Is there a place for bonds in your portfolio? I’d suggest yes if you’re in retirement or in that retirement risk zone (within 10 years of retirement). Bonds provide that portfolio ballast. I like to call them portfolio shock absorbers. And certain types of fixed income can help us protect our wealth against periods of inflation, stagflation, deflation and recessions. And there may be little opportunity cost for holding those bonds. David Rosenberg offered an interesting take in the Globe and Mail. A Findependence Hub post adds more. There might be a place for bonds in your portfolio, on Sunday Reads.
Here’s the link (paywall) to that Rosenberg piece.
Here’s the potential returns ‘cost’ to holding bonds at various weightings.
And we see the risk-return proposition (measured by the sharpe ratio) as we add bond exposure. A higher number represents a better risk-return measure.
More bonds = greater risk return potential.
And the thing is, those numbers or returns will get even better if we use long term treasuries that offer a greater inverse relationship to stock markets. These are bonds that punch above their weight with respect to risk management.
Using U.S. stocks and U.S. long term treasuries …
From January of 1997, that bond exposure would not have cost you a penny.
Getting your fixed income fix
On Findependence Hub here is a very strong post courtesy of Robb Engen – Getting your fixed income fix with BMO ETFs. Robb and Erika Toth, Director at BMO ETFs go over many of the options and how you might fix your fixed income. That is, how can you use fixed income to add some potential inflation protection? You’ll also see how they do that in BMO’s one ticket asset allocation ETFs.
As we know, the core fixed income ETFs and especially long term U.S. Treasuries can do the job for managing that stock market correction risk. Those types of bonds are known to be a necessary holding for deflationary periods as well.
Stock were no match for stagflation
On the inflation front, have a look at this Twitter thread as advisors discover that stocks did not work during inflation. Not U.S. stocks, not Canadian stocks and not International stocks.
Most folks think stocks work to cover inflation. That is also how investment advisors and most portfolio managers are trained. Sorry, it ain’t so folks.
Thanks to Resolve Asset Management for the chart creation.
Could a whole generation of investors go down in inflationary flames? Eye-opening post to follow, soon. We need a go-to post on this topic. It will get lots of use.
On My Own Advisor we have the Weekend Reading that is the climate crisis edition. And from that post here’s a quote that caught my eye …
“Life expectancy of retirees was reduced by a year for every year retirement was delayed after age 55.”
I sure hope that my current semi-retirement status counts in that regard
Enoch at Savvy New Canadians looks at the 7 best Canadian bank ETFs. Yes there’s more than just the BMO ETF offerings.
Related post on Million Dollar Journey – Investing in Canadian bank stocks. It was offered at the time (July 2020) that the banks offered great value. From the time of that post they have crushed the market, more than doubling the total returns of the TSX Composite.
And also on Million Dollar Journey, an update on 25 ways to save money.
Given that post, it’s once again a good time to share Oh look, I just found $888,000 in your coffee. That’s my personal finance ‘book’.
On the Maple Money podcast investors in home ownership, with J.D. Roth, author of Get Rich Slowly. On that front, we own a Toronto home and would consider that our accidental investment.
Here’s the portfolio moves and commentary at Dividend Hawk. You’ll also find a good assortment of investment-related reads.
On a wealth of common sense, did bitcoin kill gold?
Related read: What is bitcoin? Investing in bitcoin.
On MoneySense, from Jason Heath, are interest payments deductible?
We took the week off for my MoneySense weekly. It was vacation week for my editor. But in case you missed it my latest was a good one.
And here’s a great Tweet from Scott Barlow on the Canadian earnings season .
And last but not least, here’s the latest on Craig’s mutual funds with AGF. A look at the terrible returns.
Thanks for reading. Don’t be shy. We’ll see you in the comment section.
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Consider Justwealth for RESP accounts. That is THE option in Canada.
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.25%. You’ll find some higher rates on certain GICs. They now also offer U.S. dollar accounts.
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