I’ve heard people say that a RRIF is just an extension of an RRSP. It’s not true!
These two plans are linked in that they are both designed to save for retirement. But their goals are different, which means that the tactics involved must be the same.
The purpose of an RRSP is to build a tax-sheltered savings account that will be part, or all, of your retirement income. This requires careful management of the risk/reward balance in the portfolio. A GIC based plan will save your money, but it won’t generate much income.
Using GICs or other income-based securities as part of a RRIF makes sense, however. Now the goal is cash flow, covering the annual income, and saving money. Growth is no longer the main concern.
This means that RRIFs require a different investment strategy. You need to protect your income while generating enough income to supplement any other sources of income you have. Sometimes, that can lead to a difficult juggling act.
My sample RRIF portfolio was created for my Income Investing newsletter in February 2013 with an initial value of $49,910.30. We now have 13 years of experience, and the performance is about what we originally expected.
The original goal was to provide a better return than you would get from a five-year GIC. According to ratehub.ca, the best five-year rate for an enrolled plan right now is 4 percent from Ganaraska Financial Credit Union. This portfolio has consistently outperformed.
Here are the current positions of our portfolio with an explanation of how they have progressed since the last review in August. Bidding begins on the afternoon of March 20.
CI High Interest Savings ETFCSAV). This low-risk ETF consists of high-interest deposit accounts at major Canadian banks. Funds are low but reliable. We received six monthly distributions for a total of $0.648 per unit. If interest rates rise because of the Iran war, so will the money from CSAV.
iShares Core Balanced ETF PortfolioXBAL-T). This is a mutual fund that invests in eight iShares ETFs. The current mix is 60.28 percent, bonds/cash 39.72 percent. The units posted a gain of $0.59 in the most recent period. We had two quarterly earnings of $0.358 per unit.
Royal Bank of Canada Non-Cumulative 5-year rate Reset Resets First Preferred Shares Series BO (RY-PR.ST). This option was reset to 2024. The quarterly dividend increased to $0.3678 ($1.4712 per year). We’ve had two quarterly losses, but the shares have lost $0.27 in the most recent period.
Power Corporation of Canada (POW-T). We added 100 shares of POW to the portfolio last year, at $47.82 a share. It turned out to be a timely move as the stock has risen to over $17 a share since then. In the latest period, we received two dividends for a total of $1.226 a share. The company announced that profits will increase by 9 percent in the next payment.
Telus Corp.TT). Televisions are crap these days. After a bad run with BCE, we added Telus to the portfolio. It hasn’t done well, it lost $4.95 in the latest period. Quarterly dividends provide solid cash flow, but we return cash when the share price declines.
Pembina Pipeline Corp.PPL-T). Shares of Pembina received a positive $9.13 in the recent period. Due to the period, we received three quarterly dividends of $0.71 each.
Brookfield Infrastructure LP (BIP-UN-T). This limited partnership invests in infrastructure projects around the world. The units were up $7.66 in the recent period. We received three distributions totaling $1.80 per unit.
Capital Mortgage Investment Corp.FC-T). The credit union’s share price fell by $0.55 a share as interest rates rose on concerns that the war in Iran could trigger global inflation. We continue to collect a steady monthly dividend of $0.078. The yield is 8.1 percent at current prices. That looks attractive, but if the fight drags on for a long time, rates are likely to rise further, putting downward pressure on the share price.
iShares S&P/TSX Capped Utilities Index ETFXUT-T). This ETF invests in a portfolio of commodity instruments traded on the TSX. Teams earned $3.03 in the latest period, helped by lower interest rates. We received a total distribution of $0.7076 per unit.
Royal Bank of Canada (RITE). Bank stocks had a strong run but have pulled back recently. However, RY shares gained $27.58 in the most recent period, and we received two shares for a total of $3.18.
Manulife Financial Corp.MFC-T). The stock gained $3.98 in the most recent period, and we received two quarterly dividends of $0.925.
Money. We had cash and saved $4,169.94 in earnings, which we moved to Tangerine Bank. It was offering a special promotion for new accounts, paying 4.5 percent for five months. We got a profit of $78.19.
Here is a view of the RRIF Portfolio as it stood on the afternoon of March 20. Note that commissions are not deducted. Although this is a RRIF portfolio, withdrawals are not known, as this would make it impossible to track performance accurately.
Investor Income RRIF Portfolio (a/o March 20/26)
Comments: Most of our securities did well, and any losses were small except for Telus, whose share price fell about 22 percent. Power Corporation was the biggest gainer, as its share price rose 21 percent. Brookfield Infrastructure Partners gained 18.1 percent, Pembina Pipeline added 17.3 percent, and RBC was ahead with 14.4 percent.
As of March 20, the total portfolio (market value plus retained earnings) was $106,288.75 compared to $98,545.74 last August. That’s a seven-month advance of 7.9 percent. Our goal for the year is 5 percent to 6 percent, so we’re well ahead of that pace. The cash flow was $2,268.92, or 2.3 percent of last August’s total.
Since we started more than 13 years ago, we have a compounded interest rate of 113 percent. That works out to an annual growth rate of 5.99%.
Changes: We’ve seen the Telus story before with BCE. We will not repeat that. We will sell our position in Telus for $18 a share. With retained earnings, we have $4,014.12 to reinvest.
We will invest in 70 shares of Quebecor Inc. (QBR.BT), at a price of $4,109.70. Quebecor has become a significant second-tier player in the telecommunications business since acquiring Freedom Mobile as part of Rogers’ takeover of Shaw Communications. The stock paid 2.73 percent. We need an additional $95.58 to complete the deal, which we will take in cash.
We will also use some of our funds as follows.
RYPS – We will buy 10 more shares for $26.18, or a total cost of $261.80. That increases our position to 330 shares and reduces the accumulated amount to $170.25.
BEEP. ONE – We will add 10 units at a cost of $500.70. That increases our position to 170 units and lowers the retained earnings to $215.25.
We have cash and retained earnings of $5,424.85, which we will transfer to Oaken Financial. It offers 2.8 percent on savings account with no transaction fees.
Here is the updated portfolio. I will visit again in August.
RRIF Portfolio Income Investor (updated March 20/26)
Gordon Pape is the editor and publisher of Internet Wealth Builder and Income Investor magazines.
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