Q: Do you consider HYLD as a reasonably safe place to store cash in my normally growth orientated TFSA while I decide on a growth stock I want to invest in long term? (The high yield is very tempting).
Thank you.
David
Thank you.
David
5i Research Answer:
We would be comfortable with HYLD for higher yield and some long term potential, but ONLY if an investor is familiar with, and comfortable with, leverage. The ETF uses 25% leverage, so in a bad market things will be worse than the other ETFs. But, over time, leverage can certainly improve returns. The yield helps offset risk a bit, and its 3-year annualized return is acceptable at 9.70%. Note there will likely be some asset value decay because of the high yield. We would be less interested in using it as a 'cash' parking vehicle as it can decline and may be volatile. If money is needed in a short, defined time period we would prefer a high interest ETF such as CASH.