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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Dear 5i,

Please critique the following proposed index ETF portfolios (only equity portion provided, fixed income allocation will be identical in each)

1.
20% VCN
20% ZLB
40% VFV
10% VIU
10% ZLI

2.
20% XIC
20% ZLB
20% XUU
20% ZLU
10% XEF
10% ZLI

3.
40% XMV
40% XMU
15% XMI
5% XMM

With these portfolios, I am attempting to achieve greater sector diversification than if I went with strictly broad-market indices, with a defensive tilt. Which do you think is best (in terms of long-term, risk-adjusted total return potential) for long-term hold/accumulation with annual rebalance to initial weights, and what changes would you suggest (if any)?

Thank you.
Read Answer Asked by Walter on June 22, 2017
Q: My wife and I are voting these days on a number of proxy votes. My questions are about directors:
-- For some companies, particularly oil and gas companies, the proposed directors sometimes seem to be affiliated (director or executive) with a competitor. Is it reasonable that directors are affiliated with competitors?
-- Some directors who are a Chairman or CEO of one company are also directors of multiple other companies. How can they have the time to do this? How many outside directorships is it reasonable for a Chairman or CEO to have?
Read Answer Asked by Doug on June 21, 2017
Q: Hello Peter,

I am planning on making a 30% capital contribution to my stock portfolio. With my holdings predominately being the Balanced Equity Portfolio, which stocks are OK to add to given the latest market activity and specific company outlook, regardless of weighting?

Thanks,
Angelo
Read Answer Asked by Angelo on June 21, 2017
Q: Could you confirm that dividends of companies domiciled in Canada, regardless of the exchange they are listed on, and paid and received in US dollars still qualify for the Canadian dividend tax credit? As such, I assume that there would not be any US withholding tax (non-reg accounts). It would only be the US dividends from US corporations that would have 15% withheld?

Thank you.

Paul F.
Read Answer Asked by Paul on June 20, 2017
Q: I hold the following ETF’s in a Non-Registered account. It is sort of a general purpose portfolio with a bit of emphasis on the health care sector (just because I think it is coming due). My question is with additional cash to add should I look for another ETF or add to the existing ones? I guess I am saying do I need more diversification or is there another particular sector I could emphasize?

Canada
iShares S&P/TSX 60 Index Fund

US
Vanguard US Total Mkt Ind ETF
AdvisorShares Focused Equity

Europe
Vangrd FTSE Dev Europe All Cap

Health Care
BMO EqWt US HthCare Hedged CAD
iShares Global Healthcare ETF

Emerging Markets
BMO India Equity Index ETF
Fairfax India Holdings
Fairfax Africa Holdings


Read Answer Asked by David on June 20, 2017
Q: Is there a way to determine whether the dividends paid out by a company will be taxed as income or will receive the dividend tax credit, in an unregistered account? for example: enb.to, enf.to, bep/un.to, bip/un.to, bns.to, ala.to, bce.to, eci.to, etc. I am looking for solid companies with growing dividends where these dividends will be taxed more favourably as dividends and not income. Would you have a list of suitable companies? Thank you.
Read Answer Asked by A on June 20, 2017
Q: Thank you for answering my question on the names of the companies that have been deleted from the portfolios for underperformance. You told me in advance that it would take some time to respond, but you did. And that's why I subscribe. It's great to align with people who keep their word and are up-front. While some of the choices we make could turn out well or not, integrity can always be upheld. I hope you charged me about ten or twenty questions for the response. -Jerry
Read Answer Asked by Jerry on June 20, 2017
Q: I manage an income portfolio for my wife who is 69 years old. The sole purpose of this portfolio is to provide income for life. Therefore the dividends are important and the actually ups and downs of the price of the stock less so. Some of these stocks pay quite high dividends. My question is are any of these company dividends at high risk of being cut due to raising interest rates or a downturn in the market and should be replaced with stocks that have lower yield but with safer dividends. The stocks are:

A&W Revenue Royalties

Artis REIT

BCE Inc.

Bank of Nova Scotia

Brookfield Renewable Partners

Chartwell Retirement Residence

Chorus Aviation Inc.

Cineplex Inc.

Dream Global REIT

Enbridge Income Fund Holdings

Extendicare Inc.

Pure Industrial Real Estate

Richards Packaging Income Fund

Royal Bank of Canada

Sun Life Financial Inc.

TransCanada Corp.


Apple

Whirlpool Corp.

Read Answer Asked by David on June 19, 2017
Q: Preference shares
How does the market value preference shares? Disregarding variables such as credit quality and characteristics of different issues, these shares strike me fundamentally as a series of cash flows discounted to a present value. I suspect that the market is driven by institutional traders who are guided by a particular benchmark to establish a discount rate to determine the value of the cash flows If I am correct, what benchmark rate do the market makers use and does it vary? For example, do traders always use a benchmark of x bps over Canada bond yield for equivalent terms and is there an established amount for x which doesn't change over time? Without predictability in this regard, there would be no way to assess whether reset shares will trade at par on their reset date.
Read Answer Asked by Carl on June 19, 2017
Q: Whenever I rebalance my portfolio, I find it somewhat troubling that I am treating a dollar in my RRSP account as equivalent to a dollar in my TFSA account or a dollar in my unregistered account. I am very near to the time when I will be converting my RRSP to a RIF and withdrawing mandatory amounts starting at 5.28% and rising in subsequent years. I will have to pay tax on these withdrawals and my marginal tax rate is not much below 50%. Moreover, I do not expect my marginal tax rate to change much over the remainder of my life. This means those withdrawals will be worth only about half as much to me after tax. Of course, when I withdraw a dollar from my TFSA or my unregistered account I get to keep the entire dollar. So I am inclined to treat a dollar in my RRSP account as equivalent to just 50 cents or so when I am totalling up my total assets and doing the rebalancing. Does this make sense to you?
Read Answer Asked by Philip on June 19, 2017
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