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Quarterly Investment Update
Fourth Quarter 2012
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Market Update: A Quarter in Review
December 31, 2012
Large Cap
Small Cap
Growth
Value
Large Cap
Small Cap
Growth
Value
Emerging
+2.34%
-1.08%
-1.06%
+4.34%
+7.59%
+7.03%
+6.78%
+8.42%
+6.59%
INTERNATIONAL STOCKS
CANADIAN STOCKS
Large Cap
Small Cap
Growth
Value
Global
REITs
1-Month
T-Bills
+0.58%
+2.83%
-0.24%
+2.62%
+4.81%
+0.24%
US STOCKS
Short Term Intermediate
Bonds
Bonds
+0.34%
+0.30%
Global
Bonds
(hedged)
+0.59%
REAL ESTATE AND FIXED INCOME
Data is in Canadian dollars. Market segment (index representation) as follows: Canadian stocks: Large Cap (TSX 60), Small Cap (MSCI/Barra Canadian Small), Growth (MSCI/Barra Canadian
Growth), Value (MSCI/Barra Canadian Value); US stocks: Large Cap (S&P 500), Small Cap (Russell 2000), Growth (Russell 3000 Growth), Value (Russell 3000 Value); International stocks:
Large Cap (MSCI EAFE [net div]), Small Cap (MSCI EAFE Small (net div)), Growth (MSCI EAFE Growth [net div]), Value (MSCI EAFE Value [net div]), Emerging Markets (MSCI Emerging (net
div)); Real Estate: Global REITs (S&P Global REIT [net div]); Fixed Income: Canadian (Canadian 1-month T-bills), Short Term Bonds (DEX Short Term Bond), Intermediate Bonds (DEX
Universe Bond), Global Bonds-Hedged (Citigroup World Government Bond Index 1-5 Years [hedged to CAD]). Indexes are not available for direct investment. Index performance does not
reflect the expenses associated with the management of an actual portfolio. Past performance does not guarantee future returns.
S&P/TSX data provided by S&P/TSX. MSCI data copyright MSCI 2012, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright ©
Russell Investment Group 1995-2012, all rights reserved. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Citigroup
bond indexes copyright 2012 by Citigroup.
1
Survey of Long-Term Performance
December 31, 2012
Annualized (%)
Index
1 Year
3 Years
5 Years
10 Years
20 Years
Since
Inception
Inception
date
Large Cap
TSX 60
8.07
3.81
0.32
9.28
9.75
8.62
Small Cap
MSCI/Barra Canadian Small
0.80
6.82
2.18
8.79
9.58
9.40
MSCI/Barra Canadian Growth
1.46
0.76
-3.15
8.45
7.60
7.09
MSCI/Barra Canadian Value
11.68
7.22
3.99
10.35
11.91
11.38
Feb-87
Jul-90
Jan-82
Jan-82
Large Cap
S&P 500
13.04
8.78
1.64
2.26
6.89
10.53
Small Cap
Russell 2000
13.38
10.13
3.53
4.75
7.10
10.77
Russell 3000 Growth
12.27
9.35
3.13
2.82
5.68
9.84
Russell 3000 Value
14.55
8.83
0.81
2.67
7.79
11.47
Large Cap
MSCI EAFE (net div.)
14.32
1.60
-3.71
3.32
4.79
8.87
Small Cap
MSCI EAFE Small (net div.)
16.94
5.15
-0.88
6.87
4.66
4.66
MSCI EAFE Growth (net div.)
13.88
2.87
-3.11
2.90
3.32
8.63
MSCI EAFE Value (net div.)
14.68
0.26
-4.36
3.66
6.13
11.79
MSCI Emerging (net div.)
15.21
2.68
-0.93
11.25
7.28
11.36
Jan-70
Jan-93
Jan-75
Jan-75
Jan-88
S&P Global REIT (net div.)
19.26
12.39
1.44
4.90
8.30
7.63
Jul-89
Canadian 1-Month T-Bills
0.91
0.75
1.03
2.10
3.31
6.74
DEX Short Term Bond
2.01
3.40
4.64
4.38
5.95
8.46
DEX Universe Bond
3.60
6.64
6.35
5.97
7.43
9.64
Jun-73
Jan-80
Jan-80
Citigroup World Government
Bond Index 1-5 Years
2.87
2.79
3.53
3.59
5.11
6.97
Jan-85
Asset Class
CANADIAN STOCKS
Growth
Value
US STOCKS
Growth
Value
Feb-51
Jan-79
Jan-79
Jan-79
INTERNATIONAL STOCKS
Growth
Value
Emerging Markets
REAL ESTATE
Global REITs
FIXED INCOME
Canadian Bills
Canadian Short Term Bonds
Canadian Bonds
Global Bonds (hedged)
Data is in Canadian dollars. MSCI EAFE Small index return is price only prior to January 1999 data inception. MSCI Emerging index return is gross dividends prior to January 1999 data
inception. S&P Global REIT index return is gross dividends prior to January 2001 data inception. S&P/TSX data provided by S&P/TSX. MSCI data copyright MSCI 2012, all rights reserved. The
S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright © Russell Investment Group 1995-2012, all rights reserved. Canadian fixed income data provided by
PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Citigroup bond indexes copyright 2012 by Citigroup. Indexes are not available for direct investment. Index
performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
2
Value of Stock Markets around the World
January 1990 – December 2012
Weights
Number of
Countries
Number of
Stocks
Total Value
December 31, 2012
Change from
Previous Year
01/90-12/12
Average
Canada
1
339
1.63 Trillion
4.55%
-0.29%
3.11%
United States
1
2,470
15.90 Trillion
44.44%
0.22%
44.46%
Developed Markets
22
3,085
13.00 Trillion
36.34%
0.38%
46.50%
Emerging Markets
21
2,616
5.25 Trillion
14.66%
-0.31%
5.93%
Total
45
8,510
35.78 Trillion
100.00%
Intl. Developed Markets
Maximum 67.07%
January 1990
US Stock Market
Maximum 54.85%
January 2002
Intl. Developed Markets
Minimum 34.51%
May 2012
US Stock Market
Minimum 29.89%
January 1990
Emerging Markets
Minimum 0.72%
January 1990
CAN Stock Market
Minimum 2.11%
December 1998
Emerging Markets
Maximum 15.68%
September 2010
CAN Stock Market
Maximum 5.07%
March 2011
Global market capitalization weights are not static; they change across time.
Data is in US dollars and values are beginning of month. The proxies for the Canadian and US equity markets are based on the respective country markets from the MSCI All Country World
IMI Index. The international developed market proxy is the MSCI All Country World IMI ex USA ex Canada Index. The proxy for emerging markets is the MSCI All Country World IMI Index
(Emerging Markets). MSCI data copyright MSCI 2012, all rights reserved.
3
The Randomness of Quarterly Returns
December 31, 2012
Q2
2009
Highest
Return
This table shows from top to
bottom the highest returning
asset classes each quarter over
the last 14 quarters. Each asset
class is color coded based on
the legend below.
Lowest
Return
Q3
2009
Q4
2009
Q1
2010
24.30 21.76 6.58
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
3.14
2.93 14.09 9.45
5.60
3.33
5.12
8.97 11.71 5.16
7.02
7.59
?
19.97 11.30 3.98
2.34
0.97 12.78 8.15
3.43
2.48
1.49
6.18 10.52 2.25
4.07
6.59
?
18.04 10.61 3.86
1.40
0.08 12.59 4.03
2.41
1.05
0.23
3.59
8.56
0.58
3.27
4.81
?
15.72 9.98
2.61
1.26 -2.14 10.26 3.49
0.50
1.01 -7.92
2.09
8.43
0.23
2.60
1.72
?
7.77
7.07
0.33
0.78 -3.94
7.80
3.33
0.23
0.23 -8.54
1.49
4.39
-1.16
1.24
1.21
?
1.25
2.71
0.24
0.03 -5.51
3.15
0.23
-0.05
-0.56 -11.97 0.65
0.71
-5.22
0.96
0.59
?
0.20
0.98
0.05
-1.08 -7.04
0.93
-0.30 -0.27
-1.68 -12.02 0.43
0.20
-5.67
0.23
0.30
?
0.07
0.04
-0.16 -2.57 -9.82
0.09
-0.71 -0.78
-5.15 -15.72 0.21
-0.21 -7.02 -0.21
0.24
?
Canadian Stocks
US Stocks
International Developing Markets
Emerging Markets
Global REITs
The lack of a pattern indicates that picking which asset classes will be the best or
worst performers is virtually impossible.
Portfolios combining these various investments will avoid extreme returns.
1-Month CAN Treasury Bills
CAN Bonds
Global Bonds
Data is in Canadian dollars. Indexes represented as follows: Canadian stocks (S&P/TSX Composite Index), US stocks (Russell 3000 Index), International Developed Markets (MSCI EAFE
Index), Emerging Markets (MSCI Emerging Markets Index), Global REIT (S&P Global REIT Index), Canadian 1-Month T-Bills, Canadian Bonds (DEX Universe Bond), Global Bonds (Citigroup
World Government Bond Index Canada 1-5 Years). Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an
actual portfolio. Past performance is not a guarantee of future results.
S&P/TSX data provided by S&P/TSX. MSCI data copyright MSCI 2012, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright ©
Russell Investment Group 1995-2012, all rights reserved. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Citigroup bond
indexes copyright 2012 by Citigroup.
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Currency
December 31, 2012
CHANGE IN FOREIGN EXCHANGE RATES (%)
FX/$CAD
Currency
$ US Dollars
€ Euro
£ Pounds
¥ Yen
UnitedStates
Q4 2012
-1.45%
-3.57%
-2.17%
9.37%
One Year
2.48%
0.73%
-2.15%
15.07%
Three Years
5.09%
14.27%
4.51%
-2.24%
IMPACT OF CURRENCY FLUCTUATIONS
Annual Returns in CAD and Local Currency
Three-Year Annualized Returns in CAD and Local Currency
CAD
Local Currency
Data is in Canadian dollars. The market for the United States, International Developed Markets, and Emerging Markets is defined as: Russell 3000 Index, MSCI EAFE Index, and MSCI Emerging
Markets Index, respectively. The S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright © Russell Investment Group 1995-2012, all rights reserved. MSCI data
copyright MSCI 2012, all rights reserved. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.
Past performance is not a guarantee of future results. FX Rates courtesy of Federal Reserve of New York.
5
MSCI Country Returns in
Canadian Dollars and Local Currency
December 31, 2012
FOURTH QUARTER 2012 RETURNS
Return
in CAD
ONE YEAR RETURNS IN CAD AND LOCAL CURRENCY
Return
in Local
Currency
Impact of
Currency
Return
in Local
Currency
Impact of
Currency
1. Greece
19.28%
15.02%
-4.26%
1. Turkey
59.84%
54.46%
5.37%
2. Turkey
18.91%
16.80%
2.12%
2. Egypt
54.90%
67.17%
-12.27%
13.78%
16.36%
-2.58%
6.49%
6.49%
0.00%
-0.68%
11.49%
-12.17%
-12.85%
-12.03%
-0.81%
.
.
.
.
.
.
.
UnitedStates
Return in
CAD
UnitedStates
32. United States
40. Canada
1.58%
1.58%
0.00%
37. Canada
41. United Sates
1.36%
0.16%
1.20%
.
.
.
44. Czech Republic
-0.44%
-4.39%
3.95%
45. Egypt
-9.82%
-6.97%
-2.85%
44. Brazil
45. Morocco
MSCI data copyright MSCI 2012, all rights reserved. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an
actual portfolio. Past performance is not a guarantee of future results.
6
MSCI Country Returns
December 31, 2012
COUNTRY RANKINGS–TEN-YEAR ANNUALIZED RETURNS
Canada
United States
UnitedStates
Percent Return
Data in Canadian dollars gross of fees. MSCI data copyright MSCI 2012, all rights reserved. Indexes are not available for direct investment. Index performance does not reflect the expenses
associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
7
Bond Returns
December 31, 2012
Return (%)
Q4 2012
One
Year
Three Years
Annualized
Canadian 1-Month T-Bills
0.24%
0.91%
0.75%
DEX Short-Term Bond Index
0.34%
2.01%
3.40%
DEX Mid-Term Bond Index
0.40%
4.65%
7.74%
DEX Long-Term Bond Index
0.15%
5.21%
11.83%
DEX Universe Bond Index
0.30%
3.60%
6.64%
Citigroup World Government Bond Index
0.59%
2.87%
2.79%
Index
(1-5 years hedged)
CAN Treasury Yield Curve
Data is in Canadian dollars. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Data provided by Citibank. Treasury yield
data provided by Bank Of Canada; copyright © 1995-2012, Bank of Canada.
8
Growth of Wealth
December 31, 2012
ONE YEAR
$1.21
$1.14
$1.14
$1.13
$1.09
$1.05
$1.05
$1.01
In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is
MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P
Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills,
30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided
by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2012, all rights reserved. The S&P data are provided by Standard & Poor’s
Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the
management of an actual portfolio. Past performance is not a guarantee of future results.
9
Growth of Wealth
December 31, 2012
THREE YEARS
$1.48
$1.31
$1.20
$1.19
$1.18
$1.12
$1.06
$1.02
In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is
MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P
Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills,
30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided
by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2012, all rights reserved. The S&P data are provided by Standard & Poor’s
Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the
management of an actual portfolio. Past performance is not a guarantee of future results.
10
Growth of Wealth
December 31, 2012
FIVE YEARS
$1.37
$1.12
$1.07
$1.06
$1.06
$1.02
$0.95
$0.80
In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is
MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P
Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills,
30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided
by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2012, all rights reserved. The S&P data are provided by Standard & Poor’s
Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the
management of an actual portfolio. Past performance is not a guarantee of future results.
11
Growth of Wealth
December 31, 2012
TEN YEARS
$2.83
$2.44
$1.82
$1.76
$1.64
$1.35
$1.23
$1.19
In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is
MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P
Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills,
30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided
by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2012, all rights reserved. The S&P data are provided by Standard & Poor’s
Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the
management of an actual portfolio. Past performance is not a guarantee of future results.
12
Growth of Wealth
December 31, 2012
TWENTY YEARS
$5.90
$4.95
$4.28
$4.17
$4.14
$3.79
$2.53
$1.93
In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is
MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P
Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills,
30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided
by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2012, all rights reserved. The S&P data are provided by Standard & Poor’s
Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the
management of an actual portfolio. Past performance is not a guarantee of future results.
13
The Top Ten Money Excuses
Fourth Quarter 2012
Human beings have an astounding facility for
self-deception when it comes to our own money.
We tend to rationalize our own fears. So instead
of just recognizing how we feel and reflecting on
the thoughts that creates, we cut out the middle
man and construct the façade of a logical-sounding
argument over a vague feeling.
These arguments are often elaborate, short-term
excuses that we use to justify behavior that runs
counter to our own long-term interests.
Here are ten of these excuses:
1) "I JUST WANT TO WAIT TILL THINGS
BECOME CLEARER.”
It's understandable to feel unnerved by volatile
markets. But waiting for volatility to "clear" before
investing often results in missing the return that
can accompany the risk.
2) "I JUST CAN'T TAKE THE RISK ANYMORE.”
By focusing exclusively on the risk of losing money
and paying a premium for safety, we can end up
with insufficient funds for retirement. Avoiding risk
can also mean missing an upside.
3) "I WANT TO LIVE TODAY. TOMORROW
CAN LOOK AFTER ITSELF.”
Often used to justify a reckless purchase, it's
not either/or. You can live today and mind your
savings. You just need to keep to your budget.
4) "I DON'T CARE ABOUT CAPITAL GAIN.
I JUST NEED THE INCOME.”
Income is fine. But making income your sole
focus can lead you down a dangerous road.
Just ask anyone who recently invested in
collateralized debt obligations.
5) "I WANT TO GET SOME OF THOSE
LOSSES BACK.”
It's human nature to be emotionally attached to past
bets, even losing ones. But, as the song
says, you have to know when to fold 'em.
6) "BUT THIS STOCK/FUND/STRATEGY
HAS BEEN GOOD TO ME.”
We all have a tendency to hold on to winners
too long. But without disciplined rebalancing,
your portfolio can end up carrying much more
risk than you bargained for.
7) "BUT THE NEWSPAPER SAID…”
Investing by the headlines is like dressing based
on yesterday's weather report. The market has
usually reacted already and moved on to worrying
about something else.
8) "THE GUY AT THE BAR/MY UNCLE/MY
BOSS TOLD ME…”
The world is full of experts; many recycle stuff
they've heard elsewhere. But even if their tips
are right, this kind of advice rarely takes your
circumstances into account.
9) "I JUST WANT CERTAINTY.”
Wanting confidence in your investments is fine.
But certainty? You can spend a lot of money trying
to insure yourself against every possible outcome.
While it cannot guard against every risk, it's
cheaper to diversify your investments.
10) "I'M TOO BUSY TO THINK ABOUT THIS.”
We often try to control things we can't change—like
market and media noise—and neglect areas where
our actions can make a difference—like the costs of
investments. That's worth the effort.
Given how easy it is to pull the wool over our own
eyes, it can pay to seek independent advice from
someone who understands your needs and
circumstances and who holds you to the promises
you made to yourself in your most lucid moments.
Call it the "no more excuses" strategy.
Adapted from “The Top Ten Money Excuses” by Jim Parker, Outside the Flags column on Dimensional’s website, October 2012. This information is provided for educational purposes only and should not be considered
investment advice or a solicitation to buy or sell securities. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
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