Here are the 2013 performance figures for my Model Portfolios. Last year was one of stark contrasts: huge returns in stocks combined with dismal bond performance. But for anyone who had a balanced index portfolio, the returns would likely have been in the double digits.

As it turns out, the Global Couch Potato and the Über-Tuber performed almost identically in 2013, which can only be attributed to coincidence, since their asset mix is very different. The Complete Couch Potato, on the other hand, dramatically underperformed. That’s easy to explain: the Complete includes three asset classes absent in the Global Couch Potato—real-return bonds, real estate and emerging markets—and they were all duds in 2013.

There were a few other remarkable events in the markets in 2013:

The long-predicted rise in interest rates finally came in the spring, leading to the first negative year for the DEX Universe Bond Index since 1999. It’s easy to say this wasn’t a surprise, but let’s remember commentators have been forecasting rising rates since early 2010 and were wrong for three-and-a-half years.

Real-return bonds had their second-worst year since they were created by the Government of Canada 22 years ago. Only 1994 (–13.7%) was worse, and not by much. Rising rates on long-term bonds and lower-than-expected inflation was a double whammy that dragged their prices down.

The extraordinary returns in US stocks (over 33%) coincided with a strengthening US dollar, which gained almost 7% against the loonie. The result was a once-in-a-generation return of almost 43% in the broad US market for Canadians. I have data for the Wilshire 5000 Index going back to 1975, and there has never been a year with higher returns when measured in Canadian dollars.

Global Couch Potato (ETF Option) % Return BMO S&P/TSX Capped Composite (ZCN) 20% 12.8% iShares MSCI World (XWD) 40% 33.9% iShares DEX Universe Bond (XBB) 40% -1.5% 15.5% Global Couch Potato (TD e-Series) TD Canadian Index – e (TDB900) 20% 12.5% TD US Index – e (TDB902) 20% 40.3% TD International Index – e (TDB911) 20% 29.6% TD Canadian Bond Index – e (TDB909) 40% -1.6% 15.9% Global Couch Potato (Mutual Funds)

RBC Canadian Index (RBF556) 20% 12.2% TD US Index – I (TDB661) 20% 40.0% Altamira International Index (NBC839) 20% 28.1% TD Canadian Bond Index – I (TDB966) 40% -2.0% 15.3% Complete Couch Potato BMO S&P/TSX Capped Composite (ZCN) 20% 12.8% Vanguard Total Stock Market (VTI) 15% 42.7% Vanguard Total International Stock (VXUS) 15% 23.1% BMO Equal Weight REITs (ZRE) 10% -4.6% iShares DEX Real Return Bond (XRB) 10% -13.4% iShares DEX Universe Bond (XBB) 30% -1.5% 10.2% Über-Tuber iShares Canadian Fundamental (CRQ) 12% 15.6% iShares S&P/TSX SmallCap (XCS) 6% 7.2% Vanguard Total Stock Market (VTI) 12% 42.7% Vanguard Small Cap Value (VBR) 6% 46.0% iShares MSCI EAFE Value (EFV) 6% 31.1% iShares MSCI EAFE Small Cap (SCZ) 6% 38.1% Vanguard FTSE Emerging Markets (VWO) 6% 1.6% SPDR Dow Jones Global Real Estate (RWO) 6% 10.0% BMO Mid Federal Bond (ZFM) 20% -2.4% BMO Short Corporate Bond (ZCS) 20% 2.1% 15.0%

The data above were gathered from fund websites whenever available: otherwise I used Morningstar. Returns for US-listed funds are expressed in Canadian dollars using exchange rates from the Bank of Canada.

Update: The returns for the the two versions of the TD US Index Fund (38.6% and 38.4%, respectively) are incorrectly reported on the TD website. After a reader tipped me off to the fact they appeared very low compared to the index, the intrepid Justin Bender noticed that TD’s numbers did not include all dividends in the fund’s total return. I’ve updated the tables above with numbers from Morningstar.

With Justin’s help, I am updating the long-term Couch Potato performance report card now: we have expanded the report card to include 20 years of data using a combination of actual fund returns and index data. Stay tuned.