Investment Q&A

Q: For taxable accounts, a US-listed international ETF (or Cdn-listed ETF, with an underlying US listed ETF) is tax inefficient because the international withholding tax is not recoverable. Purchasing a similar Cdn-listed ETF which holds the international stocks directly (i.e. not a US-listed ETF) is more tax efficient as the international withholding tax is recoverable.

However, there are often advantages to buying the US-listed ETFs as they typically have much larger AUMs, and much lower MERs than their Canadian listed counterparts (which have underlying international-listed stocks). For example, the MER for VEA (US listed) is 0.05% and for VDU (Canadian listed) is 0.22%. The MER "spread" varies considerably between ETFs, and can sometimes be quite significant.

Are you aware of any formula to help an investor determine when it is best to buy the lower-MER US ETF (and pay the higher tax) and when it is best to buy the higher-MER, lower tax, Canadian ETF? Is there any rule of thumb for an investor to use, to decide that once the MER-spread exceeds a certain amount, then an investor should buy the US ETF (as the additional MER costs in buying the Canadian ETF exceed the tax advantages)?

I realize that the result can vary depending on the percentage of non-recoverable international withholding tax, the investors' tax rate, etc. However, any guidance you can provide would be most appreciated. If you are aware of a "formula" to make this assessment, that would be ideal.

If there is no formula, please assume the investor is in a 50% tax bracket, is a long-term investor, the account is taxable, and there are no currency (hedging or exchange fee) concerns.

Thank you again for this excellent service.

Q: Hi Folks,
Everyone is looking for returns, and income investors are searching for interest and yield. Forgive me if I missed a previous question asked and answered, but would it be possible to give a quick list of the type of fixed income products in the low risk category. For a very conservative portion of a portfolio, with a five year hold, which product(s) do you suggest offer the best risk/return trade off given the current rate situation in the market today? How far on the risk spectrum does an investor need to go to achieve a reliable 2-3% return?
Thank you, Michael

Q: I'm hoping you can help me understand something.

On yahoo finance if I pull up a 6 month chat of HXS.TO and compare it to the S&P 500 index, HXS is underperforming by a significant amount (up 28% vs. 38%).  However if I add HXS.U.TO (the US dollar version of HXS) it tracks the index much closer.  Do you know why these two etfs track the index so differently?

In my RSP I buy HXS.TO weekly and journal the shares over to the US side a couple times throughout the year to buy US listed ETFs.  When I journal the HXS shares over do my gains magically increase?

Thanks for your help!

Q: I just retired with no pension and living off my portfolio. I’m sitting on a lot of cash right now with very little US investments. I would like to start buying slowly. What would you suggest. Preferably ETF’s listed on the TSX with the odd US stock. Thanks

Q: What is your view of return of capital ETF's, like XTR...in particular, do you think they are sustainable and are there any risks that stand out which do not apply to other ETF models? Thank you.

Q: Good Day Team,
Looking at VGG and it seems to look quite well. Would this be a good time to purchase?

Thank you,
John G.

Q: Hi

I am retiring in the near future and am looking at increasing my income based positions. I am looking for a REIT or ETF. Can you suggest any? Currently I am not holding any.

Q: Hi 5i
I am looking to add international exposure to my portfolio and would like your recommendations

Q: I own a considerable position in this ETF for exposure to Artificial Intelligence . It has done extremely well but seems to be levelling off . Obviously at 3x index , holding it becomes a crap shoot. UBOT may be too risky . Does it make sense to stay in the sector , or what might you recommend ?

Q: Would you please comment on the Canadian uttilities as a sustaining dividend provider and in particular ZWU and whether the covered call feature has consistently provided a history high dividend yield --- currently at 8+percent.
George Murphy

Q: Hi Folks,

I know your main focus is stocks, but if you have some cash to invest and you don't want it it equities, would you prefer XBB or XSB right now? Or is there another bond fund alternative I should look at for $CDN. This if for a long term hold.

Thank you. Michael

Thank you.

Q: Hi Folks,

I know your main focus is stocks, but if you have some cash to invest and you don't want it it equities, would you prefer AGG or BSV right now? Or is there another bond fund alternative I should look at for $US. This is for a long term hold.

Thank you. Michael

Q: Which would you prefer, IDR, ZRE, or RIT, and why?

Q: Could I get your opinion on these 2 etfs? If one is looking for small cap value exposure would these be good options in your opinion? Thanks

Q: Hello gentleman and thanks for your wonderful service as always. I'm wondering if you can point me in the direction of your preferred ETF's for the tech industry and the pharma industry.

Q: Hi 5i,

For a taxable account, which one would be your choice ? Thanks very much!

Leo

Q: Hi
Thinking of selling XEI down 11% and buying IVOL instead.
Presently I have1% in fixed income.
Your comments and suggestions always welcome.
Thank you
Mike

Q: Hello,
It is OK to have QQQ, VOO and VIG in TFSA accounts ? If not, are there any equivalent Canadian ETFs that are focused on US stocks like them ? Thank you very much.

Q: I was looking at the credit Quality of the bonds. 41% are rated BBB. To me this seems quite high risk, considering all the debt that has been issued as of late. This makes up 24% of the Vanguard Retirement Income Fund ETF Portfolio.
Im thinking of selling my BNS430 and purchasing the Vanguard retirement Portfolio ETF VRIF.
Would the risk Factor be equal, and with the high MER would you prefer the VRIF over the BNS430
Thanks

Q: Rob Carrick reported in the Globe yesterday that Vanguard is starting a new retirement income ETF (VRIF) today targeting 4% yield and expects it to be big. Do you think this is suitable for a later stage RESP investment, and if not could you suggest some specific investments that you feel would be appropriate for RESP's where withdrawals may take place in 2- 3 years. Thanks