Investment Q&A

Q: I’m investing for a parent who is currently 100% in cash, is nearing retirement and has never invested. They will not actually need income for another 3-5 years, but I would like to generate some dividends, so they can see actual cash coming off their investments (this may be reinvested). I think dividends will help psychologically if the equity portion declines as they will at least “be paid to wait” while the market recovers.

I am considering constructing the portfolio as follows:
30% Cash – PSA
50% Bonds – ZAG
10% Equity – International Dividend – PID
10% Equity – International Broad Index – XAW
10% Equity – Canada Growth – 5i

Can you provide 5i’s 2 or 3 highest conviction calls right now. I’m looking for growth at a reasonable price. Not looking for yield, but would like it to at least pay a modest dividend.

I would also be interested in any views you have about the suitability of the portfolio and any alternative / additional suggestions you may have.
If there is a correction in the equity markets in next few years or one of 5i’s A companies slips on a banana peel, I may look to put some of the cash to work and increase the equity potion.

My tactical views are: interest rates will rise with the US leading the way, the US broad equity markets are looking very expensive, Bonds are generally not a good investment and at low rates they will get killed by inflation over the long run (but they reduce volatility).

Also, in terms of allocating these investments between non-registered and TFSA, how should I generally be thinking about this? International stocks and bonds into the TFSA until it’s full and cash and Canadian stocks in the non-registered account? I don’t think they will be making any new contribution so perhaps there is no way to use the RRSP.

I look forward to your thoughts and apologise for asking a multi-part questions. If you start to run out of steam, don’t worry about the tax questions.

Thanks

Q: I'm a young investor (early 30s) and have previously had all of my portfolio in equities. I'm concerned about risk and want to put about a quarter of the portfolio into safer, fixed income type investments. I'm struggling to understand the benefits of investing in GICs (currently with rates of 2.8-3.5%) vs Bond ETFs (like VAB or ZAG). Can you help explain the difference and benefits between Bond ETFs and investing in a direct GIC? Can you recommend the better choice for me; GICs or Bond ETFs?

Q: To add to Julien’s post from today on bonds. I am in a very similar situation, younger (early 30s) with no bond exposure, all equities in the portfolio. I’d like to start adding some bond exposure through ETFs and did appreciate your suggestions on specific names. My question is, what etf would you say is a ‘one stop shop’ for bond exposure, as I like to keep it to one or two names at most. I’ve seen ZAG or VAB mentioned before. I’d like to keep it in CAD as I don’t want to add exchange risk. The purpose for the bond exposure would be to add uncorrelated assets and reduce volatility. Thank you as always

Q: As between the two Canadian Fixed Income ETFs - XBB, VAB and ZAG - which ones) would be your choice? Or would it make sense to have exposure to all?

Q: Hello 5i team,
I was wondering if there is an ETF in canada that contains provincial bonds. I am guessing VAB may contain these as well as Canadian bonds.

Also what is the best website that would have breakdowns of what is in canadian ETFs?

Thank You,
Andrew

Q: Good evening,

Multi-part question.

Had just finished reading ‘The Little Book of common sense Investing’, decide to make the switch, and am beginning to plan my transition to CPD, ZAG, VFV, XEF, VCN, VEE, and XRE, when I come across the new Vanguard products, of which VBAL to me seems the most interesting.

I see the pros of this ETF as being straightforward and dropping from 7 commission fees (re-balancing myself), vs just one trade a year to add money (portfolio currently around $26,000).

Cons: no preferreds or real estate. Less control (e.g they decide the asset allocations).

Do you have an opinion on this ETF?

Not sure the yield on VBAL but am guessing 2.5-3% maybe? Any idea?

Also, If I go ahead with VBAL would you give it some time to settle down (trading looks a little erratic), or is that volatility purely a product of price changes of its holdings already?

Thanks!

Q: I'm switching from mutual funds to ETF's and making a portfolio makeover. I have 3 years to retire and wanted to make sure I chose the correct Canadian Fixed Income ETF (at 40% bonds and 60% equities). I'm looking at HAB, ZCS, VSB, ZAG and ZEF. Of these 5 ETF's which one should I go with?

Q: What would you recommend for someone with a short term horizon 6M-1Year with a low risk tolerance. Should I put everything into bond etf such as ZAG or even VAB?

Q: A few questions have mentionned the ETF XBB. Since its fee is 0.34% versus ZAG's fee of 0.23%, shouldn't we go for ZAG? I also like the fact that ZAG is a BMO product which means I pay fees to a canadian company rather than a U.S company (bonus points). Thank you.