It makes the investment industry look bad when one of its customers has to contact a personal finance writer to find out whether his returns are any good.
Investment companies do show clients personalized returns, and you’d think advisers would go over these numbers with clients individually. What’s often missing from these communications is context to help investors understand not just how much their account went up or down, but how it performed comparatively.
In a submission to the Carrick on Money newsletter’s Q&A section, a reader mentioned that his managed account with medium risk has had a return of 6.4 per cent over the last five years. He asked how he could determine if this is a good return compared to other managed accounts and DIY investors.
To help assess returns, investment companies would ideally provide clients with a blend of stock and bond market indexes that corresponds to their personalized portfolio mix. Indexes are the best benchmarks because you can buy into virtually all the most followed ones using exchange-traded funds with minimal fees. If your portfolio can’t beat ETFs, just buy ETFs.
A quick and easy way for any investor to compare their returns is to use the results of asset allocation ETFs, which are fully diversified portfolios wrapped into a single fund. There are conservative, balanced, growth and all-equity asset allocation ETFs – choose the one closest to your portfolio and use it as a benchmark.
The reader with the 6.4 per cent five-year return didn’t specify a portfolio mix, but his mention of medium risk suggests using a mix of 60 per cent stocks and 40 per cent bonds. The oldest asset allocation ETF with this blend is the Vanguard Balanced ETF Portfolio (VBAL-T), which made 4.8 per cent on an average annual basis for the five years to Oct. 31. For a portfolio closer to 80 per cent stocks and 20 per cent bonds, try the Vanguard Growth ETF Portfolio (VGRO-T). For a 40-60 portfolio, there’s the Vanguard Conservative ETF Portfolio (VCNS-T).
Benchmarking your personal investment returns only works if you match up the end dates correctly. Stock and bond markets are volatile enough that five-year results can vary substantially from month to month. Example: VBAL made 4.2 per cent annually for the five years to Sept. 30.
The reader who asked about his returns appears to have done well in the past five years, a period of sharp ups and downs for the markets. Why didn’t his adviser and investment company show him the good news?
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
