DIVERSIFYING PORTFOLIO BEYOND FIXED INCOME
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Wealth Builder
Gordon Pape writes on common-sense wealth-building strategies.



By Gordon Pape  | Tuesday, January 02, 2018


BUILDING WEALTH WITH GORDON PAPE
 

Q – My portfolio is now about 45% cash after taking some profits. I am 75; my spouse is 65. I would like to have 25% or so in fixed income. Would you see any problem with having the entire fixed income allocation in XBB, or would you suggest diversifying among a number of bond ETFs? – Larry W., Kamloops, BC

A – XBB is the trading symbol for the iShares Core Canadian Universe Bond ETF. It covers the entire domestic bond market, including corporate and government issues and bonds of varying maturities. If you only want exposure to Canada, it’s a good fund to hold (I own it myself).

But Canada represents only a fraction of the world bond market. You may want to diversify by adding ETFs that give you some exposure to fixed-income securities from the U.S. and overseas. Here are three you might want to discuss with your advisor.

iShares Core Total USD Bond Market ETF (NASDAQ: IUSB). This fund invests in a portfolio of U.S. dollar-denominated bonds that can be both investment grade and high yield. It did quite well in 2017 with an annual gain of 4.05% to the end of December. The expense ratio is only 0.06%.

iShares Core International Aggregate Bond ETF (BATS: IAGG). The mandate here is to invest in a portfolio of investment-grade bonds that are not denominated in U.S. dollars. The main holdings are issues from Japan, France, Germany, Italy, and the U.K. The expense ratio is 0.09%. The fund returned 2.51% in 2017.

iShares J.P. Morgan Emerging Markets Bond ETF (NASDAQ: EEM). As the name suggests, it invests in debt from Emerging Markets countries but only in bonds denominated in U.S. dollars. It had a strong run in 2017, with a gain of 36.41% for the year. The expense ratio is 0.40%.

Any mix of these and XBB would provide a lot more diversity and profit potential for your portfolio. – G.P.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investornewsletters, which are available through the Building Wealth website.

For more information on subscriptions to Gordon Pape’s newsletters, check the Building Wealth website.

Follow Gordon Pape on Twitter at https://twitter.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.

Notes and Disclaimer

© 2018 by The Fund Library. All rights reserved.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

BUILDING WEALTH WITH GORDON PAPE
 

   
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