Stock & Bond Quotes

A high stock market allocation leads to higher long-term returns compared to portfolios with lower stock allocations. I’m not talking about ten-year returns. That’s short-term. Over thirty-year durations, portfolios with higher stock allocations have historically won. [2022] - Andrew Hallam

You have to look at rolling 20-year periods before there's a very high probability of equity returns close to 8% average. This means if your time horizon or temperament prevents you from thinking that far ahead, you need to dampen your portfolio with an allocation to high-quality bonds. This will lower your expected return, but that is the inevitable trade-off between risk and reward. [2021] - Dan Bortolotti

It's important to understand that correlations are not constant. The same two assets may trend in opposite directions for a long time-even a decade or more-then move hand-in-hand with each other for a time, and then behave independently. However, there are two asset types that have historically made good dance partners: stocks and high-quality government bonds. In most countries, over the very long term, the two have moved independently and for long periods their correlations have been negative. [2021] - Dan Bortolotti

Adding stocks to an all-bond portfolio actually lowers the risk of the overall portfolio. That's why many believe retirees should keep at least 20% of their portfolio in equities, even if they're very risk-averse. It works the other way around, too. Historically, a portfolio of 20% bonds and 80% stocks has been significantly less volatile than an all-equity portfolio, with only modestly lower returns. So even if you're a very aggressive investor, you should probably keep at least 20% of your portfolio in bonds. Thoughtful diversification can deliver higher returns with less risk. No wonder it's sometimes called the only free lunch in investing. [2021] - Dan Bortolotti

Bonds have historically returned almost 5% annually, according to the data from Credit Suisse. It's hard to see how an investor could expect that to continue in the foreseeable future, with high-quality bonds in many countries yielding less than 1%. One place to look for a realistic estimate of future returns for bonds is to invest the web page of an ETF that tracks the overall Canadian bond market, such as the Vanguard Canadian Aggregate Bond Index ETF (VAB). Look for the fund's "yield to maturity": this is the total return you should expect if interest rates don't change. [2021] - Dan Bortolotti

Expected returns should be viewed with a time horizon of at least 20 years. If your target rate of return is 5% or 6%, then a portfolio of 60% stocks probably isn't going to cut it. If you're comfortable with a more aggressive approach, that's fine, but remember that most people over-estimate their risk tolerance. If possible, you should consider increasing your savings rate or giving yourself more time. [2021] - Dan Bortolotti

There are occasions when it's appropriate to reconsider your asset allocation. An investor who started in her 30s with a portfolio that was 70% equities might want to dial back to 50% as she approaches retirement. Another reason for making changes to your asset allocation is a major life event; for example, if you inherit a large sum of money, you may want to lower your risk level to protect your new wealth rather than aggressively trying to grow it. [2021] - Dan Bortolotti

Hold equal amounts of Canadian, US and overseas stocks. For example, if your overall portfolio target is 60% stocks, you'd hold 20% in Canada, 20% in the US, and 20% in international equities. You can slit that last category into 15% developed markets and 5% emerging markets. (That mix of three-quarters developed and one-quarter emerging is a good rule of thumb.) [2021] - Dan Bortolotti

I recommending including a mix of government and high-quality corporate bonds in your portfolio, and you can do this easily with a single fund. The most widely used bond indexes in Canada include about 70-80% government bonds, with the reminder in corporates, a blend that should suit most investors. These so-called "broad-market" bond funds also include a cross-section of maturities. About 40-45% are short-term bonds (which mature in less than 5 years), another 25% or so are intermediate (maturing in 5-10 years) and the rest are longer-term bonds with maturities of more than 10 years. In general, bonds with short maturities are the least volatile and have the lowest expected returns. [2021] - Dan Bortolotti

It's true, there have been many periods of 5 and even 10 years when stocks underperformed bonds, but most of us remain confident that equities will deliver a premium over the long term. Most people lose patience when their strategy underperforms for a year or two. Then they jump to another one that has enjoyed some recent success, probably just before the music stops. [2021] - Dan Bortolotti

A common piece of advice is to invest in stocks only if you have a time horizon of 10 years or longer. One long-standing general rule for retirement holds that you should hold a percentage of stocks equal to 100 minus your age. But with people living longer and retiring later and returns from bonds very low, many investment advisers say the old guidelines aren’t bold enough. Some suggest using 110 or even 120 minus your age to achieve the kinds of returns that will sustain you in retirement. [2021] - Erica Alini

There are several reasons why future stock market returns will be lower than we are used to seeing. One is that inflation will probably be closer to 2% rather than the average of nearly 4% that has prevailed since 1960. Another is that pension fund managers invest about 60% in equities rather than 50%. A third reason is that the bond portion of portfolios will not do as well in the future because interest rates are so low. Long-term bonds can achieve high returns when interest rates go from high to low because they are producing capital gains as well as regular interests. For this reason, it's practically impossible to obtain high returns on bonds when the starting point is low interest rates. [2020] - Frederick Vettese

The best hope for decent returns in the years to come - by which I mean a return of 5% a year, not 8% - is to invest in stocks, risky as they are. I would recommend a 60-40 asset mix over 50-50 in the case of a recently retired couple, provided they have some tolerance for risk. [2020] - Frederick Vettese

The value of a bond generally moves in the opposite direction of the change in interest rates. For example, if you're holding a bond issued at 5 percent and rates on similar bonds increase to 7 percent, your 5 percent bond will decrease in value. (Why would anyone want to buy your bond at the price you paid if it yields just 5 percent and 7 percent can be obtained elsewhere?) [2019] - Eric Tyson

Connections between stock and business profits correlate strongly over long time periods—15 years or more. But short term (and 10 years is considered a stock market blip), markets are mad because people are crazy. [2018] - Andrew Hallam

A particularly prevalent problem in many Asian countries involves family‐controlled companies satisfying family desires at the expense of external minority shareholder wishes. Most global expats are aware of the corruption among many emerging‐market businesses. Such palm greasing is one of the reasons strong economic growth doesn't always manifest itself in the stock market. [2018] - Andrew Hallam

Breathlessly jumping onto a hot IPO is usually a bad idea. Fewer than one‐third of the newly public businesses were trading above their IPO price by the decade's end. IPOs are a great deal for the investment banks that underwrite them but usually a terrible deal for regular investors. [2018] - Andrew Hallam

The 1 percent rule: Never pay more than 1 percent of your total invested proceeds in commissions. [2018] - Andrew Hallam

Bond index funds rise and fall in price. But over the long term, they aren't meant to gain elevation. Long term, profits are derived from bond interest payments. Some investors think they've lost money on their bond index, if the unit price has dropped. But with short‐term or broad bond market index funds (or ETFs), that rarely happens over a period of two or more years. If it does occur, it will eventually revert to the mean. [2018] - Andrew Hallam

Some investors own international bond ETFs that are priced in US dollars. If the US dollar rises against other currencies, the price of such a bond ETF will show an exaggerated loss. For an American investor, that loss could be real. After all, if they plan to retire in the United States, they'll pay future bills in US dollars. As such, if they buy an international bond market index, they would be taking a currency risk. But for a non‐American investor, that loss isn't real. Always remember that the listed currency of an ETF is irrelevant. [2018] - Andrew Hallam