How the Bond Market Could Affect Your Retirement Funds

Posted October 08, 2018 11:24:58It’s been a good few years for Canadian investors in the bond market, as stocks and bonds have been on a tear since mid-2014.

The Canadian bond market is up more than 100% in the last five years, according to the Canadian Real Estate Association.

But some investors, including those who own fixed income, are worried about what the market will look like in five years.

In an interview with CBC News, Vanguard and Fidelity Investment Management chief investment officer Doug Roksa said the bond markets could grow more volatile and the risk that the markets will crash is a concern.

Roksa told CBC News the bond bubble has been a boon for many Canadians.

“People are looking to get into the market and get out of the market,” he said.

“We have an infrastructure of bonds that’s growing at a healthy pace, and we have a real estate market that’s doing well.”

Roksonas company has also been investing in a range of bonds, including Canadian-made and U.S. bonds, which he says are now better than other bonds in terms of their performance.

“It’s just an investment that’s more diversified, that’s less risk-free,” he explained.

“And that’s the thing that we like about bonds.”

Rokuas company is now buying and selling bonds in Canada, as well as in the U.K., Japan and Australia.

He said the companies interest in the bonds has grown over time, and they are now investing in more of them.

“In the U, it’s the bonds that have grown most in the industry and that we are now buying,” he noted.

“When you’re buying bonds, you’re not buying a bond that’s going to pay you $1.00 in five or 10 years, it is a much more diversifying investment.”

Roksas company, Vanguard Canada, is buying bonds in the market through the BIS and the Investment Board of Canada.

He explained that the company is looking for the right mix of debt securities that are both stable and can be traded in the future.

“I think we’re looking for a mix of bonds with very high credit quality, as opposed to bonds that are highly rated, which are very risk-prone,” he told CBC.

“The reason we’re buying the bonds is that it gives us the ability to invest in both the U and Canadian bond markets at the same time.”ROKSAS company also has an exchange-traded fund, called Fidelity Canada, that is also selling bonds.

The company is currently buying $5 billion worth of bonds through its ETF, the Fidelity Fund Rise, which has a $100 million allocation.

Rokssa said his company is still making its investments, but said that in five to 10 years the market is going to grow even more, and that’s good for investors.

“There’s going be a lot more risk, a lot of volatility,” he added.ROKSA said that for some investors the bond boom has been good for them, because they’re able to diversify their investments.

“They can buy bonds that they may not necessarily want to hold as a diversification strategy,” he acknowledged.

“So if you’re going to buy a bond, I would say that it would be a good thing for you to buy it in a diversified portfolio.”

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