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Pape’s RRIF Portfolio makes gains
11/18/2018 9:41:56 AM
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Wealth Builder
Gordon Pape writes on common-sense wealth-building strategies.



By Gordon Pape  | Monday, November 05, 2018


 

BUILDING WEALTH WITH GORDON PAPE
 

In February 2013 I created a model RRIF portfolio for my Income Investor newsletter with an initial value of $49,910.30. It is oriented to income and capital preservation, with a focus on low-risk assets that provide decent cash flow. Here’s a look at the current positions with a commentary on how they have fared since the last review in mid-February.

Values are as of Aug. 24, and some prices have fluctuated since then. However, my strategy and comments remain unchanged.

MAXA Financial five-year GIC. Our original three-year GIC matured in February 2016. We reinvested the $13,418.75 we received (principal and accrued interest) in a new five-year GIC paying 2.5%, with annual payments, which are compounded. This GIC is redeemable, so if rates rise significantly, we can cash in and trade up (albeit with a penalty). The GIC will mature in February 2021.

iShares Floating Rate Index ETF (TSX: XFR). This ETF invests in a portfolio of floating-rate bonds, whose interest payments are adjusted to reflect rate changes. It is trading at about the same price we paid in February when we acquired it. We received $0.179 in distributions, including the payment of Aug. 27.

CI Signature Dividend Fund A (CIG610). This fund invests primarily in preferred shares and dividend-paying large-cap stocks. The fund’s NAV is up $0.04 from the last review, and we received distributions totalling $0.2511 per unit.

PIMCO Monthly Income ETF (TSX: PMIF). This ETF invests in investment-grade bonds from developed countries around the world as well as some mortgage-backed securities. It pays monthly distributions, which are currently running around $0.05 per unit. The NAV was down $0.33 in the latest period, which was offset by distributions of $0.3821.

Sentry U.S. Growth and Income Fund (CIG50237). This fund invests in a portfolio of U.S. dividend-paying stocks, both common and preferred, with a large-cap bias. It is coming off another good run with a six-month NAV gain of $1.18 and monthly distributions of $0.05 per unit, totaling $0.30.

BCE Inc. (TSX, NYSE: BCE). BCE shares continued to decline, depressed in part by rising interest rates. We lost $2.41 per share, which was only partially offset by two quarterly dividends totaling $1.51.

Inter Pipeline (TSX: IPL, OTC: IPPLF). The stock rallied in the latest six months, gaining $2.05 per share. We received seven monthly dividends of $0.14 each (total $0.98), due to timing.

Brookfield Infrastructure LP (TSX: BIP.UN, NYSE: BIP). This Bermuda-based limited partnership is trading at about the same level as our last review. We received two distributions totaling US$0.96.

First Asset U.S. and Canada Lifeco Income ETF (TSX: FLI). This ETF was added to the portfolio in February. It invests in a portfolio of Canadian and U.S. life insurance companies. It’s been a disappointment thus far, losing $0.96 in the six months since. Distributions totalled $0.3481 per unit.

Cash. We kept the cash balance of $2,149.82 in a high-interest savings account with EQ Bank paying 2.3%. Interest earned in the latest period was $24.72.

The following table shows the RRIF Portfolio as it stood at the close of trading on Aug. 24. I have included the accrued interest for two years on the GIC in the retained earnings column. Note that commissions are not deducted, and that U.S. and Canadian currencies are treated at par. Although this is a RRIF portfolio, withdrawals are not factored in, as this would make it impossible to track performance accurately.

Comments: We recorded a gain of 2.6% in the latest period to Aug. 24, thanks mainly to the contributions of the Sentry U.S. Growth and Income Fund and Inter Pipeline.

Since inception five and a half years ago, we have a cumulative total return of 46.3%. That works out to an average annual compounded rate of return of 7.16%. For a portfolio with a large weighting in GICs, preferred shares, and bonds, that is a decent return. Our target is in the 5% to 6% range.

Changes: We will reinvest some of our accumulated earnings as follows:

CIG610 – We will buy 40 units at a cost of $571.60. That will give us a new total of 510 units and leaves us $10.37 in cash.

CIG50237 – We’ll add 10 units for a price of $228.90. That gives us 390 units and leaves cash of $78.32.

BCE – We have enough to buy 10 shares for $534.60. That brings our share count to 140 and leaves cash of $120.41.

IPL – Finally, we’ll add another 10 shares of Inter Pipeline, to bring the total to 310. The cost will be $248.70, leaving cash of $143.83.

We have $679.32 of our cash in the compounding GIC. We will keep the remaining cash of $1,272.96 in the EQ Bank account, which is still paying 2.3% annually.

The following table shows the revised portfolio at Aug. 24. I will review it again in my Income Investor newsletter in February.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

For more information on subscriptions to Gordon Pape’s newsletters, check the Building Wealth website.

Follow Gordon Pape on Twitter at https://twitter.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.

Notes and Disclaimer

© 2018 by The Fund Library. All rights reserved.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

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