Investment Q&A

Q: What kind of portfolio should one have to lower risks while having a good return? By having most of my investment portfolio in equities am I necessarily taking too much risk. I am 41 have a well diversified portfolio of canadian equities (all 5i recommended, mostly from model portfolio, some growth and some income portfolio stocks) and some blue chip US equities and etfs and some bond etfs. It is currently 70% canadian equities, 25% US equities and about 5 to 6% fixed income. Is this considered too agressive. The RBC direct investment website does an analysis based on their standard ratios of fixed income to equities and put me at higher risk than agressive growth profile..I am fairly comfortable with this mix and I tend to keep my cool in adverse situations..Your thoughts and suggestions are much appreciated. Thanks. Shyam

Q: I would like to add my 2 cents worth of info towards Tamara's post, in part to add something to these boards in my way of paying it forward for the $$'s I have made off of investments I learned about from other board members.

I have studied Warren a tiny bit and some of the other big gurus a lot more who do similar type investing to Warren B..

What I have read and 1 Guru recently told me was that Warren for example, does in fact sell routinely.

He routinely sells part of his holdings when he determines they have become over valued (above his calculated Intrinsic Value). Not the complete holding but just a portion of his really big holdings, or maybe all of a smaller holding. Meaning he takes a profit. He then may repurchase some shares of the same business 6 months, 1, 2, 3, 5... years later when the stock price has dropped to being on sale again. Repeat and spin. He even does this with the ~ 6 holdings that make up ~70% of his portfolio.

They big guys/gals routinely make 100%++ profits this way.

Said another way, he practices buy low sell high.

These big guys/gals will wait years watching their Watch List all waiting for one on the list to go deeply on sale so as to buy more of or to start a new position. They try to not over pay. So even if they get it wrong they still often do not loose $$$$ or very little because they bought at such a low price. A big important part is what the company is doing not what the market or media is doing/ saying.

Q: With interest rates scheduled to be increased, is
it time to sell Reits like REI.UN - AP.UN I see that these stocks have dropped a few points reently
Thank you for your help
Hanna

Q: Hi Team! Just an investment methodology question.....I have read that Warren Buffet holds 63% of his portfolio in four stocks.( Kraft, Wells Fargo , Coke and IBM I think. He also bought quite a bit of Philips66.) Well there goes the thought of a well balanced portfolio out the window. I hold approximately 30 Canadian and Us stocks with businesses across the board. I understand that he is a value investor who likes his dividends and rarely sells his holdings....so what is the best approach to stock investing? Concentrating on just a few businesses like Mr Buffett, or holding more businesses? Has there been any studies done? Just wondering....Tamara

Q: Hi,

This is follow up to James' question about living off the dividends from these ETFs.

ETFs = XTR,FIE,XEI,VDY,XHY

Suppose I convert my portfolio(s) over to equal weights of these ETFs and start living off the distributions ~ 5.5% yield. I'm ok with the tax situation. I can account for inflation.

What other risks am I taking? When we see another 2001 or 2008 what is the possible impact to the ETF values & the distributions?

I'm not looking for a guess (and certainly not a promise) as to what will happen in the future. I'm looking for a list of additional things that I need to consider about this strategy for my own risk management before pulling the plug on my current working life. A handful of "what-ifs" to consider would be great.

Thanks,

Gord

Q: Is there a way to differentiate between different posters who have the same name when presenting the posts on the Board?

For example my posts show "Stan" and it appears there is myself and at least 1 other poster named Stan.

Could a solution, so as not to expose a poster's full or last name, be to show for example, Stan1 or Stan2...? Or transfer to using an alias? or....?

Maybe this would require too much work on 5i's part. I do not know what any solution would involve in resources for 5i.

Q: (MISC) Aug 30/16 ? asked by Anthony:

As noted stop loss orders don't always work.
To limit fill losses enter 'stop loss with stop limit' orders rather than 'stop loss' orders. You also enter buy orders with a 'buy on stop with stop limit' order.

Q: Good morning Peter, Ryan, and Team,

In today's answer to Adam about DRIPs (SIS in particular), you told him that "on a portfolio basis, we would just never get into a situation where you need to sell something to generate cash". Is it appropriate to sell part of a stock or ETF to raise cash if you're doing it for portfolio balancing? Or is this a dangerous strategy that could backfire if the market takes a nose-dive? I'm presently in a situation like this in my RRIF, which is well-balanced using mostly 5i recommendations, plus some fixed-income ETFs.

Thanks as always for your timely advice.

Q: Could you recommend a source of accurate and up to date statistics of mutual fund flows? Also interested in ETF fund flows, especially leveraged ETFs.

Thank you.

Q: Hi 5i,
I'm 58 years old and recently transferred over my Mutual Fund RRSP's to a self directed RRSP. I now have a diversified portfolio except for fixed income - still have 50% in cash. I know I should have around 30% in bonds (fixed income) but having a difficult time justifying investing in bonds with such low interest rates. Can you explain to me if rates start going up won't the value of bonds go down? What bonds would you recommend CBO or CDV or.... Are there bond like equities that would be better at this time.
Question 2: If rates go up in the US will that effect Canadian Utilities, Telco's and interest sensitive stocks.

Thanks,
Luca

Q: I wonder about letting your winners run vs diversification. I recently donated half of my PBH(up 300%) to charity, and it still is 5% of my portfolio. Is this an appropriate way to balance those competing ideas? I read that you can't get a "10 bagger" if you keep selling your winners, and at least some pundits think it's 10 baggers that make a portfolio a success, but surely that unbalances the portfolio? confused.

Q: Hi Gang,

What are the best strategies or tactics to follow ahead of earning announcements to safeguard against potential precipitous price drops given that stop orders will not necessarily work? As example the significant drops in AVO and CXR after the recent earnings announcements.

Thank you
Anthony

Q: How do you decide whether to use a DRIP or not for companies in your portfolio? Do you base it on whether you need dividend income or not or is it more company specific? We can use SIS as an example since I own some shares and wondering if I should drip the 2% dividends or take the cash.
Thanks

Q: What is the best way to invest in GICS? $200,000 proceeds to be withdrawn over four years at $50,000 annually. So $50,000 in one, two, and three year terms. It looks like Oaken Financial offers the best rates in Alberta. Or is there a better alternative that provides the safety of a GIC?

Thanks,
Hal

Q: (MISC)Covered Call ? of Aug 29/16 Asked by Linda:

Go to Google advanced search, Youtube.com, www.torontopubliclibrary.ca, Amazon.com, or Chapters.com etc and search on 'covered calls'. Also, Richard Croft and Lawrence McMillan have written books and articles on options.

Q: Would you have some suggestions for reading material on covered calls? I wasn't looking for something too complicated. But I am interested in information that would cover (a) stocks and stock markets best suited for covered calls (b) logistics of how to choose the best case of option cost and duration for a particular stock ( c) option timing in dividend paying stocks and (d) what is a realistic rate of return. Thanks!

Q: There was an article from the Globe describing an investment stratigy to look for areas where capital is scarce. I havn't seen this before, at least described like this, I guess basically the opposite of momentum investing. Or maybe this is what value investors look for. In any case they did not back the article up with any evidence that the strategy has been successful over the long term.

So: are you familiar with this conceptype and do you think there is merit to it? I guess it could help being early to a sector that will soon turn around, but it seems to me that investor capital (aside from a lot of retail) is pretty smart money and may be avoiding areas for a good fundamental reason that could last many years.

"Returns are best where capital is scarce” is one of my favourite bits of investing advice. The idea was popularized by Richard Bernstein, former chief quantitative strategist at Merrill Lynch and founder of RB Advisors."

Q: Good Morning
WealthBar is a Robo Adviser based out of Vancouver.
We will appreciate any information you may have about this company. Is it safe to invest through them?
Thank you

Q: You may have answered this in the past, but: does the 5i team believe that individuals can beat the market? I'm assuming you must think so given your team is essentially in the stock picking business, but how does this align with most studies that suggest the ETF or couch potato approach?

Q: Hi guys,

When analyzing companies with a high debt load model like infrastructure companies or utilities, what is the best metric to analyze the valuation? Should we use a multiple of EBITDA, rather than net income since net income will be heavily influenced be depreciation and interest expense?

Thanks,
Jason