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Discussion Starter · #1 ·
It is my first post in this forum. Sorry if this questions has been asked before, I couldn't find a current answer.

I am at a loss to balance my portfolio with the present extremely low rates and expected high inflation. I am 66 year old with a pension that I can live on (unless inflation kills it) and a substantial portfolio. Usually, I have kept my portfolio 40% bonds and 60% stock. My portfolio is now back at the pre-crash, September 2008 level.

With the expected inflation, I have sold all my bond ETF's and I am left with 15% long term bonds (mostly BCE, bought very cheap), 8% high yield bond funds (Chou and AGF) and 12% cash.

I would like to have more protection against the possibility of another crash without overexposure in case of high inflation. I have started to buy some real return bonds (XRB) but I am concerned that they did fall 20% last October - I don't understand why and it isn't much protection against a crash.

The best I could find for my cash is a 1% Smart Savings Account. I feel excessively exposed if there is another crash. Any advice would be appreciated.
 

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Discussion Starter · #5 ·
Thank you Leslie and Sampson for your reply. The RRBond graph is very useful.

I was under the impression that when inflation would rise the yield of RRBonds would be automatically adjusted to the inflation so that their value would not go down the way regular bonds would go down. Am I missing something? I have now 1% of my portfolio in RRBonds, since I do not understand them well, I will not buy more.

Yes, my pension is fixed but it is 20% more than what I spend now and I have an RRSP that I will be forced to liquidate gradually in a few years - its income will equal my pension. I think that will be enough if I live for 30 years with a sustained inflation of 4% - both being pessimistic assumptions.

I also have the rest of my portfolio that I do want to manage responsibly so that I could survive a much higher inflation and, mostly, I would like to leave as much as possible to my children. This is why, despite the crash of last year, I do not follow the rule of having 65% of bonds in my portfolio, particularly given the current yield of bonds.

I am more scared of a sustained high inflation than I am of a stock crash, which explain the present balance of my portfolio. However, I would like to reduce my exposure to a stock crash but I can't find the right vehicle.
 

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Discussion Starter · #8 ·
Thank you Robillard. I do not understand the Mx criteria, but it is good to see some experts more optimistic about inflation than the news media. From a layman perspective, I think that the US will not manage to reign in their deficit. I am still assuming that we are in a bond bubble.

I have been studying the RRBond yield graphs that Leslie had referred to. I have tried to relate them to the price of XRB and I am more puzzled then ever. I like the fact that the XRB price went up 10% in the first 9 months of 2008 while the stock market was declining.

Berubeland, as a question of life style, I would not want to have direct rental properties. Do you have any opinion on real-estate ETF's?

Actually, I am well protected (may be too much) against inflation. More than 40% of my portfolio is in commodities now (including the XIU component). Sorry '$1600 Gold by 2011', I think gold will loose its strength as a standard. I prefer copper (FM); it is more useful. In the last 3 months, for instance, FM has appreciated much more than XGD - China needs copper not gold.

I have 15% in non-hedged International (Claymore ETF's). I think that the US $ will sink and that the Canadian $ will go higher than parity but still move down relative to International currencies.

I am coming to the sad conclusion that the only way to protect against a crash, without loosing too much with inflation, might be to have significant cash, at 1% for now.

Finally, I am looking into International High Yield funds; I do like the AGF fund. Any opinions?
 

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Discussion Starter · #10 ·
Thank you Leslie. You are a mine of information.

Yes, speaking of face value and payments for RRBonds, rather than yield, makes then more understandable. I will read the references you indicated.
 
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