A retired Alberta investor has undertaken a detailed comparison of his tax-free savings account (TFSA) returns against key exchange-traded fund (ETF) benchmarks to evaluate the effectiveness of his active portfolio management. Beginning in 2009, when TFSAs were introduced, Don contributed the maximum allowable amount annually each January, reinvesting dividends throughout the period. Now 68 and retired, he sought to determine if his active stock-picking efforts yielded better returns than a passive investment strategy tracking broad market indices.
Since Don consistently added contributions yearly, he could not simply compare his total portfolio value against a single market index. Instead, he developed a method simulating a passive investing approach by calculating what a TFSA would have accumulated if each annual contribution had been invested in broad-market ETFs at the start of the respective year, with dividends reinvested. For this, he used the iShares S&P/TSX 60 Index ETF (XIU) as a Canadian market proxy, multiplying each contribution by XIU’s cumulative total return from the investment date through 2025, and then summing the results. This calculation yielded a hypothetical portfolio value of approximately CAD 285,000.
Recognizing that his actual investments included U.S. and international stocks, Don also benchmarked against the iShares MSCI World Index ETF (XWD), which has a significant weighting in U.S. equities. Using the same methodology, investing the maximum contributions in XWD each year would have grown to over CAD 340,000 by the end of 2025—outperforming both XIU and his own active TFSA performance. Don’s results suggest that his active management lagged behind a passive global equity approach.
For investors with more conservative, balanced portfolios, Don also evaluated the iShares Core Balanced Portfolio ETF (XBAL), which combines approximately 60 percent stocks and 40 percent bonds. Applying his calculation from 2009 to 2025, XBAL’s compounded value totaled just over CAD 200,000. Its lower return compared to XIU and XWD is attributed to its bond allocation and automatic rebalancing that limits equity exposure during market rallies.
Don recommended that TFSA investors use similar benchmarking techniques adjusted to their own contribution schedules and portfolio compositions to objectively assess their investment performance.
Matt Ardrey, a portfolio manager and senior financial planner at TriDelta Private Wealth, praised Don’s approach as a practical method for self-directed investors to measure their returns accurately. Ardrey explained that many individual investors fail to benchmark their portfolios, hindering their ability to assess whether active management justifies its time and effort. He emphasized that comparing a TFSA’s annual contributions against passive ETFs invested on the same dates accounts correctly for the incremental nature of contributions.
Ardrey noted that beating market indices consistently is challenging even for professionals due to the efficient pricing of stocks, management fees, and the concentration of gains in a few stocks. He also highlighted behavioral pitfalls common among do-it-yourself investors, such as selling winners too soon or holding losers too long, which can erode returns.
On diversification, Ardrey observed that Canadian equities often underperform during certain periods relative to U.S. and international stocks, increasing portfolio risk without geographic diversification. He cautioned that broad global ETFs like the MSCI World (XWD) are heavily weighted toward U.S. stocks and may not represent a fully balanced global equity portfolio. He recommended combining Canadian, U.S., and EAFE (Europe, Australasia, Far East) ETFs to achieve broader diversification. Finally, he pointed out the importance of matching benchmarks to the investor’s actual portfolio mix, particularly if bonds are a component, to ensure accurate performance comparisons.