Q&A: What should an RRSP return?

Question: I was wondering if this question has an answer. What would be the average rate of return for an RRSP in the year 2005? Talking to a friend, he says his return was 22 per cent, compared to mine at a mere 13 per cent. Is there a site where I can find RRSP mutual fund returns (industry averages) by the year? – Len K.

Gordon Pape’s answer: There is no possible way to calculate an average return for an RRSP because everything will depend on what is in the plan. For example, last year the Toronto Stock Exchange gained about 22 per cent so if an RRSP were fully invested in an index fund that tracked the TSX it would have been ahead by about that percentage. Interestingly, your friend was right on that mark which suggests his RRSP is mainly in stocks or equity mutual funds.

A more balanced portfolio would have produced a lower return because bonds and cash did not do as well as the TSX in 2005. The Scotia Capital Universe Bond Index gained 6.46 per cent last year. So if you had a portfolio that was divided equally between a TSX fund and an average bond fund, your RRSP should have gained about 14.7 per cent. If you held a higher percentage of bos and cash, the return would have been lower.

The best way to gauge your results is to compare the individual securities in the portfolio with a benchmark of some type. For example, if you have any Canadian equity funds check to see how they did against the average for the category and for the TSX. If they significantly underperformed, it’s time to start asking questions.

Do you have a money question you’d like to ask Gordon Pape? E-mail it to [email protected] and then check our website every week to see if it was chosen for a response. Sorry, we cannot send personal answers.