* Source: article in the Globe & Mail .

NB-For the returns of the various markets for the past 10 years, and for more information on the major indexes, see Investment Returns and Indexes on our site. Before discussing the figures for 2009, we want to draw the attention of our readers to a free and very useful Canadian source where you can find centralized financial data for 2009 and also historical data since 1982: it is the site of Libra Investment Management (see on their website under Links-Research, or a PDF version doc.1193 which is not up to date). Libra describes itself as a fee-only adviser who draws its compensation solely from its clients, an approach favored by our site; see the section Independent Adviser on our site. Libra publishes data for all major markets of interest to retail investors; in addition, their data provides total returns (all-in) with the total increases (or decreases) in prices added to returns in the form of dividends, interest etc.. The data are published both in nominal dollars (i.e. before inflation) and  in real dollars (i.e. after the impact of inflation).

Our model portfolio
 
Given the above results of the various markets, what was a realistic performance in 2009 for a Canadian investor?

First, our site does not believe that the average investor can regularly and in the long-term, beat the market; for more, see the sections Our Philosophy and Beat the Market? on our site. Under this approach, for investments in stocks, exchange traded funds or index mutual funds are ideal; see on our site Index Funds (ETF’s and index mutual funds ) . With these products, you will realize long-term returns approximating the returns they track (less management fees, which are typically modest for these products). For investments in debt securities, to minimize costs and portfolio volatility, we recommend avoiding if possible bond funds and to invest in individual debt securities using the bond ladder method; we consider provincial bonds as the ideal product for this approach. See Building a ladder on our site. .

  But what percentage of your portfolio should be invested in the various markets? This issue is by far the most important factor in determining the performance of your portfolio; we discuss it in detail in the following sections of our site; Asset Allocation and Geographic diversification . For the purpose of our annual reviews we assume that our hypothetical portfolio is composed of the following:

• The portfolio is divided 50-50 between stocks and bonds (a division which we recognize to be conservative)
• bonds are limited to the Canadian market (non-Canadian readers: beware); 
• the equity portion is invested 25% in Canada (which is a heavy weighting given the small size of the Canadian equity market in global terms); 
• the balance of the equity portion is invested equally between the U.S. market and other foreign markets, which roughly corresponds to their respective weights in global markets; and
• investments in those foreign non-USA markets are divided equally between developed and emerging countries. 
• NB: It goes without saying that such a portfolio will probably not be appropriate for you as an investor, but it nevertheless gives you a starting point when analyzing your own portfolio. For those wishing to follow the calculations see our worksheet doc.1482.
  
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