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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 and Merry Christmas to all at 5I.
Moving forward I have new funds to add to my portfolio in the fixed income sector. My RRSP portion is fully utilized for fixed income using CBO and XBB so this is new fixed income funds outside of a sheltered account should I still use XBB/CBO or is there some other fixed income source that would be more beneficial that I should consider.
Read Answer Asked by Peter on December 08, 2016
Q: Hello 5i,
My wife is concerned that our exposure to bonds is far too high, so I thought I would turn to the experts for advice.
Fixed Income is 31.1% of our total, combined portfolio broken down as follows:
CBO 4.8%
EMB 6.9%
VEE 1.0%
XHY 5.0%
XIG 4.7%
XPF 2.4%
XTR 3.0%
RBF 461A 3.30%
Note: these percentages reflect only the Bond or Fixed Income component of these ETF's, not the equity or other holdings.
We each have modest private pension as well as CPP and (1) OAS.
Our total portfolio income will soon be required to help cover living expenses - and presently looks to be able to do so for the most part.
So, my question is: given the foregoing do you see any areas of concern or any compelling changes that would be required?
I know this might sound a lot like a mini portfolio review, but I have added a lot of detail so that it might assist others who read the Q&A as I know asset allocation is an area of concern and interest for many members.
Please feel free to deduct as many questions as you deem appropriate.
Many thanks,
Cheers,
Mike
Read Answer Asked by Mike on November 28, 2016
Q: I am retired, and have a portfolio with a mix of equities, ETFs and bonds. I have some money from municipal bonds to reinvest and I am considering some ETFs such as XSB, CBO, XBB and XHY as options to invest these funds, with a 5 year investment horizon. In the current environment (interest rates and the US election), how do you think these ETFs will perform in the coming years? Thanks for your great service.
Read Answer Asked by Alan on November 14, 2016
Q: How would you suggest I invest $100,000 in fixed income today, or would you recommend I hold the cash position into December? My only fixed income holding at present is a $200,000 5 year GIC ladder. Thanks, Barrie
Read Answer Asked by Barrie on November 14, 2016
Q: I read an article in the Globe and Mail by someone named Bryden Teich in which he predicted that the lack of liquidity in the corporate bond market would cause bond ETFs to tank at dizzying rates in a market panic. Is there anything to this, and if so, how would it impact popular bond ETFs such as CBO, XSB, and XBB, and what would be the long term effect?
Read Answer Asked by Bryan on October 17, 2016
Q: I am supposed to increase my fixed income exposure via one or more ETFs. I see you usually recommend CBO, but what about VSC. VSC seems to be a better performer over the last 1, 3 and 5 year periods. Which is better in your opinion and why?

I have about $21K in cash in an RRSP to invest in fixed income products. Should I buy two or 3 ETFs, or all in CBO or VSC is sufficient?

Should I buy now, or wait until after the US election, or even after FED meeting in December to see if they increase interest rates? Does it really matter at this time?

p.s. I have been invested in over 90% equities for the last 25 years (now 53 years old) so I am struggling to get myself to buy fixed income products. I am reluctantly buying fixed income products only because I know I am supposed to have better asset allocation and not be so heavily equity focused, but today the returns are so small I wonder if I would just be better off buying stocks like BCE, T, SLF, FTS, IPL, PPL that pay around 4% dividend.
Read Answer Asked by Paul on October 04, 2016
Q: This is a response to the question posted by Donald on CBO. Be careful with CBO. My experience over the last 14 months has been that the monthly distribution has been completely offset by a reduction in unit price so my total return has been 0.2%. Far different than their posted yields and returns. The HY acct paying 1.5% might not look so bad now.....
Read Answer Asked by Richard on September 16, 2016
Q: Good Morning: I would appreciate your advice in the following situation. I currently hold roughly 15% of my portfolio in a Hi-Yld savings acct. paying 1.5%. The benefit of course is total flexibility in case of a market correction where I see opportunities. The down side is the relatively low return on assets. I have been thinking about transferring some portion of those monies to CBO (or an equivalent if you know of a better option.) However, when I look at the fact sheet for CBO I see the following data: Weighted average yield to maturity is 1.72%; distribution yield is 2.84%, and the trailing 12 month yield is 3.23%. To my relatively novice eyes (esp. in regard to bonds and bond etfs) it doesn't seem that I would be getting that much of a premium, and I would be giving up some flexibility and there is always the risk of a continued decline in the share price (even though it is near its recent lows) thus erasing any gain in yield. There are a lot of issues here that I'm finding it hard to balance out and would appreciate any insight or suggestions you have to offer. Sorry for the length of the question. Don
Read Answer Asked by Donald on September 15, 2016
Q: Good Morning: A two part question about CBO. First, what is the difference between CBO and CBO.A, and is one preferable to the other for retail investors? Second, and more importantly, I notice that the stated yield (on my BMO Investorline fact sheet) for CBO is currently 3.3%. In your opinion, would an increase in interest rates in the US be likely to affect this rate in a significantly negative fashion?
Read Answer Asked by Donald on September 14, 2016
Q: Hi 5i,
I'm 58 years old and recently transferred over my Mutual Fund RRSP's to a self directed RRSP. I now have a diversified portfolio except for fixed income - still have 50% in cash. I know I should have around 30% in bonds (fixed income) but having a difficult time justifying investing in bonds with such low interest rates. Can you explain to me if rates start going up won't the value of bonds go down? What bonds would you recommend CBO or CDV or.... Are there bond like equities that would be better at this time.
Question 2: If rates go up in the US will that effect Canadian Utilities, Telco's and interest sensitive stocks.

Thanks,
Luca
Read Answer Asked by Luca on August 30, 2016
Q: Good Morning: I have been reading some of the recent questions related to bond etfs. I have been avoiding bonds and using preferred shares instead for fixed income in my portfolio, slightly better yield although also struggling through 2015. I notice that the yield for the two bond etfs mentioned is roughly 3.2 (CBO) and 3.1 (XCB). (Taken from BMO Investorline trailing 12 months average payout.) In your opinion, what can I expect in terms of yield from these instruments going forward -- roughly the same, a little more, or a little less? Also, I notice (not surprisingly) that the share price for CBO is near its 5 year low, whereas for XCB it is slightly up over the same period. What would your opinion be in terms of share price direction for each over the next 2 to 3 years as well. Many thanks. Don
Read Answer Asked by Donald on July 12, 2016
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