two: but you have to start somewhere and then hedge from there.)

You need to commit to an approach based on an investment philosophy you can live by before you do anything else. Complaining that you are not getting index returns and then proposing a concentrated strategy has a good chance of landing you up in the same spot a couple years from now (a better chance than having a positive outcome, actually; especially with the behavioural aspects you've disclosed).
 

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Thanks for your post, ashby. I'm in the same situation. I started in 2001 and have only recently gained back what I have lost these past 9 years. Like you, I feel the money would be safer in my mattress rather than in the hands of others to mismanage and use for their personal gain. Sure, some will disagree and tell me that short term gain is better than long term pain, but given our results I would have to disagree. I think those who are saying that are on the receiving end of our money.

Constructively, might I suggest taking money you would have contrbuted in future RRSP years and maxing out your TFSAs? You can put $5K per year in there, leave it as cash and get 1% (right now) with the bank. That rate goes up as do interest rates so when the recession ends in 2-3 years the returns will be better. The money is not taxable, readily accessible and then you don't have to deal with all this stock market nonsense. Unless you want to (in the TFSA).

Just my opinion, I realize it's controversial, but oh well, it's my money lol.
I completely disagree with the notion that the response to past poor returns is buying a mattress to stuff your money in. Cash isn't without its own sets of risks -- pretty much the best you can expect is to earn a smidgen over inflation (assuming cash is kept in a RRSP account). That's the price to pay for the comfort of "safety".

Long-term investors should first have a plan. How much are you going to save each year? How are you going to invest those savings? What's your asset allocation plan? Your asset allocation plan will tell you what you can reasonably expect from your investments. It sounds too ad hoc to drastically adjust portfolio allocations based on your past experience. You will be simply setting yourself up for future problems.
 

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You can see why "ordinary" investors get frustrated, though, eh?

People try one poorly-implemented strategy, then another poorly-thought-through strategy, very dissimilar from the first, but they don't correct any of the behavioural discontinuities (like not having an asset allocation and investment policy for themselves) and they end up concluding that "nothing works" and the pillowcase method is the only way forward.

Which is why I am glad places like this exist.
 

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My sympathies

Ashby, you have my condolences. The advice you've received from this thread seems quite sound to me. You should especially listen to MoneyGal.

First, you need a strategy. Many investors get into a worse situation by trying to "make-up" for poor past returns. They end up choosing risky investments with the hope of hitting "homeruns." What is your overall financial situation? Do you have debt? What is your risk tolerance? What asset allocation do you want to choose?

Second, after you've decided on an asset allocation, choose the lowest-cost investments possible. One of the few certainties in investing is that higher cost leads to lower returns. You can choose broad-based ETFs or index funds in place of mutual funds. One disadvantage of ETFs is that a stock commission is needed to purchase them. Many of the big banks (TD for sure) have index funds that automatically re-invest dividends. That way you can still invest monthly without worrying about commissions. If you have ~ $100,000 portfolio, then your cost (MER) is ~ $2,500 (2.5%). If you use ETFs and index funds then your cost should be < 0.5% ($500 per year). Just lowering costs gives you ~ $2,000 more per year working for you. Some ETFs to consider are XIU (60 stocks from the S&P60, MER 0.17%) and XSB (combination gov't and corporate Canadian 1-5 year bonds, MER 0.25%). The costs of mutual funds are much higher than people think. The rule of thumb I'm familiar with states that each 1% of MER over 20 years costs ~ 20% of your capital (when compared to capital accrued without the same expense).

If it makes you feel better, don't forget that you've saved tens of thousands of dollars in taxes with your contributions. Good luck with your future investments!
 

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Discussion Starter #20
I really, really, really appreciate all of the tips and suggestions.

I'm not going to do anything drastic, I'm just trying to talk with as many people as possible to develop a plan. I'm not really going to put anything in a pillowcase.

Do I have a bit of risk tolerance? yes.
Do I have debt? a bit of lingering consumer debt (nothing drastic), and a considerable mortgage :eek: (recently moved from the burbs of a major center to closer to down town--we went 'all in' on this. No regrets).

For now, I've asked 'my guy' to park every new contribution in cash until I come up with a plan. I'm going to look into these ETF things.

the only thing that keeps me sane is that my spouse has a defined benefit pension plan. Hopefully that'll never go in the crapper!:):):)
 
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