We saw very strong ETF flows for May. Canadian investors continue to add to a wide array of asset classes. There was continued strength in the one ticket asset allocation ETFs. And surprisingly to many, even though bitcoin and other cryptocurrencies continue to take it on the chin, Canadians continue to move monies to this nascent asset class. But more importantly, Canadian ETF investors continue to add monies to their portfolio. And that money is being added or allocated in balanced fashion.
Here is the recent Canadian ETF report for May, courtesy of National Bank.
Sell in May and go away? Not a chance.
We see strong ETF flows across the core in investment categories. Canadian ETFers continue to embrace that balanced growth portfolio model. It is the sweet spot.
By category, here’s the flows for the month of May and for 2021 year to date.
Canadian investors are (perhaps) smartly overweighting to Canada, and as the last column shows, in the year to date numbers – to International assets.
The U.S. markets are quite expensive to say the least.
The top performing ETFs year to date.
We continue to see strong ETF flows for the Canadian bitcoin and ethereum ETFs.
On Twitter I had also added …
I continue to hold and add to bitcoin. It is just another asset class for me.
And here’s the flows for single ETFs.
Keep in mind that for the crypto ETFs, investors have been converting assets from their closed end mutual funds and moving to the ETFs – for the lower fees and close bitcoin price tracking.
The difference between bitcoin ETFs and closed end funds.
Moving to inflation-friendly assets.
When Canadians select sector funds, they mostly have their eyes on inflation.
We see strong flows to financials, materials, and real estate. Utilities continue to be popular for their solid and steady income.
Of course, I’d like to see more Canadians consider energy producers. The free cash flow yields appear to be ridiculous as was suggested back in October of 2020.
Here’s investing in Canadian energy stocks. I believe that was posted about 90% ago, ha 🙂
Many energy analysts suggests that we are in the early stages of growth for the sector. Oil prices are marching higher. Wait until the Summer driving and flying season hits. Given that, you might consider a position to at least hedge your Summer price-at-the-pump bills.
Personally, we already have any Summer driving fuel bills more than covered by our gains from Canadian energy producers.
For quick and easy inflation protection investors might consider that Purpose Real Asset ETF.
Horizons also offers a basket of commodities ETFs.
I think it is prudent for investors to take a serious look at inflation. It may or may not be transitory. Inflation is a wealth destroyer. Stock markets are not the answer in many periods.
The Purpose Longevity Pension Fund.
In my weekly MoneySense post I also gave mention to the Purpose retirement fund.
The fund is designed to pay out 6.15% annual in pension-style format. There is no guarantee of that payment of course, but the prospects look more than strong.
Learn about mortality credits.
On Cut The Crap Investing I posted on the day of the launch.
This launch certainly was an ‘opinion splitter’. It went from Ponzi scheme to revolutionary game changer. I like it. You can do your own research and form your own opinion.
Send me any questions and I’ll get the answers from Purpose.
It was encouraging to see more balanced reporting and opinions throughout the week. That is a very good piece from Ian McGugan in the Globe and Mail (paywall).
Ian offered …
This burst of financial innovation is welcome news. It addresses a huge need among retirees desperate for steady sources of income in today’s low-return environment. But you have to know what is going on under the hood to gauge whether any of these products will suit your individual situation. The Longevity fund, in particular, contains a lot of moving parts.
For starters, the new offering is structured as a mutual fund. You can buy or sell units in much the same way as you would with other mutual funds. But the Longevity fund aims to function in many ways like a defined-benefit pension plan. This is a pioneering concept.
So is its eye-popping 6.15-per-cent annual target return for 65-year-old do-it-yourself investors. At a time when long-term government bonds and guaranteed investment certificates can’t pay even 2 per cent, the payout seems close to miraculous.
Payments (and levels are not guaranteed) but …
How likely is a cut? Not very, Purpose insists. It needs to achieve only a 3.5-per-cent to 3.75-per-cent annual return on the fund’s portfolio of stocks, bonds and alternative investments to maintain distributions. (The plan has apparently passed muster by actuaries, but Purpose has not immediately agreed to a request to share the actuarial review.)
If history is any guide, the Longevity fund should be able to increase payouts in later years thanks to mortality credits and investment returns. This suggests the Longevity fund is likely to deliver a substantially better return to long-lived unitholders than an annuity would.
As always – Read. Decide. Invest (or not).
Thanks to Mark at My Own Advisor for including that story and my post in his Weekend Reads.
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Consider Justwealth for RESP accounts. That is THE option in Canada.
At Questrade, Canadians can buy ETFs for free.
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