Investment Q&A

Q: I have found various definitions of Small Cap.
Please tell me what size you consider a small cap, mid cap and large cap.

You are the best!

Q: where to put $175M for short term to wait turbulence



where to park $ to wait out summer and Brexit turbulence before re-entering foreign markets - then what?

Q: Ron's comment made mention of the fact that a short interest approaching 25% of the float should raise red flags. Can you explain this?

DON

Q: Although I have an idea of what the term Current Ratio means, could you give your interpretation of the term. I have read that it has importance in determining the value of a company. Could you please comment on this. If it does have value then what would be a good benchmark to use. Thanks.

Q: Re: the questions of max percentage small caps for a long-term investor that does not need the capital (answer: 30% max) - what do you consider a small cap? what do you consider mid caps? I am not sure but my understanding is that definitions range on that front. Would the 30% include mid caps too? Many thanks!

Q: I'm trying to understand the above 2 companies which has a really high P/E, and yet has been refer to as a favorite. What other measurement should I be watching aside from P/E.

Q: I see that George Soros is buying gold. Carl Icahn has made a big bear bet on the market of 150% net short. Bill Gross calls negative yield bond gang up a "supernova" waiting to explode. 10 year bonds of UK, Japan ad Germany are at record lows. How is 5i feeling about the market? These factors do give me pause to worry!

Q: Peter you have mentioned previously there is a large number of shorts on the S&P.(near record number since 2008).Is there a site that tracks the number of shorts on the S&P? I see this as a catalyst down the road if the market decides to break out,it would be interesting if there is a tracking system on this.Thanks Cal

Q: A question related to portfolio weightings. I used to only have individual stock names and a fairly equal balance across various sectors. I just purchased an market ETF the other day (VUN) to get additional exposure and classified it as "other", but it didn't feel right when I noticed that the weighting of my other sectors went down.

As an example, if I had x% in a particular sector, but made a large contribution due to new cash into a market ETF, the original x% in that sector would now show up lower in my own calculations. How do you account for this? I don't want to be overleveraged in a particular sector by mistake.

Q: This question may be out of your area of expertise but I will assume, maybe.
I have come across a fascinating investment, income vehicle. BMO retail has a product called -BMO Cash Flow Plus Deposit - Here is a quick overview.
On a deposit of $100,000 they will pay you, tax free, $500 per month for 15 years. This is a "return of capital"
After that time a sum will be returned to you which is the original amount that BMO has invested rather aggressively. Needless to say that with the 15 year compounding timeline and investment posture this could be substantial. This would be taxed as a "capital gain" There are a few other features but this is the gist. On the surface this is interesting. Any hidden aspects or dangers?
Thank you.

Q: I noticed a comment a couple of days ago about the quality of your portfolio reviews. I had one completed a couple of years ago and I echo the sentiment. They are of very high quality and well worth the cost.
For all of us to continue learning, please indicate the top five mistakes you continuously see investors making from your portfolio reviews.

Thanks

Paul

Q: Hi 5i,
This is in response to Earl’s question about managing an account for someone whose OAS supplement is reduced substantially in proportion to any taxable income from investments. A good way to generate some cash flow giving the effect of income but without taking the full impact of the supplement reduction might be to focus a portion of the portfolio on REITs whose growth and development activities allow them to designate all or most of their distributions as ‘return of capital’ or ROC. The cash payments come monthly, typically, but the ROC designation turns some or all of that cash from income into a reduction of the cost base for the investment, effectively swapping current year income tax on the payments for capital gains tax that is deferred until the eventual sale of the holding. Because any portion of a cash distribution designated as ROC is effectively not income, there should be no reduction of the OAS supplement resulting from receiving that ROC.
There is imperfect visibility with this approach because one cannot be certain in advance exactly how much of the year’s distributions will be designated ROC. That information comes with the tax slips and related info after year-end. But with that caveat, I have held REITs over many years that have designated most, sometimes all, of their distributions as ROC, year after year. A good example that I have held would be Artis REIT (AX.UN) but I expect that other 5i members have several other favorite examples. If you are willing to dig a bit, a REITs’ past record regarding ROC designations is usually available on its website or potentially through its Investor Relations people.

Q: I'm sitting on some cash and will be purchasing a house in the next year. Which makes more sense - to put down a minimal deposit and invest the remaining cash or to put down a more substantial deposit?

Q: Greetings to the 5i team. The last question I noted on sector weightings was quite some time ago now. Your response to a member asking about weightings for an income oriented portfolio was I believe as follows: 10% Cons Disc, 15% Cons Staple, 5% Energy, 15% Fin, 10% Health, 10% Indust, 5% Real Est., 5% Tech., 10% Telco, 15% Utilities (no allocation to materials at that time, although I know you have advocated a 5% "insurance" in gold in the past). Would you please indicate any changes to those percentages if you were to answer the same question today? I'd also be interested in how they might change if the question was for a more income/growth balanced portfolio. On a side note, I think I consider my membership fee
mostly for research but partly for therapy, since I find your reasoned responses to various market fears a calming influence! Cheers,

Q: Hi Peter,
DBA is actual agricultural commodities while COW is companies involved in agriculture. Any Canadian listed company closer to DBA than COW ? Thanks.

Q: in michael's blog today what is CAGR? please try and give definitions for any acronyms.
thanks.

Q: I just wanted to comment about the Portfolio Review that you did for me a few months ago. I wasn't certain what to expect but I really did feel I had gotten good value. It was informative and thoughtful. I liked that it was a suggestion of what I could be doing. It was a bonus to be able to ask questions that pertains to my specific situation.
In my case, I needed a "kick in the butt" to start really PLANNING for retirement and to reduce my risk exposure. This review is so thorough that it took me several readings to really filter the information. Awesome job 5I!!! Highly recommended!

Q: For portfolio type mutual funds such as the Mawer 104 balanced fund or the BMO select trust balanced portfolio is it possible to track down the MERs for the underlying holdings to better understand the overall fee structure? For the Mawer fund I can't find any information on the MER for the series O funds held in the portfolio as compared to their regular series A funds.

I haven't started to dig into the BMO fund yet, but it too is of interest as it has been recommended to family members by the local bank branch 'advisor' and already has a high MER on the portfolio fund.

Q: Peter and team:
In my kid's RESP, I am trying to transition away from individual equities into ETF's as we approach the time that it will be required.They currently hold ZWB, ZRE, ZLB & ZLU. I was thinking of adding ZDV to this. Would this be redundant, or help in diversity along with increased yield.

Thank you as always.

Phil

Q: My son is in his mid-thirties and has very limited time available to actively follow/trade the markets. He is looking for a simple, passive investment portfolio with very broad exposure, a modest dividend focus, and that is rebalanced, ideally, once a year. Can you comment on the following proposed portfolio and allocations, assuming about $100k? Are there any alternatives he should consider? Should he modify his approach in a TSFA/RRSP? Thanks.

VAB - 20% (Canadian bonds)
VCN - 15% (Canadian equity)
VDY - 15% (Canadian dividend)
VXC - 50% (Global equity excluding Canada)