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Updating Gordon Pape’s Defensive and RRSP Portfolios
2/19/2018 4:20:28 PM
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Wealth Builder
Gordon Pape writes on common-sense wealth-building strategies.



By Gordon Pape  | Tuesday, February 13, 2018


 

BUILDING WEALTH WITH GORDON PAPE
 

At the start of 2009 I created several model fund portfolios for various types of investors, from very conservative to strongly growth oriented. In each case, I set a target range of return that was consistent with the risk level. These portfolios have just completed their ninth year (as of Dec. 31), so we now have a good idea of how they perform over a meaningful period of time. I’ll review three portfolios in this article, including my RRSP portfolio, and three more, including my Growth Portfolio, next time.

Defensive Portfolio

This portfolio aims for a higher rate of return than the Ultra Safe Portfolio, with correspondingly higher risk. It is best suited to non-registered accounts where safety and income are the top priorities. The fund targets an average annual compound rate of return between 4% and 6%.

Performance to date
Initial value (Jan. 1/09) = $25,000
Value at last review (June 30/17) = $38,794.04
Current value = $39,010.78
Change since last review = $216.74
Return since last review = 0.06%
Change since inception (9 years) = 56%
Annualized compound rate of return = 5.07%

Comments: The two PH&N bond funds recorded small losses, but the big disappointment was the performance of Mackenzie Ivy Foreign Equity, which dropped just over 2% in the latest six-month period at a time when the average fund in the category gained over 6%. This fund has been underperforming for a while, so the time has come to replace it.

The other side of the coin was a nice return from the TD Diversified Monthly Income Fund, which added 5.2% thanks to its 65% stock weighting – the rest is in bonds and cash.

Changes: We will replace the Mackenzie Ivy Foreign Equity Fund with RBC Global Equity Fund (“A” units). It is a well-balanced fund, with slightly more than half its assets in the U.S. and the rest divided among several countries. It has been a very strong performer in recent years with a 3-year average annual compounded rate of return of 14.4% to Dec. 31. It’s a no-load fund with an MER of 2.15% (some classes have a lower MER, check with your broker). The minimum initial investment is $500. We will switch the $6,437.08 in the Ivy fund to this one.

RRSP Portfolio

This portfolio is designed for RRSP accounts. Risk is kept to a reasonable level (we aim for a 60-40 equity/bond split) and the annual target rate of return is in the 6% to 7% range.

Performance to date
Initial value (Jan. 1/09) = $25,000
Value at last review (June 30/17) = $45,009.19
Current value = $45,439.19
Change since last review = $430.00
Return since last review = 0.096%
Change since inception (9 years) = 81.76%
Annualized compound rate of return = 6.86%

Comments: We should have had a better performance from this portfolio in the latest period, but we were dragged down by the 2% loss in the Mackenzie Ivy Foreign Equity Fund and a fractional gain in the Fidelity Canadian Large Cap Fund. Once again, Beutel Goodman American Equity Fund was the star performer.

Changes: Here again we will sell the Ivy Fund and replace it with RBC Global Equity Fund A Series. We will also sell Fidelity Canadian Large Cap Fund, which has been underperforming for some time. We’ll replace it with another fund from the same family, Fidelity Canadian Growth Company (“B” units). About half its portfolio is in Canada, led by stocks such as TD Bank, Cenovus Energy, and West Fraser Timber. U.S. stocks make up most of the rest, with PayPal and Microsoft among the major holdings. The 3-year average annual compounded rate of return is 13.4%. The MER is on the high side at 2.27%, but the performance justifies that cost.

Next time: I’ll review my Ultra-Safe, RRIF, and Growth Portfolios.

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.

BUILDING WEALTH WITH GORDON PAPE
 

 
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