How can we help?

COVID-19 & Your Finances: How are WealthBar’s Portfolios Managed

Global stock markets have experienced unprecedented volatility as a result of COVID-19 and that has a lot of investors asking about the impact this will have on both their short-term and long-term finances. 

To keep you well informed, we’ve answered some of the most common questions we’ve received about how we manage our portfolios:

1. Are you making any changes to your portfolios as a result of the current volatility?

We won’t be changing the strategy behind our portfolios as they were designed to weather difficult markets. However, to make the most of current opportunities for our investors:

  • We are evaluating equity opportunities with plans to adjust geographic diversification once we have a better understanding of the impact to global economies. 
  • Before the market downturn we adjusted our ETF portfolios to reflect low interest rates and heightened credit risks in the US by reducing exposure to high yield bonds, and increasing the income from investment grade bonds. We expect to make additional adjustments to our Canadian bond exposure in line with that strategy as needed.

2. Why has my account not been traded this week?

When we place trades, our priority is to get a fair price on the asset for our clients. Nobody wants to pay more for something than it’s worth. When markets are operating normally we trade our ETF portfolios frequently throughout the week and we are able to get fair prices for our clients on those trades.

Recent increased market volatility has made it harder to get a fair price. Bigger ”spreads” have opened up between “bid” prices (what someone is willing to buy an investment for) and “ask” prices (what someone else is willing to sell an investment for). This difference has become much larger and less predictable than normal.

In order to ensure all our clients get a fair price on trades, we are trading our ETF portfolios a little less often so that we can pool the buying power of many clients. This situation is very fluid, but for now you may notice that cash takes a few extra days to be invested. This enables us to get the best possible outcome for all of our clients.

This only impacts ETF investments. This does not affect Nicola Wealth investments held in our Private Investment Portfolios, which will continue to trade weekly at market prices.

3. When does WealthBar rebalance my portfolio?

We rebalance portfolios when the investment mix drifts too far from the targets. We also invest cash from contributions and investment income to help keep portfolios balanced.

Rebalancing has always been an important part of our strategy and that hasn’t changed.

4. Is my portfolio performing the way it's expected to?

WealthBar portfolios are diversified by design to help you take advantage of growth when the market is up, and minimize losses when the market is down.

We don’t expect the portfolios to go up every month, or even every year, but over longer periods of time the returns should be in line with expectations for future returns of the asset mix in each portfolio. It's the mix of these assets (equities, fixed income, real estate, etc.) that drive returns.

The global selloff has impacted portfolios with exposure to public equities (stock and real estate). The higher the weighting in public equities, the more the portfolio has declined. With respect to fixed income (mainly bonds), a combination of panic selling, lowering interest rates, and credit concerns has led to a larger than expected drop in some of these investments, which will also be reflected in portfolios holding those assets (find the monthly performance of each of our portfolios here).

As the pandemic unfolds, investors around the world are trying to account for potential impacts (and timelines), many of which are largely unknown. We feel that heightened uncertainty is driving the current volatility and swings in the prices of investments. We expect this to resolve once the virus is better contained and the world has a better understanding of it.

5. Could you explain the strategies used in the WealthBar Private Portfolios to manage risk and minimize loss?

WealthBar’s Private Portfolios are powered by Nicola Wealth Management. These portfolios include private asset classes for enhanced diversification and protection against volatility. 

Historically, these funds have produced stable returns during volatile environments as more of the return comes from cash flow through dividend paying stocks, interest bearing bonds, and income producing real estate, as opposed to relying primarily on growth in the value of assets.

6. Is WealthBar doing tax-loss harvesting right now?

(Note: This question is relevant only for non-registered account holders.)

Given the level of volatility and uncertainty we believe tax loss harvesting introduces more risks than benefits at this time. We continue to evaluate market conditions and portfolio performance and will consider tax loss harvesting opportunities if they become appropriate.

7. For non-registered accounts, should I be concerned about receiving taxable dividends?

(Again, this question is relevant only for non-registered account holders.) 

When we selected the current ETF holdings in our portfolios, tax treatment of distributions were a primary concern. For North American equity and real estate investments, we use ETFs that do not pay out a distribution, which means that in times like these when we’re seeing a loss, there isn’t any taxable investment income from the equity and real estate in the portfolios. 

Still have questions?

See these other articles for frequently asked questions we’ve received in light of the COVID-19 crisis:

Was this article helpful?

sign up
sign up

Can’t find the answers you’re looking for?

Our customer care team is here for you.

Contact Support