Hi all,
As a companion post to my existing thread, this new thread will solely focus on my daughter's RESP. As a change, I'll be openly disclosing the full value of the account.
RESP investing
Statistics show many Canadians do not take advantage of an RESP. Of those who do use an RESP, many Canadians are not aware they can invest for themselves, and instead invest in group plans that are not optimal due to higher fees, restrictions on withdrawals, and under performance.
I'm creating this thread to provide encouragement to those who are looking to take control of their child's RESP, by investing in a passive, index-tracking, low-cost, ETF portfolio.
Feel free to post your questions or your own RESP results below.
RESP setup
The RESP will typically receive new deposits, and be rebalanced on a quarterly schedule (January, April, July, October).
I'll be following the ETF model portfolio, as described on Canadian Couch Potato, with some modifications:
RESP deposit & government contribution schedule
For RESPs, I have to be mindful of both of the rules surrounding personal and government contributions.
Personal contributions
Presently, there is a lifetime contribution maximum of $50,000. I'd like to front-load this as much as possible.
As I intend to hit the maximum, my goal is to deposit $4,000 per year from 2015 to 2023, $3,000 in 2014, $2,500 from 2025 to 2028, and $1,000 in 2029.
Government contributions
Like all Canadians, my family qualifies for the Canadian Education Savings Grant, which provides 20% of the contribution each year, up to a maximum of $500 / year, and a lifetime maximum of $7,200.
As I intend to get the maximum amount, if I follow my schedule outlined above, I'll receive $500 every year from 2015 to 2028, and $200 in 2029.
RESP results
The portfolio since inception (April 2015): up 5.20% or $467.35
If I count the Canada Education Savings Grant [CESG] funds as an investment gain, the portfolio is: up 18.35% or $1,467.85
The annualized (money-weighted) investment rate of return is 6.48%
The annual cost of the portfolio (i.e, the combined, embedded ETF management fee) is 0.24%, or $22.38
You can log in to view the attachment below.
Monthly performance:
2015
View attachment 11874
As a companion post to my existing thread, this new thread will solely focus on my daughter's RESP. As a change, I'll be openly disclosing the full value of the account.
RESP investing
Statistics show many Canadians do not take advantage of an RESP. Of those who do use an RESP, many Canadians are not aware they can invest for themselves, and instead invest in group plans that are not optimal due to higher fees, restrictions on withdrawals, and under performance.
I'm creating this thread to provide encouragement to those who are looking to take control of their child's RESP, by investing in a passive, index-tracking, low-cost, ETF portfolio.
Feel free to post your questions or your own RESP results below.
RESP setup
The RESP will typically receive new deposits, and be rebalanced on a quarterly schedule (January, April, July, October).
I'll be following the ETF model portfolio, as described on Canadian Couch Potato, with some modifications:
The ETFs being used in the account are: VCN (Canadian markets), VXC (International markets), and VAB (Canadian bonds)
I've be allocating funds among three asset classes: equity, bonds, and GICs
For the equity portion, I'm allocating 20% to VCN (Canadian), and 80% to VXC (International)
Until the year my daughter turns 4 (2019), I'll be investing 100% of the portfolio in the equity class
Starting in 2019, I'll reduce the equity portion by 1/9 (~11%), and move the funds to bonds: VAB. This process will be complete in 2027.
Starting in the year my daughter turns 12 (2028), I'll be primarily focusing on capital preservation. To do this I'll be reducing the bond allocation by 1/5 (20%), each year and moving it into GICs with a maturity in 2033. I'll be fully out of bonds, and only in GICs, as of 2032.
RESP deposit & government contribution schedule
For RESPs, I have to be mindful of both of the rules surrounding personal and government contributions.
Personal contributions
Presently, there is a lifetime contribution maximum of $50,000. I'd like to front-load this as much as possible.
As I intend to hit the maximum, my goal is to deposit $4,000 per year from 2015 to 2023, $3,000 in 2014, $2,500 from 2025 to 2028, and $1,000 in 2029.
Government contributions
Like all Canadians, my family qualifies for the Canadian Education Savings Grant, which provides 20% of the contribution each year, up to a maximum of $500 / year, and a lifetime maximum of $7,200.
As I intend to get the maximum amount, if I follow my schedule outlined above, I'll receive $500 every year from 2015 to 2028, and $200 in 2029.
RESP results
The portfolio since inception (April 2015): up 5.20% or $467.35
If I count the Canada Education Savings Grant [CESG] funds as an investment gain, the portfolio is: up 18.35% or $1,467.85
The annualized (money-weighted) investment rate of return is 6.48%
The annual cost of the portfolio (i.e, the combined, embedded ETF management fee) is 0.24%, or $22.38
You can log in to view the attachment below.
Monthly performance:
2015
- April 2015: -1.45%
- May 2015: 2.08%
- June 2015: -1.87%
- July 2015: 4.88%
- August 2015: -5.92%
- September 2015: -2.79%
- October 2015: 5.10%
- November 2015: 1.31%
- December 2015: 0.20%
- January 2016: -3.49%
- February 2016: -3.60%
- March 2016: 2.39%
- April 2016: -1.09%
- May 2016: 3.97%
- June 2016: -1.13%
- July 2016: 4.45%
- August 2016: 0.72%
- September 2016: 0.82%
View attachment 11874