Sharing My Investment Returns

I'm writing a shorter post this week as I am on vacation enjoying beautiful springtime coastal British Columbia with my family.

I've received some requests to clarify my investment portfolio returns distinct from my contributions. Since 2014, my net worth has gone nearly straight up from $120,000 to $750,000—a compounded growth of 45 percent annually. This is the product of aggressive saving and aggressive investing.

There are outstanding risk/reward benefits of investing very aggressively when young with a small portfolio and high savings rate. In fact, if I had to do it all over again with my current understanding of risk, I would have invested even more aggressively at the start.

However, over time, as savings shrink in relation to net worth, it is generally wise to shift focus from high absolute returns to greater risk control (the Bernoulli rule). This is true in my own portfolio. Even when I'm contributing $60,000 a year towards my investment accounts, it is difficult to come back from a massive drawdown on $750,000 portfolio without a little nervous sweat.

As stated, our savings rate is quite high. This is thanks to careful spending. My wife and I both work full-time in professional careers. Our salaries are healthy, but far from enormous and actually look quite slim after the many mandatory deductions on our paycheques: income tax, pension contributions, extended health plans, life and disability insurance, CPP, EI, etc.

For the past few years, our income could roughly be broken down as follows: we spend around C$50,000 per year, we pay around C$50,000 in taxes, and we save the rest either in our directly controlled investment accounts or via our workplace pension plans.

I do not include our pensions in the net worth calculation as they are difficult to value with great accuracy. For some perspective on our pensions, we both have DB plans which are split between employee and employer contributions. We contribute over 12 percent of base salary and our employers put in around 13 percent.

Although DB pensions are envied by many and have much ado made about them in the media, based on my calculations our pensions are likely to provide the returns of a short-term bond fund if we wait until they mature.

My Investment Returns

I started investing in 2008, but I pulled nearly all my money out of my account to buy a house in 2011. I didn't get back to investing seriously again until 2014 as we put a lot of money into home renovations for a few years to try "build equity".  We eventually sold our house and made a pitiful profit. I can confidently say we would be much wealthier if we rented from the start, but it was a valuable lesson.

To share my actual investment returns net of contributions and without pension estimates, I completed a chart which shows my portfolio returns since 2014. I will keep this chart updated each month and post it on my About Daren page starting next week.

Adjusted monthly for contributions. Does not include all taxes.

Comments & Questions

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5 Replies to “Sharing My Investment Returns”

  1. Thanks for being transparent and sharing this info Daren.

    With a DB pension could you not say your returns are more like 100% + return on short term bonds as your employer is essentially 1-for-1 matching your contributions up to a certain amount?

    1. Daren (Editor) says:

      That part would be correct in an immediate sense. My view was more on comparing a DB pension to a DC style pension. With a DB pension, I estimate the returns on the combined employee/employer contributions works out to a percent or two over inflation. I know my plan is heavily invested in equities and hard assets (“alternatives”), so the only way this makes sense is if we are subsidizing current or near pensioners who under-contributed massively. Sort of like a Ponzi scheme but hidden in actuarial mathematics.
      On the other hand, if I had a DC pension with the same contributions it should not be difficult to achieve 4+ percent over inflation over the course of a whole career with new contributions throughout. The annuity that could be collected from that would be much higher than the estimated benefit of my DB pension. Even worse is there’s a good chance my DB pension benefits are likely to be cut sometime before I would retire as they are constantly talking about this.

  2. Short, but interesting post Daren. Thanks for sharing….

    When you began your investment journey you did not have the understanding of risk you have now, yet you invested aggressively. I would be scare to invest aggressively without being super aware of the risks. Would you say you had a decent awareness of the risks when you started investing or did you charge ahead and luck was on your side?

    It would be interesting to know how you approached investing at the beginning. What mistakes you made that others (like me) could learn from? How did you evolve as an investor: where you a buy and hold guy, followed a couch potato style, did you ever pursue dividends or value stocks, where you in the trend following crowd in your early days?

    If you can go back in time and deliver a message to you past self, what would you tell him (investing wise; no lotto numbers allowed)?

    An interesting topic for a post (maybe), how did you do during the Financial Crisis?

    1. Daren (Editor) says:

      I would say that I had a elementary understanding of risk in the sense that I knew I could lose a significant amount of money, that markets do not always go up, that I need to risk money to get ahead, and that there are few good methods to protect yourself from large losses. However, I had around $20k saved up and wanted to put it to work. I was okay with losing all of that money if need be since I was young and had good earning potential.
      I started out investing in fall of 2008 after Warren Buffett began pouring money into the market. I didn’t really understand the difference between his sweetheart deals and what I was doing, but I figured he wouldn’t be investing if he believed things were way too expensive. It’s been 10 years, but I believe the first stocks I bought (about 25 percent each) were Potash Corp of Canada, Teck Cominco, Cameco, and a mid-size oil and gas producer that I cannot remember and I believe no longer exists. I sold Teck near the bottom as it dropped pretty bad into early 2009. Then I got a little distracted by other things and held the rest which did quite well as resources came back into favour. I hit the jackpot on Potash when BHP Billiton made a big offer in early 2010. Things got very political, so I sold it on some optimistic news just under the offer price. That worked out really well since the offer never got approval and the stock price fell hard.
      Then I used my cash profits to buy another small oil company called Mart Resources (basically a penny stock) based on a conversation I had with a guy on an airplane! I did some research on it before buying it and it wasn’t the worst company in the world… Anyways, that turned out to work well and I think that stock nearly doubled into 2011.
      I sold everything in early 2011 to buy a house. If I had sold Cameco just a month earlier I would have sold before Fukashima… I managed to scrape together over $60k to buy the house, around $40k was from my investment account. Was it a lot of luck and market timing? Absofriggenlutely. Looking back I had no real strategy, but I thought it was value-style investing at the time.
      After that, I started back intending to have more of a couch potato + buy/hold approach using ETFs (for international exposure) and a few individual stocks like Scotiabank and Imperial Oil. I wanted to stay on the Canadian exchanges at the time.
      In early 2016, I had began a lot of research into risk, FIRE, and the benefits of compounding huge early. I also had a pretty optimistic view of the U.S. economy. This is when I took on leverage and focused on ETFs exclusively. This also paired well with trend-based investing to manage risk on the downside as my account quickly got bigger.
      I was late in the Financial Crisis and thought of it more as a good time to invest at lower prices than anything else. Granted… I didn’t have much money and didn’t experience the losses. I got out of Teck at $6 after a big loss, saw it bottom near $3.50, then turn around and rip up to $60. That was a big lesson in buying into downtrends (catching falling knives).
      Overall, I would say to my older self: Avoid individual stocks, especially when starting investing with a small account. Diversify across regions. Buy into strength (invest with the trend). Use leverage heavily when you’re young with a high savings rate, especially leveraged ETFs. Do not buy a house when you are young.

  3. Thank you very much for your detailed investor-biography, Daren. I would put in the “About Daren” page. New readers (amateur or yet to be DIY investors) stumping into the blog might find the current size of your portfolio and your overall knowledge intimidating and discouraging. I mean, how can I grow my 20k into something like that all the while acquiring so much market knowledge?! Showing your investments’ beginning would allow others to more easily relate.

    Again, thanks for sharing this.

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