It’s been about a year since my last RESP portfolio update and probably would have been longer if it wasn’t for a reader request for a quick update. 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 $5k contributed gives us $6k 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 long term plan for the RESPs 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%
Portfolio totals as of December 6, 2013
First RESP Portfolio (started 2nd quarter 2008):
|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):
|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. This portfolio is up about 18% since inception (not including annual contributions or Canadian Education Savings Grant). While the % holdings on some of the mutual funds appear to be on track, there is way too much cash. I hope to deploy the cash in the coming year.
The second RESP portfolio was started near mid 2011, which fortunately, was during a small market correction. Since last year, I managed to bring the $ holdings of each of the mutual funds to “near” target amounts. I had a hard time adding to the US index as it’s been making highs all year. Like the first portfolio, there is too much cash and will be re-balancing in the new year. This account has returned 16% since inception (not including annual contributions or Canadian Education Savings Grant).
If you have setup an RESP, who is your provider? What is your investment strategy?