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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{ 11 comments… read them below or add one }

1 The Financial Blogger

This year was simply a bad one 😉
I couldn’t invest until April this year (lack of cash flow) so I missed a good chance of making profit early in the year. I’ll post about my SM result next week… this ain’t pretty ;-(

2 FourPillars

Yes, it was FB – if you couldn’t have money invested at the beginning you would have been better not investing at all (20/20 hindsight!)


3 Canadian Capitalist

Thanks for the link again. I should clarify that the asset class returns in my post (cited here as well) are total returns including dividends.

4 Mr. Cheap

Is your 7% target real return or nominal return?

5 FourPillars

Mr. C – nominal return.

For retirement planning I use 7% nominal return minus 3% inflation = 4% real return.

Considering I’m 75% equity I’m not sure if that is too high but it’s good enough for long range estimates which are complete guesses anyways.


6 growthinvalue

if you couldnt have money invested at the beginning you would have been better not investing at all (20/20 hindsight!)

Fantastic news, considering I made four buy orders in total during 2007, all of which were between April and October….

Just like that old chestnut says: “Buy in May and watch the returns roll in!”

Isn’t that it?

7 FourPillars

GIV – well I guess it would depend on what you bought??

Actually October probably was a good time to buy.


8 moneygardener

If you need a good time / new money weighted return calculator let me know….I have one in Excel.

9 Four Pillars

MG – I should use something like that. I know the irr function works pretty well for that sort of calculation.

Sure, send it on.


10 Mr. Cheap

I may be wrong, but long term I think a 7% REAL return is reasonable (is that what Bernstein suggests?). A 7% nominal return should be quite conservative (you should definitely be able to see that and meet any objectives you make using that number).

Good idea to be conservative so you aren’t eating Alpo in your golden years though…

11 Four Pillars

Mr. C – I’ll check out my 4P book and see what it says.


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