Family Finance

Understanding your returns in 2010

In 2010, Canadians were generally experiencing positive returns on their investments, as shown in the table of index benchmarks below. The global equity market was up 6.5%, Canada was up 17.6% and the US was up 9.1%. The bond index was 6.7% higher for the period. Readers should note that indexes are not a reflection of their own portfolios. An index may have 500 to 1,000 or more securities, while your fund's portfolio manager might select between 25 and 100. As well, index returns do not take any fees into account. Here are a few of the factors that affected returns over the course of 2010 as well as a few thoughts for 2011.

Risks and responses

Many governments were continuing to balance the need to stimulate their economies with the need to control debt. In Europe, this reached a crisis point in the spring, when European government debt was downgraded over concerns about the ability of some European Union members (e.g. Greece) to repay their debts. On May 9, Europe's Finance Ministers announced a financial stability package of close to $1 trillion, aimed at helping the weaker economies of Europe.

During the month of May, as a result of concerns over euro zone difficulties, stock market volatility rose. In the US, the Federal Reserve signaled in August that it was considering a second round of monetary stimulus, in order to strengthen the economic recovery. In early November, the Fed announced details: the purchase of $600 billion in long term Treasuries over the following eight months, and reinvest $250 to $300 billion in Treasuries with proceeds from earlier investments. From the end of August to December, equity markets rallied, making up for the difficulties of the spring.

Moderate economic recovery

The US economy grew at a steady 2.0% rate in the third quarter of 2010, and various economic indicators were positive. Consumer confidence rebounded in November to a five-month high, and consumer spending grew by 2.6%. In Canada, the growth rate of the third quarter was expected to be lower, but other economic measures, including employment, favoured Canada.

Some thoughts on 2011

The question for most Canadians: how do you balance the potential for gains with the need to control volatility? One strategy advisors commonly promote is called a PAC, short for pre-authorized chequing. Every month a set dollar amount is transferred from your bank account into your RRSP, TFSA or other investment account. If you don't invest this way, call your advisor. These regular amounts, invested in a consistent mix of funds can make saving easier and help you strike the balance you need.

Calendar year returns, 2007 - 2010
Index	2007	2008	2009	2010
S&P/TSX Composite Total Return Index	9.8	-33.0	35.1	17.6
MSCI World Total Return Index Cdn	-6.7	-26.9	12.9	6.5
S&P 500 Total Return Index Cdn	-10.1	-22.9	9.2	9.1
MSCI Europe Total Return Index Cdn	-2.5	-34.0	18.1	-0.9
MSCI Emerging Markets Total Return Index Cdn	19.1	-42.7	54.5	13.0
BLENDED Index Precious Metals¹	-1.4	-1.6	12.1	28.4
DEX Universe Bond Total Return Index	3.7	6.4	5.4	6.7
5-year Average GIC Index²	3.4	3.1	2.0	1.8
¹ 70% Philadelphia Stock Exchange Gold & Silver Index + 30% S&P TSX Global Gold Index ²Source: Globe HySales, to Nov. 30, 2010.

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Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Please read the prospectus carefully before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.