Author Topic: Canadian Couch Potato model portfolio is tanking. Why??  (Read 3020 times)

Joseppi

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Canadian Couch Potato model portfolio is tanking. Why??
« on: July 04, 2017, 04:46:25 PM »
Hi everyone,

Just thought someone smart out there may know why my CCP ETF model portfolio (VAB 10%, VCN 30%, VXC 60%) is doing so shite at the moment. Was doing really well, but now is only up 0.35% compared to my TFSA (VFV and VXUS) which is up 13.09% and my RRSP (TD e-series a la CCP) which is up 8.82%.

Obviously, a lot probably depends on when purchases were made and for how much etc., but given that the other 2 accounts are doing well, it seems odd.

Thanks for your input!

Mr. Rich Moose

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #1 on: July 04, 2017, 10:35:29 PM »
Canadian stocks haven't been great and our dollar climbed so some of the foreign stuff got held back in the past two weeks. But that's a real big difference.

Some of the other influence could be timing of your purchases?
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Katiekatie

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #2 on: July 05, 2017, 08:47:43 AM »
Iam a super newbie investor and put 10k into a tangerine balanced growth fund last month and it's down 9637. I have another 40k I want to invest. Should I purchase more since the price is low?

Mr. Rich Moose

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #3 on: July 05, 2017, 09:53:46 AM »
Iam a super newbie investor and put 10k into a tangerine balanced growth fund last month and it's down 9637. I have another 40k I want to invest. Should I purchase more since the price is low?

The whole point of investing via a CCP model is to let the rebalancing do the work while you invest consistently and mindlessly as money comes available. Trying to time a CCP strategy will probably not help you out much.
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max9505672

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #4 on: July 05, 2017, 11:00:37 AM »
I also have a similar portfolio as CCP which is not doing so great in the last few weeks.

Losses are normal and have to be expected.

Not much to do besides sticking to your AA, not selling anything and keeping investing as much as possible. Remember, this is all long term goal.

Katiekatie

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #5 on: July 05, 2017, 11:47:58 AM »
Thanks for the insight, much appreciated.

Prospector

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #6 on: July 05, 2017, 11:54:24 AM »
Also a couch potato here.

Yes things are down at the moment, but you need a long view. here is how my fund (AA of 25% VAB, 25% VCN, 50% VXC) looks over the last 2 years since I began investing. Like you, I came into the game with zero investment knowledge, but I've made enough in year 2 to beat down the year 1 depression. Remember that the dividends are huge factor in this game, and the P/L line doesn't tell the whole story.

Like you, I bought in at a high point. It took a long time to get the markets to catch up. Just be patient, keep contributing, and one day the account will switch from red to black and not go back.

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daverobev

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #7 on: July 05, 2017, 05:13:39 PM »
Canadian base interest is (very probably) going up next week = people selling bonds because they'll drop; also = Canadian dollar going up which means everything else is going down relatively; and oil is in the toilet, which is a large portion of what Canada makes. It's the perfect storm, really - even while most things are ticking along nicely.

I'm... back to March, or April, I think, in terms of Net Worth.

Good news is I came from the UK, and originally started tracking my NW in pounds - and in pounds, it looks fantastic!

Bad news is we're not likely moving to the UK to take advantage of it :P
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human

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #8 on: July 05, 2017, 05:34:13 PM »
VXC and VCN are both down lately I went from 104k and even with adding a couple of grand on top of that with 600 bucks of distributions I'm back down to 99k. Inflation increase coming, currency up all play a role. Just got to go with it I plan on investing every paycheck or so like I normally do otherwise who can tell the actual time to get in. As for those with lump sums I personally wouldn't try to dollar cost average, if it goes down it will go back up. You keep waiting and you may never find the right time for you to invest. When would the right time be? TSX Down 5% over a month and on the solar eclipse when mars aligns with venus?

thriftycanadian

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #9 on: July 05, 2017, 06:17:52 PM »
Very recent strength in Canadian dollar has played a role combined with a less than stellar Canadian Index over the last few months.    Sit tight, this is a long term plan - a large part of the magic is rebalancing and regular dividends over the long term. 

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Heckler

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #10 on: July 05, 2017, 10:23:01 PM »
Look at the five year charts and understand the implications of buy and hold.  Since 2013, VCN has gone from $26 up to $31, with a deep dip in early 2016 due to oil and FtMac fires. Depending on when you buy in and how long you hold is the key.

Also, most performance reports don't include the 2.5% annual dividends and also dont neglect the fact that 90% of other managed funds are also dipping now - plus loss of 1-3% in fees.

Buy low, sell high.

Heckler

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #11 on: July 05, 2017, 10:27:49 PM »
My VCN bought in 2014 is +5.84% with a 2.51% div yield.

My other halfs from 2016 is -0.16% but I still get the 2.51% annual dividend on top of that, so its actially 2.51% higher than shown

Joseppi

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #12 on: July 06, 2017, 09:07:58 AM »
Thanks everyone!! Fears and anguish aside, I don't plan on doing anything, other than to keep investing for the long term. I was just curious as to what factors are at work here.

Thanks again and good luck to everyone!

Joseppi

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #13 on: July 06, 2017, 09:09:06 AM »
I also have a similar portfolio as CCP which is not doing so great in the last few weeks.

Losses are normal and have to be expected.

Not much to do besides sticking to your AA, not selling anything and keeping investing as much as possible. Remember, this is all long term goal.

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Joseppi

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #14 on: July 06, 2017, 09:09:47 AM »
Also a couch potato here.

Yes things are down at the moment, but you need a long view. here is how my fund (AA of 25% VAB, 25% VCN, 50% VXC) looks over the last 2 years since I began investing. Like you, I came into the game with zero investment knowledge, but I've made enough in year 2 to beat down the year 1 depression. Remember that the dividends are huge factor in this game, and the P/L line doesn't tell the whole story.

Like you, I bought in at a high point. It took a long time to get the markets to catch up. Just be patient, keep contributing, and one day the account will switch from red to black and not go back.

Thanks Prospector!

CanuckExpat

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #15 on: July 11, 2017, 10:36:24 PM »
Comparing VFV to VSP (S&P 500 vs S&P 500 hedged to CAD), monthly returns are -3.4% vs +0.57% respectively.
So at least in moderate to large parts, blame Canada ('s dollar rising in value vs USD) ?

Not to say you should or shouldn't be investing in currency hedged funds, that's a different argument all together.
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snacky

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #16 on: July 11, 2017, 11:26:57 PM »
Comparing VFV to VSP (S&P 500 vs S&P 500 hedged to CAD), monthly returns are -3.4% vs +0.57% respectively.
So at least in moderate to large parts, blame Canada ('s dollar rising in value vs USD) ?

Not to say you should or shouldn't be investing in currency hedged funds, that's a different argument all together.

Could someone explain that argument to me? I don't understand currency hedging and Google's explanations are too advanced for my dainty little brain.
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J.Milly

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #17 on: July 12, 2017, 04:41:12 PM »
Hedging simply means to protect yourself against something. Currency hedging means to take currency fluctuation out of your value. So if American company xyz increases 5% then you make 5%. If it was unhedged and for example the US Dollar increases 5% in value as well as the increasing 5% on the stock, your return ends up being higher like 10% (unhedged). This can also work against you.

CanuckExpat

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #18 on: July 12, 2017, 08:24:24 PM »
Could someone explain that argument to me? I don't understand currency hedging and Google's explanations are too advanced for my dainty little brain.

This seems like a test. Someone correct me where I'm wrong.

If you are Canadian and hold a fund priced in USD, your returns will be impacted both by the underlying return of the asset, and fluctuations in the CAD/USD exchange rate:
Fund doubles in price, but USD drops 50%, you make no money (in CAD), even though you should have doubled your money based on the asset return.
Fund stays same price, but CAD drops in value relative to USD. You make money even though there is no change in the underlying asset.

A hedged fund attempts to remove the effect of currency fluctuations. They do "stuff" behind the scenes so that the impact of currency fluctuation are reduced. That "stuff" isn't free, so there are usually higher expenses than the unhedged version of the fund. Hedging also isn't perfect. It doesn't fully remove the impact of currency fluctuation.

The arguments go like this:

Pro currency hedging: You invest in CAD and you are going to spend in CAD. You don't want your returns to be impacted by the CAD/USD exchange rate. Use currency hedging to reduce the currency risk.

Anti currency hedging: Currency fluctuations are neutral in the long run, they can help or hurt you (see examples above). If you currency hedge, you are paying expenses that eat into your overall return. The tracking error isn't worth the purported safety. Also, if you check performance, currency hedging doesn't work that well?

More arguments either way probably. If you could predict in advance what the CAD/USD exchange rate would do, you'd have your answer, but if you could predict that in advance, you could just make a killing on the Forex market using your crystal ball and not need to do anything else..

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snacky

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #19 on: July 12, 2017, 08:31:25 PM »
Thanks, both of you. I appreciate you taking the time to explain.
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drstarter33

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Re: Canadian Couch Potato model portfolio is tanking. Why??
« Reply #20 on: July 13, 2017, 07:55:11 AM »
Canadian base interest is (very probably) going up next week = people selling bonds because they'll drop; also = Canadian dollar going up which means everything else is going down relatively; and oil is in the toilet, which is a large portion of what Canada makes. It's the perfect storm, really - even while most things are ticking along nicely.

I'm... back to March, or April, I think, in terms of Net Worth.

Good news is I came from the UK, and originally started tracking my NW in pounds - and in pounds, it looks fantastic!

Bad news is we're not likely moving to the UK to take advantage of it :P
in the same boat mate... not going back to Blighty, but good to see how much pounds loonie can buy now!