I haven’t always been a DIY investor. Like many Canadians, I started investing in mutual funds through a financial advisor at my bank.
I was getting matching RRSP contributions from my employer, up to 2% of my salary each year, but in order to get the match I had to invest through a specific bank – HSBC.
I went to the local branch and filled out the know-your-client form. Because I was young and had a high tolerance for risk, I was steered toward their HSBC Global Equity Fund. One fund, that’s it.
Since I was in early the accumulation phase, I didn’t pay much attention to the abysmal returns I was getting, or the high MER that I was paying. I just set up automatic contributions to come off my paycheque every two weeks and started pouring money in.
After a few years, I had invested nearly $25,000. But the markets started tanking in 2008, and when I checked my annual statement I saw the value of my investments had dropped below $20,000.
Becoming a DIY Investor
I made a career change the next year, and one of the first things I did was transfer my RRSP portfolio from HSBC to TD Waterhouse. I had researched dividend growth investing and was ready to take control of my investments and become a DIY investor.
The in-kind transfer took a few weeks to set up. Once the transfer was complete, I used the $20,000 to buy eight dividend stocks.
Over the last three years I’ve added $3,900 to my RRSP, and with that, along with the cash accumulating dividends, I’ve added five more stocks to my portfolio and added to existing positions.
Related: Using ETFs Inside Your RRSP
(Since I have a defined benefit pension at my new job, I no longer contribute that much to my RRSP)
I haven’t been very diligent in tracking my returns in the past. I found this rate of return calculator from Justin Bender at PWL Capital, which made it easy to calculate my portfolio returns.
All I did was plug-in the total month-end portfolio value from my TD Waterhouse statements, which are available online, and add in my contributions. I was impressed with the results. My DIY investing portfolio has grown from $20,000 to just over $40,000 in a little more than three years.
- 2009: +35.54%
- 2010: +14.23%
- 2011: +9.82%
- 2012: +10.12% (YTD)
It’s a good idea to regularly track your performance, but unless you’re comparing it to an appropriate benchmark, you won’t really know where you stand.
I looked up the returns from my former HSBC Global Equity Fund to see how it’s done over the past three years. According to Morningstar, this fund returned a total of 9.74% since 2009. But wait, when you factor in the 2.7% annual MER, the fund returned -1.06%.
What about the S&P/TSX 60 Index? Since July 2009, the main Canadian index had a total return of 20.39%, meaning $20,000 would have grown to just over $24,000 in three years.
The iShares dividend ETF (CDZ) had a total return of 57.58% since July 2009. With this fund, my $20,000 would have grown to $31,516 in three years. If you were to factor in the additional $3,900 in contributions, these returns are more in-line with the performance of my individual stock portfolio.
I realize not everyone is cut out for investing on their own, and so many people will look for help from a professional advisor. But it’s important to understand what you’re invested in, and how much it’s costing you, even if you leave the details up to your advisor.
I’m happy with my decision to become a DIY investor. I’m not saying my approach is perfect; I was extremely lucky to switch to dividend investing at the right time.
I doubt my personal rate of return will be this high going forward, but I know I’m better off now than I was with those expensive equity mutual funds.