2013 Active Investing Update

January 26th, 2014 by Potato

A quick update to my 2013 active investing summary. Because Michael James put together a neat graph of his investing history, I thought I should make one as well. I don’t have as much history as he does (and I didn’t have a year so positive I needed drawing tools to break the line) so it’s not quite as impressive. My benchmark is a 50/50 mix of the Canadian and S&P500 e-series funds (all my rest-of-world exposure comes in through the passive portfolio). Like him, I had losses a bit worse than the benchmark in 2008, snapped back very strong in 2009, and lost a bit more in 2011. At this point you may notice I’ve had three out-performing years, and three under-performing years. Except for the fact that the magnitude of the out-performing years was (much) higher than the losing ones, this would look very depressing. As it is, it looks much like a coin-toss. It’s quite possible that I have no skill and this was a matter of luck. To defend against that I do passively invest (my RRSP and now Blueberry’s RESP are totally indexed), and it’s the approach I recommend for everyone1.

I also forgot to repeat my brief approach summary: I try to capture some of the benefits of a passive approach by trading as little as possible. In 2013, my equivalent MER from commission costs was 0.15% (this was helped along by the lack of savings while Wayfare was on mat leave for the first half of the year). Because I know that I am the easiest person to fool, savings from 2014 will go to the indexed portfolio (even though, as Wayfare pointed out, this is the equivalent of performance-chasing — I’m ok with that because I don’t have any buy ideas now anyway).

A boring old bar graph showing how my investing returns stacked up against a benchmark

1. Well, practically everyone. Everyone who isn’t willing to take some accounting courses, read balance sheets and all the footnotes until 2 in the morning on a work night, or suffer through volatility and downturns — and call it fun all the while. Oh, and stuff their puny human emotions into a box and jettison it into space. So yeah, everyone.

2 Responses to “2013 Active Investing Update”

  1. Michael James Says:

    Just eye-balling the chart, it looks like your 6-year compound return is ahead of your benchmark. Is that right?

  2. Potato Says:

    Unfortunately they’re not that detailed — I never got around to setting up a benchmark with similar fund inflows. It really only matters in 2008 when I was saving most aggressively (makes my returns look relatively better as they were coming in while the market was already down, and the savings were significant relative to the capital at the time).

    But using the approximate comparison as it is, it’s a compounded 2.7% outperformance. There’s still a little bit of outperformance left if I just look 2011-2013.