RESP Portfolio Update – Feb 2009
A few readers have requested that I do a blog post about the performance of my Registered Education Savings Plan (RESP) portfolio based on the TD e-series low cost mutual funds. As I’ve written before, I chose the TD RESP solution as it provided a low cost way to index the bambinos education fund. In addition, it gave me the option to build the RESP in small increments without any extra fees (unlike ETF’s).
As I opened the account June 2008, I started investing shortly after in a diversified portfolio. As you may know, not long after is when the bottom fell out of the markets. As most investors who were positioned in equities lost money, our RESP account was no different.
On the bright side, however, it could have been a lot worse. My tendency to dip my toes by purchasing small amounts over time instead of jumping in feet first worked to my advantage in this case.
What did the diversified portfolio consist of? The long term plan for the RESP is to be aggressive for the first 10 years (90% equities 10% bonds) with increasing fixed income as the University tuition nears. I copied the table from my RESP strategy article below.
Index 0-10yrs 10-14yrs 14-17yrs 18yrs + Canadian Equity 30% 20% 10% 0% US Equity 30% 20% 10% 0% International Equity 30% 20% 10% 0% Canadian Bonds 10% 40% 35% 0% GIC’s 0% 0% 35+% 75% Money Market Fund 0% 0% 0% 25%
As I mentioned above, although my plan to is follow the allocation stated in the table, I never actually got to that point as I stopped buying when the markets started their crash.
Below is my actual allocation and portfolio values thus far. We deposited $2,500 into the account last year with a $500 CESG top up from the government.
Portfolio as of Jan 30, 2009
|TD CDN Money Mkt||41.249||$10.00||$412.49||18.170||$412.49|
|TD CDN Index-e**||38.346||$13.70||$525.34||23.140||$829.12|
|TD US Index-e**||34.007||$17.54||$596.48||26.270||$814.27|
|TD CDN Bond Index-e**||24.093||$10.60||$255.39||11.250||$257.68|
|TD Int’l Index-e**||64.300||$7.48||$480.96||21.180||$772.83|
|Total as of Jan 30, 2009||$2,270.66||$3,086.39|
Despite the paper loss thus far, I’m not too worried as there is a long time frame before the money will be needed. As you can see, we still hold 18% of the portfolio in the TD Money Market fund which I plan to deploy soon to take advantage of the lower prices.
That reminds me, it’s about that time for our 2009 RESP contribution.
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I am considering a Questrade RESP account in which I can buy a balance of Canadian, US, and International ETFs. The downside is that I can only contribute about $25 per week (say $108/month). So, I am forced to buy stocks on a bi-monthly basis rather than a weekly basis (since I could only afford to buy a single share of the average $20 ETF if I try to invest weekly). Is that correct?
For those of you who buy ETFs for your child’s RESP, how often do you contribute? Perhaps it’s unrealistic to think I can own 6 ETFs while only contributing $108/month. Perhaps a one-time-per-year purchase of 6 different ETFs is the way to go.
I have opened 2 account RESP account at TD. one is GIC and one is regular saving. When i went TD to open MF account, they said you will not get any additional grant if you are eligible and there is no way to do so?
So how can get additional CESG grant and have MF account as well with TD?
I’m basically a simpleton when it comes to investing but jumped I encourage people to pursue RESP contributions.
Where else can you get an automatic 20% return on your investment? The grants over the past few years helped to weather the market downturn for the RESPs I have for my three young ones.
I put the full amount of the contributions in right off the top this year figuring the markets can’t be much worse (famous last words, I know). This way the gov’t contribution gets in as soon as possible to take advantage of markets that will hopefully be on the slow upward future trend. I’m in the 11 to 15 year horizon’s with my 3 children.
Best part….i am not going to tell the kids that the RESP accounts exist until they are about to graduate high school..
I was under an impression that gov’t CESG will not deposit to TD E-fund directly because the account does not support CESG?
I was thinking that I will need to open up another GIC account to hold the CESG. Please let me know! I’m going to open up the account next month.
Last year, it took the government a couple months to deposit the $500 CESG into our RESP account.
According to my account history, I made a $2500 deposit on May 16, 2008 and received my $500 CESG on July 2, 2008. About 1.5 months.
Xander, I believe mine was around 30 days after the deposit, I don’t have my TD card with me right now so I can’t log in and check the history, but I’m pretty sure this was how it went in the beginning.
I recently opened a TD E-Series account for my second son’s RESP.
I contribute $100 bi-weekly. I was wondering how long it was before the government starts depositing the 20% grant money.
I’ve only made 2 deposits so far, I figured it would take a couple of months for it to kick in.
I’d be interested to hear other people’s experiences.
The issue of course is that with this portfolio, at least some allocation to stocks should be kept. Tuition costs in US have been rising at several times the inflaiton rate over the past years. Some stock market exposure in 18 yrs could provide the benefit of inflation protection. You could also buy tips if it were allowed in the RESP account.
Providing that you open an RESP account with a discount brokerage that offers RESP accounts, you can purchase any stock on the market, including ETF’s.
From what I’ve read, there’s not a whole lot of difference between a family plan and two individual plans as ind plans can be transferred in case one child doesn’t attend post secondary education. What I like about ind plans is that the portfolio asset allocation can be individualized for the age.