8.0%
GLOBAL PORTFOLIO TAKES A HIT
By Gordon Pape
When you invest in a portfolio of ETFs, you’re at the mercy of the markets. When they go up, you win. When they drop, you lose. There’s no escape.
Our Global Portfolio, which invests entirely in mainstream ETFs, was hammered in the first part of 2022, as stock prices plunged in the face of high inflation and rapidly rising interest rates. We did better in the September-March period. The gain wasn’t big, but at least it was on the plus side of the ledger.
This portfolio was launched in March 2012. It is designed to provide an international model for growth-oriented investors, with the diversification and low costs that ETFs offer. The target annual rate of return is 8-10%.
The portfolio invests in eight domestic, American, and international ETFs, covering all parts of the globe. Investors should only track this portfolio if they are willing to accept stock market risk. As we’ve seen that risk has been significant recently.
Here’s a look at how our ETFs have performed since the last update in September. Results are as of March 23.
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 held its ground over the past six months, so we experienced a drop of only $0.40 per unit. That was more than offset by three distributions for a total of $0.759 per unit, so we came away with a slight gain for the period.
iShares S&P/TSX Small Cap Index ETF (TSX: XCS). This ETF tracks Canadian small cap stocks. This sector of the market was marginally higher in the recent period and the units gained $0.48 – not a lot but on the plus side. Because of timing, we received three quarterly distributions that totaled $0.224 per unit.
iShares US Small Cap Index ETF (CAD-Hedged) (TSX: XSU). US small cap stocks continued to retreat in the latest period. The units were down $2.43 or 6.7%. We received a semi-annual distribution in December of $0.293 per unit.
iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX: XSP). This ETF tracks the performance of the S&P 500. This ETF posted a small gain of $0.18 during the period. We received a year-end distribution of $0.325 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. After a terrible first half in 2022, this fund staged a modest rally, and the units are up $4.91 (5.7%) since the last review. We received a year-end distribution of $0.35 per unit.
.iShares MSCI EAFE Index ETF (CAD-Hedged) (TSX: XIN). This ETF tracks markets in Europe, Australasia, and the Far East. Despite the problems in China, the stock markets in those countries posted positive returns during the period and these units gained $2.09. We received a semi-annual distribution of $0.102 per unit in December.
iShares MSCI Frontier 100 ETF (NYSE: FM). This ETF holds major companies in Third World countries from Nigeria to Vietnam. These markets have been in a prolonged slump and the units are down US$1.76 (6.6%) since the last review. We received a year-end distribution of US$0.08 per unit in December.
iShares MSCI Emerging Markets ETF (NYSE: EEM). After a long losing streak, emerging markets managed a small gain of $0.63 per unit in the latest six-month period. We received a nice year-end distribution of US$0.584 per unit.
We received $13.41 in interest from the cash balance in our Saven Financial high-interest savings account.
Here’s a look at how the portfolio stood at day’s end on March 23. 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 23/23)
| Security | Weight | Total
Shares |
Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Income |
Gain/
Loss % |
| XIC | 19.4 | 290 | $22.34 | $6,479.95 | $30.87 | $8,952.30 | $432.99 | +44.8 |
| XCS | 6.4 | 165 | $16.23 | $2,677.90 | $17.86 | $2,946.90 | $101.62 | +12.4 |
| XSU | 13.6 | 185 | $17.96 | $3,527.35 | $33.79 | $6,251.15 | $123.33 | +80.7 |
| XSP | 20.9 | 230 | $18.29 | $4,206.10 | $41.94 | $9,646.20 | $102.98 | +131.8 |
| ZQQ | 21.7 | 110 | $21.44 | $2,358.40 | $90.68 | $9,974.80 | $280.06 | +334.8 |
| XIN | 11.0 | 170 | $21.76 | $3,698.75 | $29.84 | $5,072.80 | $66.33 | +38.9 |
| FM | 2.2 | 40 | $35.18 | $1,407.25 | $24.84 | $993.60 | $35.88 | -26.5 |
| EEM | 4.6 | 55 | $43.29 | $2,381.20 | $38.77 | $2,132.35 | $73.50 | -7.4 |
| Cash | 0.2 | $73.38 | $86.79 | |||||
| Total | 100.0 | $26,810.28 | $46,056.89 | $1,216.69 | +74.7 | |||
| Inception | $20,002.30 | +136.3 |
Comments: We experienced a modest recovery from the beating we took in the previous six-month period. The total value of the portfolio as of March 23 was $47,273.58, up about 2% from the November review. Nasdaq (ZQQ) was our best performer during the period, with a 5.7% gain in the unit price.
As a result, our cumulative gain since inception improved to 136.3%. That works out to a compound average annual growth rate of 8.04%. That’s at the bottom end of our original target range.
Changes: Despite weakness in world equity markets, this portfolio continues to offer excellent diversification and geographic coverage. We will not replace any components at this time.
We have a little money to reinvest so we’ll add to two positions.
XIC – We will buy 10 units at $30.87, for an outlay of $308.70. We now own 300 units, with retained earnings of $124.29.
XCS – We’ll buy five units at $17.89, for a cost of $89.30. We now own 170 units, with $12.32 left in the reserve fund.
All else remains the same.
We have cash and retained income of $905.48. Several banks have high-yield interest offers right now, some quite complicated. The best we could find was 4.65% on a Scotiabank Momentum Plus savings account, so we’ll put the money there.
Here is the revised portfolio. I will review it again in September.
IWB Global Portfolio (revised March 23/23)
| Security | Weight | Total
Shares |
Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Income |
| XIC | 19.9 | 300 | $22.63 | $6,788.65 | $30.87 | $9,261.00 | $124.29 |
| XCS | 6.5 | 170 | $16.28 | $2,767.20 | $17.86 | $3,036.20 | $12.32 |
| XSU | 13.5 | 185 | $17.96 | $3,527.35 | $33.79 | $6,251.15 | $123.33 |
| XSP | 20.8 | 230 | $18.29 | $4,206.10 | $41.94 | $9,646.20 | $102.98 |
| ZQQ | 21.5 | 110 | $21.44 | $2,358.40 | $90.68 | $9,974.80 | $280.06 |
| XIN | 10.9 | 170 | $21.76 | $3,698.75 | $29.84 | $5,072.80 | $66.33 |
| FM | 2.1 | 40 | $35.18 | $1,407.25 | $24.84 | $993.60 | $35.88 |
| EEM | 4.6 | 55 | $43.29 | $2,381.20 | $38.77 | $2,132.35 | $73.50 |
| Cash | 0.2 | $86.79 | $86.79 | ||||
| Total | 100.0 | $27,221.69 | $46,454.89 | $818.69 | |||
| Inception | $20,002.30 |
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