Portfolio Alternatives

A traditional portfolio is made up of a combination of stocks, bonds and cash. Should we hold anything else?
High yield bonds, REITs, real return bonds, preffered shares, sector specific ETFs like infrastructure or healthcare stocks, are some other alternatives.

You can add any layer of complexity to your portfolio if you so wish, there really is no end to it. I have often wondered if it's even necessary. I ask myself "how much more stress would it add to my investing life"? Probably a lot. I worry enough as it is.

"Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas".- Paul Samuelson

If you really believe in the simplicity of investing then you really don't need some or any of the alternative investments out there. If you do then these are some of the alts out there;

REITs

Usually pay a higher than normal dividend so great to improve monthly cash flow of a portfolio. Very hard for retail investors to know which ones to buy. More suited to buy an ETF like XRE or ZRE. The problem I have found investing in these vehicles in the past is the distribution very seldom rises so you will have income but it doesn't grow.

The other drawback to these ETFs is that they are dominated by just a couple of Canada's biggest REITs. This is a big drag on performance. Lastly the monthly expense ratio is high for what you are getting, even though it's diversified. I would rather be concentrated in the best not the most. I do not own ZRE or XRE or any individual REITs in my retirement account.

RRBs Real Return Bonds

I don't buy them, I wouldn't know which ones to buy. You lend the government your money, buy at a discount today and receive all your money back at a future date. They are pegged and rise in value as inflation ticks up.

I hate bonds because I don't like to invest in the government and neither does Warren Buffett. That's good enough for me.

High Yield Bonds 

Expensive in ETF form with a high MER which would be the only way to own them as a retailer. You would never enter this world as a newbie investor. Too complicated. They really do well in an up market. The only time I owned these was in 2009 after the financial crisis. I had no idea what I was doing and only bought them because the market was rising. I own ZERO high yield bonds and because I like simple, I just stay away.

Sector ETFs

What sector and when? I don't try and rotate in and out of sectors or different commodities like lead, copper, lithium or cannibas and the other tens of investment vehicles you could own. This again is way too hard to pick sectors and adds a layer of complexity you don't need and another cost that will slowly eat away at your yearly returns.

Professional money managers love to spin tales of how you must be in certain sectors and out of others. This is how they make money and not really suitable for you and I.

Gamble if you like but this is too complicated for me.

Preferred Shares

Usually held to juice monthly cash flow. They do well in a rising interest rate environment. I hold ZPR in my wife's RRSP as an alternative and in combination with a bond ETF.

They are difficult to pick individually without expertise so I only have experience indexing the whole pref share market. 

In Sum

I just stick to good solid companies and hold on for the long term. It is probably prudent to hold cash for buying opportunities. Everything else are shiny objects distracting you from your retirement goals. Consider these alternatives but remember you are adding another layer of cost and complexity to your portfolio.

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