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RESP Portfolio Update – Feb 2009

A few readers have requested that I do a blog post about the performance of my Registered Education Savings Plan (RESP) portfolio based on the TD e-series low cost mutual funds.  As I’ve written before, I chose the TD RESP solution as it provided a low cost way to index the bambinos education fund.  In addition, it gave me the option to build the RESP in small increments without any extra fees (unlike ETF’s).

As I opened the account June 2008, I started investing shortly after in a diversified portfolio.  As you may know, not long after is when the bottom fell out of the markets.  As most investors who were positioned in equities lost money, our RESP account was no different.

On the bright side, however, it could have been a lot worse.  My tendency to dip my toes by purchasing small amounts over time instead of jumping in feet first worked to my advantage in this case.

What did the diversified portfolio consist of?  The long term plan for the RESP 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%

As I mentioned above, although my plan to is follow the allocation stated in the table, I never actually got to that point as I stopped buying when the markets started their crash.

Below is my actual allocation and portfolio values thus far.  We deposited $2,500 into the account last year with a $500 CESG top up from the government.

Portfolio as of Jan 30, 2009

Investments Units
Held
Price Per
Unit
Market
Value
%
Holdings
Book
Value
TD CDN Money Mkt 41.249 $10.00 $412.49 18.170 $412.49
TD CDN Index-e** 38.346 $13.70 $525.34 23.140 $829.12
TD US Index-e** 34.007 $17.54 $596.48 26.270 $814.27
TD CDN Bond Index-e** 24.093 $10.60 $255.39 11.250 $257.68
TD Int’l Index-e** 64.300 $7.48 $480.96 21.180 $772.83
Total as of Jan 30, 2009 $2,270.66 $3,086.39

Despite the paper loss thus far, I’m not too worried as there is a long time frame before the money will be needed.  As you can see, we still hold 18% of the portfolio in the TD Money Market fund which I plan to deploy soon to take advantage of the lower prices.

That reminds me, it’s about that time for our 2009 RESP contribution.

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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.

{ 15 comments… add one }
  • Traciatim February 11, 2009, 11:56 am

    Wow, this is remarkably close to my plan for my son, at age 10 planning to start the migration to safer assets to be 100% secure when he is 18.

    My daughter however I made the mistake of joining up to a group plan. Our family has had to stop our RESP payments recently due to finances and that has cost us a huge amount in the group plan, but with the TD E-Funds account it was as simple as clicking a few buttons.

    I urge everyone reading to avoid group RESP providers, but I don’t want to hijack the post, so I won’t say anything more on this post about it.

    I really like the TD E-Funds account. It’s simple to set up, it’s easy to manage, and since you have a limited number of cheap funds it’s not like you have to spend hours of research figuring out what to invest in. Simply split up your fund in some combination of around the world in the equity funds and in bonds depending on your feeling of stocks and losing paper value in short terms. Want safe? Just use the bond/money market ones and keep your money safe.

  • FT FrugalTrader February 11, 2009, 12:54 pm

    Traciatim, if you don’t mind me asking, what kind of fees are you looking at to stop contributions to the group plan?

  • Traciatim February 11, 2009, 1:10 pm

    The main one is now that we are behind on the plan and not paying our ‘enrolment fees’ are non refundable unless we catch up. That cost us $2100 (around 25% of our value), unless we can now come up with all the money we have not been contributing for over a year now.

    Looking back since we were young and couldn’t guarantee we could pay the monthly amount for 18 years it probably was not the best option for us, but we thought we were doing what was best for our daughter since neither of us had tuition help from our parents.

    I’m considering just transferring what I can save from the CST plan over to a TD E-Funds account to see what I can do, or possibly come up with some sort of catch up payment plan to see if I can re-coup the enrolment fees, but until my spouse’s business starts making a real amount of money that could be called a salary we can’t do much anyway.

  • Novice February 11, 2009, 4:21 pm

    Traciatim — I just want you to thank you for being honest with your experiences with the group plan. Heritage tried for months after my son was born to get ahold of us but thanks to your candidness I was able to block their calls from getting through. It’s usually easy to be honest with your financial smart moves but not your missteps and I wanted to thank you.

  • Little Ms. Scrooge February 12, 2009, 1:33 pm

    Great and timely post on RESPs.
    Can anyone help me with this? I just opened my kids RESP. I want to invest in ETFs. My older one is 11. (Delayed start due to delayed SIN,cos of immigration). I have been researching on etfs, I seem to come back to ishares because of of its low MERs and decent distribution. Is it safe to put all money into one etf provider with diversification-XIC, XIU, XRB, XSB, XSP. The allocation will be similar to yours FT but you have gone with TD and I am looking at Barclays. Does anyone have an idea?? Also with family plans do I just double purchase all? or go with a different allocation with the younger one’s RESP. Any input is much appreciated. Thank you all

  • FT FrugalTrader February 12, 2009, 1:39 pm

    Ms. Scrooge,

    Providing that you open an RESP account with a discount brokerage that offers RESP accounts, you can purchase any stock on the market, including ETF’s.

    From what I’ve read, there’s not a whole lot of difference between a family plan and two individual plans as ind plans can be transferred in case one child doesn’t attend post secondary education. What I like about ind plans is that the portfolio asset allocation can be individualized for the age.

  • Dividend Growth Investor February 15, 2009, 4:14 am

    The issue of course is that with this portfolio, at least some allocation to stocks should be kept. Tuition costs in US have been rising at several times the inflaiton rate over the past years. Some stock market exposure in 18 yrs could provide the benefit of inflation protection. You could also buy tips if it were allowed in the RESP account.

  • Xander February 16, 2009, 11:18 am

    I recently opened a TD E-Series account for my second son’s RESP.
    I contribute $100 bi-weekly. I was wondering how long it was before the government starts depositing the 20% grant money.
    I’ve only made 2 deposits so far, I figured it would take a couple of months for it to kick in.
    I’d be interested to hear other people’s experiences.
    Thanks.

  • Traciatim February 16, 2009, 11:21 am

    Xander, I believe mine was around 30 days after the deposit, I don’t have my TD card with me right now so I can’t log in and check the history, but I’m pretty sure this was how it went in the beginning.

  • FT FrugalTrader February 16, 2009, 11:21 am

    Xander,

    Last year, it took the government a couple months to deposit the $500 CESG into our RESP account.

    According to my account history, I made a $2500 deposit on May 16, 2008 and received my $500 CESG on July 2, 2008. About 1.5 months.

    FT

  • Xander February 16, 2009, 5:18 pm

    Thanks!

  • Jane February 21, 2009, 5:03 pm

    I was under an impression that gov’t CESG will not deposit to TD E-fund directly because the account does not support CESG?
    I was thinking that I will need to open up another GIC account to hold the CESG. Please let me know! I’m going to open up the account next month.

  • RESP'er February 27, 2009, 5:37 pm

    I’m basically a simpleton when it comes to investing but jumped I encourage people to pursue RESP contributions.

    Where else can you get an automatic 20% return on your investment? The grants over the past few years helped to weather the market downturn for the RESPs I have for my three young ones.

    I put the full amount of the contributions in right off the top this year figuring the markets can’t be much worse (famous last words, I know). This way the gov’t contribution gets in as soon as possible to take advantage of markets that will hopefully be on the slow upward future trend. I’m in the 11 to 15 year horizon’s with my 3 children.

    Best part….i am not going to tell the kids that the RESP accounts exist until they are about to graduate high school..

  • rajarajan November 16, 2009, 3:08 pm

    Hello FT,

    I have opened 2 account RESP account at TD. one is GIC and one is regular saving. When i went TD to open MF account, they said you will not get any additional grant if you are eligible and there is no way to do so?

    So how can get additional CESG grant and have MF account as well with TD?

    Thank You!

  • Charles April 5, 2011, 8:23 pm

    I am considering a Questrade RESP account in which I can buy a balance of Canadian, US, and International ETFs. The downside is that I can only contribute about $25 per week (say $108/month). So, I am forced to buy stocks on a bi-monthly basis rather than a weekly basis (since I could only afford to buy a single share of the average $20 ETF if I try to invest weekly). Is that correct?

    For those of you who buy ETFs for your child’s RESP, how often do you contribute? Perhaps it’s unrealistic to think I can own 6 ETFs while only contributing $108/month. Perhaps a one-time-per-year purchase of 6 different ETFs is the way to go.

    Thoughts?

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