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Inside the Market My TFSA portfolio has emerged from the market turmoil in great shape

It’s been a volatile six months for the stock market. The major indexes plunged almost 20 per cent in December but then rallied back for strong start in 2019.

When your money is invested in an all-stock portfolio, times like this can be highly unsettling. So, what was the overall impact on my Aggressive TFSA Portfolio? Actually, we came out of the market turmoil looking pretty good.

This portfolio was launched in my Internet Wealth Builder newsletter in March 2012, so it is now just over seven years old. I stressed at the time, and since, that it is only suitable for readers who are seeking capital gains in a Tax-Free Savings Account. This portfolio provides 100 per cent exposure to domestic and international stocks by using ETFs. That means you should only invest in it if you are willing to accept a higher degree of risk and volatility.

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Here’s a look at how our ETFs have performed since the last update in October. Results are as of the afternoon of April 3.

iShares Core S&P/TSX Capped Composite Index ETF (XIC-T). This ETF tracks the performance of the S&P/TSX Composite Index. We recorded a gain of $1.51 per unit over the latest period plus we received two quarterly distributions totalling just over 33 cents. Total gain for the period was 7.6 per cent.

iShares S&P/TSX Small Cap Index ETF (XCS-T). Small-cap stocks in Canada have not done well in recent years, and this ETF once again lost ground, dropping 35 cents. The distributions of 12.5 cents per unit couldn’t make up for that so, overall, we again suffered a small decline here.

iShares U.S. Small Cap Index ETF (CAD-Hedged) (XSU-T). This one is more or less flat since the last review in October. The unit price is down 20 cents, but we received a semi-annual distribution in December of just over 16 cents.

iShares Core S&P 500 Index ETF (CAD-Hedged) (XSP-T). The units are up $1.21 since the last review and we received a year-end distribution of almost 29 cents.

BMO Nasdaq 100 Equity Hedged to CAD Index ETF (ZQQ-T). This fund provides exposure to the top 100 stocks on the Nasdaq exchange, which is heavily weighted to technology. This ETF was going gangbusters until last week’s sell-off hit the tech sector hard. The units were trading as high as $58.40 on Oct. 1; by Oct. 11 they were down to $52.80. Since then they have bounced back to $56.30 plus we received a year-end distribution of 30.2 cents per unit.

iShares MSCI EAFE Index ETF (CAD-Hedged) (XIN-T). This ETF tracks markets in Europe, Asia, and the Far East. The units are up $1.27 since the last review, and we received a semi-annual distribution of about 28 cents per unit in December.

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iShares MSCI Frontier 100 ETF (FM-A). This ETF tracks major companies in Third World countries from Nigeria to Vietnam. This ETF was badly beaten up in the first half of last year, but it staged a modest recovery in the latest period, gaining $1.63. There was a year-end distribution of 31.7 US cents.

iShares MSCI Emerging Markets ETF (EEM-A). After posting a big loss in the first nine months of 2018, emerging markets staged a strong rally. The result was a gain of $4.65 for this ETF, plus we received a year-end distribution of 58.4 US cents per unit.

We received $6.29 in interest from the cash balance in our EQ Bank high-interest savings account.

Here’s a look at how the portfolio stood as of the afternoon of April 3. The Canadian and U.S. dollars are treated at par, and commissions are not considered. 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.

IWB Aggressive TFSA Portfolio (as of April 3)

Weight %Total sharesAvg. priceBook valueCurrent priceMarket valueRetained incomeGain/loss %
XIC-T18240$20.13$4,831.35$25.84$6,201.60$114.5430.7
XCS-T6.5150$16.23$2,434.45$14.91$2,236.50$115.35-3.4
XSU -T17180$17.96$3,297.80$32.51$5,851.80$91.8680.2
XSP-T20.4220$17.06$3,752.70$32.05$7,051.00$63.0489.6
ZQQ-T 23.7145$21.44$3,208.90$56.30$8,163.50$128.91158.4
XIN-T8.3110$19.98$2,197.95$26.11$2,872.10$135.1236.8
FM-A2.935$35.09$1,228.30$28.93$1,012.55$83.67-10.4
EEM-A3.225$41.57$1,039.25$43.79$1,094.75$102.5715.2
Cash0$2.47$8.76
Total100$21,993.17$34,492.56$835.0660.6
Inception$20,002.3076.6

Comments: Despite all the volatility, the portfolio posted a gain of 4.9 per cent in the latest period, with big contributions from ZQQ (Nasdaq) and EEM (emerging markets) leading the way.

Since inception, the portfolio has gained 76.6 per cent, which works out to a compound annual rate of return of 8.46 per cent.

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Changes: None. We do not have enough retained income to make any meaningful purchases at this time.

We have $843.82 in cash and retained earnings, which we will switch to a Savvy Savings Account at Motive Financial (a division of Canadian Western Bank), which is currently offering 2.8 per cent.

I will review this portfolio again in September.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.

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