Initial Value $24,875.52
February 20, 2012
Update Value $50,549.46
August 26, 2019
By Gordon Pape
Our IWB RRSP Portfolio 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.
About a quarter 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, mutual funds, 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 some comments on how they have performed since the last review in February, when we did a major overhaul of the portfolio. Stock results are as of the afternoon of Aug. 22. Mutual fund results are as of the close on Aug. 21.
PIMCO Monthly Income ETF (TSX: PMIF). This fund invests in a portfolio of global bonds and pays monthly distributions. It was added in February 2018 at $19.83. The unit value has moved higher in recent months, as interest rates have fallen. We received distributions of $0.333 a unit for the period.
iShares Canadian Universe Bond Index ETF (TSX: XBB). This ETF tracks the performance of the total Canadian bond universe including government and corporate issues. Bonds have been strong recently as interest rates have declined. The fund has gained $1.49 since the last review plus we received distributions of $0.445 per unit.
iShares Canadian Corporate Bond Index ETF (TSX: XCB). This fund invests exclusively in corporate issues, as opposed to XBB, which covers the entire Canadian bond universe. It was added to the portfolio at the time of the last update, in February. So far it has performed well, with a total six-month return of 5.2%.
iShares U.S. High Yield Bond Index ETF (CAD-Hedged) (TSX: XHY). This fund tracks the performance of the U.S. high-yield bond market. It was added to the portfolio in February and generated a total return of 4.1% in the six months since.
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 as well. It was also added in February and is ahead 3.7% since.
First Asset Canadian REIT ETF (TSX: RIT). There are several good REIT ETFs available, but we chose this one in February because it has the broadest diversification. The timing was good – REITs have performed well in a falling interest rate environment and we have a total six-month return of 9.2%.
Beutel Goodman American Equity Fund D units (BTG774). The unit value is up $0.85 since the last review, which is a gain of 5.6%. Profits are nice, but the fund is lagging the broad U.S. market by a considerable margin.
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, meaning they are less sensitive to broad market movements and, therefore, less risky. It was among the many new securities added in February and has done well so far with a gain of 9.1%.
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. International markets have been weak this year, but the fund has still managed a gain of 4.3% since it was added in February.
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), mostly in North and South America. Renewable energy stocks have been hot recently and the share price is up $10.46 since the last review. We received two distributions totaling US$1.03 per unit.
Brookfield Infrastructure Partners LP (TSX: BIP.UN, NYSE: BIP). This limited partnership invests in infrastructure projects around the world. It has been the best performer in the portfolio for some time and gained $7.22 in the latest period. We received two distributions totaling US$1.005.
Interest. We invested $1,447.46 in an account with EQ Bank, which is paying 2.3%. We received $16.65 for the period.
Here is how the RRSP Portfolio stood as of Aug. 22. 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 Aug. 22/19)
Comments: Every security in the portfolio gained ground in the latest period, producing an overall gain the for six months of 9.65%. Our bond holdings did especially well against a backdrop of falling interest rates.
In the seven and a half years since this portfolio was launched the average annual gain is 9.82%. That’s in excess of our target.
Changes: We have one mutual fund remaining, the Beutel Goodman American Equity Fund. It’s our largest single holding and has performed reasonably well but it has been lagging the market recently. I believe we can do better with our U.S. exposure so we will sell this fund for a total value of $10,831.29.
We will buy 300 units of the iShares Edge MSCI Minimum Volatility USA Index ETF (CAD-Hedged) (TSX: XMS) at a cost of $28.19 for a total expense of $8,457. Like the two BMO funds already in our portfolio, XMS invests in low-beta U.S. stocks such as Coca-Cola, Visa, McDonalds, and Verizon. BMO has a similar fund but this one has a better track record. The MER is 0.33%.
That leaves us with $2,374.29 to work with. I would like to add more exposure to the U.S. bond market so we will buy 20 units of the iShares Core U.S. Aggregate Bond ETF (NYSE: AGG) at $113.32 for a total cost of $2,266.40. The balance of $107.89 will be added to the cash account.
We will also buy another 10 units of BEP.UN for $493.10. That will give us 120 units in total with $68.30 remaining in cash.
The new cash balance (including retained income) is $1,673.76. We will move the money to Motive Financial’s Savvy Savings Account, which pays 2.8%.
Here is the revised portfolio. I’ll review it again in February.
IWB RRSP Portfolio (updated Aug. 22/19)
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