Rate of Return: 8.1%

Initial Value $25031.92

February 20, 2012

Original Issue

Update Value $63741.33

February 26, 2024

Update Issue

Previous Updates

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Gordon Pape's Defensive portfolio

RRSP PORTOLIO POSTS GAIN

By Gordon Pape, Editor and Publisher

It has been a difficult period for RRSP investors. Rising interest rates buffeted bonds and dividend paying stocks through 2022 and most of 2023. If you didn’t have large positions in GICs and cash type securities, you probably saw the value of your RRSP decline.

Fortunately, that rough stretch is over. Interest rates have stabilized, inflation is inching lower, and both the Bank of Canada and the Federal Reserve Board have indicated that we can expect interest rate cuts later this year. That will help boost the market values of traditional RRSP holdings such as bond ETFs and high-yield stocks.

We saw the first signs of this in the returns for our RRSP Portfolio in the latest six months. It was up over 7%, with every security but one posting a gain.

This portfolio was launched 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.

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 we currently hold, with comments on how they have performed since the last review in August. Results are as of the close on Feb. 21.

iShares 0-5 Years TIPS Bond Index ETF (TSX: XSTP). This ETF invests in short-term US Government inflation protected notes. They pay a low rate of return, but both the face value and the interest increase as inflation rises. This provides downside portfolio protection. The units are up $0.43 since the last review in August. We received distributions that totaled $0.433 per unit. Note that while distributions are monthly, they vary considerably and some months the payout is zero, as was the case in January.

CI High Interest Savings ETF (TSX: CSAV). We added this high interest ETF at the time of our review in August. It was trading at $50 at that time, and it’s designing not to vary too much from that level. This fund invests in high-interest deposit accounts at Canada’s major banks. It earns a better rate of return than a retail customer can obtain because of its hefty purchasing power. The units are up $0.18 since the last review, and we received monthly distributions totaling $1.279 per unit.

 BMO S&P/TSX Banks Equal Weight Index ETF (TSX: ZEB). This ETF invests in shares of the Big Six Canadian banks. Banking stocks have been hurt by recession fears, although they are now starting to recover. The units gained $2.33 since the last review. Monthly distributions totaled $0.84.

 iShares Edge MSCI Minimum Volatility USA Index ETF (CAD-Hedged) (TSX: XMS). XMS invests in low-beta US stocks such as Broadcom, Merck, Waste Connections, and IBM. Low beta means they are less sensitive to broad market movements and, in theory, less risky. The fund posted a gain of $2.50 in the latest six months. Quarterly distributions totaled $0.254 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 $2.67 since the last review. We received two quarterly distributions for a total of $0.56.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 gained $1.72 in the latest period. Distributions totaled $0.34 per unit.

Brookfield Corporation (TSX, NYSE: BN). Brookfield operates in a range of business areas including real estate, asset management, renewable resources, infrastructure, and insurance. The stock is up $9.97 since the last review. We received two quarterly dividends of $0.10 each.

Enbridge (TSX, NYSE: ENB). We added 100 shares of Enbridge to the portfolio a year ago. The stock offers an attractive yield (currently 7.8%) and modest capital gains potential. The stock is up $0.56 since the last review and the quarterly dividend has increased to $0.915.

 Fortis Inc. (TSX, NYSE: FTS). Interest sensitive stocks have been under pressure, but they are now starting to stabilize. Fortis gained $0.27 in the latest period. We received two dividends for a total of $1.18 per share.

BCE Inc. (TSX, NYSE: BCE). BCE stock dropped after the company announced it would lay off 4,800 workers. The optics were bad, especially since the company announced a dividend increase at the same time. But the cuts should boost the bottom line and the stock will recover. The shares are down $4.99 since the last review. We received two quarterly dividends for a total of $1.935 per share.

Interest. We have cash totaling $2,191.73 which we invested at Duca Credit Union, which was offering 5.25%. We earned $57.53 in interest.

Here is how the RRSP Portfolio stood as of Feb. 21. Commissions have not been factored in. All amounts are in Canadian dollars.

IWB RRSP Portfolio (a/o Feb. 21/24)

Security Weight

%

Shares Average

Price

Book

Value

Current

Price

Market

Value

Retained

Income

Gain/

Loss

%

XSTP 8.6 130 $40.00 $5,200.00 $40.38 $5,249.40 $422.32 +9.1
CSAV 18.1 220 $50.00 $11,000.00 $50.18 $11,039.60 $221.28 +2.4
ZEB 10.3 180 $41.91 $7,544.00 $34.91 $6,283.80 $216.40 -13.8
XMS 8.3 150 $28.19 $4,228.50 $33.66 $5.045.00 $275.85 +25.8
ZLB 11.2 160 $31.97 $5,114.80 $42.73 $6,836.80 $280.88 +39.2
ZLD 4.7 110 $24.08 $2,649.30 $26.30 $2,893.00 $79.80 +12.0
BN 17.7 200 $49.53 $9,886.00 $53.96 $10,792.00 $68.00 +9.9
ENB 7.8 100 $52.90 $5,290.00 $46.98 $4,698.00 $357.75 -4.4
FTS 6.2 70 $57.67 $4,050.90 $53.79 $3,765.30 $425.95 +3.5
BCE 5.9 70 $63.80 $4,466.10 $51.20 $3,584.00 $215.37 -14.9
Cash 1.2     $663.30   $720.83    
Totals 100.0     $60,029.90   $60,907.73 $2,563.60 +5.7
Inception       $25,031.92       +153.6

Comments: Every security in the portfolio showed a profit in the latest six-month period except for BCE. Overall, the portfolio was up 7.3% in the latest period. This was a clear signal that we have turned the corner on interest rates. When the central banks start to ease later this year, our securities should benefit.

Over the 12 years since the portfolio was launched, we have a total return of 153.6%. That’s an average annual growth rate of 8.06%, well ahead of our target.

 Changes: Now that rates appear to have stabilized, our returns are starting to improve. When they begin to decline, as expected later this year, we should see a boost to asset values. For that reason, we won’t make any changes in the securities we hold at this time.

Our only move will be to use retained earnings to buy another 10 units for XSTP for a total cost of $403.80. We now own 140 units with retained earnings of $18.52.

The new cash balance (including retained income) is $2,880.63. We will keep it at Duca Credit Union which is now offering 5.75% on its high-interest savings accounts.

Here is the revised portfolio. I’ll review it again in August.

IWB RRSP Portfolio (Revised Feb. 21/24)

Security

Weight

%

Shares Average

Price

Book

Value

Current

Price

Market

Value

Retained

Income

XSTP 9.2 140 $40.03 $5,603.80 $40.38 $5,653.20 $18.52
CSAV 18.0 220 $50.00 $11,000.00 $50.18 $11,039.60 $221.28
ZEB 10.2 180 $41.91 $7,544.00 $34.91 $6,283.80 $216.40
XMS 8.2 150 $28.19 $4,228.50 $33.66 $5,045.00 $275.85
ZLB 11.2 160 $31.97 $5,114.80 $42.73 $6,836.80 $280.88
ZLD 4.7 110 $24.08 $2,649.30 $26.30 $2,893.00 $79.80
BN 17.6 200 $49.53 $9,886.00 $53.96 $10,792.00 $68.00
ENB 7.8 100 $52.90 $5,290.00 $46.98 $4,698.00 $357.75
FTS 6.1 70 $57.67 $4,050.90 $53.79 $3,765.30 $425.95
BCE 5.8 70 $63.80 $4,466.10 $51.20 $3,584.00 $215.37
Cash 1.2     $720.83   $720.83  
Totals 100.0     $60,554.23   $61,311.53 $2,159.80
Inception       $25,031.92