Investment Performance for 2007

by Mike Holman

It was a volatile year in the markets and my asset allocation was even more volatile! I switched most of our low cost mutual funds into ETFs part way through the year, lowered our Canadian content (unfortunately) and lowered the equity portion of our portfolio from 80% equity to 75% equity and 25% fixed income.

Here is a list of some relevant asset returns for 2007 in Canadian dollars which is listed on Canadian Capitalist.

Bonds 3.3%
Canadian Equities 9.5%
US Equities -10.5% (5.3% actual index return)
EAFE Equities -6.6% (10% in USD return)

As you can see the rise of the Canadian dollar was the dominant factor in this year’s returns.

In the end our final return on our investment accounts was 4.1% which is not bad at all. Please note this does not include our leveraged account which will be analysed in a separate post.

To calculate our return I use a very basic estimation which only works if your contributions are a small percentage of your overall portfolio. I take the year end total of all our investments minus the total at the beginning of the year minus any contributions made during the year. The error in this calculation is that I’m assuming that there is a zero percent return on the contributions.

January 1, 2007 total: $219,907

December 31, 2007 total: $241,831

Contributions made during the year: $12,990

Return = ($241,831-$219,907-$12,990)/$219,907 = 4.1%

Our long term investment expected return is 7% so while this year didn’t meet our expected return, it wasn’t very far below it. And if you consider that our 2006 return was 14.7%, we are still on track.

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