Investment Q&A

Q: From your answer to Milan :
A diversifed portfolio of bond issuers (corps, gov, prefs, high yield) will earn a better yield and is more appropriate from a higher income need aspect. Bonds can actually see capital appreciation if rates were to decline, or even hold steady. Cash/GICs would not benefit in this case. Overall, we remain on the side of diversification. Hold a bond portfolio with various issuer types and add in some GICs and/or cash. How you weight these reflects your views and tolerance.
Could you suggest a diversified bond portfolio with various issuer types that should produce more than the 2.75% offered by Tangerine?

Q: Follow up question: as a guideline, with a "rock solid" defined benefit pension, what percentage, overall, of a $200,000 RRSP portfolio should be allocated to fixed income? Of the 4 funds you suggested, as a guideline, what percentage of the overall allocation go into each fund? Retirement 2-3 years away.

Q: This morning I ask a question about fix income and recommended bshort duration bond ladders. You indicated that CLF or CBO would be your recommended choices. What is the difference?

Can you also recommend a short term bond ladder, corporate bond and preferred share ETF to hold USD in?

Thanks again!

DON

Q: Would CPD be classified as 'fixed income'? What would be a recommended short duration ladder bond fund that you would recommend for diversification?

Q: Preferred shares usually have an issue price of $25. Would it be correct to assume that in a rising interest rate environment CPD has a chance to climb towards the $25 range?

Dumb question?

Carl

Q: I note that CPD is included in your Income Portfolio (with a unit cost of $16.19). I purchased a significant holding of CPD in Nov. 2012 (at $17.30), and am understandably upset with the current market price of $14.09 (i.e., down 18.5% on the unit price basis). I have held on to this ETF for the monthly dividend flow (which has continuously shrunk), and with the hope that, when the tide turned in GOC 5-year rates, the unit price would recover. While individual preferred share issues that I hold have shown a marked price recovery in recent months, CPD not so much! I am curious to know why you include this ETF in your portfolio while I consider it to be the worst investment that I have ever made! Do you envision a day when the market price will recover to your purchase price level?

Q: I am 70 years old, been retired for 14 years, and can't risk losing capital. Thus my portfolio is currently 100% in fixed income.... 65% in laddered 1-5 year GIC's, 10% in bond ETF's (CBO, CLF, XBB), 5% in preferred shares, and 20% in cash. In the preferred share category, I currently hold CPD, HPR, and ZPR equally. Given a steadily increasing interest rate environment, would you recommend selling CPD and adding to HPR and ZPR, due to their leanings towards rate re-sets? Is a 5% total weighting for preferreds appropriate for this fixed income portfolio? What do you recommend for the remaining cash, given my mandate for "safe" investments? Should I stick with additional GIC's or expand the bond allocation? Thanks!

Q: Can you please recommend Canadian and US preferred share ETF's as fixed income part of my portfolio. Would rate reset preferreds perform better in a rising interest rate environment?

Q: I'm stunned by this asset class I had not known about until seeing the link you provided in a recent answer. I had lost interest in preferreds after having them decline in share price upon reset to a low rate of yield.

These seem different. The reset is guaranteed to be a good amount of yield (e.g. 3.5%) no matter what. Which is more than good for me. It looks a lot like the safe bond that I wish existed but doesn't. (I am retired, don't need to touch my investments, just want them to grow a bit more than inflation, and NOT DECLINE, until such time as I need to start taking some income.

So what's the catch?
a) if interest rates rise, the value of the shares will go down? But that may not happen so much with these will it? Since the reset is also based on then-current interest rates plus the guaranteed amount. Plus most of the BNN experts say inflation seems to be the last thing that's going to happen anytime soon so rate increases won't be very rapid or substantial. And suppose they are wrong - as long as these are higher than bonds they wouldn't get sold off too much would they?
b) the company could get into trouble somehow and default. Let's say we pick a company that's stable and that won't happen.
c)..... what else do you think is important to consider.

Q: Currently I have CBO, CLF and XHY in my RRSP acct and they represent my entire fixed income investments. I am looking to add CPD to my Non-Registered Investment acct to add to the FI component of my portfolio. CPD provides a good yield which is tax advantaged. I will be adding to this overtime as I rebalance my portfolio. Basically taking from my growthier winners with lower yields. I am retired and looking to add yield and reduce risk to my portfolio.
Given the proliferation of ETFs would CPD still be your choice for Preferred Share ETF if designing your Income portfolio today.

Q: Preferred Shares:
Can you explain the difference between Preferred and common shares ?
can they be considered "bond proxies"?
Is now a good time to add to "CPD"

Thanks, Peter

Q: I've recently sold my ZRE position and am looking for some suggestions on what to consider purchasing with the extra funds on the fixed income side of my portfolio. My equity portfolio is balanced; I am about 8 years from retirement, and am conservative in my approach. I am about 30% in laddered GICs, 5% individual bonds, 3% CPD and 5% in cash. I don't have any bond ETFs (and am concerned about the principal in a rising interest rate environment). What to do with the extra cash? More CPD? Or an international REIT? Or a bond ETF, Canadian or International? Or something else?

Q: I am looking for investments which will respond positively to rising interest rates. I suspect CPD has anticipated a rise and I am told E*Trade will substantially benefit from rising rates - why? what are E*Trade prospects and for that sector in the current environment? Can you recommend an ETF for the US regional banks and do you think they will outperform? Thanks for your consideration

Q: I have the above mentioned stocks and receive dividends.How would they perform if interest rates were to rise.Is there a comparable ETF that would be better. I am up approx. 12% on both.Should I just keep them.

Q: Hello Peter, Like most of us, are concern about the effect of the coming rate increases. How safe will the above preferred shares be, would you consider them as good choices for income and safety? Also, can you suggest equivalents in the Canadian market? Many thanks for your valued advise, J.A. P. Burlington

Q: Hi Peter and Team,

Could you please give me your thoughts on preferred shares in general given the current interest rate environment and the pending rate hike by BOC in about a week's time. Please also provide some names of ETFs of preferred stocks in both Canadian and US denominations.

Cheers,
Harry

Q: Many of the preferred reset shares are trading at large discount. In the expectation of higher interest rate which of them do you see delivering higher returns when the reset dates approache?

Thanks

Q: What ETF(s) might you consider best choice(s) for dependable tax efficient income with no concern for capital appreciation whatsoever but capital preservation being very important in both CAD and USD please? Thanks.

Q: Dear 5i
Can you confirm the following yields and MER`s for the following Bond ETF`s;
CLF yield 3.04% & MER .17%
CBO yield 2.91% & MER .28%
CPD yield 4.54% & MER .51%
XHY yield 5.47% & MER .67%
Thanks
Bill C.

Q: Hi,
I would like to buy some preferred shares as I don't have any Preferred's in any of my accounts but with so many different descriptions out there I'm not sure what I should be looking for. For instance I would like to have a high yield ( > 4.5% ) and a guaranteed return of capital on a set date if held until that date (if there is such a thing out there). I see many new offerings come out through TD & Scotia iTrade but these are usually closed very quickly.

For instance this one came out this morning:
"TD Direct Investing would like to inform you that the following New Issue has just been announced.

Element Fleet Management Corp. - 5.75% 5 Year Rate Reset Preferred Shares, Series I

Short Description: Offering of Cumulative, 5-Year Rate Reset Preferred Shares, Series I via Bought Deal
Price: $25.00 CDN per share.
Settlement: On or about May 5, 2017."

This sounded good but by the time I tried finding out more about the offering it was closed already.

So, is there some guidance you can give on what "buzz words" to look for when a new issue comes out so I can put my "expression of interest" in before the offering is closed?
I guess what I would really like to know are the following:
1) Are 5-Year Rate Reset Preferred shares the best option for capital preservation?
2) Is it best to try and buy Preferred shares on a new offering or to look in the open market?
3) Is there a Preferred share Class that guarantees your original capital outlay?
4) Any other guidance you can offer in looking for the best: time / place / kind when looking for Preferred's?
5) And finally, once I find a suitable Preferred offering - which account type would you recommend best to hold in for tax purposes (i.e.- reg. vs non-reg.)
Thank you.