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.
|Measurement Period||Beginning Market Value||Deposits & Withdrawals||Interest & Dividends||Change in Portfolio||Ending Market Value||Simple Rate of Return|
|2010 - 2011||$100,000.00||$0.00||$4,607.78*||$4,531.18||$109,138.96||9.139%|
|2011 - 2012||$109,138.96||$0.00||$4,135.35||$1,074.03||$114,348.34||4.77%|
|2012 - 2013||$114,348.34||$0.00||$4,275.60||$1,019.47||$119,643.41||4.63%|
|2013 - 2014||$119,643.41||$0.00||$4,604.20||$2,094.98||$126,342.59||5.60%|
|2014 - 2015||$126,342.59||$0.00||$3,758.61||$1,406.72||$131,477.92||4.06%|
|2015 - 2016||$131,477.92||$0.00||$4,246.92||($946.16)||$134,778.68||2.51%|
|2016 - 2017||$134,778.68||$0.00||$4,994.43||($1,391.36)||$138,381.75||2.67%|
Average Annual Return:
*includes a one-time special dividend from George Weston Ltd.
Summary of the most recent period
The Sample Balanced Portfolio began with an investment of $100,000 in June 2010.
Between July 1st, 2016 and June 30th, 2017, the portfolio increased in value by $3,603.07. The increase in value can be attributed to the receipt of approximately $4,994.43 in interest and dividend income, which was partially offset by a decline of $1,391.36 in the market values for the bonds, preferred and common shares.
In the sixth year, the portfolio generated a 2.67% rate of return and it averaged a 4.77% annual rate of return over the last 7 years.
Note: For reference, between July 1st, 2016 and June 30th, 2017, the S&P/TSX Composite Index had a positive 6.92% 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 positive 8.76% rate of return.
As discussed in the Investment Policy Statement (IPS), the balanced 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 portfolio's ending value of $138,381.75 is in the lower-middle of the Projected Annual Portfolio Values.
Note: The method we use to calculate our portfolio's investment performance is very simple, does 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.