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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: Hello, iam a retired investor with $190,000 in a tangerine fund.
50,000 in rrsp balanced fund
70,000 in non reg. balanced fund
70,000 in tfsa equity growth fund
I will be transferring the above to a CIBC global monthly income balanced fund,as I will be getting a employee discount on the MER.
My tfsa will be in a equity growth fund at CIBC.
My question is that Tanerine only pays a dividend once a year around Dec. 20th.
Should I wait for the dividend,or because the fund drops in price after the dividend it would not make any difference?
I think I would be better off getting the dividend and then transferring in the new year, any thoughts on this
Thanks Brad.A
Read Answer Asked by Brad on October 30, 2017
Q: A friend of mine has $100K invested in RBC Select Conservative Portfolio Series (RBF461). She is 55, and those are all her assets. Her risk profile is conservative, and she has no investment knowledge. The fund meets her investor profile and risk tolerance, however the Morningstar Quartile ranking has been 3rd in each of the past 5 years and 4th in the 2 years previous to that. MER is 1.84%.

Could you suggest some other mutual fund (even from RBC), or ETF that fits her profile, but has better performance (like a 1st or 2nd Quartile performer from Morningstar).

Read Answer Asked by Paul on October 30, 2017
Q: Can you please further my understanding of enterprise value. I think it is the name that throws me off.

I fully understand how its calculation works, I fully understand how the ratios work but I have difficulty with the term. I feel like things are backwards.

For example: If we have a company that has a Market Cap of $1M, it has an enterprise VALUE of $1M (assuming no debt, no cash,...). If the company has a Market Cap of $1M and $1M in debt, it has an enterprise VALUE of $2M. This company has a VALUE of $2M vs the other company that has a VALUE of $1M. If these were 2 competitors, I would prefer the company with the LOWER VALUE (and that is the way it is but the numbers actually reflect the opposite). If I was buying the business, I would probably want to pay $0 for the company with the debt ($1M market cap - $1m Debt) and $1M for the company with no debt.

If a company has cash, I would want to pay market cap PLUS its cash / cash equivalent but in determining VALUE we deduct the amount. Once again it appears backwards.

I must be missing something here. Personally, per my understanding, I would have deducted debt and added cash to determine the VALUE of the enterprise.

It is the word VALUE that throws me off. Can you please shed some light on this. Thank You.
Read Answer Asked by Walter on October 30, 2017
Q: Question about index returns, and whether individuals can exactly replicate. How does delisting one company and introducing a new company work? For an individual, we would have to sell a loser at presumably a loss, and buy a very small amount of a new company and wait quite a while to recover. But the index is market weighted. So how much of the new company is "bought" on introduction. A lot has been made of the importance of low fees on returns as they compound over decades. Is there a discrepancy here that might amount to 0.5% annual gain that real world investing cannot access?
Read Answer Asked by Gary on October 30, 2017
Q: I have read that the Fed dot plots are showing a 3% Fed Funds Rate within three years. That should imply a 10 year bond rate of 4% to 5% at that time. If so, would that be negative for bond proxies such as utilities, pipelines. telcos and reits? What about high yield corporate bonds? Should we stay away from rate sensitive investments and concentrate of growth stocks? I am a retiree with a need for income.

Thanks
Read Answer Asked by Hans on October 30, 2017
Q: My company has announced an employee share offer plan. I would like your opinion on the pros and cons of employee share offer plans in general, and specifically on the plan being offered to me.

I work for a large European company (20B euro market cap; 65,000 employees in 50 countries), and the stock trades in Europe. This is not a small start-up company.

The key terms of the offer are: (a) 20% discount on the share price, (b) 1 free share for every 4 shares subscribed up to 10 matching shares, (c) account management fees paid by the company, (d) investment locked-in for 5 years (to Dec 2022) (except in the case of early redemption). I really don’t like being locked in for 5 years, but I guess that is the price to pay for a 20% discount.

I have been burned before on an employee share offer program (dot com era), so am always questioning why companies ask employees for help. The employer always promotes how good it is for employees (e.g. 20% discount), but what is in it for the company? If the company needs to raise money why not just go to the stock market? I don’t buy the pride of ownership in the company you work for, blah, blah, at least not with a very large company (I am one of 65,000 employees).

I am skeptical when employers tell employees how great something is for them. Been burned before 15 years ago when they told us how great it is for us to switch from a DB pension plan to a DC pension plan. They neglected to tell us how much better it is for them if we switched from the DBPP to the DCPP.

p.s. Maybe one day you can do a blog on pros and cons of employee share offers, and what an employee should look out for.
Read Answer Asked by Paul on October 27, 2017
Q: Good morning Peter and team,

In the 10th anniversary edition of his book The Little Book of Common Sense Investing John Bogle states:

"My own total portfolio holds about 50/50 indexed stocks and bonds, largely indexed short- and intermediate-term."

Warren Buffett famously wants a 90/10 indexed stocks/government bonds mix for the trust fund he is leaving to his wife.

Given that interest rates will certainly go up from today's levels which will drive bond values down, wouldn't an investor be better off holding cash instead of bonds, cash drag notwithstanding?

Thank you.

Milan
Read Answer Asked by Milan on October 26, 2017
Q: hello 5i:
referencing "Dennis'" question of October 20th, BNS AT1 hybrid security.
Can you expand on the answer? I'm having a great deal of trouble trying to find out EXACTLY what this is. And, if the statement, this debt is cheaper for the bank (Hymas), then won't all banks be doing this? Or, what about non-banks? And what effect do you see this having on the preferred market? Would this increase the yield of new prefs being offered, as older prefs will be seen as less attractive? Many questions here, but as I said, I am having trouble finding answers anywhere else, not subscribing to Hymas as there maybe answers there.
thanks
Paul
Read Answer Asked by Paul on October 26, 2017
Q: Peter and team:
I read a question from someone this morning about a TFSA for their 18 yr. old daughter. I had just been thinking about this prior to turning on the computer. I too am in the same position. I had been thinking RRSP. Which vehicle (RRSP vs. TFSA) do you feel is best for a young investor to start with? Also, for an RRSP, what would you think of a low MER high quality Mutual Fund such as MAW 104.

Thanks as always for a great service.

Phil
Read Answer Asked by Phil on October 25, 2017
Q: Hello,
I would like your opinion on this. Do you feel it is important to try and keep a certain number of stocks in your portfolio, based on the size of it of course. If you do, could you advise what "approximate number" you would have for each of following sizes of portfolios to give me a sense of how you would handle this:
-$100,000 portfolio
-$500,000 portfolio
-$1,000,000. portfolio
-$1,500,000. portfolio

Thank you
Margaret
Read Answer Asked by Margaret on October 25, 2017
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