≡ Menu

Indexed Family RESP Portfolio Update – 2018 Edition

It has been about a year 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 set up with TD e-Series mutual funds which provide a low-cost way to index the market (some other ways to index your portfolio).  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 two RESP accounts gives us $6,000 annually 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 though, there have been some advancements in ETFs and discount stock brokerages (here is an updated comparison). If I were to set up an RESP account today, it would be tough to choose between this and brokerages that offer no-commission ETFs.  If I were forced to choose, I would likely choose the no-commission ETF route, but I’ll stay the course with TD funds for now.

The original plan was to 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 original 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 set up 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 9 and my youngest 6.  I have started to increase the bond allocation of my oldest child but staying fairly aggressive with the youngest account.

Index 0-10yrs 10-14yrs 14-17yrs 18yrs +
Canadian Equity 30% 25% 20% 10% 0%
US Equity 30% 25% 20% 10% 0%
International Equity 30% 25% 20% 10% 0%
Canadian Bonds 10% 25% 40% 35% 0%
GIC’s 0% 0% 35+% 75%
Money Market Fund 0% 0% 0% 25%

First (oldest child) RESP Portfolio (started 2nd quarter 2008)

$2,500 deposit already completed for 2018

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 353.835 $10.00 $3,538.35 7.070 $3,538.35
TD CDN Index-e** 394.723 $26.77 $10,566.73 21.110 $8,396.40
TD US Index-e** 179.190 $59.22 $10,611.63 21.200 $4,583.80
TD CDN Bond Index-e** 1,301.728 $11.42 $14,865.73 29.700 $15,071.17
TD Int’l Index-e** 739.506 $14.17 $10,478.80 20.930 $7,298.29
Total as of Jan 05, 2018 $50,061.24 $38,888.01

Previous update January 2017 ($2,500 contribution not made yet):

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 53.373 $10.00 $533.73 1.33 $533.73
TD CDN Index-e** 442.749 $25.31 $11,205.98 27.88 $9,367.68
TD US Index-e** 202.867 $51.89 $10,526.77 26.19 $5,102.24
TD CDN Bond Index-e** 627.925 $11.56 $7,258.81 18.06 $7,303.91
TD Int’l Index-e** 861.217 $12.39 $10,670.48 26.55 $8,418.57
Total as of Jan 13, 2017 $40,195.77 $30,726.13

I’m still working on deploying capital here.  In this portfolio, since I’ll be increasing the bond allocation, most of the cash will go to bonds.

Second RESP Portfolio (started 3rd quarter 2011)

$2,500 deposit already completed for 2018

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 404.904 $10.00 $4,049.04 12.570 $4,049.04
TD CDN Index-e** 283.856 $26.77 $7,598.83 23.600 $6,111.69
TD US Index-e** 124.747 $59.22 $7,387.52 22.940 $4,342.96
TD CDN Bond Index-e** 460.956 $11.42 $5,264.12 16.350 $5,370.06
TD Int’l Index-e** 557.703 $14.17 $7,902.65 24.540 $5,668.81
Total as of Jan 05, 2018 $32,202.16 $25,542.56

Previous update January 2017 ($2,500 contribution not made yet):

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 54.220 $10.00 $542.20 12.150 $542.20
TD CDN Index-e** 258.104 $25.31 $6,532.61 27.330 $5,448.46
TD US Index-e** 113.545 $51.89 $5,891.85 24.650 $3,750.77
TD CDN Bond Index-e** 406.512 $11.56 $4,699.28 19.660 $4,741.11
TD Int’l Index-e** 503.342 $12.39 $6,236.41 26.090 $4,976.66
Total as of Jan 13, 2017 $23,902.35 $19,459.20

The investment return for both portfolios was fairly close year over year.  I ran the numbers through Excel’s XIRR function (here’s how to use XIRR to calculate investment returns) for the period of January 1, 2017 to December 31, 2017 and the larger portfolio returned 9.11% and the other returned 9.59%.  I suspect the slightly higher return was due to the lower concentration of bonds through the year.  These returns do not count the free $500 CESG contributed to each account.

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.

The second RESP portfolio was started near mid-2011, which fortunately was during a small market correction.  Since the last update, I managed to bring the % holdings of each of the mutual funds to “near” target amounts by releasing some of the cash that I have a tendency to hoard.  When the new cash gets deposited into this account this year, I will likely move the money into bonds and the US Index to bring the allocations close to 25% each.

So in conclusion, I find that indexing provides a steady, systematic, and low-stress way of investing.  With another 8 years until post-secondary education for my oldest child and 11 years for my youngest, the accounts should have enough to cover most of their undergraduate degrees if they decide to move away from home, and perhaps even pay for a post-graduate degree should they stay home.

-> If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 22 comments… add one }
  • Katie January 23, 2018, 12:01 am

    I’d love to follow your strategy except the td eseries would not support the Canadian learning bond (additional grant for low income in BC). In order to receive that grant it would have to stay in a regular account and the only thing I can really do with it is buy GICs. Iv thought about keeping the two accounts but feels like a PIA to juggle and I suspect it would be confusing when it comes to withdrawing. What’s your take on this and what would you recommend instead? Thank you! :)

    • Robb Engen January 27, 2018, 1:04 am

      Hi Katie, I had the same issue with TD so what I did was just leave the Learning Bond (actually in my case it was the ACES grant – Alberta) and some early contributions on the TD Bank side to house the grant and then started buying e-Series funds with all of my new contributions.

      Now I have about $35k in e-Series Funds (kids are 8 and 5).

      Kind of annoying to have a few grand sitting in a GIC but at least I could keep the grant money.

    • Karen April 6, 2018, 11:19 am

      Good news about the Canada Learning Bond! I began my son’s RESP in a TD account, and wasn’t receiving the learning bond. Once the value of the account got above $25,000 I transferred the account for free to Questrade (they cover transfer fees for balances over 25,000) and began to receive the learning bond as well as being able to purchase ETFs commission-free.

      My son is 8 1/2 and is well on the way to having the funds he needs to attend whatever undergrad program he chooses.

  • Laura January 23, 2018, 10:28 am

    Great article! I use the same index fund strategy for 75% of my TFSA and it has worked well for me over the last 8 years. It is great to see how you have applied it to other accounts

  • Jason January 27, 2018, 10:28 am

    Curious as to why you didn’t get up a family RESP? After my 2nd was born (3 and 4 now) I transferred everything over to a family account.

    • FT FT January 27, 2018, 10:07 pm

      Hey Jason, it is a family RESP, but each child gets a “sub-account”. With differing ages, their asset allocation would be different, so separate portfolios make sense imo.

  • Susan January 27, 2018, 11:27 am

    It’s great that you are starting early. My 17 year old is looking at schools and I was SHOCKED at the cost. (Well I live in Ontario so thanks to our government maybe shocked is not right response). Tuition is about $7000 and if going away in residence add another $7000 for books, living expenses, etc. College not much cheaper than university. I was so surprised I looked into what happened since I went in 1985. Apparently the funding went from 60/40 government/students to 70/30 students/government.

    So we are looking at approximately $14000 per year for 4 years.

    And the cherrry on top is in Ontario they have introduced free tuition for families making under $50K (good idea) in a revenue neutral move by cancelling the Ontario tuition credit (bad for me). I don’t normally rant about the government but this change kicked us. We are in the unfortunate situation of not being poor enough to get free tuition and not being rich enough (or smart enough to save enough) to be able to afford this.

    We are an anti-debt philosophy household mainly due to our stupid decisions in the past (which we are still paying for). But in order to go to university my son will have to get student loans. (Or we move to Quebec where tuition is free.)

    Anyway my message to parents of young children is to stack as much money as you can into a combination of RESPs and TFSAs for the amount over the grant so you don’t have to deal with withdrawal rules for all of it.

    • FT FT January 27, 2018, 10:08 pm

      Thanks for sharing your story Susan!

    • Ian February 6, 2018, 10:51 am

      I’m generally anti-debt, but if you (or rather, your son) is careful about it, student loan debt is one of the better debts to take on. Some of it often comes in the form of non-repayable grants, it’s interest-free while in school, interest rates are relatively low compared to other debt, and the interest is tax-deductible.

      Plus, I think there’s a certain sense of discipline and pride that comes from the responsibility of paying for your own education. I had a lot of classmates who got the “free ride” from parents, and perhaps didn’t value that as much as they should have. For me, I knew every dollar would eventually have to be repaid, so I should make the most of it. 1/2

      • Ian February 6, 2018, 10:53 am

        To be fair, I’d be very happy if someone came and paid off my remaining student loans today. They have certainly slowed by financial progress compared to if I hadn’t needed loans. But at the same time, they set me up for a life I couldn’t have had if I hadn’t been able to go to university because of a lack of family money. 2/2

        • Ian February 6, 2018, 10:54 am

          Most importantly though, your son needs to know that student loans are a commitment. They can really drag you down if you rack up a few years of student loans, but then don’t finish school and get that degree at the end.

          • Ian February 6, 2018, 10:54 am

            Sorry for all those partial posts. The site was blocking the full post because “it’s spammy” and I was trying to figure out why…

  • GYM January 29, 2018, 2:20 am

    This is fantastic, thanks for sharing your RESP portfolios, they are doing really well, the CESG grant is fantastic (I hope the government doesn’t take that away). $50K for your 10-year-old is fantastic and you have many more years to go. We are going the TD e-series route for 50% of the RESP and selecting a few equities for the other half, our time horizon has just started and we have 18 more years to go :)

  • Tam February 13, 2018, 7:11 am

    I found the whole RESP think pretty weird. We saved from cradle to university, and now that they are there, the government in Ontario is for low income families (high asset, retired) paying the full tuition. If you kick in they claw back, and all that savings was pointless. Now it is paying your way, which we also did with high income taxes through our working lives. Anyway, the kids are putting themselves through college, so the savings don’t really do anything for them, until maybe they get to some graduate or specialized schooling that isn’t funded. Though one of them has so many scholarships, good luck with that. I wonder if a tax free savings account approach would have been better, as that money can go to living expenses, though you miss out on the government kick in.

    We also found the program hugely confusing when one starts to look at various options and how the various pots of money and their growth, etc… is affected. It seems simple, it gets complicated fast. Been a while since I thought about it. But there are different pots of money, yours, theirs, and the accumulations on both. There can be pretty significant effects on how you deal with withdrawals. Now that my kids are nearing graduation, they will maybe need the plans for further schooling, and I will have to delve in to see what the details were.

  • Juan Refrito February 16, 2018, 1:50 am

    Big fan of the e-series funds. Though I would humbly recommend you ditch the money market fund and just use an investment savings account. TDB8150. Significantly better return.

    • FT FT February 16, 2018, 2:51 pm

      Didn’t know about TDB8150, I will take a look!

  • Jeremy June 22, 2018, 7:37 am

    One thing that I can’t find in any of your RESP updates is how to transition to the GICs in your plan. Once locked in the TD Mutual Fund RESP plan, the only options are to switch to different mutual funds (none of which are GIC related), or redeem in person at a branch.

    How do you plan to do the shift to GICs during years 14-17?

    • FT FT June 24, 2018, 10:52 am

      That is a good question Jeremy! If GIC options are not readily available with TD, I may need to switch RESP providers in the later years. If rates are still crazy low at that time, I may not even bother with GICs and let them sit in a money market fund. I will need to wait and see. Are you with Td right now? What are your plans?

      • Jeremy June 26, 2018, 1:15 pm

        I’m with TD right now. I still have a year or two before starting to transition to the holding phase but I wanted to plan for it. Changing providers seems like it may be a hassle so I may just move to a money market fund until withdrawals begin then reassess how much to pull out and whether GICs would be worth while at that point.

        • FT FT June 26, 2018, 1:31 pm

          I would probably do the same. Good to have cash locked in and ready for when you need it.

  • Jeremy October 10, 2018, 12:20 pm

    FT – any thoughts on how this outlook for bond funds may affect the RESP performance? https://www.theglobeandmail.com/investing/article-do-you-hold-bond-etfs-watch-those-rising-interest-rates/

    Is it just alarmist, or should I really consider moving to a money market fund sooner?

    • FT FT October 10, 2018, 6:23 pm

      A bond index will have a mix of long/short/corporate bonds and will be impacted by interest rates. The shorter the “duration” of the bond, the less volatile it should be. In other words, short-term bonds should be less impacted by interest rate hikes. Having said that, personally, I would just keep adding savings to your portfolio on a regular basis.

Leave a Comment