Andrew Hallam
02.01.22

Yes, Spiderman Can Make You A Super Investor
_

The latest Spiderman movie, No Way Home, grossed $1 billion in just its first week. That makes it the pandemic-era’s highest selling film. It’s easy to love Peter Parker, the high school kid who was bit by a Krypton-esque super spider. It gave him freakish abilities to climb walls, sense danger and pound a UFC fighting champ with a single finger. But audiences relate to the guy’s very human flaws.

In the film, No Way Home, he asks his fellow Marvel hero, Dr. Strange to cast a spell on the world. In the previous Spiderman film, his identity as Peter Parker is revealed. Parker wants Strange’s spell to wipe that memory from everyone. But while Dr. Strange casts the spell, Parker continues to request that he adjust it. That messes everything up, opening a gateway to Spiderman’s mortal enemies from different dimensions to try to destroy him.

Spiderman films entertain the masses. But according to at least one source, they were written as allegories for how people should invest. For example, Peter Parker’s girlfriend, MJ, his friend Ned and his Aunt May are like bond ETFs. By themselves, they have no real power. In theory, if Spiderman lived alone in a cob-webbed apartment and didn’t have friends, family or a love interest, that would free up time to web more bad guys. He wouldn’t have to worry about anyone attacking his family or friends. From the outside, looking in, loved ones are liabilities.

After all, he can’t fight as well with MJ on his arm, especially when a creep like The Goblin drops her from a building. During a period of soaring stock market returns, such as we’ve had over the previous ten years, this is how many people feel about bonds. When stocks are rising, they hold portfolio’s back. They’re especially shunned when they earn paltry interest, much as MJ might be if she insisted on carrying a portable fridge.

But Spiderman’s friends save him–often from himself. They provide emotional grounding, whether it’s Aunt May reminding him of his core values or MJ or Ned providing emotional support. Could he snag as many bad guys without them? No way.

Your portfolio is much like that. Bond ETFs pay paltry interest and they don’t soar like stocks. But when the going gets rough, you’ll be happy to have them. After all, we don’t own them for their interest-paying ability, much like Peter Parker doesn’t hang out with Aunt May for her left jab and upper cut.

Bonds prevent us from pooping the bed when stocks fall hard. When stocks fall 30 percent, 40 percent of 50 percent, especially if they stay down a few years, such as they did during 2000, 2001 and 2002, a portfolio with a bond allocation won’t fall as far.

That can keep investors from tossing in the towel or trying to time the market. It can give investors courage to keep adding money. And those factors, eventually, will help build more wealth.

Plenty of headline hungry journalists enjoy calling for the death of bonds. But they reveal their ignorance, not their sophistication. For example, when they quote someone who says, “I wouldn’t own bonds,” the source typically refers to individual bonds. I wouldn’t want them, either. Here’s why. When you buy a ten-year government bond, for example, that pays 2 percent per year, it could lose to a plastic Spiderman toy. Such toys, for example, increase in price with inflation. If inflation averages 3 percent per year over the next ten years and a US government bond pays 1.7 percent, that bond loses 1.3 percent every year to that Spiderman toy, a roll of toilet paper or a tube of hemorrhoid cream.

A short-term or broad market bond ETF, however, is a different animal. It has virtually no chance of losing to inflation over a three-year period. For example, when inflation rises, bond prices drop. That might sound like a villain tossing sand at your face or rolling an explosive at your feet, but it isn’t. When new bonds are issued, the issuers of those bonds increase interest payouts. A broad bond market ETF is like a revolving door. When a one-year bond expires within that ETF, the fund company replaces it with another one-year year bond. If bond prices have fallen and interest rates have risen, that’s good for investors in diversified bond market ETFs. It’s much the same when a three, five or ten-year bond expires. They get replaced at the new, going rate.

Investors face higher odds of success when they stay the course. And the best way to do that is with an all-in-one portfolio of stock and bond market ETFs. I’ve written about such products here, for Canadians and Australians. Asians, Europeans, African, Middle Easterners and Canadians living in Europe should consider one of these.

British investors might consider these.

All-in-one portfolio funds are one-stop shops. But don’t mistaken simplicity for something sub-par.

In the investment world, these are super heroes…with the best Aunt Mays, Neds and MJs in their corners.

Andrew Hallam is a Digital Nomad. He’s the bestselling author Balance: How to Invest and Spend for Happiness, Health and Wealth. He also wrote Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas

Swissquote Bank Europe S.A. accepts no responsibility for the content of this report and makes no warranty as to its accuracy of completeness. This report is not intended to be financial advice, or a recommendation for any investment or investment strategy. The information is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Opinions expressed are those of the author, not Swissquote Bank Europe and Swissquote Bank Europe accepts no liability for any loss caused by the use of this information. This report contains information produced by a third party that has been remunerated by Swissquote Bank Europe.

Please note the value of investments can go down as well as up, and you may not get back all the money that you invest. Past performance is no guarantee of future results.