Q: I previously was using a Roboadvisor but decided to do it on my own and had all my funds transferred to self-directed accounts. In my TFSA, I lost 29% on ZFL (~$6500). I would like your opinion on taking a loss on ZFL in my TFSA? My thinking is that this is dead money in my TFSA and I would be more likely to gain in a S&P or TSX ETF. Should I repurchase ZFL in my RRSP? What are your thoughts on this.
5i Research Answer:
ZFL is up 0.33% this year. The issue is that, due to the Iran War, interest rates may not decline as much as previously expected. Long bonds are more sensitive to rates, so ZFL really needs lower rates to get back on track. For a TFSA, we would prefer equity (growth) exposure over bond exposure, but of course this entails higher risk. We are not adverse to buying ZFL in an RRSP. A recession is also a possibility, and this could see longer bonds perform better if investors see longer term rate declines going forward. Bottom line: we would prefer growth in a TFSA, but are OK with fixed income in an RRSP.