8.5%
GLOBAL PORTFOLIO ON TRACK
By Gordon Pape, Editor and Publisher
There are three basic ways to invest.
The first is to pick your own securities. If you’re good at it, you may do well. If not…
The second is to have someone do the selection for you. That can be a financial advisor or an activist fund manager.
The third is to simply track indexes. Where the TSX or the S&P go, you go too.
Number three is the direction I chose for the IWB Global Portfolio. It invests only in passive ETFs that cover most of the world’s markets, with a heavy weighting to Canada and the US.
After doing well for several years, the portfolio took a hit in 2022, when high interest rates, burgeoning inflation, and the Ukraine war took a heavy toll on global markets. This year has been somewhat better, with the portfolio posting a gain of almost 10% between late March and Sept. 21.
The 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.
Here’s a look at how our ETFs have performed since the last update in March. Results are as of mid-day on Sept. 21.
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 managed a slight gain over the past six months, so we experienced an increase of $0.98 per unit. Because of timing we received one quarterly distribution of $0.267 per unit.
iShares S&P/TSX Small Cap Index ETF (TSX: XCS). This ETF tracks Canadian small cap stocks. This sector of the market was marginally lower in the latest period and the units lost $0.29. Because of timing, we received one quarterly distribution of $0.118 per unit.
iShares US Small Cap Index ETF (CAD-Hedged) (TSX: XSU). US small cap stocks finally staged a modest rally. The units were up $1.25 or 3.7%. We received a semi-annual distribution in June of $0.173 per unit.
iShares Core S&P 500 Index ETF (CAD-Hedged) (TSX: XSP). This ETF tracks the performance of the S&P 500. It posted a nice gain of $4.17 (9.9%) during the March-September period. We received a mid-year distribution of $0.248 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. Thanks to a strong performance from the so-called “Magnificent Seven” tech stocks, this ETF recorded a strong gain of $14.31 (15.8%) in the period under review. There were no distributions during the period.
.iShares MSCI EAFE Index ETF (CAD-Hedged) (TSX: XIN). This ETF tracks markets in Europe, Australasia, and the Far East. Despite the on-going problems in China, the stock markets in those countries posted positive returns during the period and these units gained $1.97 (6.6%). We received a semi-annual distribution of $0.468 per unit in June.
iShares MSCI Frontier 100 ETF (NYSE: FM). This ETF holds major companies in Third World countries from Nigeria to Vietnam. These markets have not done well for us, but we saw a bit of a turnaround in the latest six months with the units up US$1.31 (5.3%) since the last review. We received a mid-year distribution of US$0.428 per unit in June.
iShares MSCI Emerging Markets ETF (NYSE: EEM). After a long losing streak, emerging markets produced a small loss 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 $21.05 in interest from the cash balance in our Scotiabank Momentum Plus savings account.
Here’s a look at how the portfolio stood on the afternoon of Sept. 21. 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 Sept. 21/23)
| Security | Weight | Total
Shares |
Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Income |
Gain/
Loss % |
| XIC | 19.2 | 300 | $22.63 | $6,788.65 | $31.85 | $9,555.00 | $204.39 | +43.8 |
| XCS | 6.0 | 170 | $16.28 | $2,767.20 | $17.57 | $2,986.90 | $32.38 | +9.1 |
| XSU | 13.0 | 185 | $17.96 | $3,527.35 | $35.04 | $6,482.40 | $155.34 | +88.2 |
| XSP | 21.3 | 230 | $18.29 | $4,206.10 | $46.11 | $10,605.30 | $164.62 | +156.1 |
| ZQQ | 23.2 | 110 | $21.44 | $2,358.40 | $104.99 | $11,548.50 | $280.06 | +401.6 |
| XIN | 10.8 | 170 | $21.76 | $3,698.75 | $31.81 | $5,407.70 | $145.89 | +50.1 |
| FM | 2.1 | 40 | $35.18 | $1,407.25 | $26.65 | $1,066.00 | $53.00 | -20.5 |
| EEM | 4.2 | 55 | $43.29 | $2,381.20 | $38.08 | $2,094.40 | $97.04 | -8.0 |
| Cash | 0.2 | $86.79 | $107.84 | |||||
| Total | 100.0 | $27,221.69 | $49,854.04 | $1,132.72 | +87.3 | |||
| Inception | $20,002.30 | +154.9 |
Comments: After taking a hit in 2022, the portfolio has done well so far this year. The total value as of Sept. 21 was $50,986.76, up about 8% from the March review. Nasdaq (ZQQ) was our best performer during the period, with a 15.8% gain in the unit price.
As a result, our cumulative gain since inception improved to 154.9%. That works out to a compound average annual growth rate of 8.48%. That’s comfortably within our original target range.
Changes: The portfolio is performing as expected. I see no need to replace any components. There is not enough in retained earnings to reinvest so we’ll let those ride.
We have cash and retained income of $1,240.56. Duca Credit Union is offering 5.25% on its high interest savings account with no minimum balance, so we’ll invest the money there.
I’ll review the portfolio again in March.
Previous updates
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