I created this Aggressive TFSA Portfolio in March 2012. It invests exclusively in stock-based ETFs and is designed for readers whose goal is to maximize tax savings in their TFSAs and who are willing to accept a higher degree of risk and volatility. This is not a model to use if you are saving for retirement, a child's future education, or a major purchase to be made within a few years.
This marks the fifth anniversary of the portfolio's launch so we now have a reasonably good idea of what we can expect from this collection of ETFs over a reasonable time frame.
Here's a look at the securities in the portfolio with some comments on how they have fared since our last review in September. Results are as of noon on March 24.
iShares Core S&P/TSX Capped Composite Index ETF (XIC-T). This ETF tracks the performance of the S&P/TSX Composite Index. It has been in an uptrend since the last review in September, gaining $1.06 per unit over that time. We received two distributions totalling 33.171 cents.
iShares S&P/TSX Small Cap Index ETF (XCS-T). Canadian small cap stocks were in a deep slump for a long time but they rebounded strongly in the first half of 2016 and were modestly higher in the latest period. The units are up 16 cents since the September update plus we received quarterly distributions totalling just over 15 cents per unit.
iShares U.S. Small Cap Index ETF (CAD-Hedged) (XSU-T). U.S. small-cap stocks continued to perform well during the latest period. The unit value gained $2.13 and we received a December distribution of about 22 cents. The result was a gain of 8.7 per cent over the period.
iShares Core S&P 500 Index ETF (CAD-Hedged) (XSP-T). This ETF tracks the performance of the S&P 500 Index, hedged back to Canadian dollars. It continues to do well for us, with a $1.90 increase in the unit price in the latest six months. We received a semi-annual distribution in December of 22.78 cents per unit.
BMO Nasdaq 100 Equity Hedged to CAD Index ETF (ZQQ-T). Tech stocks continue to perform well and this ETF reflects that. The fund provides exposure to the top 100 stocks on the Nasdaq exchange. It was up $3.46 per unit in the latest period and we received a year-end distribution of 31 cents. Total return for the six months was almost 10 per cent. This ETF continues to be the No. 1 performer in the portfolio.
iShares MSCI EAFE Index ETF (CAD-Hedged) (XIN-T). This fund invests in large-cap companies from developed countries in Europe, Asia, and Australasia, hedged back to Canadian dollars. It's really a Canadian replica of EFA, which trades in New York and which should be your choice if you don't want the hedging feature. XIN gained $2.06 per share in the latest period. Plus, we received a year-end distribution of 22.15 cents per unit.
iShares MSCI Frontier 100 ETF (FM-N). Frontier Markets continued to rally in the latest period. This ETF, which tracks major companies in Third World countries from Nigeria to Vietnam, gained more ground, adding $2.61 (U.S.). We also received a small year-end distribution of 2.62 cents per unit. Despite the rebound, we are still down overall on this one.
iShares MSCI Emerging Markets ETF (EEM-N). After a long decline, this ETF started to turn back up in January 2016 and continued to rise in the latest period, gaining $1.72 (U.S.). We received a year-end distribution of 39.62 cents per unit. Those results took this fund out of the red and back to the plus side of the column by a small amount.
We received $5.26 in interest from the cash balance in our EQ Bank high-interest savings account.
Here's a look at how the portfolio stood at noon on March 24. The Canadian and U.S. dollars are treated at par and commissions are not taken into account. The percentage in the Gain/Loss column represents the cumulative return since the portfolio was launched or since the security was added. The initial book value was $20,002.30.
Comments: The total value of the portfolio, including retained income, now stands at $29,982.84. That is up 7.7 per cent from our last review six months ago. Since inception five years ago, we have a cumulative return of 49.9 per cent, which works out to an average annual gain of 8.43 per cent. That's a reasonable return, but it is below the target of 10 per cent - 12 per cent that I set when I created this portfolio.
Changes: Every ETF in this portfolio gained ground in the latest six-month period. All except the Frontier Markets fund are now in the black. The weighting of ZQQ has passed 20 per cent, which is a signal to consider some rebalancing. However, since these are ETFs, this is not a case of a single stock dominating a portfolio (the fund replicates the Nasdaq 100) so we'll hold off for now.
We'll use some cash to buy new units, as follows:
XIC – We will buy five units at $24.47 for a cost of $122.35. We now have 230 units and our retained income drops to $36.94.
XCS – We will add five units at $16.65 for an outlay of $83.25. We have $13 left in cash and a new total of 150 units.
XIN – We'll buy five units at $24.48 for a total cost of $122.40. That will require all our retained income plus an additional $8.33 from the cash account, reducing it to $1.70. We now own 110 units.
Remember, don't do these small trades in your personal account unless it is fee-based. Use dividend reinvestment plans where available.
We'll keep our cash reserves of $465.44 in the EQ Bank account, which continues to pay 2 per cent.
Here is the revised portfolio. I'll revisit it in September.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.