Answers to popular stock and investing questions this week

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Popular Answers to Member Questions 

Question 1: Do you have any comments on the US-China trade war escalating? Which Canadian sectors will be less damaging and which sectors will be affected most?

Answer 1: Companies with domestic revenue are the safest, such as telcos (BCE, T, RCI.B) or food retailers (L, MRU). Canadian utilities (FTS, AQN) are also somewhat immune. Exporters and producers of goods (STLC, NTR, MG, AFN) are more likely to get caught up with trade issues, or at least more likely to be ignored by investors while the dispute carries on.

Question 2: I could use your opinion. A good friend has recently inherited $800,000. He and his wife are in their 60's, retired with a small pension. They are conservative people who have no investing experience and would like to invest the funds in "safe", dividend-paying stocks/ETF's to augment their pension. They currently have no money in the market, with all their net worth (excluding the pension) is in real estate. They have reached out to investment advisors who want to charge them a flat 2% to invest their funds and have asked me if this is reasonable. They need these funds to live off and the thought of paying someone $16,000/yr to invest the funds seems ridiculous to me. I would like to help them and was hoping you could provide some views.

Answer 2: 2% for a managed account is very much on the high side. If they 'need the inheritance' to live off then one has to ask what they planned to do without this. We can't tell, but there might be too much real estate exposure here. Investors with little experience do have to be careful and we think an advisor fee of 1% is something to target if going that route (excluding costs on funds owned).  Something like VBAL, with a 2.6% yield and 40% bond exposure may be something to consider. XTR is diversified and provides good monthly income as well if considering the DIY route. 

Question 3: Is Bombardier (BBD) going to survive?

Answer 3: BBD has $7B in debt coming due from 2021 to 2025, and has a high cash burn for the next few years. Based on its (absolutely horrible) execution over the past two decades, we would not see it in very good shape. We are sure the government will step in to support it though, as usual. But this does not make it's stock a very good bet. It has really destroyed shareholder value. 

Question 4: Can you please point me to an ETF similar to NBC7433 - Meritage Global Balanced Portfolio - Advisor Series/ISC, with a much more reasonable MER than 2.39% (in addition to a “sales charge option”)?

Answer 4: We would view Vanguard Balanced ETF Portfolio (VBAL) as very similar right now, based on equity/debt mix and geographic positioning. YTD returns are also almost identical (10%). MER is 0.25%

Question 5: Does Just Energy Group (JE) still pay a dividend.

Answer 5: NO. The dividend was suspended on Aug 14. 

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Disclosure: The author does not hold positions in any stocks or funds mentioned.

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