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Gordon Pape’s RRIF portfolio posts gain
9/23/2018 12:32:37 AM
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By Gordon Pape  | Monday, October 09, 2017



It’s time for my semi-annual review of the RRIF model portfolio, which was started in my Income Investor newsletter in February 2013 with an initial value of $49,910.30. This portfolio balances the twin objectives of income and safety by putting a significant amount into low-risk assets and the rest into higher-yielding securities. Here’s a look at the current positions with a commentary on how they have fared since the time of the last review in February.

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. This GIC is redeemable, so if rates rise, we can cash in and trade up (albeit with a penalty). The GIC will mature in February 2021.

Phillips, Hager & North Short Term Bond and Mortgage Fund (RBF1250). This is a short-term bond fund that provides stability for the portfolio. However, with interest rates low but rising, we must expect returns to be minimal. Since the last review, the net asset value (NAV) has declined by $0.11, while we received distributions of about $0.096 per unit, so we lost a little ground.

CI Signature Dividend Fund (CIG610). This fund invests primarily in preferred shares and dividend-paying large-cap stocks. The fund came out slightly on the plus side since the last review. NAV was down by $0.17, but we received distribution of $0.24 per unit (($0.04 per month) for a modest overall gain.

PIMCO Monthly Income Fund (PMO005, front-end units). This fund 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 $0.04 per unit. The NAV was up $0.36 in the latest period, so with the distributions we had a total return of 4.3%. That’s very good for a bond fund these days.

Sentry U.S. Growth and Income Fund (NCE737). This fund invests in a portfolio of U.S. dividend-paying stocks, both common and preferred, with a large-cap bias. The net asset value increased by $0.13 during the latest period, and we received six monthly distributions totaling $0.30 per unit.

BCE Inc. (TSX: BCE) . BCE shares gained modestly over the summer, adding $0.32 each. We received two quarterly distributions totaling $1.4348.

Inter Pipeline (TSX: IPL). We took a big hit on this one in the latest period, losing $6.36 per share. Disappointing returns and the company’s prevarication about proceeding with a major project concerned investors. The dividends continued to flow at the rate of $0.135 per month, however.

Brookfield Infrastructure LP (TSX: BIP.UN). What we lost on Inter Pipeline we more than made up on this limited partnership. The shares are up $7.67 since the last review, and we received two distributions totaling US$0.87, with another due shortly.

Emera Inc. (TSX: EMA). After a slow start, we finally got back to slightly above breakeven with this utility stock. The shares were up $2.55 in the latest period, and we received $1.045 in dividends.

Cash. We kept the cash balance of $1,550.64 in a high-interest savings account with EQ Bank paying 2%. Interest earned in the latest period was $15.51.

The following table shows the RRIF Portfolio as it stood at the close of trading on Aug. 23. I have included the accrued interest 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: The big loss on the shares of Inter Pipeline reduced our gain for the six-month period to 1.9%. Most of the upside was provided by the continued strength in Brookfield Infrastructure LP.

Since inception four and a half years ago, we have a cumulative total return of 41.4%. That works out to an average annual compounded rate of return of about 8%. For a portfolio with a large weighting in GICs, preferred shares, and bonds, that is a respectable return. Our target is in the 5% to 6% range.

Changes: There may be a temptation to sell off our position in Inter Pipeline as a result of its retreat. I think that would be a mistake. Despite the setback, this is a stable business with a steady cash flow. The company is not going out of business. At the lower price, the yield is a very attractive 7%. We have $479.33 in retained earnings, so we will use $463 of that to buy 20 more shares. That will bring our total to 280 shares and reduce the retained cash to $16.33.

We will also make some other purchases with our cash, as follows:

CI Signature Dividend Fund. We will add 10 units at a cost of $144.60. Our total position is now 470 units, with cash remaining of $3.82.

PIMCO Monthly Income Fund. We’re buying 10 more units for a total of $144.50. That gives us 450 units in total with cash of $68.12.

Sentry U.S. Growth and Income Fund. We have enough cash to buy 10 units at a cost of $205.30. We now own 380 units with retained earnings of $79.22.

Brookfield Infrastructure LP. Finally, we will add 10 units of this partnership at a cost of $551.60. We will take $0.41 from cash to cover the shortfall in retained earnings. We now own 220 units.

We will keep our remaining cash of $1,121.24 in the EQ Bank account, which is now paying 2.3% annually.

The table below shows the revised portfolio. I will review it again in my Income Investor newsletter next 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 Investornewsletters, 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 and on Facebook at

Notes and Disclaimer

© 2017 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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