How to hold bonds for Canadians

Added: 2026-05-19

[00:00:00]So, what is the best way for Canadians to hold bonds in 2026? That's kind of the wrong question. There's no single best option. There's a decision framework to think about. Four questions you want to ask yourself or think about to land on the right structure that works for you. The four options today is individual bonds you buy directly. bond ETFs like XBB or Z A bonds bundled inside an all-in-one ETF like VBA or VGRO or looking at a GIC or defined maturity ETF ladder. Many Canadian forms might have you believe that there's one single best option that's not quite true. So the right one depends on you.

[00:00:36]Question one is if you're accumulating or drawing down. So in accumulation bonds are a small drag on returns.

[00:00:44]Simpler the better. Honestly, an all-in-one ETF or a single broadbond ETF in your RRSP totally gets the job done in accumulation though or retirement.

[00:00:54]So, bonds do three jobs all at once. One is income, one is sequence of returns risk, and it's also rebalancing fuel when equities crash and the structure starts to matter a lot more because of those. Question two is which account is the bond going in? Inside an RRSP, the tax difference between vehicles mostly disappear. pick for simplicity.

[00:01:15]Honestly, in a nonregistered account, the premium bond tax problem is super real. Justin Bender at PWL Capital has shown that broadbond ETFs holding discount bonds beat GIC's at par on an after tax basis for top rate and in a corporation the math on bonds is brutal.

[00:01:32]Question three is, are you matching a known liability or providing an open-ended balance? If it's a known liability like the bridge ears before retirement or when CPP and OAS start to kick in, you want a non-rolling structure. So a GIC ladder, a strip bond or an RBC style target uh maturity ETF, the duration declines to zero at maturity so it's predictable end date.

[00:01:53]If you're more open-ended balance and you want that bond ETF or an all-in-one with constant duration so the vehicle matches the need. Question four is the hardest one. What can you behaviorally hold? Your bond ETF lost almost 12% back in 22. If a number like that makes you want to sell, the ETF is definitely the wrong move for you. Even if it's mathematically optimal, the GIC ladder hides the same economic loss and removes that temptation to sell if your spouse cannot manage seven CDIC institutions and three brokerage loginins. Simplify this ruthlessly. Agewave 2018 widowhood study found that only 14% of widows had been the household financial decision maker before the spouse died. So the structure that survives the gap is the one worth picking. For most Canadians uh the answer is going to be layered. So it's not one vehicle. It could be a combination. A GIC or target maturity ladder for the bridge years a bond ETF as a balancing reserve and all-in-one when survivability beats optimization.

[00:02:53]The best vehicle is the one you actually hold longterm. Decide before you buy what you