If not bonds, then what?

Ask a Planner

By Allan Norman, MSc, CFP, CIM on January 8, 2026
Estimated reading time: 5 minutes

Many investors disparage bonds—with good reason. You have to determine what problems these investments solve and whether there are viable alternatives.

I was recently warned by someone in the financial sector to think twice about investing in bond ETFs right now because now’s not a great time to do that. However, what alternatives are there for that 40% [fixed-income] portion of my balanced portfolio?

I thought about REIT ETFs, but read that they should be considered equity. I thought about Mortgage Backed Security (MBS) ETFs, but there seems to be only one in Canada (XMBS) and its chart seems to be very unimpressive.

I’m kind of at a standstill at the moment as I decide how to invest that 40%. Thanks for any advice you share.

—Jessica

Hi Jessica. I can understand why someone may have suggested why now is not a good time to buy bonds or exchange-traded funds (ETFs) invested in bonds. The average five-year return on bond funds has not been good, interest rates are fairly low, and there is uncertainty as to which direction interest rates generally will go, up or down.

Over the same time, equity markets have provided returns well above historical averages, which can lead people to take more risk than they normally would by reducing their bond holdings.

Adding to that, if you look at pre-tax historical bond returns, there have been some long stretches when returns have been really bad as you can see in the table........

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