Initial Value $25,031.92
February 20, 2012
Update Value $62,118.41
February 15, 2021
By Gordon Pape
When we last reviewed our model RRSP Portfolio in mid-August, it was still suffering from the beating it took in the pandemic-induced market crash of last March. The good news is it has now made a full recovery.
This portfolio was launched nine years ago, in February 2012. It has two main objectives: to preserve capital and to earn a higher rate of return than you could get from a GIC. The original value was $25,031.92.
Almost 30% of the portfolio is in bonds and cash. The balance is in growth-oriented assets that offer exposure to the Canadian, U.S., and international equity markets. The portfolio contains a mix of ETFs, stocks, and limited partnerships so readers who wish to replicate it must have a self-directed RRSP with a brokerage firm.
These are the securities currently in the portfolio with comments on how they have performed since the last review. Results are as of the afternoon of Feb. 11.
PIMCO Monthly Income ETF (TSX: PMIF). This global bond fund turned around in the latest period and made us some money. The fund posted a capital gain of $0.77 per unit plus we received distributions of just over $0.40 per unit.
iShares Canadian Universe Bond Index ETF (TSX: XBB). This ETF tracks the performance of the total Canadian bond universe including government and corporate issues. We lost ground in the latest period, as the units declined $0.79. That was only partially offer by distributions of $0.421 per unit.
iShares Canadian Corporate Bond Index ETF (TSX: XCB). This fund invests exclusively in corporate issues. It was added to the portfolio in February 2019. In the latest period, it lost $0.19 per unit but that was more than offset by monthly distributions totaling $0.313.
iShares Convertible Bond Index ETF (TSX: CVD). This fund invests in bonds that can be converted into common stocks under certain conditions. It offers a play on the stock market while providing cash flow. The units continue to recover from their nosedive last March, gaining $0.86 in the latest period. We received distributions of just under $0.41 per unit.
iShares Core U.S. Aggregate Bond ETF (NYSE: AGG). This ETF aims to replicate the returns of the total U.S. bond market. It was added in 2019 to give us more exposure to American bonds. The units are down $1.34 since the last review but we received distributions of just over $1.11.
Harvest Tech Achievers Growth and Income ETF (TSX: HTA). This portfolio had no technology exposure, so we added this ETF last August at a price of $12.40. The fund invests in an equally weighted portfolio of 20 large cap tech companies such as Apple, Cisco, Facebook, and Adobe. The managers write covered call options to generate income. The units gained $2.30 over the latest six months, plus we received $0.418 in distributions. Total return during the period was almost 22%. A promising start for this one.
iShares Edge MSCI Minimum Volatility USA Index ETF (CAD-Hedged) (TSX: XMS). XMS invests in low-beta U.S. stocks such as Coca-Cola, Visa, McDonalds, and Verizon. Low beta means they are less sensitive to broad market movements and, in theory, less risky. None of our low beta funds stood up to last March’s market plunge, but all are recovering. This one posted a gain of $1.42 in the last six months and delivered quarterly distributions totaling $0.238 per unit.
BMO Low Volatility Canadian Equity ETF (TSX: ZLB). This ETF invests in a portfolio of large-cap Canadian stocks that have a low beta history. It’s up $1.69 since the last review, plus we received two quarterly distributions for a total of $0.48.
BMO Low Volatility International Equity Hedged to Canadian Dollar ETF (TSX: ZLD). This ETF focuses on international stocks and is hedged to Canadian dollars, so the currency risk is removed. It too is recovering, with a gain of $1.05 in the latest period and distributions totaling $0.30 per unit.
Brookfield Renewable Energy Partners LP (TSX: BEP.UN, NYSE: BEP). This Bermuda-based limited partnership owns a range of renewable power installations (mainly hydroelectric but also some wind and solar). At the end of July, investors received one share in a new company, Brookfield Renewable Corporation (TSX, NYSE: BEPC) for every four units of BEP. We owned 100 units, so we received 25 shares of BEPC. In December, the shares split 3 for 2. We adjusted the cost base accordingly.
Brookfield Renewable Corporation (TSX, NYSE: BEPC). This is the spin-off corporation from Brookfield Renewable Partners. Its shares also split 3 for 2 in December.
Brookfield Infrastructure Partners LP (TSX: BIP.UN, NYSE: BIP). This limited partnership invests in infrastructure projects around the world. As with BEP, it has also spun off a Canadian-based corporation, known as Brookfield Infrastructure Corporation (TSX, NYSE: BIPC). We received one share of the new company for every nine partnership units. The shares/units of the two entities have continued to move higher.
Brookfield Infrastructure Corporation (TSX, NYSE: BIPC). We used cash from our reserve to bring our total position to 25 shares. It turned out to be a good move; the shares are up more than $10 since the last review.
BCE Inc. (TSX, NYSE: BCE). We added BCE to the portfolio a year ago. It turned out to be bad timing, but this is a quality company, and the shares will recover. Meantime, we’re collecting a healthy dividend.
Interest. We invested $1,752.52 in an Alterna Bank High Interest Savings Account, paying 1.4%. We received $12.27 in interest.
Here is how the RRSP Portfolio stood as of Feb. 11. Commissions have not been factored in and Canadian and U.S. currencies are treated at par for ease of tracking.
IWB RRSP Portfolio (a/o Feb. 11/21)
Comments: After taking a hit during the market crash almost a year ago, our RRSP portfolio has recovered well. During the six-month period since our last review in August, we gained $7,437.39 or 13.6%. The Brookfield entities were the biggest gainers during the period, but we also had decent contributions from our low volatility funds and our newly added Harvest Tech Achievers ETF.
Over the nine years since the portfolio was launched, we have a total return of 122.2%. That’s an average annual growth rate of 10.63%, well above target.
Changes: The portfolio is performing well at this point, so I am not inclined to make any substantive changes. It could be argued that the bond position is too high, given the strength of the stock market and the low interest rate environment. However, an RRSP is a long-term investment and bonds provide stability in times of market turmoil.
We’ll use some of our retained earnings to add to positions as follows:
PMIF – We’ll buy 10 more units at $20.32 for a total investment of $203.20. That will give us 220 units and reduce retained earnings to $38.52.
HTA – We will add 10 units at $14.70, for a cost of $147. Our retained earnings will drop to $20.20.
The new cash balance (including retained income) is $2,353.99. We will keep this in our Alterna Bank High Interest Savings Account. The current rate is 1.2%.
Here is the revised portfolio. I’ll review it again in August.
IWB RRSP Portfolio (revised Feb. 11/21)