# Fixed Income Diversification?



## Juggernaut92 (Aug 9, 2020)

Hello All,

I am building up some fixed income into my portfolio. I bought around $1000 worth of ZAG recently. I am aiming for 10% portfolio allocation into fixed income for now. I may buy more if bonds stay this low for a while. My time horizon is 30 years+ (will retire in more than 30 years). 

While buying ZAG I was thinking about Diversification. Canada is quite a strong nation with a good credit score but I wanted to know if others on here diversified their fixed income? Have people bought fixed income such as ZAG which consists of CAD government and Corporate investment grade bonds but then also bought fixed income ETFs from other developed countries or emerging markets?

Or do people feel like just buying fixed income from Canada and Canada alone is good enough for their Fixed income in their portfolio?

Any feedback would be appreciated.


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## bigmoneytalks (Oct 3, 2014)

I am also interested what people respond here. I have 20% of my portfolio money in XBB. I wonder if I need to diversify into other bonds regionally or internationally. My equities is very diversified however...


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## newfoundlander61 (Feb 6, 2011)

With interest rates being so low and likely to stay this way some time some stocks can be used for income instead of actual income products. BCE & Fortis as two examples.


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## Thal81 (Sep 5, 2017)

Equities are no replacement for proper fixed income.


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## hfp75 (Mar 15, 2018)

Im using a 50/50 split between zag & clf for my allocation…. I am all canadian bonds…. A small exposure to corp in a few accounts using cbo.

sorry !! Using vab ! Forgot but virtually the same as zag.


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## Juggernaut92 (Aug 9, 2020)

hfp75 said:


> Im using a 50/50 split between zag & clf for my allocation…. I am all canadian bonds…. A small exposure to corp in a few accounts using cbo.


Interesting. Thanks for sharing. ZAG is long term bons and from BMO and CLF is from ishares and is short term bons. That feels like better diversity than just ZAG. I may consider adding some CLF into my portfolio.


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## hfp75 (Mar 15, 2018)

You could also consider zst ultra short virtually no interest rate risk….


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## Lee P. Hernandez (Oct 11, 2021)

How is diversification achieved in fixed income portfolios?


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## damian13ster (Apr 19, 2021)

Lee P. Hernandez said:


> How is diversification achieved in fixed income portfolios?


High yield bonds, low yield bonds, government treasuries, foreign government debt, GIC, prefereds (although some mix of equity in it), etc.


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## Ukrainiandude (Aug 25, 2020)

Slightly off topic. 
anyone knows why yahoo finance doesn’t show the information as it used to?
now everything for certain Canadian ETFs is NA


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## londoncalling (Sep 17, 2011)

Best Savings Rate: U.S. Government Series I Savings Bonds Offer 7.12% - Bloomberg 

Haven't followed up on this and don't know if it limited to US investors only but the headline caught my attention. I don't buy fixed income but thought I would post to see what people think about this offering. Is it financial pornography?


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## doctrine (Sep 30, 2011)

londoncalling said:


> Is it financial pornography?


_There are some catches, of course. The rate is guaranteed for the first six months. After that, it adjusts based on inflation. You have to hold onto your investment for at least a year, and if you exit before five years, you’ll lose three months of interest — which brings down the effective rate you’d been earning. Plus, the maximum you can invest in a calendar year is $15,000, and the bonds aren’t tradeable._

Bonds are pretty brutal. Not that cash is much better, but I would either be in cash or the most liquid bonds possible. Look at the havoc caused in March 2020 when the bid simply evaporated for almost all bonds. I used to have a 70-30 in my registered accounts, but after last year, I sold all my bonds and haven't looked back. 

And if anything was truly 7%, then you would be in a very high risk category. Worst than high yield junk bonds, which are below 5%.


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## james4beach (Nov 15, 2012)

The US I-Bonds really are a tremendously good buy. But those are only available to US residents, as they are through a special program of the Treasury which is meant to provide individuals with good savings options.

I have a few American friends who own I-bonds. One guy has an 80K portfolio because he's routinely been buying them for many years. They have confirmed for me, yes, they are now earning 7%. There really is no risk to those. But again these are government-subsidized, special savings vehicles. These aren't marketable securities.

It's kind of like a GIC program run by the US Government with a special kind of instrument that's indexed to CPI. We don't have anything like it in Canada, except the old Canada Savings Bonds (which were discontinued).



doctrine said:


> I used to have a 70-30 in my registered accounts, but after last year, I sold all my bonds and haven't looked back.


I'm sticking with my typical bond and GIC allocation. I have 50% in fixed income which is roughly half GICs, half regular bonds


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## Juggernaut92 (Aug 9, 2020)

I was considering posting in this thread and giving it a bump since I did not really get an answer in terms of FI diversification. I actually ventured out and and bought some BND in addition to ZAG. BND is listed in the US and is for treasuries/government and corporate bonds in the US. For now I am not sure if I want to get into international (outside of NA) bonds but would be interested to hear if anyone else went that way or if they just feel safe with domestic bonds?


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