10.4%
A TEN-YEAR MILESTONE
By Gordon Pape, Editor and Publisher
This month marks the tenth anniversary of the IWB Global Portfolio. It was launched in March 2012 and was originally designed to provide an international model for growth-oriented Tax-Free Savings Accounts. This was achieved through 100% exposure to domestic and international ETFs. That means you should only track this portfolio if you are willing to accept stock market risk, although the use of ETFs provides a high degree of diversification. The target is an average annual return in the 8-10% range.
Although it was originally designed to demonstrate how TFSAs could be used to create significant tax-free wealth, this portfolio can be used in any type of account where global diversification is one of the objectives.
Here’s a look at how our ETFs have performed since the last update in October. Results are as of the close on March 24.
iShares Core S&P/TSX Capped Composite Index ETF (TSX: XIC). This ETF tracks the performance of the S&P/TSX Composite Index. The TSX has been performing well and recently hit another record high, as energy, gold, and materials stocks have done well. The units are up $1.36 (4%) since the last review in October. Due to timing, we received one quarterly distribution of $0.206 per unit.
iShares S&P/TSX Small Cap Index ETF (TSX: XCS). This ETF tracks Canadian small cap stocks. This sector of the market has shown strength recently as commodity prices have rallied, boosting mining stocks. The units are up $1.01 or 4.9% since the last review. We received one small quarterly distribution of $0.063 per unit.
iShares US Small Cap Index ETF (CAD-Hedged) (TSX: XSU). After a long, strong run, US small cap stocks pulled back in the latest period. The units were down $4.41 or 9.6%. We received a semi-annual distribution in December of $0.222 per unit.
iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX: XSP). This ETF tracks the performance of the S&P 500. It’s been a difficult period for US stocks, with several high-tech giants posting big retreats. However, thanks to gains in value securities, this ETF lost only $0.37 (0.08%) during the period. We received a year-end distribution of $0.288 per unit.
BMO Nasdaq 100 Equity Hedged to CAD Index ETF (TSX: ZQQ). This fund provides exposure to the top 100 stocks on the Nasdaq exchange. This has been the most volatile index in the US in recent months as some of the giants of the tech sector have seen their stocks pull back. The fund is down $5.33 (4.8%) since the last review. We received an annual distribution of $0.16 in December.
.iShares MSCI EAFE Index ETF (CAD-Hedged) (TSX: XIN). This ETF tracks markets in Europe, Asia, and the Far East. The fund was in recovery mode but the war in Ukraine has had a negative impact. The units lost $0.95 (3.1%) since the last review. We received a semi-annual distribution of $0.495 per unit in December.
iShares MSCI Frontier 100 ETF (NYSE: FM). This ETF holds major companies in Third World countries from Nigeria to Vietnam. After rebounding strongly last year, these markets have taken a hit and the units are down US$3 since the last review. We received a year-end distribution of US$0.214 in December.
iShares MSCI Emerging Markets ETF (NYSE: EEM). This sector continues to lose ground as the pandemic and the war in Ukraine weighed heavily on global markets. The units are down US$6.73 (12.9%) since our last review. We received year-end distributions of US$0.733 per unit.
We received $3.54 in interest from the cash balance in our Motive Financial high-interest savings account.
Here’s a look at how the portfolio stood at the close on March 24. The Canadian and US dollars are treated at par, and commissions are not considered. The percentage in the Gain/Loss column represents the cumulative return since the portfolio was launched or since the security was added. The initial book value was $20,002.30.
IWB Global Portfolio (a/o March 24/22)
| Security | Weight | Total
Shares |
Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Income |
Gain/
Loss % |
| XIC | 17.4 | 260 | $20.87 | $5,427.25 | $35.09 | $9,123.40 | $80.64 | +68.7 |
| XCS | 6.8 | 165 | $16.23 | $2,677.90 | $21.68 | $3,577.20 | $23.41 | +34.5 |
| XSU | 14.6 | 185 | $17.96 | $3,527.35 | $41.50 | $7,677.50 | $41.74 | +118.8 |
| XSP | 20.8 | 225 | $17.06 | $3,997.30 | $48.55 | $10,923.75 | $184.60 | +178.0 |
| ZQQ | 24.4 | 120 | $21.44 | $2,572.80 | $106.74 | $12,808.80 | $241.56 | +407.2 |
| XIN | 9.1 | 160 | $21.38 | $3,421.25 | $29.85 | $4,776.00 | $243.61 | +46.6 |
| FM | 2.5 | 40 | $35.18 | $1,407.25 | $32.79 | $1,311.60 | $8.56 | – 6.2 |
| EEM | 4.3 | 50 | $43.81 | $2,190.50 | $45.41 | $2,270.50 | $213.98 | +13.4 |
| Cash | 0.1 | $48.24 | $51.78 | |||||
| Total | 100.0 | $25,269.84 | $52,520.53 | $1,038.10 | +111.9 | |||
| Inception | $20,002.30 | +167.8 |
Comments: Our Canadian ETFs continued to do well as energy and materials stocks surged on the TSX in response to rising inflation and the war in Ukraine.
However, the rest of our funds lost ground, led by ZQQ which was hit by the sell-off in the tech sector. The net result was a loss of 2.4% over the latest period.
Since inception, the portfolio has gained 167.8%, which works out to a compound average annual growth rate of 10.35%. That’s slightly ahead of the top end of our target range, even with the latest pull-back.
Changes: Despite the drop in value in the latest period, this portfolio continues to perform above target and offers excellent diversification and geographic coverage. We will not replace any components at this time.
However, I think we should trim our position in ZQQ, which still constitutes almost a quarter of the portfolio, despite the pull-back. We’ll add to our Canadian stock market exposure with XIC. Accordingly, we will sell 10 units of ZQQ at $106.74 for a total of $1,067.40. We will use the money to buy 30 units of XIC for a cost of $1,052.70. We have $14.70 left over, which we’ll add to our cash account.
All else remains the same.
We now have cash and retained income of $1,104.58. We’ll move the money to EQ Bank, which is currently paying 1.25%.
Here is the revised portfolio. I will review it again in September.
IWB Global Portfolio (updated March 24/22)
| Security | Weight | Total
Shares |
Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Income |
| XIC | 19.4 | 290 | $22.34 | $6,479.95 | $35.09 | $10,176.10 | $80.64 |
| XCS | 6.8 | 165 | $16.23 | $2,677.90 | $21.68 | $3,577.20 | $23.41 |
| XSU | 14.6 | 185 | $17.96 | $3,527.35 | $41.50 | $7,677.50 | $41.74 |
| XSP | 20.8 | 225 | $17.06 | $3,997.30 | $48.55 | $10,923.75 | $184.60 |
| ZQQ | 22.4 | 110 | $21.44 | $2,358.40 | $106.74 | $11,741.40 | $241.56 |
| XIN | 9.1 | 160 | $21.38 | $3,421.25 | $29.85 | $4,776.00 | $243.61 |
| FM | 2.5 | 40 | $35.18 | $1,407.25 | $32.79 | $1,311.60 | $8.56 |
| EEM | 4.3 | 50 | $43.81 | $2,190.50 | $45.41 | $2,270.50 | $213.98 |
| Cash | 0.1 | $66.48 | $66.48 | ||||
| Total | 100.0 | $26,126.38 | $52,520.53 | $1,038.10 | |||
| Inception | $20,002.30 |
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