Portfolio Update – September 2016

An investment portfolio is like a garden: you have to constantly maintain it to watch it grow. Otherwise it becomes overrun with weeds, and ultimately turns into an utter mess. Such is the state of my own portfolio…I stopped monitoring/caring for it on a regular basis in 2015, and this is the first month I have sat down to really review it, and see where it sits. Reviewing the historical performance against some benchmarks, things are dreadful. But, with some tender loving care, I’m going to right the ship and get back on the road to successful returns.

Before I begin, a note on benchmarking. I consider the Canadian Couch Potato, specifically the “Assertive” portfolio, as my benchmark. The reason being, if I had zero time to look at my portfolio, this is the portfolio I would assemble, rebalancing twice annually. In building some comparison returns, I have built a parallel portfolio as follows, based on the Assertive portfolio:

  • Initial portfolio value is $100,000, with a seed period of May 2014.
  • Because the model portfolio uses VXC, which only came into existence in mid-2014, the first few months of the portfolio used 75% VCN and 25% VAB, and starting in July 2014, 50% VCN, 25% VAB, and 25% VXC. Realistically this no bearing on current analysis or future analysis, as July 2014 is more than twelve months back, and thus out of range for TTM calculations.
  • The portfolio is rebalanced every January and July.
  • Dividends are retained until the next rebalancing period.
  • Each period of rebalancing incurs $59.70 in commissions: at $9.95/trade, this is for three sells, and three buys. This is representative of what I would pay at my own discount brokerage. I know that I may not do three outright sells and/or three outright buys (i.e. I may only add to a position), but this simplifies compiling the benchmark.

Moreover, because I am a dividend investor, I track a separate portfolio which projects what I would receive in dividends if my entire portfolio was invested in the Assertive portfolio. E.g. if my portfolio value were $500,000 in a given month, what the dividend income would be from the Couch Potato’s Assertive portfolio if I had the $500,000 invested in the appropriate proportions of VAB, VXC, and VCN, based on dividends for each of those ETFs for that month.

With a discussion on benchmarks out of the way, lets see the portfolio performance for September 2016, and the TTM (trailing twelve months) up to and including September 2016:

In total, I have five portfolios:

  • Margin. My regular trading account. This is a non-registered account where I do the majority of my trading once my RRSP and TFSA are maxed out. I also have some US companies in here for US dividends, which I use to pay for any US purchases.
  • RRSP. My RRSP account, which is the bulk of my portfolio. Locking in the majority of my dividend income in this portfolio is a smart move, since it prevents me from spending it or using dividends from those companies for day to day spending.
  • TFSA. My tax free savings account portfolio, which I typically contribute to once my RRSP is maxed out.
  • Certificated. This portfolio is relatively small, and is where I keep all of my certificated holdings. This portfolio is where I do all of my DRIP investing. All positions in this portfolio are registered directly in my name, and all companies hold fractional shares due to the nature of DRIP investing. Moreover, they are held directly at Computershare or CST Trust Company. Finally, I have regular monthly contributions to these positions via direct debit from my banking account; this is a great feature of DRIPs because I can purchase shares on a regular basis commission free, and take advantage of dollar cost averaging.
  • LIRA. I have a locked in retirement account for when I cashed out my pension at one of my previous employers.

Each portfolio has a varying mix of sectors, and I also track the total fund return which is the total return of all portfolios. This is my main measure of success. Reviewing the above, my total fund on a monthly basis has been near or above the benchmark portfolio, with a dip in the most recent periods. You’ll also notice a big drop in the certificated portfolio in December 2015, mainly driven to a drop in Telus during that period. On a trailing twelve months perspective, total fund has been relatively good, picking up post-March 2016 after I started selling things off to pay for our new house: I had sold a number of laggards during that period, which boosted overall returns on a go-forward basis. The above also includes liquidating a large percentage of my portfolio to buy a new house earlier this year, as well as paying off my student loans in late 2015.

With regards to dividend income, these two charts tell the story:

You’ll notice that the income from the benchmark portfolio is somewhat lumpy; this is because the equity ETFs (VXC, VCN) only pay a dividend quarterly, whereas the fixed income ETF—VAB—pays monthly. Because of this, every quarter my total fund passive income is relatively lower than the benchmark. However, you’ll notice that the trailing twelve month total passive income is consistently relatively higher – this shows that overall, even though on some quarters I am lagging behind my benchmark, on an annualized basis (i.e. TTM) I am still ahead. Ergo, to date my own dividend choices have been better than those of the benchmark. The drop in relative excess dividend income starting in December 2015 was due to the selloffs mentioned above for paying down student loans, and a new house purchase.

Reviewing the historical results, things aren’t as great as I would like them to be, but they aren’t horrible either. A big challenge was that I sat on a large pile of cash and didn’t even do something as simple as investing that cash in a broad market index fund to generate some returns; it sat there as cash, generating literally 0.00% return for 6+ months! But now that I am refocusing, I’m looking to right those previous errors.

Here’s hoping October shapes up to be a little better.

Onward and upwards!


Portfolio Update – September 2014

September was a brutal month for returns, but I did manage to fix the asset allocation a little by going long some CBO.TO in my TFSA. Reviewing the results, using traditional methods my returns are down -2.44%, however if we use the Modified Dietz method, I am actually up 2.00%. This just goes to illustrate how the timing of your trades in a given period can greatly affect your perceived returns (in this case, I gained 4.44% due to the purchase of CBO.TO, all things being equal).

2014-09 Monthly Performance

2014-09 TTM Performance

The benchmark was down as well at -1.25%, and this month has put a drag on my Sharpe ratio, which dropped from .45 to .38.

As I said, I also purchased some CBO.TO (250 shares to be exact), which has improved my weights a little. Last period my fixed income was 5.6% (target range 20.0%-30.0%), and this month it is up to 8.0%. Only a 2.4% bump, but more than I had before.

2014-09 Asset Mix Allocation by Asset Class

These short-term fluctuations in the market don’t worry me too much — I am still making good progress overall, at 19.82% for the last twelve months.


Portfolio Update – August 2014

Once again, we are up over the benchmark, clocking at at 1.65% for the month of August vs. the benchmark’s 1.30%, giving us a sharpe ratio of 0.45.

The biggest drag in this reporting period was High Liner Foods, which has a 5.78% weighting in the portfolio, and which suffered a 14.53% loss due to lower than expected earnings (see this link). The biggest gain was from Brookfield Asset Management at 6.81%, which has a weight of 7.31% in the portfolio. The gain in BAM-A.TO was likely due to improved confidence due to higher net profits in the quarter.

On to the graphs!

2014-08 Monthly Performance

2014-08 TTM Performance

2014-08 Asset Mix Allocation by Asset Class

2014-08 Asset Mix Allocaiton by Geogrpahic Region

No change from last week with respect to weightings, but I am at the point where I can sink some cash into fixed income. The fixed income component should be up by 2.00% by next reporting period, if all things go to plan.


Portfolio Update – July 2014

The year continues to be a good one, and July was no exception. Sharp Ratio was 0.44, which is better than the last reporting period. Month over Month was up 1.82%, beating the benchmark return of 0.43% by over four fold! TTM is still north of 20.00%, although it has dipped isnce last period, coming at 23.09% vs. 23.45% in June.

The biggest losers this period were Front Street Growth Fund, which last 8.36%, and the biggest gain was in Intel, up 12.04%.

On to the graphs!

Monthly Performance 2014-07

TTM Performance 2014-07

Asset Mix Allocation by Asset Class 2014-07

Asset Mix Allocation by Region 2014-07

Observing the above it is clear that my weightings are still an issue. I am not losing sleep over it, and I still haven’t reached my $5,000 minimum before pulling the trigger on a new investment. As I get closer to that target though, I am looking for some fixed income ETFs to round out the portfolio.


Portfolio Update – June 2014

Skipped the May update, but the results are baked into here.

Overall I am still happy with the way that things are going. Sharpe ratio for this period is just south of 0.40, and I am still consistently exceeding my benchmark portfolio. May and June were up 1.49% and 1.37% respectively, vs. the benchmark of 0.76% and 0.23% for the same months. The S&P/TSX (using XIC as a proxy) was down 0.09% and up 3.32% over the same periods.

I am still concerned about my asset allocation, since I am not making any of my targets. I will be re-balancing when I have a minimum of $5M to work with though..

On to the graphs.

201406_Monthly

201406_TTM

201406_Asset Mix Allocation by Asset Class

201406_Asset Mix Allocation by Geographic Region


Portfolio Update April 2014

So..
This is the first month of a real portfolio update since November 2012. I have effectively ignored my portfolio for the past 16 months. That said, how did we fare?

Monthly Performance 2014-04

Here we have the monthly performance for the past 12 months. Reviewing the results, for the past 12 months I have beat my benchmark for 9 out of 12; so 75% of the time. Not bad. More importantly, my Sharpe Ratio has been positive, which means that, on a risk adjusted basis, I am making gains, also important!

How about the trailing twelve months?

TTM Performance 2014-04

You’ll notice that there are no results for May 2013-November 2013; this is because I haven’t entered enough historical pricing information for the portfolio, so I don’t have any results for those periods. For my May 2014 update, I should have a full TTM graph available. However, for months where I have data, I have beat the benchmark handily.

Finally, the asset allocation..

Asset Mix Allocation 2014-04

As suspected, I am heavily weighted in equities, and my fixed income exposure is definitely below the acceptable range: equity is over by 28.5% and fixed income us under by 19.0%. I am making a concerted effort to fix that in the coming months by reallocating cash towards fixed income.

Some notes on all of this..

While I have effectively ignored my portfolio, I did make some calls based on research for my courses (Value Investing saw me purchasing Logsitec (Class B) and Rock-Tenn Paper Corp. Logistec is up 39.3% since I purchased it in the fall of 2013; Rock-Tenn hasn’t been doing so well but I am patient). I’ve also taken some money off the table to pay for my wedding and unwind some debt.

I’ve also revisited my benchmarking. Before I compared myself against five benchmarks: three Couch Potatoes, XIC, and XIU. This was silly, and it was merely a numbers game. The results going forward will be based off of a new benchmark composed of 20% Canadian Equity, 20% US Equity, 20% International Equity, and 40% Canadian Fixed Income. If I were a truly passive investor, this is what I would be investing in. If I come up on new portfolios that may interest me (e.g. Fundamental Indexing) then I’ll switch things up, but I am taking a more realistic approach: what would I invest in now if I was passive? This means that, if I switched later to Fundamental Indexing I would not retroactively compare my returns. This will give me a better snapshot of how my real performance ranks against what I might have done if I was purely an ETF investor.

Finally, I have been giving some thoughts to how to measure performance vis-a-vis making actual trades. I do some funky math right now to generate returns on a monthly basis when taking trades into consideration, but I am going to see if I can rework my workbooks to use a Modified Dietz approach, and then link those together for the TTM. Hopefully I can squeeze that in for the May or June update.


Portfolio Update for November 2012

My discount brokerage issued my November statement today, which means it is time to see how I stacked up against the benchmarks. Holdings for this period are BCE Inc, Calian Techologies, CCL Industries, Davis & Henderson, High Liner Foods, iShares DEX Universe Bond Index, iShares S&P/TSX Capped Composite, and Manulife. The below focuses only on my Canadian margin portfolio; since moving to a new investment model I have yet to go back and evaluate performance for the US margin or TFSA portfolios.

Nov-12 Margin CAD XIC XIU Global Couch Potato Complete Couch Potato Complete Couch Potato
Month 3.48% (1.68%) (1.68%) 0.41% (0.53%) 0.08%
YTD 12.12% 4.61% 5.27% 9.01% 3.59% 5.84%

Margin CAD Monthly Returns 2012-11
Margin CAD YTD Returns 2012-11

Since I dumped Bombardier in October, and picked up some CCL and CTY on leverage, the portfolio has been doing very well. The big winner is still High Liner Foods (HLF.TO) which is up over 85% since I first purchased it a few years back. Overall, I’m pretty happy that I am beating every index I track against (XIC, XIU, and the three Potato portfolios), even taking into account the interest I am paying on margin. Unless something disastrous happens in December, this year is shaping up to be much better than 2011.