Baby R2R’s Portfolio Update – Q4 2017

This is the second update in a new series where I intend to share the progress of Baby R2R’s investment portfolio. I started documenting this in Q3 2017 and intend to provide quarterly updates.

Baby R2R was born in Spring 2016 and a few months later, I setup her education fund to which I contribute on a regular basis. We live in Canada, so we take advantage of the RESP program (Registered Education Savings Plan), an account type where we can save and invest for our child’s benefit for secondary education. In addition to tax advantages, we also receive an education grant, which matches upto 20% of the saved amount (upto a max of $500 per year). How can anyone say no to free money? 🙂

In addition to the education fund, we also decided to start a Nest Egg fund, where we save and invest for Baby R2R and let compounding do its job over the course next couple of decades. The two accounts take different approaches to investing strategy.

The Education Fund

For the Education fund, I have chosen to go with index funds. The details of portfolio construction are shared in this post. While I contribute regularly, I do not invest every last penny in the account. I have decided to invest slightly at a slower rate and dollar cost average over the months.

To get full benefits from the government, I contribute $2,500 per year and will receive $500 in grants. So, the total contribution amount going into the account is (and will be) $3,000 per year.

As it stands at the end of Q4 2017, the total account value is $6,118, of which 50% is invested and the rest in cash.

Portfolio Composition and Returns

This portfolio consists of four ETFs giving exposure to Canadian Equities (20%), All World Ex-Canada Equities (40%), Canadian Fixed Income (20%) and Emerging Market Fixed Income (20%).

For the year 2017, this portfolio has returned 7% + dividends.

The Nest Egg Fund

The Nest Egg Fund is extra savings and contributions that I earmark part of my tax free savings account for Baby R2R. The goal was to save an extra $100/month, although I may have been a bit more generous with the contribution in the last few months 🙂

Portfolio Composition and Returns

This portfolio consists of 2 dividend growth stocks: Bank of Montreal (BMO.TO) and Brookfield Asset Management (BAM.A.TO).

Baby R2R received her second raise in Q4 2017! In Dec 2017, BMO raised its dividend by 3.3% after already raising dividends by 2.27% earlier in May.

For the year 2017, these stocks have returned 16% + dividends (although that is not my real return value, since I only initiated BAM in July 2017)

Summary

Between the two accounts, I am happy with the progress we are making for our daughter’s future. The account values have grown and Baby R2R has started earning dividend income.

Baby R2R’s total portfolio value and dividend income looks like this:

What are your thoughts on these portfolios and the plan going forward? Share your thoughts below.

Full Disclosure: Long all stocks & funds mentioned above. Our full list of holdings is available here.

6 thoughts on “Baby R2R’s Portfolio Update – Q4 2017

  1. nice, Road. Saving for our kids future is a great idea and the compounding will work wonders. I play hockey with a bunch of guys ranging in age. The older guys are always going on how broke they are from their kids schooling. I guess they didn’t save early and take advantage of the free money! My sons 4 and he has $13,100 in his resp fund. We haven’t put anything in this yr. I like your etf fund idea, I got his funds in hydro one, enbridge and CNR. I think in 14 years he will be ok…. haha

    keep it up, your daughter will thank ya!

    • Its too bad that some people dont think about saving for kids education and spend money on other random crap instead. Thats great to hear that you are saving enough and your son’s resp is already up to $13k. I am glad to have started early too with our daughter turning 2 soon and sitting at $6K+. Nice companies to own for your son’s resp.

      Best
      R2R

  2. Great planning R2R. With the 15+ year time horizon, I thought you might have a greater allocation to equities in the education fund. But I understand if you want to be conservative and it is the classic 60/40 split which tends to be a good risk/reward balance. Tom

    • Yeah I have considered increasing the equity portion a bit, but this late in the business cycle, I am not so confident with that move, so went with the classic 60/40 instead.

      cheers
      R2R

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