Global stocks continued the positive momentum from a strong performance in 2023 to deliver another banner year for investment returns in 2024.
The gap between the NASDAQ and the rest of the market shrank, but technology stocks once again led the charge, with the tech-heavy NASDAQ gaining 24.10% (XQQ). That mark was nearly equalled by the S&P 500 posting a 23.40% (XSP) gain of its own in 2024.
Not to be outdone, Canadian stocks rallied and delivered a 21.53% return (XIC), while emerging market stocks awoke from their slumber and returned an impressive 19.20% (VEE) in 2024.
International stocks were the laggard last year, posting a “measly” return of 12.58% (XEF).
On the fixed income side, Canadian aggregate bonds (VAB) were up a modest 4.00%, with most of that gain coming from higher bond yields. Short-term bonds (VSB) had a more impressive 5.50% return in 2024, from a more balanced mix of price growth and interest.
You know that I’m a big fan of asset allocation ETFs as a sensible way for many Canadians to invest. For around 20 basis points (0.20%) in fees, you get a globally diversified and automatically rebalancing portfolio that you can set and forget.
Indeed, if investing has largely been solved with low-cost index funds, then investing complexity has been solved with these asset allocation funds. They’re a true one-stop shop for your investing needs.
Investing passively through index funds allows investors to capture the aforementioned returns, minus a very small fee. That’s a surefire way to beat 90% of investors who invest more actively, incur higher fees and are prone to behavioural issues like performance chasing.
With that in mind, here are the 2024 investment returns for various asset allocation ETFs offered by Vanguard and iShares:
Vanguard Asset Allocation ETFs
Vanguard offers a suite of asset allocation ETFs ranging from 100% global equities (VEQT) to 20% equities and 80% bonds (VCIP).
I’m including the calendar year returns of VEQT, VGRO, VBAL, and VCNS to show the results from their most popular asset allocation ETFs:
| ETF | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| VEQT (100/0) | 24.87% | 16.95% | -10.92% | 19.66% | 11.25% |
| VGRO (80/20) | 20.24% | 14.86% | -11.21% | 14.97% | 10.83% |
| VBAL (60/40) | 15.63% | 12.69% | -11.45% | 10.29% | 10.20% |
| VCNS (40/60) | 11.19% | 10.55% | -11.78% | 5.80% | 9.36% |
Interestingly, each step up the risk ladder earned you an extra return of about 4.5% last year, and about 2% in 2023. Even the traditionally conservative 40/60 portfolio posted double-digit gains again thanks to strong stock AND bond performances in 2023 and 2024.
iShares Asset Allocation ETFs
iShares offers a similar suite of asset allocation ETFs with ticker symbols of XEQT, XGRO, XBAL, and XCNS.
The differences between iShares and Vanguard are slight – iShares’ ETFs cost just 0.20% MER compared to Vanguard’s 0.24% MER, and iShares’ asset allocation ETFs come with a bit more US and International equity, while Vanguard’s asset allocation ETFs have more Canadian and emerging market representation.
Here are the five-year returns for iShares’ asset allocation ETFs:
| ETF | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| XEQT (100/0) | 24.67% | 17.05% | -10.93% | 19.57% | 11.71% |
| XGRO (80/20) | 20.46% | 14.92% | -11.00% | 15.17% | 11.42% |
| XBAL (60/40) | 16.12% | 12.78% | -11.08% | 11.06% | 10.58% |
| XCNS (40/60) | 11.99% | 10.56% | -11.19% | 6.57% | 10.33% |
You can see the returns are nearly identical. XEQT enjoyed a slight performance advantage in 2023 due to its tilt towards the higher performing US and international markets, but VEQT had the edge in 2024 thanks to strong returns from Canadian and emerging market stocks.
Vanguard vs. iShares 3-5 Year Averages
Now that these asset allocation ETFs have been around for at least five years we can start to look at their three-and-five-year average returns for a better cumulative comparison.
After two years of stellar returns, we may have forgotten exactly how bad returns were in 2022, especially for more conservative portfolios. That’s why looking at average annual returns over multiple years can give us a more realistic look at a typical investor’s experience (ideally we have data from 10+ years but here we are).
Vanguard asset allocation ETF 3-and-5-year averages:
| ETF | 1-year | 3-year | 5-year | Inception |
|---|---|---|---|---|
| VEQT (100/0) | 24.87% | 9.16% | 11.61% | 12.37% |
| VGRO (80/20) | 20.24% | 7.04% | 9.34% | 8.29% |
| VBAL (60/40) | 15.63% | 4.89% | 7.80% | 6.52% |
| VCNS (40/60) | 11.19% | 2.74% | 4.64% | 4.74% |
These five-year average annual returns are still well above the return assumptions I use in my financial planning assumptions for clients (6.10% for global equities, after fees).
You could say that we’ve pulled forward a few years worth of expected returns. That means we should probably lower our expectations for future returns so that the 10-year average will look more like the 6.10% assumption.
iShares’ asset allocation ETF 3-and-5-year averages:
| ETF | 1-year | 3-year | 5-year | Inception |
|---|---|---|---|---|
| XEQT (100/0) | 24.67% | 9.13% | 11.66% | 12.46% |
| XGRO (80/20) | 20.46% | 7.04% | 9.59% | n/a |
| XBAL (60/40) | 16.12% | 5.21% | 7.42% | n/a |
| XCNS (40/60) | 11.99% | 3.22% | 5.27% | 5.46% |
*Note that XGRO and XBAL were different ETFs with different mandates prior to 2019 and so the “since inception” returns are not a true representation of the new asset allocation mix.
If you can’t decide between the two, hedge your bets by putting a Vanguard asset allocation ETF in one account type, and an iShares asset allocation ETF in another (or have one spouse pick Vanguard and one spouse pick iShares for a little friendly competition).
Whatever you do, don’t drive yourself crazy switching back and forth between the two chasing past performance.
My Investment Returns for 2024
I’ve been investing in Vanguard’s all-equity ETF (VEQT) since March 2019. It’s a perfect solution for someone like me who wants to buy the entire market for as cheap as possible and move on with my life.
I hold VEQT inside my RRSP, LIRA, TFSA, and corporate investing account. I did not make a contribution to my RRSP (or LIRA, of course) in 2024, but I did actively contribute to my TFSA and our corporate investing account.
As you know, the timing (and amount) of your own contributions will affect your own personal rate of return. So, while I expect my RRSP and LIRA to have a nearly identical return to VEQT’s 2024 calendar year return of 24.87%, the returns on the corporate account and TFSA may be different due to the timing of contributions. Let’s check it out:
- Corporate = 27.05%
- RRSP = 24.80%
- LIRA = 24.80%
- TFSA = 10.86%
Indeed, the corporate account benefited from significant contributions early in the year, while I didn’t start contributing to my TFSA until May.
I switched up the kids’ RESP account at the beginning of 2024 to be more conservative as they enter their age 15 and 12 years. I added short-term bonds and changed the overall mix to about 35% equities and 65% bonds.
We contributed $7,500 to the account in January to catch-up on one year of missing grants for our oldest child.
Not bad for going conservative with this portfolio in 2024.
Final Thoughts on 2024 Investment Returns
Most Canadians still invest in actively managed mutual funds through their bank or another investment firm. These funds have a huge hurdle to overcome – their high fees – to match (let alone beat) a passively managed portfolio of index funds.
Your job this month is to pull up your investment statement and look at last year’s returns, along with the returns over the past five years, and see if your portfolio is keeping pace with the returns of an asset allocation ETF.
Make sure you’re comparing apples-to-apples, that is you’re matching up your portfolio’s asset allocation with the returns from a similar asset allocation ETF (i.e. 60/40 to 60/40) to get the full story. No sense comparing your 60/40 portfolio to the NASDAQ 100. It likely wouldn’t be appropriate to invest in 100% tech stocks.
If you’ve reviewed your investment statement and find your returns aren’t measuring up, it might be worth switching to a self-directed investing platform and buying a risk appropriate asset allocation ETF.
I truly believe that pairing low-cost index investing with on-demand financial planning advice at key life stages can lead to successful outcomes for many Canadians. Put that on your New Year’s resolution list for 2025.
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