Last Summer, Rob Carrick at the Globe and Mail asked a few major ETF providers to offer up some inflation protection. In a recent post Rob delivered the inflation-fighting ETF scorecard. There are a couple of obvious winners and a few head-scratching ETFs offered up as inflation-fighters. Here’s the inflation-fighting scorecard, plus the Sunday Reads.
Here’s the post (paywall) on the Globe & Mail.
And let’s get straight to the goods. It is no suprise that oil and gas stocks led the way. That is the only sector that provides consistent inflation coverage. Also, base metals are doing their thing. Gold is solid. Vanguard offered up a balanced portfolio (insert WTF emoji face) as an inflation fighter. And they do that after ignoring their own research on inflation and assets.
Drum roll … and the results
–BMO Equal Weight Oil & Gas Index ETF (ZEO-T): The clear winner here, and it’s not even close. Up 71.6 per cent in the past 12 months and 30.4 per cent in the past three months.
–iShares S&P/TSX Global Base Metals Index ETF (XBM-T): Commodity exposure produced another strong showing, with a 12-month gain of 50.6 per cent and a three-month increase of 28 per cent.
–CI Gold Bullion Fund C$ Hedged Series (VALT-T): Gold’s a traditional inflation hedge and it delivered reasonably well. Up 14.3 per cent in the past year and 6.7 per cent in the past three months.
–Horizons Active Preferred Share ETF (HPR-T): The 12-month gain to March 31 was 8.9 per cent, but the three-month result is a loss of 2.7 per cent.
Here’s another head scratcher …
-Invesco Nasdaq 100 Index ETF – CAD hedged (QQC-F-T): The thinking here was that stocks are a good place to be in inflationary times, and the Nasdaq 100 is home to some of the most innovative and disruptive companies. The tech-heavy Nasdaq 100 was up almost 14 per cent for the past 12 months, but a reversal has taken it down close to 9 per cent in the past three months.
-Mackenzie US TIPS Index ETF CAD-Hedged (QTIP-NE): U.S. government-issued Treasury inflation-protected securities (TIPS) seem a natural inflation-fighter, but the results thus far have been inconsistent. The 12-month gain is 4.9 per cent, while the three-month result is a loss of 2.5 per cent.
The head scratch winner
-Vanguard Balanced ETF Portfolio (VBAL-T): The 40 per cent weighting in the broad bond market resulted in a 12-month gain of 3.4 per cent and a three-month loss of 4.8 per cent.
- Uh, stock markets – no
- Bonds – no
The Balanced Portfolio is not having a good 2022. In that post I look at the asset returns for 2022, plus the returns of various balanced models.
Readers will know that commodities and oil and gas stocks are the most consistent and robust inflation fighters. Over the last year, the Purpose Real Asset ETF (PRA.TO) is up some 32%. I offer up PRA, gold and more in that new balanced portfolio.
The Invesco commodities ETF (DBC) is up 52%. That is a U.S. dollar ETF.
Is inflation peaking, or is there much more to come? Who knows?
Who wants to guess?
More Sunday Reads
Mark is rethinking the 4% rule on My Own Advisor. That is a very solid post. And no one would really use the 4% retirement rule if they had a proper financial plan. In retirement we will spend from various buckets (portfolios, pensions, inheritance, real estate, HELOC, etc) at rates that will likely ebb and flow over time. And even if you simply tried to maximize the spend level from one portfolio; from that post:
They’ve replicated the Bengen study. In a whopping 50% of the time, using the 4% safe withdrawal rate you will finish not just WAY ahead but with almost X3 your wealth on top of a lifetime of spending using the 4% rule.
The above demonstrates the importance of a financial plan though it’s possible that you might not need a detailed financial plan. That need will certainly depend upon what life stage you are at. Things can be simple enough in the accumulation stage. I’ve never used a financial planner, but I’ve done a ton of research.
On Findependence Hub, a BMO post looks at investing during war time. There is an interesting bit in that post on emerging markets. From Sa’ad Rana at BMO …
Prior to the invasion on February 23, The BMO Emerging Market Index ETF (ticker: ZEM), which tracks the MSCI Emerging Markets Index, had 3.5% exposure to Russian equities. Since the invasion, MSCI removed Russian equities from all their indices at a value of zero because the underlying market is frozen (un-investible). For investment products like ZEM which hold Russian stocks, these portfolios will still hold Russian equities for now (as they cannot be sold because the market is frozen) but will price them at $0.
Tackling the fear factor
Also on the Hub, Anita Bruinsma is tackling your investment fears. Readers might also have a look at Anita’s services at Clarity Personal Finance. For a reasonble fee you can get a second opinion on your portfolio and financial plan, or sign up for some financial coaching. That might include how to build a simple ETF portfolio.
Here is my first video effort, and on the topic of simple portfolio construction.
The video will serve as homework for my live Zoom call this Wednesday. I’ll go over reader questions, and we’ll ‘talk portfolio’.
Here is the invite if you’d like to attend. There are 100 spots available. We are currently just slightly over-registered. Sorry the Zoom invite function does not cut off at 100.
I really liked this post on FiPhysician covering equity-alternatives for the portfolio. That covers a lot of ground on many different portfolio construction topics.
Bob on Tawcan looks at the rising rate environment plus good reads from the personal finance community. Once again, Cut The Crap Investing does not make the cut, ha.
You can have a read of that twitter feed, for more on my mission to remain a mostly ignored blogger, ha. I’ll continue to put the risks on the table.
On risk, here’s an interesting video and observation. Yes, you should follow me on Twitter. https://twitter.com/67Dodge 🙂
And heres’ my last tweet and request of the week, promise.
And once again, Kyle makes sense of the markets on MoneySense.
Thanks for reading. We’ll see you in the comment section. Don’t forget to follow this blog. It’s free!
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