We don’t often think of bonds to help us fight inflation. Core bond funds can get slaughtered, hit by the potential of rising rates (bond prices go down) and decreased spending power in real dollar terms thanks to an increase in the cost of living. So we’ll look to inflation-adjusted bonds. The thing is, the real return bonds offered in Canada have a weakness. TIPS (Treasury Inflation-Protected Securities) are far superior. I cover TIPS and where to get them in my latest for MoneySense. We also look at the types of stocks that worked during inflationary periods from the year 2000. We’re looking at stocks and bonds to fight inflation on the Sunday Reads.
Here’ the link to my column, Making Sense of the Markets.
While core bond funds and those real return bonds have suffered in 2021, the TIPS are doing their thing. From that MoneySense post …
QTIP—love the ticker!—has a year-to-date gain of 6.0%. Up to the end of October, the two-year average annual return is 7.5%. The three-year average annual return is 7.6%.
What stocks worked best from 2000?
There was a nice surprise in a recent CIBC World Markets report on assets that worked during the inflationary periods from 2000.
Utilities led the way as inflation-fighters in Canada and the U.S. That was more than interesting and a surprise to me. That post offers the full list of sectors in Canada and the U.S.
Of course inflation has largely been muted and luckily, transitory over the last few decades. It might be a different story for asset performance if we get some nasty or lasting inflation or stagflation.
On that, please have a read of how to protect your portfolio against inflation.
And as interest rates might increase, what would that mean for your mortgage?
More Sunday Reads
And Mark Seed at My Own Advisor has supply chain issues with his Weekend Reads.
On The Findependence Hub, here’s round 2 of wealth and happiness: happiness is a thought and can be changed. And Noah Solomon, Chief Investment Officer at Outcome Metric Asset Management, makes the case for bonds.
Solomon offers …
The massive drag on portfolio returns over the long-term caused by a permanent allocation to bonds does not necessarily imply that investors who hold them are irrational.
Many investors may not have a sufficiently long investment horizon to weather crushing losses in bear markets and/or may be emotionally incapable of enduring large losses that can occur in portfolios that are heavily weighted in stocks.
A real stock market correction will arrive one day, and good bonds will be there once again to ‘do their thing’.
Using your wallet for social change
On the Maple Money Podcast Tanja Hester suggests how you can use your wallet to create social change. And this is a theme that I have endorsed and put forth on Twitter – cancel Christmas (sort of) due to the supply chain issues, inflation and the environment. This would be a good time to stop buying crap that we don’t need. That post is on Tanja’s blog.
On Tawcan, Bob delivers the dividends for October. And yes it’s a nice bounty. From that post …
As you can see from the chart, October 2021 has been the best dividend month since we started focusing on dividend growth investing. The 17 paycheques added up to $3,404.25. We have officially hit the $3,300 and $3,400 monthly dividend income milestones!
Congrats to Bob and Mrs. Bob. That’s a good haul. And of course, even greater income might be generated by selling shares of the Canadian or U.S. holdings. Readers will know that I would also be a fan of managing the retirement risks with some bonds, cash and other non-corelated assets. That said, I know that Bob does understand the risks and he is still in the accumulation stage. But eventually, they will enter that retirement risk zone.
If one does plan on adding some consistent income to their retirement funding scheme, Dan at stocktrades.ca presents the best Canadian monthly-paying dividend stocks and REITs.
And while we’re counting dividends, here’s the monthly deets from Matthew at All About The Dividends.
While some are buying, Mike The Dividend guy explains why he might sell a stock.
Rosy Canadian stocks
In last week’s Sunday Reads post, the Canadian stocks were looking rosy. And that includes the Canadian banks as they will be allowed to increase dividends moving forward. What’s looking good in 2021 and beyond? I did an ambitious rewrite for Million Dollar Journey, here’s investing in the Canadian banks in 2021.
Fritz is rethinking the 4% safe withdrawal rule on The Retirement Manifesto. That is a very good post. Fritz frames the potential returns moving forward, given the low bond yields and pricey U.S. stocks of the day. The post also offers some suggestions for the retiree or near retiree.
Here’s a tight blog round up of posts on GenYMoney.
Here’s the greatest hits volume 23 on Banker on Fire.
And while we’re banking, let’s add some wheels. Banker on Wheels cautions, when you see that grizzly bear, it’s too late to run away. Take advantage of the next market crash, he adds. That’s another in-depth and fantastic post from BOW.
Thanks for reading. We’ll see you in the comment section. Are you ready with stocks and bonds to fight inflation? Are you ready for anything?
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