Readjusting my RRSP

This week, I made some changes to the content of my self-directed RRSP. I had given this some thought for the last couple of months, and I finally took the first step towards this.

You see, until now the stocks that I held there were mostly of Canadian companies. But in the last two years I have been expanding my DRiP portfolio considerably, most of which is also in Canadian companies. So I was quite overweight in Canada. And with the favourable treatment of Canadian dividends, versus the unfavourable treatment of foreign dividends, made it more efficient to hold foreign companies in my RRSP.

So I sold three relatively small positions. Two of those were in companies that I have been holding for some time, but that have not performed as expected, Killam Properties (Toronto: KMP) and Northgate Minerals (Toronto: NGX). The third position was a short-term trade done on Gildan Activewear (Toronto: GIL) when their stock nosedived a few weeks ago on disappointing results. It had recovered enough to show a small profit for me.

The proceeds of those sales were invested in a fairly large position in Pepsi Co (NYSE: PEP). I have been watching Pepsi for over a year now, and was interested in starting a DRiP with the company. However, the funds I have available for dripping are limited, and I already have many other companies that are currently attractive.

Since Pepsi has moved down quite a bit from its high in January, this looked like a good time to buy into it. My plan is to hold these shares for a long time -- this is a retirement account, after all.

House Value

The value of our house is moving up again this month, since our insurance gets renewed in May and the insurance company updated the cost of rebuilding at the same time.

As I mentioned in last month Net Worth Update, I now use an average of house value provided by our the municipal tax bill and the rebuilding cost stated on our insurance contract to calculate the value of our house. This month, that will increase by $5 500. I only report my part of the house (60%) on this blog, but that will still generate a hefty $3 300 increase in my net worth.

Personally, that doesn't make me feel any richer, but that increase in value does mean something. What we pay for the house hasn't really changed much. Some portions of it have come down, some others up, but overall the increase has been about 2%, in pace with inflation.

Would we be able to say the same if we were renting? I kind of doubt it, for one important reason. When you rent, you have very little control on the increases. Although a large part of the ownership costs leave you limited control (mortage, insurance, utilities), you have more wiggle room. If you feel that heating costs are too high, you can improve insulation. If your mortage costs are too high, you can renegociate or move your mortage. Same thing with insurance.

Net Worth Update

I have changed the way I calculate the value of our house. Previously, I was simply using the municipal evaluation, which only changes every 3 years and do not really reflects the real value of the house. From now on, I will be using the average of the municipal evaluation and of the rebuilding cost established by my insurer (which is revised at least every year). That way, the estimated value should be closer to its real value. Changing the way I calculate the value of our house increased my net worth by about $9 000, which is taken into account in the following comparison (as noted by the "revised" numbers for last month).

As of May 1st, my net worth is $63 938 (up 4.4% from a revised $61 255). If I exclude house-related assets and liabilities, my net worth is $44 187 (up 6% from $41 655).

Assets ($137 779, up 1.8% from a revised $135 357)

• Bank Accounts $3 614 (up 5% from $3 437)
• Emergency Funds $2 700 (up 10% from $2 454)
• RRSP Accounts $34 815 (up 1.9% from $34 162)
• Non-Registered Investments $7 742 (up 4.2% from $7 428)
• Home $82 800 (stable using revised value)
• Arbitrage $5 000 (stable)

Liabilities ($73 840, down 0.4% from $74 102)

• Credit Cards $4 799 (up 4.9% from $4 573)
• Student Loan $1 408 (down 15% from $1 663)
• Mortgage $56 145 (down 0.2% from $56 253)
• Heat Pump Loan $6 904 (down 0.7% from $6 953)
• Arbitrage $4 402 (down 2.1% from $4 497)

I continued to build up liquidities, increasing both my emergency fund and the my regular bank account. Credit cards increased a little bit, as I had to repair the air conditioning in my car. I decided against using a 12-month financing for this, since my car is getting older and I don't want to have any debt on it when I replace it. Hopefully it will still last 2-3 more years.