Annual Performance Summary: Balanced Portfolio

Over the past few decades the investment industry has developed a methodology for measuring investment performance that borders on a complete science - requiring the use of complex mathematical formulas and computer programs. The investment industry's standardized measurement platform helps to ensure all investment performance is calculated and reported in a standardized format. This standardized format helps to ensure investors are making an apples to apples and oranges to oranges comparison when viewing published rates of return.

When measuring the performance of our Sample Portfolios we do not make use of this standardized format. Why not? Well, simply, we do not have access to the computer program required and we are really only interested in answering two simple questions:

  • Did we make any money?
  • How much did we make?

To answer these questions, we do not need a complex computer program. All we really need are the summary reports for each sample portfolio and a bit of math. We use a very simple approach to the calculation of each portfolio's performance, answering the following questions:

  • What was the portfolio's beginning value?
  • How much money did we add to the portfolio from our savings?
  • How much money did we withdraw from the portfolio?
  • How much did the portfolio receive in dividend and interest income?
  • How much much did we make or lose from our invested capital (capital gains or capital losses)?
  • What was the portfolio's ending value? - and finally the bottom-line:
  • How much money did we make last year?

The table below provides a brief summary of the portfolio's annual performance and the contribution from each source to the overall performance. The period of measurement is from July 1st to June 30th each year. (The Sample ETF Portfolio's inception date was June 28, 2013)

 

Measurement PeriodBeginning Market ValueDeposits & Withdrawals

Distributions

Received

Change in PortfolioEnding Market ValueSimple Rate of Return
2013 - 2014$25,000.00$5,500.00$427.60$2,352.85$33,280.4511.12%
2014 - 2015$33,280.45$5,500.00  $427.34($285.62) $38,922.17 0.426% 
 2015 - 2016$38,922.17 $5,500.00  $360.66$451.84 $45,234.672.08% 
 Since Inception:    

Average Annual Return: 

4.542% 

The Sample Exchange-Traded Fund(ETF) Portfolio began with an investment of $25,000 in June 2013 and receives an annual contribution of $5,500 every June.

Between July 1st, 2015 and June 30th, 2016, the portfolio increased in value by $812.50. The increase was attributed to the receipt of $360.66 in distributions and an increase of $451.84 in the market value of the investments.

In it's third year, the portfolio earned a 2.08% rate of return and it averaged a 4.542% rate of return over the last 3 years. 

Note: For the same period, the S&P/TSX Composite Index had a negative 3.36% rate of return and the S&P/TSX Composite Total Return Index (which includes all dividends and distributions paid during the period) gave investors a negative 2.27% rate of return.

As discussed in the Investment Policy Statement (IPS), the ETF portfolio's annual performance is assessed against the Projection of Annual Portfolio Values, which serves as the portfolio's 'benchmark' or ruler. According to this measure, the ETF portfolio's ending value of $45,234.67 is slightly below the portfolio's minimum Projected Annual Portfolio Values.

Note: The method we use to calculate our portfolio's investment performance is very simpledoes not include transaction costs and it does not make any adjustments for items that may occur during the period of measurement. Namely;

  • the timing of additional deposits and withdrawals to and from the portfolio
  • the timing of interest and dividend income payments
  • the timing of changes to individual investments
  • income taxes payable

As a result of these missing adjustments, it may not be accurate nor appropriate to compare our calculated performance with the published past performance for other types of investments.

Remember: The sample investment portfolios are intended as a learning aid. They are not to be interpreted as investment advice or recommendations. For detailed information about the Sample Portfolios, their transaction histories, income payment schedules and the calculation of each portfolio's investment performance, visit the Sample Portfolios sections of the website.

Past performance is not indicative of future performance

Indicated rates of return are the historical annual compounded total returns based upon the investment strategy stated in each Sample Investment Portfolio's Investment Policy Statement (IPS) and the individual transactions as chronologically listed in each Sample Investment Portfolio's Transaction Summary. The returns are based on the historical annual compounded total returns for each Sample Investment Portfolio including changes in market values and re-investment of all interest and dividend payments received.

 

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