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Updating Gordon Pape’s Ultra-Safe, RRIF, and Growth Portfolios
6/22/2018 7:01:40 AM
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Wealth Builder
Gordon Pape writes on common-sense wealth-building strategies.



By Gordon Pape  | Monday, February 26, 2018


 

BUILDING WEALTH WITH GORDON PAPE
 

In each of the specialized portfolios I created at the start of 2009, I set a target range of return that was consistent with the risk level. In my previous article I updated my RRSP and Defensive Portfolios. This time, I’ll review my Ultra-Safe, RRIF, and Growth Portfolios. These portfolios 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.

The Ultra-Safe Portfolio

This portfolio is designed for investors who want higher returns than they can get from a GIC or money market fund, without taking on a lot of risk. The main focus is on bonds.

Performance to date
Initial value (Jan. 1/09) = $25,000
Value at last review (June 30/17) = $33,225.89
Current value = $33,428.29
Change since last review = $202.40
Return since last review = 0.006%
Change since inception (9 years) = 32.9%
Annualized compound rate of return = 3.10%

Comments: The Ultra-Safe Portfolio eked out a small fractional gain over the latest six months ending Dec. 31. We should not expect anything beyond this going forward because rising interest rates will have a negative effect on all the securities in this portfolio. At this point, you’d be better off cashing out and putting the money into a high interest savings account, such as the one offered by EQ Bank, which currently pays 2.3%. Although that rate can change any time, it’s a better choice right now than a low-risk fund portfolio. You’re covered by deposit insurance up to $100,000.

Changes: I will discontinue monitoring this portfolio since it is not suited for the current environment. Invest the money in a high-interest savings account or laddered GICs.

RRIF Portfolio

Safety and cash flow are the twin goals of this portfolio. The objective is to provide enough income to allow investors to avoid dipping into capital for as long as possible. The target return is 6% per year.

Performance to date
Initial value (Jan. 1/09) = $25,000
Value at last review (June 30/17) = $39,590.88
Current value = $40,120.41
Change since last review = $529.53
Return since last review = 1.34%
Change since inception (9 years) = 60.48%
Annualized compound rate of return = 5.56%

Comments: This portfolio performed well below our target average in the latest period, although most of the securities were in the black. The soft bond market and the weakness in Canadian equities were the primary culprits.

Changes: Overall, this portfolio is falling a short of expectations. I am not willing to compromise the risk to RRIF assets by raising the equity stake during a period of very high markets.

However, 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.

Growth Portfolio

The portfolio is designed for investors seeking long-term growth and who are willing to accept a greater level of risk to achieve that goal. As you might expect, the portfolio is heavily weighted to stocks; however, we avoid high-risk funds. The target rate of return is 8%+.

Performance to date
Initial value (Jan. 1/09) = $25,000
Value at last review (June 30/17) = $61,084.75
Current value = $61,635.37
Change since last review = $550.62
Return since last review = 0.009%
Change since inception (9 years) = 146.54%
Annualized compound rate of return = 10.55%

Comments: It was a disappointing six months for this portfolio, especially with stock markets being strong. Only two of our funds did well, Mawer Canadian Equity and Beutel Goodman American Equity. The rest were laggards.

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. Hopefully, they will deliver improved results.

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 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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