Investment Q&A

Q: Hi Peter, Ryan, and Team,

I am overweight in Consumer Staples and underweight by an almost equal dollar value in Information Technology.

Present holdings in Consumer Staples include ADW.A, ATD.B, ECI, PBH and SAP. (SAP is the only one that's down in value).

Present holdings in Info Tech include CSU, ENGH, KXS, OTEX, and PHO (PHO is the only one that's down in value).

Which stocks in the Consumer Staples sector would you trim/sell, and which stocks presently held in the Info Tech sector would you add to at this time? (If there are compelling reasons to add more Info Tech stocks, your suggestions are welcome.)

Also, is the thesis still the same for SAP? It's been a fairly disappointing stock, but of course your great recommendations have really enhanced our overall portfolio. Thank you!

As always, I appreciate your valued advice.

Please deduct as many question credits as you deem necessary.

Q: Good morning
A fundamental question regarding rising interest rates. Does a period of increasing rates typically encourage an inflow of foreign investment into domestic equities or an outflow? Based on your past experience, how has the TSX performed under increasing rates?

Thank You
Clarence

Q: Hi 5i Team, when someone looks at the financials of a company for the sustainability of the dividends, should we concentrate on the earnings or the cash flow numbers? I have often read on this site that the cash flow is more important than the earnings. Would that be true for most companies or only the ones in some industries? Thank you. Mario.

Q: Do you have any thoughts on the Mackenzie Canadian Growth A Fund and Dynamic European Value Fund?

Q: Hi 5i team,

I am trying to save to retire early or if the doesnt happen then just have much more saved when I do. I know I should max both TFSA for my wife and I, but how much %-wise should I put in a registered vs a non-registered? I'm stilll 14 years away from my ideal retirement date and about 24 from my latest. Right now I have about 30% of my total saving in a non-registered account, and have yet to max out my wifes RRSP but should I just put it all in a registered account then use just the TFSA for liquidity? I'm sorry if the question is not quite within the purpose of 5i, but I do value you guy' opinion highly.

Thank you

Q: Hi Gang

Our parents are in there 80/90s , in fairly good health, and are just now moving to a retirement home, which will cost approx $5000 pm. Their assets are largely sitting in cash. Can you recommend investments to create more income for them? They have 300-400M to invest.

Thanks Mike B

Q: On June 28 you answered a question for me about using market/limit orders and suggested that I should use them for illiquid stocks. I was wondering if you could provide a concrete example of what you would do as I am having trouble understanding how best to buy/sell in these situations. If, for example, a stock had a bid of $34.61 and an ask of $34.90, at what prices might you submit for either a sell or a buy of that stock?

Thanks for your help.

Paul F.

Q: Good day Peter and 5i Team,

This question is basically about asset allocation. My goal is to gain more exposure to global markets as opposed to the Canadian market. (United State, Europe, and Asian markets). I would like to gain this exposure by investing in, what you consider to be the highest quality ETF'S currently available with exposure to these markets. I understand there are countless possiblites available; therein lies my problem, but I would appreciate keeping the number of ETF'S to a minimum. So, what is your best investment for in each of the sectors for capital gains, some dividend support, and lower fees for overall investment appreciation?
-Europe?
-Asia?
-United States?
Keeping in mind the current condition of the world economy, what percentage of my funds would you designate to each ETF?
Thanks-you for your continued support.

Q: The fact sheet for Vanguard etf VIG and VCR mentioned the fund total net assets and the share class total net assets. What is the meaning of those terms?

For Vig the total net assets amount to $30.2B and the share class total net assets amount to $24.4B and for VCR those respective numbers are$2.5b and $2.3B.
What is the reason for the difference between the two number and why is it that the difference is larger for certain ETF?

Q: Hello. My 31 year-old son has been diligently saving for his future retirement, and has a combined portfolio of $80,000 (TFSA & RRSP). The money is mostly divided between Canada (45%) and USA (44%), with a small bit in the International market (11%). Under your advice last year, he sold his Canadian ETFs and bought some individual stocks. The result is amazingly better than the index, so THANK YOU!

Now, I'm wondering about his US portfolio. In the US part of the portfolio, he has several ETFs: VFV, VGG, ZLU, XSP - 42%, ZQQ- 18%, Health - XLV - 12%, and a remaining $10084 CAD cash (28%) that can be dedicated to US equities. What should he do with the money?

Alternatives: 1) increase his US ETFs. 2) buy individual stocks. 3) wait until the dip...
What should be the strategy for this portfolio? I'm interested in buying GOOG for him for a long term hold, but the price is too high for such a small portfolio. Any thoughts or suggestions? Thank you!

Q: Hello 5i team,
When the US Fed or the BOC talk about raising rates, are they talking about the short term or longer term rates. Do they consider the effect of such a move on the shape of the yield curve?
Thanks,
Antoine

Q: I have a small fund for grandchilds .My allocation is 30% Emerging markets ;
30%international developped and 40% CANADA.
For the Canadian portion would you have specific company that are proxy
for the general economy.

Q: The recent cashing in of my pension has left my account with a lot of cash that I have been hesitant to deploy in the current market environment. Rather than outright purchasing some of the names on my watch list, I am considering selling calls on the stocks I would like to hold. This way I can collect a premium which is a bit of compensation if the stock goes up and I miss out, and if it goes down to the exercise price I end up owning a stock I wanted anyway at a lower price and with the option premium. Does this strategy make sense to you? If yes what would be your guideline for expiry dates and strike prices and can you suggest any good candidates for this strategy from the BE and growth portfolio?

Q: Apparently there exists a ratio that gives a probability on accounting/financial manipulation. Could you tell us the name of that ratio and whether or not there is a website that shows what it is for any company? If there isn't, is the problem that the variables it is based on are not always public? Otherwise, it seems a great metric for any site (Google Finance, Globe Watchlist) to add. A quick search seems to show that there is quite a lot of interest in detection methods. There is even a professor at the Toronto Rotman School of Business who works in the area. Some call it forensic accounting.

Q: Hi Re Rod,s comment has there been a change to the TFSA?
Stan

Q: Hello 5i team,
I greatly appreciate your response to my question regarding the effect of a recession in a 74 year old’s RRIF portfolio. I retain from your response the following:
Asset allocation: one third of my retirement income comes from CPP, OAS and a very small defined benefit pension; one can’t have a better fixed income vehicle as that!
Cash: it currently stands at 6.5% of my RRIF portfolio; I’d like to increase it to around 12% or the equivalent of 2 years of minimum withdrawals.
Quality companies and Diversification: I currently hold the following companies; they are listed in alphabetical order and I would appreciate to know how you would rank them within their sector
Consumer cyclical (6.6% of portfolio) CGX, LNR/MG, TOY
Consumer non-cyclical (7.6%) ATD.B, DOL, PBH
Energy (8.4%) ENB, KEY, PKI, TOU, VET, WCP
Financial (8.7%) AIF, BNS, ECN, SLF, TD
Health (3.1%) CRH, GUD, PLI; thinking of replacing CRH and PLI with ZUH
Industrials (11.7%) BYD.UN, CNR, NFI, SIS, STN/WSP; where would CAE fit?
Materials (9.5%) AEM, CCL.B, MX, SJ
Technology (22.8%) CLS, CSU, DSG, ENGH, GIB.A, KXS, MDA, OTC, PHO, SHOP
Real Estate (5.8%) CIGI, FSV, TCN
Telco (2.2%) BCE
Utilities (7.1%) AQN, BEP.UN, BIP.UN
There are 48 stocks; that is too much to handle for my hardening grey cells. Your ranking would help me identify which ones to eventually sell.
Please deduct as many credits as you wish.
Kind regards,
Antoine

Q: In a response to a comment of TFSA's you mentioned that the TFSA should be used for growth and not safety. Of course I have a GIC ladder to the tune of $50,000 over 5 years in both our TFSA accounts. Should I take them out of the TFSA accounts? If I do what would be the suggested replacements? Or should I just continue with growth stocks in the upcoming years leaving everything as is? We are in our 70's with 50/50 equity/fixed.
Stanley C.

Q: How will bank stocks be affected if the BOC raises interest rates this week?

Q: Good morning,

Can you tell me the effect of the increase of the interest rate in Canada on each of the tsx sectors?

Thanks
Paul

Q: Regarding equity income generated in a RRIF, would the following diversification be adequate in a rising rate enviroment and also a recessionary backdrop?

banks & lifeco 60%, CPD 10%, utilities 10%, telco 10% and staples 10%. I am assuming all dividends would be considered safe. Can you buy into this approach?