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Gordon Pape: This RRSP portfolio has earned 10.8% annually

In February 2012, I created an RRSP portfolio for readers of my Internet Wealth Builder newsletter.

It had an initial value of $25,031.92 and was designed with two main goals. The first is capital preservation – as with any pension plan, you don't want to lose money. The second is to earn a higher rate of return than you could get from a GIC.

I constructed the portfolio to include bonds and defensive securities in order to reduce risk. But I also added some growth-oriented securities, including mutual funds 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.

iShares DEX Short Term Corporate Universe + Maple Bond Index Fund (XSH-T). This is a short-term bond fund that invests in securities issued by Canadian companies or by foreign corporations in Canadian currency (the Maple Bonds). Short-term bond funds are essentially defensive positions so returns are low. Over the latest six-month period, this fund lost 14 cents per unit in market value, but we received about 29 cents in distributions for a small net gain.

iShares Canadian Bond Index ETF (XBB-T). We added this ETF to the portfolio in February 2015. It tracks the performance of the total Canadian bond universe including government and corporate issues. Bonds have gone through a difficult period and the market price of this ETF is down by $1.44 since our last review in August. We received distributions of about 43 cents per unit over the period, so we lost ground here.

Fidelity Canadian Large Cap Fund B units (FID231). The net asset value (NAV) of this fund is down by $0.11 since our last review. However, we received a year-end distribution of $0.82 per unit in late December so we have a modest overall gain for the period.

Beutel Goodman American Equity Fund D units (BTG774). This fund rebounded strongly in the latest six months. The unit value is up by $0.97 and we received a year-end distribution of $0.421 per unit. The total return for the period was just over 10 per cent.

Trimark International Companies Fund, A units (AIM1733). This fund was added to the portfolio last August, replacing the Black Creek International Equity Fund, which was not performing to our expectations. We lost $0.05 per unit during past six months and received no distributions. That was below average for the category so we'll keep an eye on this one.

Brookfield Renewable Energy Partners LP (BEP.UN-T). This Bermuda-based limited partnership owns a range of renewable power installations (mainly hydroelectric but also some wind) in North and South America. The price took a tumble to the $36 range in December but has since recovered to about the same level as the time of my last review. We received two distribution totalling 89 cents (U.S.) per unit over the latest six months and the board has approved a 5-per-cent increase in the payout starting in March.

Brookfield Infrastructure Partners LP (BIP.UN-T). This limited partnership, invests in infrastructure projects around the world. The units split 3 for 2 in September, which means for every 100 units you owned previously you now have 150. The partnership just announced an 11-per-cent increase in the quarterly distribution to 43.5 cents (U.S.) starting in March.

Interest. We invested $1,636.43 in an account with EQ Bank, which was paying 2.25 per cent at the time. We received $18.41for the period.

Here is how the RRSP portfolio stood as of the afternoon of Feb. 3 (mutual fund prices are as of the close of trading on Feb. 2). Commissions have not been factored in and Canadian and U.S. currencies are treated at par for ease of tracking.

Gordon Pape's RRSP portfolio (as of Feb. 3)

SecurityWeight per centSharesAvg. priceBook valueCurrent priceMarket valueRetained incomeGain/loss per cent
XSH16.2330$19.65 $6.685.90$19.58 $6,461.40 $96.79 -1.9
XBB6.685$32.42 $2,755.90 $30.99 $2,634.15 $123.93 0.007
FID23120.4200$31.83 $6,365.47 $40.81 $8,162 $341.31 33.6
BTG77421.4580$8.42 $5,099.83 $14.74 $8,549.20 $284.57 73.2
AIM17338.8400$8.85 $3,540.00 $8.80 $3,520 $0 -0.06
BEP.UN9.9100$27.86 $2,786.02 $39.47 $3,947 $421.50 56.8
BIP.UN15.5135$20.17 $2,723.40 $45.90 $6,196.50 $620.25 150.3
Cash1.2$484.11 $502.52 3.8
Totals 100$30,440.63 $39,972.77 $1,888.35 37.5
Inception$25,031.92 67.2

Comments: The portfolio turned in a small gain of 2.43 per cent in the latest six-month period, thanks to strong performances from the Beutel Goodman American Equity Fund and the Brookfield Infrastructure LP. The rest of our securities were more or less flat.

That brings the total return in the five years since this portfolio was launched to 67.2 per cent. That's an average annual compound rate of return of 10.83 per cent, well in excess of our target.

Changes: The bond funds aren't doing well at this point so we're going to diversify our holdings. We will sell 130 units of XSH for $2,545.40 and invest the money in the TD High Yield Bond Fund (TDB626). It is priced at $6.80 per unit so we will buy 375 units. We'll take $4.60 from cash to make up the difference.

We will buy another 20 units of Beutel Goodman American Equity Fund, to bring our total to 600. The cost is $294.80. We will use $284.57 from accumulated distributions and take the other $10.23 from cash.

We have enough retained income to buy another 10 units of Brookfield Energy Partners for $394.70. This will bring our total to 110 and reduce our retained income to $26.80.

Finally, we will buy 10 units of Brookfield Infrastructure LP for $459, leaving us with cash of $161.25.

We will reinvest our cash balance of $1,237.87 in the EQ Bank account, which now pays 2 per cent

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

Gordon Pape's RRSP portfolio (revised Feb. 3)

SecurityWeight per centSharesAvg. priceBook valueCurrent priceMarket valueRetained income
XSH9.5200$19.65 $3,930 $19.58 $3,916.00 $96.79
XBB6.485$32.42 $2,755.90 $30.99 $2,634.15 $123.93
TDB6266.2375$6.80 $2,550.00 $6.80 $2,550.00 $0.00
FID23119.9200$31.83 $6,365.47 $40.81 $8,162 $341.31
BTG77421.5600$8.99 $5,394.63 $14.74 $8,844.00 $0.00
AIM17338.6400$8.85 $3,540.00 $8.80 $3,520 $0
BEP.UN10.6110$28.92 $3,180.72 $39.47 $4,341 $26.80
BIP.UN16.2145 21/95$3,182.40 $45.90 $6,655.50 $161.25
Cash1.1$487.69 $487.69
Totals 100$31,366.91 $41,110.51 $750.08
Inception$25,031.92

Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to buildingwealth.ca.

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