Investment Q&A

Q: Peter and Team, I used to think this was just coincidence. But I’m quite positive now that I know FOR CERTAIN how to determine exactly when a stock is going to drop between 5 and 10 percent, to wit: This will occur within the two trading days following my purchase of said stock. (Latest example: Exco.) My question is: how can I harness this newfound knowledge for my own financial benefit – or possibly even for the good of all mankind? (Please do not say “buy puts”. I’m quite sure this would only cause the stock to skyrocket.) Thanks as always, James

Q: Good Morning,
I rode through the October down swing and recovered. Now, fully invested and diversified, I am getting nervous that this drop isn't going to recover soon.
I bought into the Canadian ETF for Japan, after listening to Bill Carrigan at the 5i event in Toronto. Otherwise, most of my portfolio is paying dividends and in the 5i portfolio with the exception of MU, GILD and PHM.
Do you still believe the economic data coming out of the US is generally positive?
Any advice or comments you have would be very much appreciated by me and probably the other nervous Nellie's out there. I am trying to be an investor rather than a trader, Peter, but watching money disappear so quickly over a few days is tricky.

Gail

Q: My question is about the best method of "washing" US securities inside an RRSP to avoid the costs of currency exchange on the trades. What method would you recommend? And if there was going to be a delay between sell and purchase settlement dates, what US money market fund would you recommend for short term holding of US dollars inside an RRSP? Thanks!

Q: I'm looking at including international positions through a few ETFs. Just wondering what the difference would be if I, for example, bought a European ETF (currency unhedged) that is listed on the TSX in my Canadian account versus buying the same ETF but trading in the US and buying it in my US account. Can't seem to wrap my mind around the currency implications of the options and would appreciate any thoughts you could provide. Thanks.

Q: I was put onto Garth Turner's bog "Greater Fool" and found his views interesting. For those who don't know, Garth Turner predicts a U.S. style economic crash in Canada based on the fact that Canadian's today save very little and have an larger appetite for debt. He reports that as a population, Canadians are second only to Greece in the rate we are increasing our debt and that Canadians as a whole now carry over 1.82 Trillion in debt; an amount that eclipses the countries GDP. My question is this, if Garth is right and we are on the brink of another financial collapse, what sectors/ stocks would be most likely to be 'safe' or benefit? What stocks do you recommend in this environment? I would appreciate your view and insight into Mr. Turner's positions.

Thanks in advance.

DON

Q: I have a non-registered account that DRIPs all my holdings, some of them for the past 10 years. I am retiring this year and the plan is to stop the DRIPs and start withdrawing monthly dividend income. The account is expected to provide about 1/3 of our income, with the rest coming from pensions, OAS, CPP and RRSP draw downs. I am interested in any comments or changes you would suggest to this portfolio: arx, sgy, wcp, cpg, tog, hr.un, rei.un, d.un, ax.un, ipl, key, ppl, bce, spb, pki and stb. Thanks.

Q: Understanding that there are a lot of sectors within sectors (any comment on that would be appreciated as well) how do you feel about this weighting at this time?
Financials 15.00%
Utilities 5.00%
Telecom 5.00%
Consumer Discretionary 10.00%
Industrials 12.00%
Info Tech 20.00%
Consumer Staples 5.00%
Health Care 15.00%
Energy 8.00%
Materials 5.00%

Q: Question for my 30 year old son's portfolio. He is investing only in registered accounts (TFSAs, RRSPs and RESPs). Based on the below portfolio breakdown what are some additions you would recommend? He plans to put additional cash of another approx. 15% throughout the year.

Cash 14.4%
AYA 12.5%
BNS 8.4%
XDV 8.4%
ESL 6.2%
DHX 5.7%
BEP.UN 5.5%
SYZ 4.2%
CTY 4.0%
BDI 3.7%
LB 3.7%
EEM 3.6%
BIN 3.6%
HSE 3.6%
VIP.UN 3.4%
WAN 3.4%
BAD 2.5%
AVO 2.3%
SGY 0.9%

Q: Hello Peter & Co,
I am 72 years old and hold a RRIF portfolio; I consider that my Cash/TFSA positions are not material for this exercise. I'm also a recipient of CPP & OAS. The PV present value of that stream of income invested at the same rate as the indexation rate for the next 20 years is roughly $360,000, which is nothing to sneeze at. I would feel comfortable with a 50/50 Equity/Fixed Income allocation for an acceptable way of preserving my capital. Do I consider the PV amount of CPP/OAS as a "fixed income" component of my overall portfolio? or would it just be considered fictitious, thus separate from my RRIF. The math would be quite different in each case; or should I go with my own "comfort zone"?
Your opinion is most valuable; I also welcome the opinions of my fellow members.
Thanks,
Antoine

Q: Regarding the question of yesterday regarding owning a portfolio of 20 stocks vs at ETF that holds 500, thanks for the great response. I am curious, would your answer differ if the primary purpose of the portfolio was to generate income? i.e more holdings = less risk to the income stream? Thanks

Q: What are the risks associated with the shortage of the US dollars around the world? I hear that much of the international money borrowed are in US dollars. Reimbursing this money will cost more as US dollar appreciate. What will be the macro effect of this will be on the different markets? And how an investor can best prevent himself against this downturn?
Thanks. Jean

Q: I've never seen this kind of question asked: If I want to earn 7% on my money by investing in about 15 great, solid companies and selling shares in order to achieve the 7% return, what might such a portfolio look like? Would the 5i Model Portfolio, as it is, fit the bill? How might it be tweaked? I know there are a lot of questions and considerations around the question, but just looking for a general reply and any thoughts on this approach. Thank you.

Q: Given that the markets (except for Canada) are near all time highs and appear to be quite stretched, do you feel that it is wise to enter any long positions, even 5i's picks? My instinct tells me that I should be hedging my portfolio and search for short opportunities rather than go long? Any thoughts on this? Thanks so much.

Q: Hi Peter. There is a crushing amount of debt in the world which I feel may be beyond the ability of governments, companies and individuals to ever repay, as credit room appears nearly exhausted. If this is correct, the risk of creditor defaults is significant and may lead to bad deflation. Could you give me your opinion on the risk and significance of deflation and how can you protect your assets in that situation, other than holding cash?
Thanks again for your invaluable advice.

Q: This question concerns my RRSP. I am in my mid seventies and my RRSP is laddered for the next 6 yr. Each year when one of the laddered bonds comes due it results in a lot more cash than I am required by law to take out. This has resulted in an ever increasingl cash balance. My accountant informs me if I take this cash out it will bump me into an even higher tax bracket. What would you advise? And if I leave the cash within the RRSP, can you suggest an investment for it.? I have no pressing immediate need for this money. Thank you.

Q: While working on a new spreadsheet to treat all accounts as a whole for portfolio mix/diversification purposes, I am wondering about having 5% of REITS for total portfolio in RRSP account rather than having 5% in each account. The idea is a top down approach first for all accounts - like have a portfolio mix and select "best" stocks, and buy them within the account that has the best income tax treatment. From a tax point of view, REITS are assigned to RRSP account and growth stocks for the longer term that pay no or little dividend at the present time are assigned to TFSA. The other idea would be to select stocks for a US dollar account where the TSX is thin, like Health Care, and/or where the business climate is more favourable for a particular sector. The outcome would be individual accounts being out of balance relative to the diversified portfolio mix but with all the accounts taken together, a diversified portfolio mix would be in place, achieved. Seems as if this approach is like a bolt lighting cracking overhead for me, being a newcomer to all of this....and I would appreciate your take.....Thanks....Tom

Q: Hello 5i,
The yield curve is flattening; the spread between 2 and 10 year is dangerously narrowing. This kind of situation, if it continues flattening, could be a precursor of market downturn as it happened in 2000 and 2008.
I was all in cash in 2008 and am wondering how to respond now; mind you there is always a lag time between the flattening of the yield curve and the market decline.
Your opinion please.
Tony

Q: Barclay's is predicting the USA will experience a negative CPI in 2015. What would be the best sectors to be invested in should we find ourselves in a deflationary climate? Thank you.

Q: Hello, I plan to complete my portfolio with the following efts. Right now I am 100% canadian equity spread somewhat evenly over the 10 sectors using your income/model portfolios as a guide. I plan to add 2% of each bond ..xhy, cvd, cod, cob, ebb, flot, for 12% bond exposure, and 18% us equity etfs split evenly between vig, spy, iwo. This would leave 70% canadian equity with a mix of growth/dividend stocks 30/70 ratio. We have a 20 year time frame before retirement, very stable income. My portfolio is broken down to 22%rrsp, 28%tfsa, 50% non registered. I am thinking I should place my us etfs in the rrsp to avoid us taxes. Are XHY and FLOT considered US income as well?(main question) If so, I am assuming I should place these within a rrsp account as well and the rest of the bond etfs in my TFSAs. Would like your thoughts on this strategy. Also, do I have enough international/US exposure, or should I increase my US ETFs 5-10% or add an emerging market etf like VWO. Thanks again for your assistance, may have to dock me a few credits for this one:)

Q: I have a very small weighting in Materials in my portfolio (1.3% thru ADN). I was thinking of selling ADN (I'm up about 7% including the dividend in 2 years) and building a position in either FM, WEF or both. My current portfolio weightings (TFSA, RRSP, LIRA) are 18.6% Financials, 8% Healthcare, 1.6% Industrial, 24.6% Technology, 14.4% Consumer Staples and Discretionary, 5% Energy and 26.7% Cash; all mixed between blue chips and smaller growth companies. I have a 20+ year time horizon. Do you have any other suggestions to deploy about 20% of the cash and some potential stocks to buy. I'm looking for more growth and I am not adverse to risk.