Inflation

Inflation

Inflation is Kryptonite to anything but Short-term Bonds

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By Dale Roberts, Retirement Club/Cutthecrapinvesting

Special to Financial Independence Hub

Bonds may be the adult in the room, but they are certainly afraid of inflation. Bonds usually do their thing: they go up when stock markets get hit hard. They provide ballast. During periods of expected high inflation, or during rising inflation bond prices go down. That can create and contribute negative returns. The bonds can contribute to a portfolio decline.

But not all bonds are the same. Ultra-short bonds carry no price risk, while long-term bonds can carry extreme price risk. It’s crucial that investors understand the ‘types of bonds.’ To intermediate- and long-term bonds, inflation is Kryptonite. How do we battle that force?

As always, the following is not advice.

As a refresher, be sure to have a read of:  Stocks are the unruly kids. Bonds are the adult in the room.

Too funny, a rare case when Cut The Crap Investing actually ranked high on search.

Inflation up. Bonds down.

Bond yields rise during inflation primarily because investors demand higher returns to compensate for the reduced purchasing power of future fixed interest payments. Furthermore, inflation often prompts central banks to raise interest rates, which directly drives up yields, while existing bond prices fall to align with new, higher-yielding securities.

As interest rates rise due to inflation, new bonds are issued with higher coupon rates to attract investors. Existing bonds, which pay lower interest rates, become less attractive and must drop in price to remain competitive, which simultaneously increases their yield.

Join us at Retirement Club

We’ve had some recent experience with the inflation scare of 2021 and into 2022. The bond market (XBB-T) experienced one of its worst performances in 2022, losing around 11% or more as inflation surged, reversing a four-decade bull market in fixed income.

In the above chart we see that bonds provided no ballast. Quite the opposite. That said, we have to keep in mind that bonds have done their thing in every major recession. They stink the joint out, one time, and investors turn on them.

Traditional global stock and bond portfolios have delivered wonderful returns …

Asset Allocation ETF Page – to the end of December 2025

Inflation fighters and the all-weather portfolio

In mid-March we had a refresher on what works during inflation with:  How do we defend against stagflation?

If you have dedicated inflation fighters in the portfolio you’re not too worried about bonds delivering negative returns. We know that stocks don’t always go up. It’s the same for bonds.

In the following chart, we’ll start in 2021. Markets think ahead, of course, and enough investors loaded up on inflation-fighting assets as inflation storms gathered in 2021. The Purpose Real Asset ETF (PRA-T) is a nice one-stop inflation-fighting shop.

PRA-T was up 23.5% in 2021 and 15.9% in 2022.

Add 20% PRA-T to 80% XBAL-T and we have annual returns over 10% with no negative years from 2021 through 2023.

Continue on into 2026 and it gets even better. PRA-T is up almost 16% in 2026.

Go short and clip the inflation price risk

Ultra-short-term government bonds (CBIL-T) do not carry price risk: they are cash-like. In fact, they will provide greater and greater income as inflation expectations and yields rise. Continue Reading…

Vanguard Canada launches two new Dividend ETFs

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ETF TSX Symbol Management Fee1
Vanguard Developed ex-North America Dividend Appreciation ETF VIGG 0.28%
Vanguard U.S. High Dividend Yield Index ETF (CAD-Hedged) VUDH 0.28%

On Monday (June 1),  Vanguard Investments Canada Inc. announced two new income-focused Dividend ETFs. The same day, they started trading on the Toronto Stock Exchange (TSX):  Vanguard Developed ex-North America Dividend Appreciation Index ETF (TSX: VIGG) and Vanguard U.S. High Dividend Yield Index ETF (CAD-Hedged) (TSX: VUDH).

The two new funds are focused on high-dividend yield and dividend growth respectively, said Sal D’Angelo, Head of Product and Marketing, Vanguard Canada, in a press release.   VIGG tracks  a market cap-weighted index focused on companies located in developed markets excluding Canada and the U.S., with a history of increasing dividends over time.  Management fee is 0.28%. The Vanguard fact sheet describes VIGG as being medium risk.

VUDH tracks a market cap-weighted index focused on common stocks of U.S. companies with higher-than-average dividend yields, hedged to Canadian dollars; management fee is 0.28%. It is also rated medium risk.

In March, Vanguard also launched the Vanguard U.S. High Dividend Yield Index ETF  (VUDV, TSX).

In a backgrounder released with the ETFs, Vanguard said Dividend Income ETFs account for $42 billion or 5.4% of total ETF assets in the Canadian market. They include passive funds, fully active mandates and covered call options.

Dividend-focused ETFs have historically shown resilience across many market environments, the document says: “They can also provide stability in uncertain and inflationary environments through reliable cash flows which can partially offset inflation. The companies included in these portfolios tend to be more defensive during periods of market volatility, supported by steady earnings and stronger balance sheets.”

The backgrounder focuses on two main types of Dividend ETFs: those that generate high Dividend Yield, and those that grow their Dividends over time.

High-Dividend Yield ETFs

Vanguard says High-Dividend Yield ETFs are best suited for “investors looking for more immediate income including retirees drawing from their portfolios or those supplementing current cash flow.”  Higher starting yields provide more immediate income as the portfolio invests in mature, stable and value-oriented companies, with a higher allocation to sectors like energy, utilities and financials. Continue Reading…

Can Millennials become Financially Independent?

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Image Pixabay/iStock

By Billy and Akaisha Kaderli

Special to Financial Independence Hub

Millennials, those born roughly between 1980 and the year 2000, face a different future than Baby Boomers did at their same age. In terms of Wealth Building and saving for Retirement their challenges are wage stagnation, unemployment, underemployment and a seeming sense of entitlement. Because they came of age during the Great Recession, their faith in brokerage firms, Wall Street and global banks has been bruised.

Being optimists, we believe the financial future of this generation can still be bright, but with loads of student debt and lack of investment understanding they need to get started learning about finances and money management now.

Time is on your side and is your greatest asset

One thing Millennials have today that Boomers don’t is great stretches of time before Retirement. It is their greatest resource and this fact needs to be made clear to them. Time cannot be replaced, and if you are a Millennial, then knowing about the power of compounding will change your financial life. $10,000 – the cost of a used car – invested today in the S&P 500 Index and based on market historical returns from 1950 to March 2023 could grow to US$1,000,000 or more throughout your career, thereby building a solid foundation for your retirement needs. This return is without adding another dollar to your investment.

S&P Market Return Chart

If you do nothing else for your retirement, scrape and scrap to make this investment into SPY (S&P 500 Index ETF) or VTI (Vanguard Total Stock Market ETF) and you will be handsomely rewarded, since you have this time on your side.

Just get Started

A new investor with limited funds can utilize an online, no-frills brokerage account and — depending on which brokerage you pick —  you can open an account with less than $1,000. Not every house requires initial investments of more than $2,500, and as of this writing, Fidelity is offering a no minimum for opening an account. Continue Reading…

When to Sell your Precious Metals for Financial Benefits

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Find out when selling gold, silver, and other assets makes financial sense, and how timing, market conditions, and personal goals can shape better decisions.

Image courtesy Adobe Stock/Photographer: DragonImages

By Dan Coconate

Special to Financial Independence Hub

Selling gold or silver can support a stronger financial plan when the timing fits both market conditions and personal needs. The best decision often comes from balancing price trends, tax impact, and short-term cash goals instead of reacting to headlines.

Many households hold metals as a hedge, a store of value, or part of an inheritance. Knowing when to sell precious metals can help turn those holdings into funds for debt repayment, emergency savings, or major life expenses.

Start with the Reason for Selling

A clear purpose should guide the decision before any item goes on the market. Selling to cover high-interest debt or build a cash reserve often creates more financial benefit than holding metals during a period of flat prices.

Selling also makes sense when an asset no longer fits a broader plan. A collection that sits unused may offer more value as liquid funds than as a long-term holding with no clear role.

Watch Market Prices and Economic Conditions

Precious metal prices often move with inflation concerns, interest rates, and investor sentiment. A strong price run can create a good exit point, especially when gains meet a specific financial target.

Timing should still rest on more than the market alone. A solid sale happens when favorable pricing lines up with a real financial need or a planned shift in asset allocation.

Understand what you Own before Setting a Price

Not every item should sell based only on melt value. Coins, flatware, and older pieces may carry collectible or historical value that changes the right selling strategy. Continue Reading…

The Case for an All-Weather Portfolio

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By Dana Anspach for Fritz Gilbert and The Retirement Manifesto  
Special to Financial Independence Hub

 

Like many teenage girls, I had my high school bedroom walls covered in posters. Actor Rob Lowe took center stage, with a bit of Matt Dillon sprinkled in. (Ladies of the ’80s … any of you relate?)

Mixed in with the heartthrobs were glossy posters of red sports cars. Ferrari. Lamborghini. Later, in college, an Acura NSX.

Looking back, it’s strange. I’ve never been much of a car person:  especially not sports cars. I don’t see well out of them. They’re low to the ground. I scrape rims, bump curbs, and the quick handling leaves me feeling slightly queasy.

So why the fascination? 

I think those cars represented success. Flashy. Fast. The kind of thing people ‘oohed’ and ‘ahhed’ over.

Defining success by external standards is dangerous business. Thankfully, I outgrew that particular distortion: though I’m sure plenty of others remain.

As an adult, I gravitate toward practical, balanced cars. What I think of as the all-weather vehicle. I don’t need to go 200 mph down the autobahn. But I do want traction in heavy rain. I don’t care about making a statement at the valet. I care about glancing in the rearview mirror and seeing my dog’s smiling face as we head to his favorite place on earth: the park.

That preference for balance turns out to matter far beyond cars. It’s also the way I believe we should approach retirement planning and investing.

The Case for an All-Weather Approach

In hindsight, those sports car dreams and investing have something in common.  Sometimes, it’s hard not to hop into the shiny red sports car and drive away.

In investing, a shiny investment (like the shiny red sports car) promises speed and excitement. It may not be as reliable, but for a brief moment, it makes us feel brilliant. Powerful. Maybe even a little invincible. In touch with our inner James Bond. And who doesn’t want to feel like a secret service spy just once in their lifetime?

Often, it shows up as a single stock. Sometimes it’s a real estate deal. Or a business venture. It feels adventurous. Sophisticated. Like we’re seeing something others don’t.

In the late 1990s, tech stocks were the shiny red sports car.

The firm I worked for at the time offered a Science and Technology Fund that rose 99% in twelve months. One day, a middle-aged couple came in and asked me to move their entire portfolio into it.

Durability vs. Speed

Their portfolio had been built for durability:

  • blue-chip stock funds,
  • international exposure,
  • a few bond funds,
  • and a small allocation to the Science and Tech Fund.

They had spent a year watching the tech fund soar, while everything else stood still.

I balked at their request. I explained the logic of balance. Sure, in perfect weather, the shiny red sports car looked great. But the weather wouldn’t always be so accommodating.

My logic sounded silly to them: like a mom insisting you put on your helmet to ride your bike down the street.

They insisted on the change. I acquiesced on one condition: they sign a disclosure acknowledging that this was against my recommendation. They signed without hesitation.

I left that firm before the dot-com crash and the miserable weather that followed. I’ve often wondered what happened to that couple. The allure of speed was too strong.

You can go all in with a play account. But a professional financial advisor can get sued if they do the same thing with your entire life savings. That should give you pause. Risk and return are sides of the same coin. But each time you flip, if it’s several years of heads, it is all too easy to forget that the coin even has another side.

Beware the Slight Upgrade

Not everyone is tempted by flashy sports cars. Sometimes the pull is subtler.

We start to think maybe a small upgrade will help. Something just a little faster. A little more responsive. Even if it doesn’t handle storms quite as well.

I watched this at the end of 2024 when a long-time client, whose retirement plan and portfolio were in solid shape, left because they felt they should be earning higher returns. Continue Reading…