Investment Q&A

Q: Hello again. I’m interested to know how to consider currency when deciding between hedged, unhedged, and US dollar ETFs. In your answer to my last question, you mentioned that you prefer VPL over VAH; how was currency a factor in your judgment? Also wondering if you would approach European ETFs similarly, with respect to fluctuations between the Euro, USD and CAD (e.g. VEH, VE, VGK). Are there separate currency considerations I should take into account for each region, including EM? (e.g. VEE vs VWO)

When I hear professionals recommend CAD-hedged ETFs when the USD is falling, it sounds tactical but what if an investor has a long time horizon in mind? I’ve heard that unhedged ETFs yield better returns over time, say for a period of 15 years, but I’m wondering if US dollar ETFs are even more preferable, considering that I’ve already got some US cash ready to deploy.

Thanks for clearing up my confusion!

Q: Greetings Peter and company,

Having been a do it yourself investor for over 50 years and a committed index ETF investor for the last 10, I am very impressed with what you are doing.

Assume that investors put half their money into a US index ETF (say SPY) and the other half into a US money market fund. They re-balance when the ratio changes by 10% in either direction and withdraw 1% quarterly to cover living expenses. Will this no-brainer portfolio grow over the next decade? Will it equal or even outperform the i5 Growth Model Portfolio? (Projected 12% annualized long term return. Since the bottom of 2008, the S&P 500 has had a 14.5% annualized return.)

I would appreciate your views on this. Your responses, as far as I have seen, have been uniformly thoughtful.

Thank you.

Milan

Q: Portfolio Managers are saying US Stocks are expensive and they are buying Europe and Emerging Markets. What about Canada ? Is the uncertainty regarding US Tariffs holding TSE back ? DOW is hitting New Highs . We are not ? Is it also because we are a commodity economy. Are we just out of favour until world economies start to show growth which will drive commodities higher ? Oil also seems range bound $ 40.00 - $ 50.00 Not good for Canada !
RAK

Q: I have a large investment in VFV and would appreciate your opinion if I should sell my position in favor of VSP S&P 500 hedged? With thanks, Bill

Q: Hello 5i team,
I greatly appreciate your response to my question regarding the effect of a recession in a 74 year old’s RRIF portfolio. I retain from your response the following:
Asset allocation: one third of my retirement income comes from CPP, OAS and a very small defined benefit pension; one can’t have a better fixed income vehicle as that!
Cash: it currently stands at 6.5% of my RRIF portfolio; I’d like to increase it to around 12% or the equivalent of 2 years of minimum withdrawals.
Quality companies and Diversification: I currently hold the following companies; they are listed in alphabetical order and I would appreciate to know how you would rank them within their sector
Consumer cyclical (6.6% of portfolio) CGX, LNR/MG, TOY
Consumer non-cyclical (7.6%) ATD.B, DOL, PBH
Energy (8.4%) ENB, KEY, PKI, TOU, VET, WCP
Financial (8.7%) AIF, BNS, ECN, SLF, TD
Health (3.1%) CRH, GUD, PLI; thinking of replacing CRH and PLI with ZUH
Industrials (11.7%) BYD.UN, CNR, NFI, SIS, STN/WSP; where would CAE fit?
Materials (9.5%) AEM, CCL.B, MX, SJ
Technology (22.8%) CLS, CSU, DSG, ENGH, GIB.A, KXS, MDA, OTC, PHO, SHOP
Real Estate (5.8%) CIGI, FSV, TCN
Telco (2.2%) BCE
Utilities (7.1%) AQN, BEP.UN, BIP.UN
There are 48 stocks; that is too much to handle for my hardening grey cells. Your ranking would help me identify which ones to eventually sell.
Please deduct as many credits as you wish.
Kind regards,
Antoine

Q: Good morning Peter et al. I have $68K in a rrsp and $80K In a cash account to invest. A full position in each account is $20K. Time frame is 3 to 5 years. I have full positions in other accounts of shop,pbh,gud,nfi,sis, and toy. My thought was to add Boyd, CAE in each. I also have 1/2 position in Photon. Can you give me some direction on what else to add other than going bluechip defensive.
Thanks in advance david

Q: Regarding equity income generated in a RRIF, would the following diversification be adequate in a rising rate enviroment and also a recessionary backdrop?

banks & lifeco 60%, CPD 10%, utilities 10%, telco 10% and staples 10%. I am assuming all dividends would be considered safe. Can you buy into this approach?

Q: Hello 5i team,
I’m 74 years old; with due diligence and with the contribution of people like you, my RRIF portfolio is behaving very well. My plan is to deplete the RRIF portfolio at age 90. The revenue from this portfolio will continue at the same level if I get a 7% compound annual total return in the next 16 years.
Unfortunately, we expect a recession sometime during those years. If I were to ride the recession, the value of the portfolio would stand still for (let’s say) 5 years and if the portfolio were to grow by 7% in each of the remaining years, my revenue would drop by a whopping one third. In order to maintain the expected level of revenue, my excel projection model indicates that I should obtain a 20% growth per annum instead. That is unrealistic.
Alternatively, I could do what I did in 2008. I sold my holdings after incurring a 15% decline and re-entered the market a few months after it bottomed and started on its recovery path. If I did that and planned for a 7% growth per annum, the revenue would drop by 13% only. That is quite acceptable because there is a 10-15% safety margin in my revenue forecast…a cushion of sorts.
If, however, I knew when the recession will occur, I would exit the market ahead of time and re-enter after the bottom…”but that is another story”.
I would greatly appreciate your collective opinion.
Best regards,
Antoine

Q: Good morning Peter,

When looking at reversion to the mean, the near-term chart can be different from the long-term chart. For instance, the one-month chart for QQQ at closing on Friday, July 7, shows it to be below the mean suggesting a good buying time. However, the 10-year chart shows it to be significantly above its mean suggesting a good time to take profits.

Which is the more important indicator?

Thank you.

Milan

Q: I see a couple of concepts repeated in your answers: 1) if you have a short term need for cash (buying a house within 1-2 years eg) you should hold cash or cash-like investments (i.e., not equities), and (2) in general, some equity investments may be ok, but only for a 3-5 year hold.

Can you walk through the mechanics of how to deal with the situation of investing when you know you'll need cash after, say, 4 years? Do you buy good diversified equities (eg BE portfolio) and hold for 4 years, committing to yourself to sell only on the day before the 4-year period is up? Or do you buy such equities, but then slowly rotate into cash (when?)? Or commit to rotating into cash at the 2-year mark or some other arbitrary date? Or do you assess the situation at the 2-year mark (e.g.) and hang on, or not, depending on whether the portfolio is high or low?

Wondering what your thoughts are on buy/sell strategy in such a scenario. Thanks.

Q: With interest rates likely increasing this month in Canada and also the USA, would you put any extra cash into bond funds (like CBO,XHY) or preferred shares right now; or wait to see if the prices decline with the new higher interest rates?

Thank you.

Q: Hi there, not really a stock specific question but more a psychological/behavioural question. Based on your experience, how often should one look at their portfolio? I, probably like many others, look at my portfolio far too frequently. I suspect this can be stress inducing and can lead to more possible losses than gain? How often do you recommend one to look at their portfolios? Thanks!

Q: Morning folks,

Could you please comment in regards to establishing positions in good quality companies that are so called expensive. I hear money managers refer to companies as to rich and need to wait for a pullback before getting in. With some companies a pullback might not even happen. As a long term investor does it really matter when an investor buys in. Could you elaborate.

Thank you.

Q: Hello Peter,
I'd appreciate your insight.

What do you think about the suggestions that money is moving out of technology and some of it will find its way in the biotech sector? I do not hold any US tech but do hold the biggish position in IWO and IWM combined. With no fresh money, what do you think of reducing the positions in either or both IWM/IWO combine and invest in IBB?
The second aspect where I would like your thoughts is on the Financials both side of the border. With BOC likely to raise rates atleast once, the TSX may drift down, maybe even a sharp reaction. What do you think of reducing TSX exposure, buying US dollars and investing in US financials for the second half of the year?
As always, appreciate your views.
Regards
Rajiv

Q: I want to invest about $400000 new money, over what time period should I invest ? Is this a good time to get into the market or should I wait for possible pull back. or should I get into the market now by buying all the companies in the 5i income portfolio? or should I invest half now and half if the market pulls back.
Or should I just park the money in HFR until oct or nov?
Thank you

Q: Market is down so which stocks due see unfairly punished and will be good to pick up.

Q: What sector would you advise to look for some growth without huge risk. Excluding tech, which is clearly hated right now.

Q: During a serious market correction should a rebalancing happen?When the rebound in stocks eventually occurs you have less in stocks as the assets have been reallocated to bonds and cash. Therefore you will never fully recover. Should there be a waiting period?

Q: Good morning guys, great job. Are there any figures on which sectors fair better in market corrections

Q: Hi

I have about $300k new money I want to add to my modest stock/etf portfolio (Total will be $500k)- I am a bit fearful of the bubble (stocks and bonds) - Any suggestions for a reasonable safe yield for 6-12 months ?