Wow, it’s been 2 years! 2 years since I decided to get smart about how I invest my money. In early 2016, I started to build up a little bit of savings, and started to research what was the best way to use that savings. I wanted to build a reliable, long-term investment strategy. After much reading, I decided that passive, index investing, following the Canadian Couch Potato strategy, was the smartest way to build my wealth. Later that year, I started my index portfolio with TD e-Series index funds. I now have had 2 years of experience (and data!). Let’s look at how my TD e-Series Portfolio Returns did over those 2 years.
We’ll look at what my portfolio has done year-by-year from November 2016 to the end of October 2018. I’ll go over the returns of each fund, the dividends collected, and the overall gains of the entire portfolio.
Update – 2018-12-24: Thanks to the feedback from commenter Angel_Investor, I’ve updated return percentage calculations in all tables below. Return percentages are now calculated as (Returns/Contributions).
Starting point
I started in November 2016 with a $12,000 of savings to invest. After some reading and research, I decided to create a portfolio that aimed for the following targets:
- Canadian index – 23%
- US index – 23%
- International index – 23%
- Canadian Bond index – 31%
So I made purchases accordingly and started my portfolio as so:
Year 1 TD e-Series Portfolio Contributions, Dividend Payments and Returns
TD e-Series Contributions
My plan was to contribute as much as I could throughout the year, but not on any set schedule or budget. Throughout the year I made 12 contributes to my TFSA TD e-Series portfolio, and continued to purchase the 4 assets, buying varying amounts to keep my target asset allocations. You can see my Step-by-step: How to Re-balance your TD e-Series Portfolio guide for more info on how I did this.
TD e-Series Dividend Returns
For the first 12 months of my TD e-Series Portfolio, I earned $323 in dividends throughout the year, which when looking at the end of year portfolio value, is a little under 1.8% return on the investment. Not a bad starting point! Below are the dividends each asset in my portfolio returned, as well as the contributions I made myself:
Portfolio Asset Growth
Here is what the return of the portfolio looked like after the first 12 months, with growth in value in all 4 assets:
Value and percentage increases above include the re-invested dividends. The International index fund had a great 12 months, with a return of over 17%! The Canadian Bond market was my lowest earner, with only a 1.2% return, and this is to be expected. Usually, when equities are doing well, bonds tend not to.
The first 12 months with my TD e-Series Index Investment Portfolio was a great start. I was able to make an additional $5,000 of contributions, and saw my portfolio increase a healthy 9.5%. This was good, because Year 2 was not going to be as kind.
Year 2 TD e-Series Portfolio Contributions, Dividend Payments and Returns
In this section of the analysis, I’ll look at the year 2 returns completely separate from the year 1 returns.
TD e-Series Contributions
As per the year before, I continued my contribution trend, adding almost $5,000 in additional cash to continue to grow my portfolio, making 8 purchases over the year.
TD e-Series Dividend Returns
With a higher amount of shares owned of the different portfolio assets, there was greater dividend returns, that I again re-invested as additional asset purchases. In year 2, I earned $452, an almost 2% return on the end of the year total value of my portfolio:
Portfolio Asset Growth
Unfortunately, the second 12 months of my portfolio included international trade wars, lingering worry about a North American trade agreement, and volatile world leaders that threw many curves at the market. My 2% dividend payments weren’t quite able to offset the value loss of the assets over the 12 months, and my portfolio saw a small drop in value:
The US Index fund was the winner this year! It stayed above water and earning a 7.6% return! On the other side of things, the Canadian and International index funds lost value over these 12 months. The International index showed the biggest loss, at -5.4%! Ouch.
The 2 year return of my TD e-Series Portfolio
As you can see above, since my starting point of investing, I’ve had 1 really good year, and 1 disappointing year. Let’s look at how these offset each other, and what are my overall returns:
As you can see above, an overall 6.4% return over 2 years on my investment! 6.4% isn’t bad considering what 2018 did to the global economy and stock markets. In comparison, if I had invested all of this money over 2 years in a 2.3% high interest savings account, I would have received less than $890 in interest payments, or $500 less than my TD e-Series portfolio returns.
TD e-Series Portfolio: Recap and Future
As you can see, index investing is a long term game. These last 2 years are a perfect example of why. 1 year might see great returns, followed by a year of less than stellar returns. Long term investing mean waiting out the bad so that the good will outweigh it. If you have a bad year, don’t panic, and keep moving forward.
I can’t predict what will happen with the global markets in the next 12 months. My strategy will continue to be the same, contribute as much money as I can to my portfolio, re-balance to a 23%/23%/23%/31% asset allocation, and hope that the markets turn themselves around, with 2019 being a much better year than 2018.
Again, thanks for reading, and comment below if you have any questions!
Angel_Investor says
Nice article, it’s well laid out. Now, you need to learn how to calculate returns properly. Some pointers:
-Dividends are part of returns and should be included.
-Do not use the book values as your base to calculate returns. Re-invested dividends add to the book value, so won’t get included in your percentages, when they should. Use your contributions as basis to calculate returns.
-Any switching of funds you may do in the future for re-balancing will be reflected in the book values. If you keep using book values to calculate returns after that, it will really make no sense. Book values is only good to calculate capital gains in an non-registered account.
-You calculated percentages by doing “returns / (market value)”. You should do “returns / contributions”. E.g.: If you contributed $1000 and one year later the market value is $1200, your returns are 20%, not 16.7%.
As you can see when you correct your excel sheets, your actual returns are much better than what you think they are.
Good luck and keep on investing!
Let's Talk About Money says
Thanks for the detailed feedback! I’ll try to answer or clarify a few of your points:
-Dividends are part of returns and should be included.
I should maybe have been a bit more clear – While I pulled out the dividends in a separate table, I did include them as part of the returns as well. I wanted to assess specifically how much of my returns were attributed to dividends.
-Do not use the book values as your base to calculate returns. Re-invested dividends add to the book value, so won’t get included in your percentages, when they should. Use your contributions as basis to calculate returns.
I may be using the term “book value” a little differently then how it is actually defined (or I’m using it incorrectly). I’ve been using it as the cash I have put into a fund and I calculate this manually (not what TD gives me as the book value). So when I say the book value of a fund is $3,800, that means that is how much cash I have used to purchase the shares that I own. When I calculate this number, I make sure to exclude the value of the dividends that I have earned and have been re-invested.
-Any switching of funds you may do in the future for re-balancing will be reflected in the book values. If you keep using book values to calculate returns after that, it will really make no sense. Book values is only good to calculate capital gains in an non-registered account.
This is a good point. So far over the 2 years, I’ve done all of my re-balancing by purchasing more/less of funds when making a contribution – and not actually selling profits from one, to purchase another – so that means that this error hasn’t affected my return calculations at this point. But in the future, if I were to re-balance by switching around funds, then you’re right, this would skew the book value and the return calculations.
-You calculated percentages by doing “returns / (market value)”. You should do “returns / contributions”. E.g.: If you contributed $1000 and one year later the market value is $1200, your returns are 20%, not 16.7%.
You’re right! I used market value instead of contributions, which skews my data lower. I’ll work on an update to fix these calculations.
As you can see when you correct your excel sheets, your actual returns are much better than what you think they are.
Good luck and keep on investing!
Thanks again for all of your feedback. I hope I’ve helped clarify a few things, and I’ll rework some of the tables to reflect the new percentages.
Heather says
Thanks for this info! Heading to the bank to set up my TD e-series this week and this has come in handy!
Let's Talk About Money says
Hi Heather, thanks for the feedback! Glad I could help.
Rokib says
How did it do in 2019?
Let's Talk About Money says
That’s a good question. It’s a bit more complicated this year as I cashed out over half of my TD e-Series TFSA in June to make a down payment on a new home. You can get a bit of a sense in my January/February 2019 update but I haven’t done a deep dive yet on the 12 month return from Nov 2018 – Nov 2019. I’ll look to do another year by year review in January, so keep your eyes peeled.