It’s been a little over two years since my last RESP portfolio update which is probably an appropriate time span since it’s a fairly steady portfolio that is 100% indexed. The RESP portfolios for our children are setup with TD e-Series mutual funds which provide a low cost way to index the market. We contribute $2,500/account/year to get the maximum contribution from the government of $500/account/year. So basically $5,000 contributed to the RESP accounts give us $6,000 to invest.
We went with index mutual funds instead of index ETFs because of the freedom of adding small amounts at a time without having to pay a commission for every purchase. Since opening the accounts, there have been some advancements in ETFs and discount stock brokerages (here is an updated comparison). If I were to setup an RESP account today, it would be a tough to choose between this and no-commission ETFs.
The original plan was be aggressive for the first 10 years (90% equities 10% bonds) for each child with increasing fixed income as the University tuition nears. I copied the table from my RESP strategy article below. I have since adjusted the first 10 years to have close to 75% equities and 25% bonds. I like to keep things simple, and having it setup this way will still provide solid long term results, while enabling me to make sure I have 25% in each of Canadian equity, US equity, International equity, and Bonds. As of today, my oldest child is 7 and my youngest 4, so there are a number of years remaining before I start increasing bond allocation even further.
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%
Portfolio totals as of February 19, 2016
First (oldest child) RESP Portfolio (started 2nd quarter 2008):
|Price Per |
|TD CDN Money Mkt||103.040||$10.00||$1,030.40||2.910||$1,030.40|
|TD CDN Index-e**||432.768||$20.90||$9,044.85||25.580||$9,119.55|
|TD US Index-e**||199.781||$46.01||$9,191.92||26.000||$4,940.76|
|TD CDN Bond Index-e**||571.675||$11.79||$6,740.05||19.060||$6,648.68|
|TD Int’l Index-e**||795.913||$11.75||$9,351.98||26.450||$7,673.85|
|Total as of Feb 19, 2016||$35,359.20||$29,413.24|
Last Update Dec 2013
TD CDN Money Mkt 400.53 $10.00 $4,005.30 17.47 $4,005.30 TD CDN Index-e** 228.59 $21.91 $5,008.45 21.85 $4,638.48 TD US Index-e** 151.737 $33.84 $5,134.78 22.40 $3,132.94 TD CDN Bond Index-e** 211.48 $11.12 $2,351.61 10.26 $2,412.36 TD Int’l Index-e** 589.70 $10.95 $6,424.33 28.02 $5,237.24 Total as of Dec 6, 2013 $22,924.47 $19,426.32
Second RESP Portfolio (started 3rd quarter 2011):
|Price Per |
|TD CDN Money Mkt||253.911||$10.00||$2,539.11||12.150||$2,539.11|
|TD CDN Index-e**||228.430||$20.90||$4,774.19||22.840||$4,803.81|
|TD US Index-e**||111.818||$46.01||$5,144.75||24.610||$3,660.39|
|TD CDN Bond Index-e**||312.743||$11.79||$3,687.24||17.640||$3,644.66|
|TD Int’l Index-e**||405.127||$11.75||$4,760.24||22.770||$3,830.59|
|Total as of Feb 19, 2016||$20,905.53||$18,478.56|
Last Update Dec 2013
Investments Units Held Price Per Unit Market Value % Holdings Book Value TD CDN Money Mkt 251.84 $10.00 $2,518.41 23.50 $2,518.41 TD CDN Index-e** 129.93 $21.91 $2,846.85 26.57 $2,552.91 TD US Index-e** 46.66 $33.84 $1,578.94 14.73 $1,024.91 TD CDN Bond Index-e** 88.90 $11.12 $988.60 9.23 $1,027.24 TD Int’l Index-e** 254.18 $10.95 $2,783.28 25.97 $2,100.43 Total as of Dec 6, 2013 $10,716.08 $9,223.90
We started the first portfolio in early 2008 near the peak of the market so there was a point in early 2009 where the market value of this portfolio was significantly below book value. It’s comforting to see that re-balancing with new money every year has brought positive results. I have a bad habit of keeping a high percentage of cash, but I’ve done ok with this account. But to be perfectly honest, I only recently deployed significant portion of the cash since we are undergoing a bit of a market correction.
The second RESP portfolio was started near mid 2011, which fortunately, was during a small market correction. Since last update, I managed to bring the % holdings of each of the mutual funds to “near” target amounts. There is still too much cash but I will be re-balancing again soon, likely into Canadian, International, and Bond indices.
So in conclusion, I find that indexing provides a steady, systematic, and low stress way of investing. With another 9 years until post secondary education for my oldest child, and 12 years for my youngest, the accounts should have enough to cover most of their undergraduate degrees if they decide move away from home, and perhaps even pay for a post-graduate degree should they stay home.
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