Investment Q&A

Q: 1. Could you please recommend stock or etf for global or USA real estate exposure. Well diversified TFSA, conservative investor.
2. Could you also please suggest how to reduce exposure in C Cyc space. and increase in Industrial. In C Cyc currently own own MG and NFI ( C Cyc / Industrial) and WSP in Industrial.
Thank you

Q: I have a friend who has trusted his advisor completely . His basic investment account has 92 positions ... less than one third of the value in US and Canadian equities ( all in odd lots, like 14 shares of AAPL @ a profit of $56.00 ) , but most are in Mutual Funds ( everything under the sun ) . RBC have convinced him that because it is a million dollar portfolio, he gets a very “low fee”, You have trained me well ... stop this insanity right ? Buy great stocks and where you want broad exposure and indices buy ETFs ...right ?

EXCEPT
I don’t know how he can get out of 40 mutual funds and 50 stocks without incurring ridiculous trading fees . His RSP,RESP and TFSA are all structured in the exact same manner ... same exact funds
If , for example , he directed his broker to transfer all positions to RBCdirect investing , would he avoid the initial hit of over 350 trades at 9.95 each ? OR does one make a deal with the advisor to get him out of this stuff ? OR does one make a deal with a different broker altogether ? OR does one complain to the securities people ?
I don’t know what strategy to use , but as per your video , he will be giving his advisor hundreds of thousands in fees and commissions .

Q: If you could pick the best 6 Canadian stocks right now for long term growth, stability and in 6 different sectors what would they be? What would they be ignoring sector restrictions?

Q: What would be a good company to buy shares in for a teenager for his first investment? It was mentioned before that it increases interest in investing if the teen knows about the company. I was thinking of Costco, Disney, Mcdonalds?
Would you be able to provide a top 3-4 names in Canada and 3-4 in the US as suggestions? Thanks

Q: In his profoundly influential book, The Battle for Investment Survival, originally written in 1935, Gerald Loeb states: "Indeed, should some super-solvent agency agree to preserve the buying power of capital for a substantial length of time at a stated fee per annum, informed people would embrace the plan enthusiastically if they felt there was any real possibility of the agency staying solvent."

According to Bloomberg, 17 trillion dollars are invested at negative interest rates today. Surely, much of that is smart money. Is that money acting on Loeb's dictum?

Q: Further clarification of my question re bond holdings in portfolio. md stable income fund is a segregated group annuity insurance policy holding 50% insurance and 30% short term bonds. I would like to decrease my weighting to 10% or switch to another short term fund as 20% plus cash holdings is hurting my returns. What percentage do you feel of a moderate rrif should be short term bond? Thanks once again for your opinion
Tom

Q: Can't believe how stocks are getting hammered on small misses in earning,etc.Are investors more nervous than usual and panic selling?

Q: Hello 5I,

Just trying to better understand the recent shifts in the stock market sentiment here in Canada. Over the last couple of weeks, I note that safe dividend growers (mainly utilities: AQN, FTS, TRP etc.) and REITS in general are trending down. So are growth stocks such as SHOP, CSU, LSPD etc.. I also note that resource stocks are on an upswing lately. Are investors seeing an upswing in this sector or are resource so cheap that they have nowhere to go nut up?What is driving the market? Are lower interest not expected anymore here in Canada? Is the pending deal in the USA-China going to benefit resource stocks in Canada so much that we will see an uptick in inflation and an eventual rise in interest rates in Canada vs. lower interest rates in the US? I am wondering what am I missing? I know no one can read exactly what will follow, but can you help me better understand the "What and Why" of what is trending currently. Thank you!

Q: Hello 5i team,

My 33 year old son is looking at rebalancing. He has a defined benefit pension. He would like to use VTI and VXUS for non cad exposure. What percentage would you propose for cad, Vti and Vxus? And is there any ETFs that trade in canada that you would consider replacements of those two?

Thanks for all you do!

Wes

Q: I'm in the middle of switching my portfolio to a much more simple style. I've always indexed my US exposure with ETFs like VOO and VFV and have bought individual Canadian stocks just because the Canadian index is so unbalanced, holding mostly resources and financials.

I've looked at VGRO and VBAL as well as XGRO and XBAL. I'm hesitant to buy them because they have a high percentage to the Canadian index. I also don't want emerging markets or any EAFE exposure. I'm a huge fan of Jack Bogle and he preached that all anyone needed was the S&P 500 and a bond fund. Since app. 48% of S&P 500 sales are non US, it seems to me investing in EAFE is unnecessary.

My plan is to go 60%US and 40% bonds. Since Canada represents just 3% of the worlds markets, why do most Canadian investing professionals say to put 30% or more in Canada? Doesn't make any sense to me! Thanks for your help.

Q: I recently attended a fall 2019 session of Larry Berman Live. His prediction was for a recession in 2020 or 2021 and he recommended that investors adjust their portfolios accordingly. I am interested in 5i's thoughts about an upcoming recession and whether 5i members should become more defensive with their portfolios.

Q: B of C has held rates however outlook is projecting perhaps a further rate cut. Household debt load is at an all time high, with little or no margin available for emergency requirements.
Personally I cannot help that a Day of reckoning is coming, as debt servicing for majority of Canadians is coming to a bubble, similar to the 2007-2008 crisis. When home values become an ATM, debt levels only increase further.
What is 5i opinion of this going forward, and if this does occur, would this be the catalyst for the next financial crisis.
Thanks Rick

Q: My question concerns my rif which has 50% cash right now with u.s. div. stocks representing that 50% invested. I am considering investing equally in usmv - aem and cwb (convertible bond etf) in this rif. Does this make sense in todays investment market with the u.s indexes at all time highs and trading sideways or should i hold that cash into year end . That cash in the rif represents about 23% of my overall cash position. We are 70 yoa with enough income from canadian dividend stocks to supply us with our living so look at this amount as next generation money...thanks for the great service...

Q: Hello 5i,
I am 73 years old, a value investor. Except for Chartwell (bounces around), NFI and Pasons, all the rest are doing well ( not so ZPR, CLF and CBO). I am up $10,000 on many of my 50 equities but these individually are not over 2% of holdings. I do not need the money and see no reason to sell my winners. Thus since there are no losers, as such, to sell and I think I should keep my winners. With all this talk of tax loss selling: do I, at this point, have a dire need for tax loss selling? I do not think so, but then again, that is just me.
Thank you
Stanley

Q: is there a currency that Canadians could buy with Canadian dollars that is safer than our money . I am thinking that Canada's growing deficits, may not be good for the value of our dollar.

Q: With the Bloc doing so well in the election and the PM sure to lavish our taxes their way, what companies generate a lot of income from Quebec, and/or are candidates for charity ? Thanks.

Q: Tech stocks have taken a beating over the last two months, due to high valuations and a shift to value stocks. Do you foresee a continuation of this trend into tax loss selling season and further drops, then finally bottoming out into the new year, or are we now dealing with just normal volatility?

Q: The issue of mutual funds holding negative yielding global gov't bonds is an interesting one as the size of negative yielding bonds keeps rising. The lack of cash flow to finance management fees, and pressures on portfolio managers to play the yield curve to list a couple of examples sounds very tricky. Have you explored the subject in your shop?

Q: I have read about the new TSX30 index. Is there an ETF yet that follows it?

Q: I continue to struggle to find the right level of diversification, especially fixed income in my portfolio. One of the strong reasons for my struggle is the recent very strong bond performance and concerns that I am too late.

The standard rule of thumb 60/40 blend is challenged here. I am wondering if you saw this article on the Globe’s website. Could you take a look at the article and share your thoughts on Merrill Lynch’s thesis ? As well as the suggestion of using dividend paying stocks as, at least, a particle substitute.

Thanks.

.... from the Globe and Mail Investor website ( a partial excerpt...)

The 60-per-cent fixed income, 40-per-cent equity portfolio has been an important benchmark for balanced funds and overall asset allocation for decades.

Merrill Lynch analyst Jared Woodard, however, believes the 60/40 portfolio is now far less relevant because of the rising risks in bond markets.

In The End of 60/40, Mr. Woodard cites three reasons that bonds may no longer provide the portfolio stability and consistency they once did.

The first reason is that bond portfolios have not been providing diversification. He writes, “The core premise of every 60/40 portfolio is that bonds can hedge against risks to growth and equities can hedge against inflation; their returns are negatively correlated."

The problem in recent years is that periods of major market weakness have seen both bonds and equities fall.

In the U.S., longer duration government bonds have generated terrible risk-adjusted returns over the past three years - lower than junk bonds and emerging market equities. This means that investors who bought Treasury bonds for steady returns and lower portfolio volatility have seen volatility actually increase.

The data is U.S. based, but the performance of U.S. and Canadian long-term bonds has been virtually identical, as this chart posted to social media underscores.

Mr. Woodard’s final warning about bonds concerns overcrowding. He notes that globally, the fund manager allocation to U.S. Treasury debt is close to a 20 year high. So far in 2019, investors worldwide have sold US$208-billion from equity funds and bought $339-billion worth of bond funds.

With government bonds so popular, the analyst is concerned that “Crowded positioning means that natural swings in bond prices may be exacerbated as active investors rebalance their holdings.”

To the extent that Canadian investors have made the same switch to fixed income – and the 38 per cent increase in the market capitalization of the iShares Core Canadian Universe Bond Index ETF suggests fixed income has been popular domestically - these risks are also present here.