Financially, 2004 was a very good year for us. We did a few things right:
1. Fully funded our retirement (RRSP) accounts. 2004 RRSP contribution limit is 18% of 2003 earned income subject to a maximum of $15,500.
2. Pre-paid our mortgage
as much as possible. The way I see it, there is no investment option available that will provide me with the guaranteed, tax-free
5.27% interest that we currently pay on our mortgage.
3. Sold high-expense mutual funds like the TD Science and Technology Fund
(MER: 2.79%. Ouch!). Mutual funds are now less than 2% of portfolio.
4. Started investing in ETFs like the i500R and iIntR funds offered by iUnits
5. Sketched out an asset allocation plan: Cash (5-10%), Bonds (20-25%), Canada Equities (20-26%), US Equities (20-26%), EAFE (13-18%), Emerging Markets
(10-15%), REITs (5-10%).
In hindsight, I should also have done certain things differently:
1. Not sticking to our asset allocation plan. Our portfolio has no exposure to bonds because I’ve been expecting bond yields to rise significantly. However, bonds returned a healthy 7.15% in 2004.
For 2005, my resolutions are:
1. Continue to fully fund our retirement (RRSP) accounts.
2. Continue to pre-pay our mortgage to the extent possible.
3. Initiate exposure to bonds, emerging markets and REITs and work towards bringing asset allocation to plan.
4. Remain consumer debt-free. Reduce mortgage-debt (resolution #2).
5. Plan to reduce expenses (e.g. convert monthly cellular plan to pre-paid).