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Long-term bonds used to be the smart investor’s way to squeeze some juice out of the fixed income side of a portfolio.

One of the basic rules of bond investing is that the longer your term, the greater your risk and potential reward. With long bonds, you get higher yields and more capital gains in times of falling interest rates.

The interest rate surge of 2022 has annihilated long bonds while highlighting the defensive quality of short-term bonds. Bonds maturing in one to five years have fallen in price this year - let’s not over-dramatize their heroics. But the drop in the FTSE Canada Short Term Overall Bond Index for the year through June 8 was 4.6 per cent on a total return basis (price changes plus bond interest). In the bond market of 2022, that’s a comparatively strong performance.

The FTSE Canada Universe Bond Index, a proxy for bonds of all maturities in the government and corporate sectors, was off about 12.5 per cent over that same timeframe. It seemed remarkable when the Canadian bond market entered double-digit loss territory a few weeks ago. Now, it’s pushing even lower.

Long bonds are the bigger disaster, though. The FTSE Canada Long Term Bond Index was off 22.3 per cent for the year to date. When rates peak, long bonds could be a fantastic rebound play. For now, they are like lighting your money on fire.

Short bonds are the opposite. They offer a decent yield to maturity around 3.5 per cent and have withstood the surge in interest rates this year with losses that seem modest compared to other parts of the bond market. If you were to add new money to your bond holdings this year, consider a short-term bond ETF for minimal drama.

Guaranteed investment certificates offer less drama, and yields of as much as 3.75 per cent and 4.45 per cent for terms of one and five years, respectively. What you gain with short-term bond ETFs is better liquidity – just try selling a non-redeemable GIC before maturity – and the potential for capital gains when interest rates peak and then start settling lower.

-- Rob Carrick

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The Rundown

If a tanking portfolio is stressing you out, try this: Unfollow the stock markets

Being too immersed in the daily turbulence of financial markets, and compulsively checking in on one’s own investments, can actually be detrimental to performance. Research consistently shows that excessive monitoring of short-term returns results in poorer outcomes over the long term, writes Tim Shufelt.

Now that bitcoin is dead (again), is it time to buy?

So, is bitcoin dead? From a peak in November, 2021, of nearly US$70,000 for one unit, bitcoin’s value has been cut by more than half to about US$30,000 currently. The broader cryptocurrency market has similarly tanked. Well, the answer to that question is that bitcoin dies often. It has fallen by 50 per cent or more at least seven other times. Ethan Lou takes a look.

DRIPs are a great way to build registered portfolios, but they bring headaches elsewhere

If his correspondence is any indication, investors seem to be more interested than ever before in Dividend Reinvestment Plans, more commonly referred to by the rather unflattering acronym DRIPs. Gordon Pape has been asked questions about whether they are recommended for RRSPs, how they’re taxed, who offers them, what advantages they confer, and more. So, it seems like an opportune time for a quick primer on DRIPs and how they work.

Others (for subscribers)

Monday’s analyst upgrades and downgrades

Monday’s Insider Report: CEO is a buyer of this stock yielding 5.7%

The most oversold and overbought stocks on the TSX

Analysts’ forecast returns and recommendations for all stocks in the S&P/TSX Composite Index

Hedge funds pre-empt jump in U.S. yields, but cool on greenback

Why this money manager is sticking with energy and tech stocks despite the market drop

Globe Advisor

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Ask Globe Investor

Question: Is it possible to know whether a particular stock is included in an exchange-traded fund? If so, how does one go about finding out?

Answer: It’s actually pretty easy. All ETFs publish a list of their holdings and the percentage weights of each security. A quick way to find this information is to do an internet search for the fund’s ticker symbol followed by the letters ETF.

For instance, say you’re wondering which stocks are in the BMO Canadian Dividend ETF, which has the symbol ZDV. If you search “ZDV ETF” (without the quotation marks), one of the first results will be a link to the main page for ZDV on the website of BMO Global Asset Management.

Once you’re on that page, scroll down and click on the “holdings” tab. This will reveal the ETF’s top 10 holdings, which are all familiar names such as Enbridge Inc. (ENB), BCE Inc. (BCE), TC Energy Corp. (TRP), Canadian National Railway Co. (CNR) and several large banks. You can then expand the list to see all 51 holdings. Other ETF companies present their fund holdings in similar ways.

-- John Heinzl

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Compiled by Globe Investor Staff