Q: I normally keep individual stocks to a limit of 5% of my portfolio in a registered account. However, with ZWC being an ETF, how high do you think I could go, given that it is diversified in many stocks?
What would be an attractive price to buy into ZWC?
If ZWU is also held in the same account, how high could you go for that ETF (as a percentage of the account)? And would that affect the amount of ZWC held in the same account?
Thank you.
What would be an attractive price to buy into ZWC?
If ZWU is also held in the same account, how high could you go for that ETF (as a percentage of the account)? And would that affect the amount of ZWC held in the same account?
Thank you.
5i Research Answer:
As a general rule, we are comfortable with ETFs up to 15%, provided that a) It is larger than $100M in assets, and b) its underlying assets are also liquid (i.e. not microcaps or private companies). ZWC has a five-year annulalized rate above 10%, and with 107 securities is well-diversified. We would be fine buying at $18.25 or less. We might target 9% long term returns here, and would not expect a giant move. ZWU is all utilities, and also a covered call fund. Considering ZWC is about 17% exposed to utilities as well, we think we would cap a combined exposure of the two at 25%.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWU.