Thank Goodness We Didn’t Dump the Bond Fund Yet!

With the endless wailing and gnashing of teeth on the news about the recent drops in the various world stock markets, I decided to update our info on our work defined contribution pension plans. I’ve written about the fact that we have money invested in a PH&N Bond Fund in this plan. I’ve agonized for several YEARS now about whether to sell that position or not. Because I am very risk averse, and a great procrastinator, and am skeptical that any significant rise in interest rates is going to hit in the short term, I’ve left the money there. And frankly I’m glad I did.

How Has the Bond Fund Done Year to Date?

So far, till almost the end of September, the Bond Fund has returned a little over 3%. Since I have made no new contributions to the fund all year, that’s a fairly accurate number.
Until a couple of months ago, that number was closer to 6.5% and it seemed a bit small compared to the 13% return we were seeing on a “mostly European” international fund.

How Are the International and TSX Funds Faring During the Slump?

Well, the international, including US, funds are breaking even. They haven’t lost any money, yet. But it’s close.

The TSX fund is in the red.

How Is the Entire Defined Contribution Balance Looking?

Well, right now it’s essentially at a break-even point. The total amount has only grown by the amount of new contributions made this year. So technically, it’s losing money at whatever the rate of inflation is for the year.

If that doesn’t sound possible, it’s important to remember that the amount invested in the Bond Fund is fairly high compared to the amount invested in the TSX and international funds. And right now, I’m happy about that!

Related Reading

Join In
Do you still have some money tucked away in a Bond Fund? Is it providing some comfort and peace during this time of turmoil? Please share your views with a comment.

2 thoughts on “Thank Goodness We Didn’t Dump the Bond Fund Yet!

  1. Do you have an appropriate asset allocation plan for your needs which you keep in balance? For me each month when I contribute to my investments I buy the asset class or classes that is below my target % for eash asset. For last few months I have been buying equities especially Canadian as they have been taking a real beating compared to most asset classes which put the cdn equity portion of my portfolio below my target %.

    • Yes, asset allocation is very important; in fact some books I’ve read suggest it is MORE important than any other factor in long-term success.

      I don’t re-balance monthly but I do re-balance when I have new money to invest. I also do tend to “buy low” so if a class has lost value, I will add more $$ there as soon as it’s practical (sometimes in a non-registered account) rather than sell off my winners.

      We have a slightly odd approach to the fixed income portion of our allocation though. We invested primarily in only fixed income for years until we had enough to fund a “could just get by” lifestyle entirely from it. Then we started into equities. So we don’t need to add more to fixed income and we don’t usually sell any of it off to re-balance. We just try to keep the equity investments in an agreed-on asset allocation across Cdn/International including US and across the types of companies they are (e.g. transportation; oil and gas; utilities; etc.) by adding new money via individual stocks or ETFs.

      We’ve been gradually re-shaping our portfolio to match our long-term plan across things like DC Pensions, TFSAs, RRSPs, LIRAs and non-reg accounts. It’s taken some time to figure out where best to hold what. For e.g. the Bond Fund for fixed income that we can get in one DC plan has a very low MER and fee, much better than we could get if we bought it elsewhere.

      It sounds like you have a good plan that’s working smoothly. That’s half the fight!

Leave a Reply

Your email address will not be published. Required fields are marked *