Q3 2020 Portfolio Migration

How did you change the fixed income allocations and why?

We removed shorter-term government bonds and replaced them with a mix of credit-bearing bonds, longer-term bonds, and gold. We hold fixed income for two reasons: because we expect it to earn a return over time, and to diversify against equity risk in our portfolios. Because of central bank and government responses to the coronavirus, the price of bonds has gone up significantly. For some bonds we held, particularly those with shorter time horizons, we don’t believe they can continue to appreciate in price, meaning they wouldn’t be able to achieve either of our goals.

Why have you added gold?

Gold has a reliable relationship with inflation over the very long term. We hold it to replicate the inflation-hedging parts of our fixed-income allocation that no longer offer the potential for diversification or return. The gold holdings we’ve added are a very small part of our portfolio.

I thought Wealthsimple believed in staying the course and not changing your investments based on the markets. What gives?

Our investment philosophy hasn’t changed; Wealthsimple firmly believes in low-fee, diversified passive investing and the new holdings reflect those values. Passive investing means taking broad exposure to all markets rather than choosing some over others and this is what we do. The new holdings do not reflect a specific investment view on any industry or geographical region of the world, but rather are a reflection that we needed a new set of assets to fulfill the role of fixed income in the portfolio.