Annual investing account statements for 2018 can be such a downer.
The Canadian, U.S. and international stock markets were down, and the bond market delivered only a modest gain. Wrap them all together in a diversified portfolio and you end up with the kind of loss that prompts people to ask if something’s wrong with their investments.
I’ve heard from quite a few of these investors lately, including one who has a sizable conservative portfolio more or less two-thirds invested in bonds or cash and the rest in stocks. The loss for this portfolio last year was 3.9 per cent. “We have just received our year-end 2018 results and, although we realize it was a difficult year, we must confess we are disappointed on two fronts,” this person wrote.
The first problem is the size of the loss for 2018. It does seem a touch high for such a conservative portfolio, but it’s not dramatically out of line if you look at comparable portfolios. The average loss for Canadian balanced mutual funds with a tilt toward bonds over stocks was 2.2 per cent last year, according to the Fundata reports available through Globeinvestor.com.
Longer-term results are more important, so what do they show? This reader reports returns of 5 per cent annually over the past three years, 7.2 per cent annually over the past five years and 3.7 per cent over the previous 10 years. The average Canadian fixed income balanced fund made 1.9 per cent, 2.7 per cent and 4.3 per cent over the past three-, five- and 10-year periods, so he’s not doing badly on the whole.
His second problem with his portfolio goes beyond returns and is, in fact, more serious. “All [our] firm does for us is manage our money – there is no estate planning etc.,” he wrote. “In light of this, we are wondering if we should be considering changes firms.”
The answer is yes, this is grounds for seeing if better advice is available. An average-performing portfolio built by an adviser who does zero financial planning sounds like an empty relationship. Average returns might well be sufficient to get this reader where he needs to be in terms of reaching his financial goals. But without the planning, he’s left to worry about his returns with no context for explaining what they mean.