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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: Hello 5i:
can you advise on the ETF HQH? I'd like more US exposure, in US dollars and would see this as a very small part of the portfolio. I'm attracted by the yield, and by the fact that Biotech in general has been pretty beaten up; meaning little downside with good upside. I'm thinking of holding in a TFSA, if an investment is made.
thanks
Paul L
Read Answer Asked by Paul on May 08, 2018
Q: Greetings 5i,

I am comfortable holding the bigger Chinese companies however I find myself with all 3 of these ETFs as well as several of the larger China Tech companies in my portfolio in all in half positions ( BABA, TCEHY, JD, BIDU). My question is What ETF would you let go?

As far as redistribution of these funds I am more interested in Large or Mid cap longer term holds that have value currently. Any recommendations?

Cheers!
Read Answer Asked by Duane on May 07, 2018
Q: Hi Peter, Ryan, and Team,

Perhaps you could shed some some light on this ETF, as I believe there's a serious pitfall with the product. I sent First Asset an email yesterday, wondering about the so-called "reinvestment" that was "paid" on Dec. 28, 2017. I refer to it as 'so-called' because this $1.63 per share "reinvestment" does not give you cash, nor does it increase your number of shares! In other words, it appears to do nothing for me.

Here's the email I sent First Asset:

Hello,

I purchased 1395 shares of TXF on July 21, 2017. I see that on Dec. 28, 2017, the fund "reinvested" $1.63 per share. This would, in my case, be an amount of 1395 X 1.63 = $2273.85.

My broker, Scotia iTrade, increased the adjusted cost base (book value) of this fund, so I now show a slight loss when not considering the cash distributions received on Oct. 4, 2017, Jan. 4, 2018, and Mar. 29, 2018.

Here are my questions:

Should I see the amount of $2273.85 on the statement from my broker?
If I were to sell my shares of TXF today ($16.69 at this moment), would I receive 1395 X 16.69 = $23282.55?
What happened to the "reinvested" amount of $2273.85?

I look forward to an explanation of the above questions.

Here's the response from First Asset:

Hi Jerry,

The $1.63/unit amount is a non-cash distribution that was reinvested in the fund, which is why you see an increase in the Adjusted Cost Base. To answer your questions:

The amount of the distribution should be reflected on your statement but only as an increase to your Adjusted Cost Base. It wouldn’t increase the amount of units or the market value of your position in TXF.
If you were to sell your shares based on a unit price of $16.69 you would receive approximatively (1,395 x 16.69) – Adjusted Cost Base (including the $2,273.85) minus any other fees your broker my charge you.
The amount of $2,273.85 has been added to your Adjusted Cost Base.

I realize that 5i doesn't really care much for the covered-call aspect of TXF, but I was prepared to live with that. However, I certainly didn't expect the ACB (book value) to increase by the amount of this non-cash distribution! How does this help the investor? Am I correct in my assessment of TXF?

What would you replace TXF with to stay in the same sector, and one where the "reinvestment"is actually paid to the investor?

Thanks in advance for your guidance. I realize that this is a long and detailed question and your answer would be helpful to others. Please deduct as many question credits as you deem necessary.
Read Answer Asked by Jerry on May 04, 2018
Q: I wish to get international equity exposure in my portfolio using XEF or XIN, along with XEC for emerging markets. Currently international exposure is negligible.

What do you think an appropriate international weighting would be in a portfolio that is 90% equity/10% fixed income.

I was thinking 15% developed markets (such as XEF) and up to 5% emerging markets (XEC). Thoughts?
Read Answer Asked by Chris on May 03, 2018
Q: Could you explain exactly what these two ETFs invest in? On their respective websites it appears as if ZFH is largely in government bonds or treasuries of some type (the scary term CDS shows up here), while MFT refers to "bank loans". Both indicate low to moderate risk, while at the same time showing virtually all investments rated at BB or less - below investment grade.
How do these ETFs compare to ZHY or XHY in terms of safety of principle and dividend sustainability?
Thank-you
Read Answer Asked by grant on May 03, 2018
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