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Nobody wants to hear about balanced portfolios these days – at least not the traditional 60/40 split type. Small wonder. The stock markets kept setting new records right up to September. Meantime, bonds were retreating on rising interest rates and cash was paying almost nothing.

At some point, all that will change, however, and a balanced portfolio will look attractive again. Consider how this one has done over the ten years since it was created in September 2011 for my Income Investor newsletter.

The Income Investor Balanced Portfolio offers a conservative mix of stocks, bonds, and cash. It’s a little light on the fixed income/cash side, with 35.9 per cent of the total assets. But that’s reasonably close to the traditional 60/40. This type of portfolio is likely to underperform when stock markets are strong but reduces risk when bear markets emerge.

That’s what we’ve seen here. The portfolio was down about 14 per cent at the time of the March 2020 stock plunge, but that was a much better result that the overall market produced.

One reason for that was that in 2019, I increased the bond weighting to 42.5 per cent from 34.5 per cent. Bonds lost ground when the market fell, but they did much better than stocks.

Since then, the portfolio has rebounded, as we’ll see in a moment.

This portfolio had an initial valuation of $25,027.75. The goal was to achieve a return that at least matched the best available five-year GIC rate plus two percentage points.

That means the target varies with the rise and fall of interest rates. The best five-year rate I can find right now is 2.3 per cent from Oaken Financial, which would make our current target 4.3 per cent. Yes, that’s modest but this is meant to be a low-risk portfolio.

Here’s a summary of the securities we currently hold and how they performed over the period since I last reviewed this portfolio in April. Prices are as of the close of trading on Oct. 8.

GIC. We have $5,000 in a one-year GIC with Peoples Bank, paying 1.55 per cent at maturity on April 23, 2022. That’s not a great return but a core GIC provides stability.

iShares Convertible Bond Index ETF (CVD-T). This ETF invests in a portfolio of convertible bonds. These can be exchanged for common shares in a company at a pre-determined price, so they offer the potential of a capital gain along with regular bond interest. We added this fund at the time of our last update, at a price of $18.59. The price is up by a quarter since then plus we have received monthly distributions totaling 42.5 cents per unit.

iShares Core Canadian Universe Bond Index ETF (XBB-T). This fund tracks the performance of the broad Canadian bond market. It’s been a rough year for bonds as rates have been rising but we more or less broke even in the latest review period. The units lost 29 cents but we received monthly distributions totalling 40.4 cents per unit.

Canadian Apartment Properties REIT (CAR.UN-T). This REIT invests in apartment units across Canada. The units were badly hit at the start of the pandemic as investors were concerned about rent defaults. But they have since recovered and are now trading at close to their all-time high. In fact, things have been going so well that the directors approved a 5.2-per-cent increase in the monthly distribution, effective with the August payment. The units gained $3.30 during the period, and we received monthly distributions totaling 70.2 cents per unit.

Pembina Pipe Corp. (PPL-T). Pembina’s price was brutalized by last year’s onset of the pandemic and the simultaneous drop in oil prices, But it has been slowly clawing its way back, boosted in part by the promise to keep paying its 21-cent monthly dividend. The shares gained $4.15 since the last review and we received five monthly dividends, due to timing.

Brookfield Renewable Partners (BEP.UN-T). At the time of our last review, I wrote that we were too heavily weighted in this security and sold 50 units. Too bad we didn’t sell more; they’re down $5.74 since as green energy stocks as a group have taken a hit after a strong run-up in 2020. We’re not selling any more, however; this one will come back. We received two quarterly distributions of 30.375 US cents each.

Brookfield Infrastructure Limited Partnership (BIP.UN-T). This Brookfield partnership invests in infrastructure projects world-wide: railroads; ports; transmission lines; toll roads; etc. It has performed better than Brookfield Renewables recently, with the units advancing $3.12 in the latest six months. The units pay a quarterly distribution of 51 US cents.

BCE Inc. (BCE-T). We added Canada’s largest telecom company to the portfolio a year ago at this time at $56.20 per share. Since then, the stock is up almost $7, and the quarterly dividend has been raised to 87.5 cents per share. Total gain for the year was 18.6 per cent.

Bank of Montreal (BMO-T). The financial sector was hit hard by last year’s March selloff but has recovered strongly. BMO shares were up $14.69 in the latest six-month period, and we are receiving quarterly dividends of $1.06 per share. At the sharply higher price, the yield is down to 3.2 per cent from 6.8 per cent last fall, however we expect a double-digit dividend hike when the Office of the Superintendent of Financial Institutions lifts its ban on increases by financial institutions.

Fortis Inc. (FTS-T). We added this St. John’s-based utility at the time of our last review, at $55.37 per share. It hasn’t moved much since (a gain of 39 cents per share) but that’s par for the course with utilities. The company is increasing its dividend by 6 per cent in December to 53.5 cents per quarter.

Cash. We invested $2,508.24 in a high interest savings account with Motive Financial that was paying 1.25 per cent at the time. We earned interest of $15.68 for the period.

Here’s how the portfolio stands now. Commissions have not been factored in. For simplicity, Canadian and U.S. dollars are treated as being at par for purposes of the calculations.

Income Investor Balanced Portfolio (as of Oct. 8)

Weight %Total sharesAvg. costBook valueMarket priceMarket valueRetained incomeGain/loss
GIC-T9.71$5,000.00 $5,000.00 $5,000.00 $5,000.00 $38.75 0.08
CVD-T8.4230$18.59 $4,275.70 $18.74 $4,310.20 $97.75 3.1
XBB-T15.8260$32.02 $8,326.30 $31.32 $8,143.20 $128.44 -0.06
CAR-UN-T9.180$49.69 $3,975.20 $58.60 $4,688.00 $276.96 24.9
PPL-T6.480$47.49 $3,799.50 $41.06 $3,284.80 $184.80 -8.7
BEP-UN-T14160$11.98 $1,916.18 $45.16 $7,225.60 $187.98 286.9
BIP-UN-T12.290$16.58 $1,492.30 $70.22 $6,319.80 $659.80 367.7
BCE-T7.460$56.20 $3,372.00 $63.19 $3,791.40 $207.48 18.6
BMO-T10.140$108.26 $4,330.40 $130.70 $5,228.00 $497.60 32.2
FTS-T4.945$55.37 $2,491.65 $55.76 $2,509.20 $45.45 2.5
Cash2$989.18 $1,004.86
Total100$39,968.41 $51,505.06 $2,325.01 34.7
Inception$25,027.75 115.01

Comments: The stock markets faltered in September although only one of our securities, Brookfield Renewables, took a really bad hit. Over the last six months we saw some decent gains from BMO, BCE, and Canadian Apartment REIT. Overall, we gained 3.2 per cent in the latest six-month period.

The cumulative gain since inception 10 years ago is 115 per cent. That works out to an average annual compound growth rate of 7.96 per cent. That’s well above target and a good return for a portfolio with a heavy bond/cash weighting.

Changes: The portfolio looks quite solid at this point so I’m not going to make any changes. We don’t have adequate retained income balances in any of our positions to add another 10 shares/units, so we’ll keep those earnings for future use.

We now have a cash balance, including retained earnings, of $3,329.87, which will continue to be invested with Motive Financial’s Savvy Savings Account. The rate is still 1.25 per cent. I will review the portfolio again in March/April.

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

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