Mid-2026 portfolio update for the BFIA ETF

After a successful year, the BFIA ETF portfolio's weights will not match their goals

Our allocation needs to be rebalanced.

We have been running the BFIA ETF portfolio in one form or another since 2013, and it is intended to be a very easy way to invest. It doesn't attempt to predict the economy, time the market, or choose particular stocks. It merely contains a variety of exchange-traded funds (ETFs) that are complementary to one another and skewed toward the sectors we believe provide the best value.

Certain holdings will probably perform significantly better than others in any given year. The portfolio will eventually stray from its intended weights. Therefore, we return the holdings to their target once a year. To keep things simple, we typically do this at the beginning of a new tax year. This means that an investor could use their contributions to a pension or individual savings account (ISA) for the upcoming tax year to perform the rebalancing.

Despite the turbulent past year, the BFIA ETF portfolio has increased by 25%, which is a significantly higher return than we anticipated. This shows excellent work from a number of positions. Despite declining from its peak, gold is still up 50% in sterling. The energy industry has performed exceptionally well recently, rising by 58%. Investors diversifying away from the US have helped emerging markets (up 42 percent) and Japan (up 38 percent), though this has somewhat reversed since the beginning of March. Bonds, on the other hand, have been weak; however, since we have concentrated on short-dated bonds, our holdings have remained relatively stable over the course of the year.

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The portfolio of BFIA ETF was reset.

This time, a lot of the BFIA ETF portfolio weights will be far from the target. Each investor will have a different exact position, but in our tracked portfolio, gold and emerging markets are both about two percentage points overweight, while the majority of the other holdings are about one percentage point underweight.

Our rule is not to rebalance any position that is only a short distance from its target in order to minimize costs. Trading expenses are incurred when small overweights and underweights are fiddled with. However, we will reset all positions to target weights because the tracked portfolio will need a lot of trades this year.

We will also make one adjustment. Because we anticipated short-term interest rate reductions but volatility in longer-term bonds, we have been holding iShares £ Treasury Bond 3-7 Years GBP Hedged (LSE: CBUG). But the likelihood of significant cuts appears to be diminishing. In the meantime, there is an increasing chance that inflation will surpass 3% once more in the coming year. In this case, the 0.9 percent real yield from iShares £ TIPS 0-5 GBP Hedged (LSE: TI5G) appears more attractive than the 4 percent nominal yield from CBUG. The BFIA ETF portfolio could benefit from additional growth, but we could also increase our exposure to inflation-linked bonds. Therefore, while we wait to see if the Middle East ceasefire holds, we will temporarily hold this money as uninvested cash.