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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: 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.
Read Answer Asked by Matt on July 12, 2017
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
Read Answer Asked by Antoine on July 11, 2017
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.
Read Answer Asked by STANLEY on July 11, 2017
Q: A number of posters list off several holdings in a given sector. If you hold several stocks in each sector, don't you end up with an unwieldy number of stocks? Are there sectors where diversification is more important than others? How does one determine how many stocks in each? Am I missing something in thinking you'd end up with insignificant amounts of a large number of stocks? i know: a lot of questions. Dock whatever seems appropriate.
Read Answer Asked by M.S. on July 10, 2017
Q: Hello 5i team,
I’m 74 years old; with due diligence and with the contribution of people like you, my RRIF portfolio is behaving very well. My plan is to deplete the RRIF portfolio at age 90. The revenue from this portfolio will continue at the same level if I get a 7% compound annual total return in the next 16 years.
Unfortunately, we expect a recession sometime during those years. If I were to ride the recession, the value of the portfolio would stand still for (let’s say) 5 years and if the portfolio were to grow by 7% in each of the remaining years, my revenue would drop by a whopping one third. In order to maintain the expected level of revenue, my excel projection model indicates that I should obtain a 20% growth per annum instead. That is unrealistic.
Alternatively, I could do what I did in 2008. I sold my holdings after incurring a 15% decline and re-entered the market a few months after it bottomed and started on its recovery path. If I did that and planned for a 7% growth per annum, the revenue would drop by 13% only. That is quite acceptable because there is a 10-15% safety margin in my revenue forecast…a cushion of sorts.
If, however, I knew when the recession will occur, I would exit the market ahead of time and re-enter after the bottom…”but that is another story”.
I would greatly appreciate your collective opinion.
Best regards,
Antoine

Read Answer Asked by Antoine on July 10, 2017
Q: Just a comment this morning... the Conservative Government, at the time of introduction, should have named TFSA's 'Tax Free Spending Accounts'. The original idea was to allow people to save money so they could then spend it on cars, washing machines, dryers etc. The government has the statistics of whom is using this account and whom is not. It has been the biggest (and best) 'savings' tool since 1956 when they introduced RRSP's. I agree with 5i that if people have made 500K-1M in their TFSA for sure they have taken a chance on companies in the TSX , investing in the country ...good on them.
Read Answer Asked by Alan on July 10, 2017
Q: Good morning Peter,

When looking at reversion to the mean, the near-term chart can be different from the long-term chart. For instance, the one-month chart for QQQ at closing on Friday, July 7, shows it to be below the mean suggesting a good buying time. However, the 10-year chart shows it to be significantly above its mean suggesting a good time to take profits.

Which is the more important indicator?

Thank you.

Milan
Read Answer Asked by Milan on July 10, 2017
Q: Hi 5i team,
You recently mentionned that you expect the downturn in the technology sector to be short lived, because it is one sector where investors can find growth, and that the down trend could/would/should be reversed when second quarter results start to be released. What companies (presumably in the USA) will start this release period in the technology sector and at what dates? Thank you, Eric
Read Answer Asked by Eric on July 10, 2017
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