I read several personal finance blogs and have been amusing myself reading all the True Confessions about their past year’s investments’ performance. So without further ado, here’s how our investments did in 2014.
Fixed Income Is a Synonym for Zero Growth
Anyone who’s been following along on my random journey to financial tidiness knows we do not invest to win big or make great gains. We invest trying desperately not to lose too much money.
(This is why I have repeatedly said you should not follow my ideas for investing unless you are prepared to get the same incredibly low returns we get!)
Anyway, back to the numbers.
How did our GICs fare?
As I’ve mentioned before, we have a huge chunk of our savings, both for retirement and for emergencies, in GICs.
On average, we got a return of 2.6% on them in 2014.
But whoa nelly, don’t forget that’s BEFORE inflation.
So based on our personal rate of inflation we: lost money. Yep, we lost 1.7% on our GIC-invested funds in 2014. Ouch.
Frankly, that was worse than I expected. In previous years, our GICs have always earned slightly above our long-term personal rate of inflation. Thanks, NOT, Ontario Hydro, property taxes and water bills.
Of course it could have been much worse. If we’d bought our GICs through a big bank, we probably would have had an average return of about 1.2%.
I attribute our somewhat better performance to the fact that we did NOT buy any market-linked GICs, sometimes called principal protected notes. We also invested in GICs through our brokerage accounts where you can buy from a large number of financial institutions. And we staggered our maturity dates across all 12 months to take avoid having to renew everything in a “bad” month.
Now how can I be happy with a -1.7% rate of return? I’m happy because the amount we have in GICs, combined with CPP and OAS, is still enough to guarantee an acceptable income in retirement for us, if they can keep pace with inflation until we die at age 100. These GICs represent our retirement “safety net” and the money invested in them is not required to do more than provide this insurance policy.
How did our Bonds fare?
We currently don’t own any individual bonds. Instead, we have put a large slice of a DC pension into a PH&N mid-length term-to-maturity bond fund. It does not invest in junk bonds but it does have the ability to get up to some interesting tricks buying and selling bonds rather than just holding them to maturity. For me, this fund seems very risky. Can you tell how risk averse I am when I am scared of a bond fund managed by arguably Canada’s best bond fund managers?
Anyway, according to the most conservative estimate (mine) this fund returned 7.8% last year. (I had a bit of trouble doing the math properly, since I took a large chunk out of it mid-year.) According to the DC pension statement, our personal rate of return last year for this fund was 8.8% after all the different levels of fees and commissions.
Do I expect that again this year? No. I was astonished they managed that last year! Everyone keeps telling me that any second now bonds will crash as interest rates begin to climb. So I have no idea what to expect for 2015.
It does help balance the loss our GICs experienced. In fact, it more than offsets it.
Stay tuned for Part 2 where I check on our ETFs and other Equities.
- How Did Our Investments Perform In 2014? I’ll “Shoyu” Mine! Part Two
- Calculating Our Personal Rate of Inflation for 2014
- RRSP Strategy Part 3: Build a Solid Base to Start
How did your investments fare in 2014? Can you call accidentally adding another few quarters and dimes to the “under the car seat and behind the couch cushions” fund “investing?” Please share your enthusiasm or whining with a comment.