IWB Aggressive TFSA

An investment portfolio to maximize the tax savings potential of TFSAs.

7.8%

By Gordon Pape

It’s a nervous time to be a stock market investor. Equities trended higher over most of the summer but then hit a wall as October began, with the Dow recording triple-digit losses on the first two days of the month before recovering later in the week.

Against that backdrop, let’s take a look at how our all-equity Aggressive TFSA Portfolio is doing.

This portfolio was launched in March 2012, so it is now seven and a half years old. I stressed when I started it, and several times since, that the portfolio is only suitable for readers who want to maximize capital gains in a Tax-Free Savings Account. This is done through 100% exposure to domestic and international stocks by using ETFs. That means you should only invest in this portfolio if you are willing to accept a higher degree of risk and volatility. We are looking for an average annual return in the 8-10% range.

Here’s a look at how our ETFs have performed since the last update in early April. Results are as of mid-day on Oct. 3.

iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC). This ETF tracks the performance of the S&P/TSX Composite Index. The ETF is almost flat since our last review (small gain of $0.10) but we received two quarterly distributions totalling $0.435. Total gain for the period was just over 2%.

 

iShares S&P/TSX Small Cap Index ETF (TSX: XCS). Small cap stocks in Canada continue to struggle. The reason: a large percentage of these issues are in the mining sector, which is going through its worst period in years. So, it will come as no surprise that this ETF once again lost ground, dropping $0.85 per unit. The distributions of $0.275 per unit couldn’t make up for that so we again suffered a small decline here.

 

iShares U.S. Small Cap Index ETF (CAD-Hedged) (TSX: XSU). U.S. small-cap stocks have generally fared much better than their Canadian counterparts and this ETF has done well for us over the years. But it hit a bump in the latest period, dropping $1.97 per unit. We received a semi-annual distribution in June of $0.133.

iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX: XSP). This ETF tracks the performance of the S&P 500. The units are up $0.08 since the last review and we received a mid-year distribution of $0.246.

 BMO Nasdaq 100 Equity Hedged to CAD Index ETF (TSX: ZQQ). This fund provides exposure to the top 100 stocks on the Nasdaq exchange, which is heavily weighted to technology. This ETF did reasonably well over the summer but was hit by the early October market retreat. As a result, we are only up $0.12 since our last review. The fund only makes annual distributions so we received no payments in the latest period.

iShares MSCI EAFE Index ETF (CAD-Hedged) (TSX: XIN). This ETF tracks markets in Europe, Asia, and the Far East. The units are down $0.52 since the last review. We received a semi-annual distribution of $0.374 per unit in June.

iShares MSCI Frontier 100 ETF (NYSE: FM). This ETF holds major companies in Third World countries from Nigeria to Vietnam. This ETF more-or-less held its ground in the latest period. The units were down US$0.87 but we received a semi-annual distribution of US$0.793 that almost offset that.

iShares MSCI Emerging Markets ETF (NYSE: EEM). Emerging Markets have been hard-hit by global trade wars and that his been reflected in the share price of this ETF. It’s down US$3.10 since our last review and the semi-annual distribution of US$0.311 per unit in June came nowhere near compensating.

We received $11.81in interest from the cash balance in our Motive Financial high-interest savings account.

Here’s a look at how the portfolio stood at mid-day on Oct. 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 (a/o Oct. 3/19)

Security	Weight %	Total Shares	Average Price	Book Value	Current Price	Market Value	Retained Income	Gain/ Loss %
XIC	18.4	240	$20.13	$4,831.35	$25.94	$6,225.60	$218.94	+33.4
XCS	6.2	150	$16.23	$2,434.45	$14.06	$2,109.00	$156.60	-11.0
XSU	16.2	180	$17.96	$3,297.80	$30.54	$5,497.20	$115.80	+70.2
XSP	20.8	220	$17.06	$3,752.70	$32.13	$7,068.60	$117.16	+91.5
ZQQ	24.1	145	$21.44	$3,208.90	$56.42	$8,180.90	$128.91	+159.0
XIN	8.3	110	$19.98	$2,197.95	$25.59	$2,814.90	$176.26	+36.1
FM	2.9	35	$35.09	$1,228.30	$28.06	$982.10	$111.43	-11.0
EEM	3.0	25	$41.57	$1,039.25	$40.69	$1,017.25	$110.35	+ 8.5
Cash	0.1			$2.47		$20.57
Total	100.0			$21,993.17		$33,916.12	$1,135.45	+59.4
Inception				$20,002.30				+75.2

 

Comments: We suffered a small setback in the latest period, with an overall loss of $276.05 or 0.8%. Since inception, the portfolio has gained 75.2%, which works out to a compound annual rate of return of 7.77%. That’s slightly below our target range,

Changes: We will use some of our retained earnings to add to our positions in XCS while prices are down. We will buy 10 units at $14.06 for a cost of $140.60. That will give us a total of 160 units and decrease retained income to $16.

Everything else remains the same.

We have $1,015.42 in cash and retained income, which we will keep in our Savvy Savings Account at Motive Financial (a division of Canadian Western Bank), which pays 2.8%.

Here is the revised portfolio. I will review it again in March.

IWB Aggressive TFSA Portfolio (a/o Oct. 3/19)

Security	Weight %	Total Shares	Average Price	Book Value	Current Price	Market Value	Retained Income
XIC	18.3	240	$20.13	$4,831.35	$25.94	$6,225.60	$218.94
XCS	6.6	160	$16.09	$2,575.05	$14.06	$2,249.60	$16.00
XSU	16.1	180	$17.96	$3,297.80	$30.54	$5,497.20	$115.80
XSP	20.8	220	$17.06	$3,752.70	$32.13	$7,068.60	$117.16
ZQQ	24.0	145	$21.44	$3,208.90	$56.42	$8,180.90	$128.91
XIN	8.3	110	$19.98	$2,197.95	$25.59	$2,814.90	$176.26
FM	2.9	35	$35.09	$1,228.30	$28.06	$982.10	$111.43
EEM	3.0	25	$41.57	$1,039.25	$40.69	$1,017.25	$110.35
Cash	0.0			$20.57		$20.57
Total	100.0			$21,993.17		$34,056.72	$994.85
Inception				$20,002.30

 

Previous Updates

iwb21936 | iwb21813 | iwb21735 | iwb21713 | iwb21635 | iwb21612 | iwb21535 | iwb21513 | iwb21414 | iwb21335 | iwb21311