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Indexed Family RESP Portfolio Update – 2018 Edition

It has been about a year since my last RESP portfolio update which is probably an appropriate time span since it’s a fairly steady portfolio that is 100% indexed.

The RESP portfolios for our children are set up with TD e-Series mutual funds which provide a low-cost way to index the market (some other ways to index your portfolio).  We contribute $2,500/account/year to get the maximum contribution from the government of $500/account/year.  So basically $5,000 contributed to the two RESP accounts gives us $6,000 annually to invest.

We went with index mutual funds instead of index ETFs because of the freedom of adding small amounts at a time without having to pay a commission for every purchase.  Since opening the accounts though, there have been some advancements in ETFs and discount stock brokerages (here is an updated comparison). If I were to set up an RESP account today, it would be tough to choose between this and brokerages that offer no-commission ETFs.  If I were forced to choose, I would likely choose the no-commission ETF route, but I’ll stay the course with TD funds for now.

The original plan was to be aggressive for the first 10 years (90% equities 10% bonds) for each child with increasing fixed income as the University tuition nears.  I copied the table from my original RESP strategy article below.

I have since adjusted the first 10 years to have close to 75% equities and 25% bonds. I like to keep things simple, and having it set up this way will still provide solid long-term results, while enabling me to make sure I have 25% in each of Canadian equity, US equity, International equity, and Bonds.  As of today, my oldest child is 9 and my youngest 6.  I have started to increase the bond allocation of my oldest child but staying fairly aggressive with the youngest account.

Index 0-10yrs 10-14yrs 14-17yrs 18yrs +
Canadian Equity 30% 25% 20% 10% 0%
US Equity 30% 25% 20% 10% 0%
International Equity 30% 25% 20% 10% 0%
Canadian Bonds 10% 25% 40% 35% 0%
GIC’s 0% 0% 35+% 75%
Money Market Fund 0% 0% 0% 25%

First (oldest child) RESP Portfolio (started 2nd quarter 2008)

$2,500 deposit already completed for 2018

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 353.835 $10.00 $3,538.35 7.070 $3,538.35
TD CDN Index-e** 394.723 $26.77 $10,566.73 21.110 $8,396.40
TD US Index-e** 179.190 $59.22 $10,611.63 21.200 $4,583.80
TD CDN Bond Index-e** 1,301.728 $11.42 $14,865.73 29.700 $15,071.17
TD Int’l Index-e** 739.506 $14.17 $10,478.80 20.930 $7,298.29
Total as of Jan 05, 2018 $50,061.24 $38,888.01

Previous update January 2017 ($2,500 contribution not made yet):

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 53.373 $10.00 $533.73 1.33 $533.73
TD CDN Index-e** 442.749 $25.31 $11,205.98 27.88 $9,367.68
TD US Index-e** 202.867 $51.89 $10,526.77 26.19 $5,102.24
TD CDN Bond Index-e** 627.925 $11.56 $7,258.81 18.06 $7,303.91
TD Int’l Index-e** 861.217 $12.39 $10,670.48 26.55 $8,418.57
Total as of Jan 13, 2017 $40,195.77 $30,726.13

I’m still working on deploying capital here.  In this portfolio, since I’ll be increasing the bond allocation, most of the cash will go to bonds.

Second RESP Portfolio (started 3rd quarter 2011)

$2,500 deposit already completed for 2018

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 404.904 $10.00 $4,049.04 12.570 $4,049.04
TD CDN Index-e** 283.856 $26.77 $7,598.83 23.600 $6,111.69
TD US Index-e** 124.747 $59.22 $7,387.52 22.940 $4,342.96
TD CDN Bond Index-e** 460.956 $11.42 $5,264.12 16.350 $5,370.06
TD Int’l Index-e** 557.703 $14.17 $7,902.65 24.540 $5,668.81
Total as of Jan 05, 2018 $32,202.16 $25,542.56

Previous update January 2017 ($2,500 contribution not made yet):

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 54.220 $10.00 $542.20 12.150 $542.20
TD CDN Index-e** 258.104 $25.31 $6,532.61 27.330 $5,448.46
TD US Index-e** 113.545 $51.89 $5,891.85 24.650 $3,750.77
TD CDN Bond Index-e** 406.512 $11.56 $4,699.28 19.660 $4,741.11
TD Int’l Index-e** 503.342 $12.39 $6,236.41 26.090 $4,976.66
Total as of Jan 13, 2017 $23,902.35 $19,459.20

The investment return for both portfolios was fairly close year over year.  I ran the numbers through Excel’s XIRR function (here’s how to use XIRR to calculate investment returns) for the period of January 1, 2017 to December 31, 2017 and the larger portfolio returned 9.11% and the other returned 9.59%.  I suspect the slightly higher return was due to the lower concentration of bonds through the year.  These returns do not count the free $500 CESG contributed to each account.

We started the first portfolio in early 2008 near the peak of the market so there was a point in early 2009 where the market value of this portfolio was significantly below book value.  It’s comforting to see that re-balancing with new money every year has brought positive results.

The second RESP portfolio was started near mid-2011, which fortunately was during a small market correction.  Since the last update, I managed to bring the % holdings of each of the mutual funds to “near” target amounts by releasing some of the cash that I have a tendency to hoard.  When the new cash gets deposited into this account this year, I will likely move the money into bonds and the US Index to bring the allocations close to 25% each.

So in conclusion, I find that indexing provides a steady, systematic, and low-stress way of investing.  With another 8 years until post-secondary education for my oldest child and 11 years for my youngest, the accounts should have enough to cover most of their undergraduate degrees if they decide to move away from home, and perhaps even pay for a post-graduate degree should they stay home.

The post Indexed Family RESP Portfolio Update – 2018 Edition appeared first on Forex-Envoy.



This post first appeared on ForexEnvoy, please read the originial post: here

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Indexed Family RESP Portfolio Update – 2018 Edition

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