Thirteen Years an Index Investor

Posted on July 25, 2026 Updated on July 29, 2026 No comments yet

There is an urban legend that a brokerage once found that its best-performing accounts belonged to clients who were dead so could not meddle.¹ Financial planners often rely on the theoretical performance of different strategies because actual investors keep putting in money, changing strategies, and taking out money. Skeptics often warn that in practice there are various costs and delays which make the same strategy work differently in real life. Sometimes you take out money to fix your roof just before the market crashes, or put in your whole tax refund just before it booms, or the country with the big investment returns also has big taxes on foreign investors. It occurs to me that I have an account which has followed the same strategy with no new money or withdrawals since 2014.

(This is another post outside the main topic of this blog! If you just want to read about books and swords, my article on ancient spears just appeared with Marine Corps University Press and is open-access!)

On 11 July 2013, I created a Retirement Savings Plan and filled it with $9,468 from my brief career as a programmer. Sometime not long after that I contributed another $1,471 for a total of $10,939 (all sums in this post are rounded to the nearest dollar and in CAD). That was my only contribution after creating the account because graduate students and freelance editors don’t make enough money for RSP contributions and since returning to Canada I work with another financial institution. The purpose of the new account was to switch to index investing after having my retirement fund in a mutual fund that cost about 1.5% a year.

I picked the venerable TD e-series mutual funds as my vehicle. They were launched in 1999 and 2000 as an experiment in online banking. They are only available through self-directed accounts with an online brokerage. Unlike most Canadian mutual funds these have very reasonable fees of around 0.3% a year, and they could be purchased for free and set to automatically reinvest their dividends (a DRIP). They offer funds for Canadian equities, US equities, EAFE equities (a group of 21 countries in Europe and the Pacific Rim plus Israel), and Canadian bonds. Each of those funds contains hundreds of stocks or bonds, allocated based on simple rules like “if a stock makes up 1% of the Canadian stock market, invest 1% of funds in it.” The e-series does not have specialized funds for instruments like real estate investment trusts, and does not have a fund for Emerging Markets (a euphemism for countries where investors are not considered as safe as investors in Paris or Sydney, including some quite wealthy places like South Korea and Brazil). In practice investing in these countries is difficult and expensive, and Canadian stocks often behave similarly to emerging market stocks because Canada produces so many raw materials. While there is a lot of talk about ideal portfolio construction, most workers will be better served by figuring out how to save and invest more.

I rebalanced roughly once a year whenever anything was 10% over its target. For example, if at least 33% of the portfolio was Canadian stocks, I sold them down to 30% and bought something that was below its target percentage. There are two schools of thought on rebalancing. In theory, different types of assets move in different rhythms (are imperfectly correlated) so rebalancing lets you buy low and sell high. Governments often lower interest rates in a stock-market crisis, so people are willing to pay more for existing bonds that pay the old higher rates, and the rise in your bonds offsets the fall in your stocks. However, correlations change, and rebalancing also tends to sell things which tend to have higher yields and buy things which tend to have lower yields. In practice, rebalancing also lets you manage risk. Over a ten-year period stocks usually grow much faster than the other parts of a portfolio, but they can easily lose half their value from one year to the next, so if you don’t sell some of them and buy more stable assets, your portfolio will get riskier and riskier as you have more to lose. Government bonds occasionally lose money if inflation rises, but their values do not swing as wildly unless a country goes bankrupt.

I picked the classic balanced asset allocation of 60% stocks and 40% bonds. This seems to have become popular during the Cold War, as a successor to a naive portfolio of equal parts stocks and bonds. Back then investors relied on feelings and a few decades of returns in the United States. These days we have 125-year serieses of investment returns for many countries and can see that this has usually been a good balance between risk and return. I divided my money four ways:

30% Canadian stocks (Fund Code: TDB900, tracks an all-cap index)
10% US stocks (Fund Code: TDB902, tracks a large-cap index)
20% EAFE stocks (Fund Code: TDB911, tracks a mid- and large-cap index)
40% Canadian bonds (Fund Code: TDB909, owns both government and corporate bonds)

These days it is fashionable to invest much heavier in stocks than that, because from 2008 to 2022 interest rates were very low, and because stocks are booming in 2025 and 2026. People always wish they had put more money in whatever is up today, and always forget how badly stocks can do after a decade of rising returns. When I created the account I was about to move to Austria with no immediate source of income, and my income has been low and wobbly since. I also had not yet been invested through a stock-market crisis, and a common error is betting heavily on stocks, then being scared when they inevitably crash and selling them before they recover. Did my caution mean I did not make much money in the stock-market boom from 2013 to 2026 (with one serious crash in 2022 and a dip in 2020)? For much of the time I held this fund, new Government of Canada bonds were paying around 1% interest, so 40% of the account was earning less than inflation.

Performance

The value of the account on 30 June 2026 was $29,239. That is about 2.67 times the money I put in, or 7.86% annual compound interest (my brokerage helpfully calculates the time-weighted rate of return). The Bank of Canada estimates 37.89% inflation from 2013 to July 2026, or 2.5% annual inflation. That 5.3% annual real return (return after inflation) is above-average even for investors in the USA. The Norwegian Sovereign Wealth Fund has been compounding at 6.6% nominal growth a year since 1998, and the Canada Pension Plan has been compounding at 8.8% a year since 2016.

The biggest decline was from February to June 2022 when I lost a quarter of my gains. Anyone who owns stocks can expect them to lose half their value for years every decade or two. None of those bad times has happened since 2013 so there is a good chance that another will happen before I turn 50.

It is Not 2013 Any More

Since 2019 the e-series mutual funds have started to transition into wrappers for Exchange-Traded Funds, although several of them still hold some individual securities as well as the ETF. I suspect that this is to avoid triggering taxable events by selling assets, or let people close to retirement finish their careers managing the e-series. Dan Bortolotti has details. It has also become possible to buy many ETFs without paying a $10 to $30 fee. This has caused some investors to move away from the e-series. Even though the mutual-fund structure has many advantages in theory, it has become associated with high costs and active management, while young early adopters moved to the ETF structure. This created a cascade, where ETFs became the default replacement for an expensive actively-managed portfolio, and institutions competing for that market picked the ETF structure not the mutual fund structure. These funds are slightly more expensive than comparable ETFs at about 0.33% a year versus 0.17%. However, it is foolish to muzzle the mouth of the ox that tramples out your grain. Larry Bates’ handy T-Rex score suggests that I paid TD about $1,000 for holding hundreds of investments in 23 countries and 10 provinces for thirteen years, which is about as much money as I lost when I missed a flight to a conference in 2018.² The cheaper funds would have cost $500 over the same period.

It has also become fashionable to invest much more heavily in the USA than I do. Canadians have the problem that our stock market is not very diverse and prone to booms and busts in commodity prices. About 70% of the TSX is in financial services, energy (often an euphemism for oil and gas), or raw materials. International investments face additional taxes and fees and are affected by changing exchange rates, but someone who just invests in Canada may lose their job and watch their investments crash at the same time. After testing historical returns and finding that having about 25% of your stocks in Canada minimized volatility, someone at Vanguard Canada got the idea that the remaining stocks should be allocated proportionately to the size of various national stock markets.³ Vanguard is an American company and foreigners who follow their theory will put about half their stocks in the US. Since 2018 the one-fund solutions which package Canadian, US, and international stocks and bonds follow Vanguard’s theory.⁴ In my research and my correspondence with financiers, I have never found an argument for this beyond “cap-weighting is the only portfolio all investors can hold simultaneously; deviating from it requires finding someone to take the other side.”⁵ 2013 was the year of the Snowden revelations and my opinion of the US government and US megacorps has not improved since. As I noted in another blog post, investing heavily in one country also exposes investors to a lot of risk if any one country has a period of bad government, a civil war, goes Communist, freezes foreigners’ assets, is sanctioned, or so on. I would have a few thousand dollars more in the account today if I had invested in equal amounts of Canadian, US, and EAFE stocks which was a common suggestion back then. We will see how it looks in two years.

Some people say that couch potato investors are rare (although they often define the term more strictly than I do).⁶ I don’t know because I have never met anyone interested in investing or finance in person except my parents. Money has been flooding into index funds over the past twenty years, but much of that money is pensions and endowments. The evidence for this strategy has been piling up since the 1970s like a siege ramp against the pallisade which once ran along Wall Street. Since 2018 the asset-allocation ETFs which follow this strategy have been so popular that five major financial institutions now offer them (Vanguard Canada, iShares / BlackRock, BMO, CIBC, and TD), but Morningstar Canada believes that 81% of money in Canadian funds is still under active management.

There are many ways I could have squeezed slightly more money out of this portfolio. If this were a personal finance blog I would talk about some of them. However, I could manage this portfolio in about an hour a year, and most of the solutions would have taken more time or left some money uninvested. Money sitting in your account as cash drags down your rate of return (since discount brokers are not allowed to practice fractional reserve banking, one of the ways they make money is putting your deposits in a money-market fund or high-interest eSavings account and collecting the interest themselves, much like a supermarket that signs net/90 deals with suppliers, and holds the money it owes them in the money market for 89 days to earn interest before paying the supplier). One of the dirty truths of personal finance is that most people’s most valuable asset is their ability to earn money from labour, so spending time fiddling with your portfolio has to be weighed against spending the same time attending a new event, learning a new skill, or applying for a new job. Finding a new customer for your small business or getting a promotion at work will generally have much higher RoI than squeezing an extra 0.5% a year from your investments, especially if you take some of your new income and put it in index funds and GICs.

If you pick some reasonable asset allocation, find an inexpensive way to hold it, contribute regularly, and follow that strategy for a decade, index investing is very likely to bring a positive return after inflation. After 20 or 30 years it is even more likely. Anyone who can earn enough to save in a country with stable currency and access to international banks can build up some capital. A portfolio of 60% stocks and 40% bonds in e-series mutual funds that you actually contribute to every month and keep invested for decades is a perfectly fine choice.

Thirteen Years an Index Investor

Performance

It is Not 2013 Any More

Further Reading

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