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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: With the 30 year US bond flirting with 1.7% I am wondering what 5i's take is relative to the current discussion about inflation and the taper. Conventional wisdom would suggest selling bonds should tend to move rates up as would expectations of higher inflation.
Thanks in advance.

Read Answer Asked by michael on December 06, 2021

Q: Can you suggest some short-term bond ETFs that are investing in government and/or large blue-chip companies? 3 for Canadian market and 3 for internal markets please? This is to provide regular income after retirement.

Read Answer Asked by CK on December 06, 2021

Q: fyi
Question was asked where to park cash for short periods that is readily available. You suggested PSA ETF. Looked this up and I think the yield is .57%. EQ Bank (virtual) currently pays 1.25% calculated daily and is CDIC backed. Money can be transferred between EQ and your bank at any time (up to 3 days to clear). There are other high interest savings opportunities but for the past while, EQ has paid the highest rate.

Read Answer Asked by jim on November 22, 2021

Q: Hello, I am looking for an answer to a difficult question about evaluation of risk for fixed income assets.
I understand that for a long time, it was anticipated that the long decline of interest rates and correlated bond rally has ground down and the current prevailing question surrounding interest rates is how fast they may rise.
With this in mind, could you please offer thoughts on the relative risk of bonds? How much downside potential is there, and is it justifiable to buy their low volatility, even if it is believed to be a (apparently) horrible investment with no future potential, just for those two percents of yield?
Your thoughts are greatly appreciated.

Read Answer Asked by Peter on November 22, 2021

Q: Good morning. I have VALE in my registered account, with a much lower value than cost. It does pay a substantial dividend and I am aware that it also has cash. Is it reasonably safe to hold since materials are doing fairly well generally? Should I consider reducing my position or selling? Is it safe to hold with its high dividend at this time?

Read Answer Asked by Catherine on November 17, 2021

Q: Good afternoon!
This is one of Dorr Capital's funds that invest in mortgages (assumedly higher risk), and are speculating (pun intended!) a return of 7.5% annually, with distributions monthly.
The management fee is 1.25% (Series "A") or .85% (Series "F"). There is a cost to redeem on 30 days notice of 2% if in 1 year or 1% if in the second year.
I don't think this is much of a good idea, but was wondering:
1) Your thoughts on this specific investment?
2) Would there be any equities you could steer me towards that do this type of investment but without the management fees or the slow redemptions?

Read Answer Asked by Paul on November 15, 2021

Q: Hi 5i Research. I have all the above ETFs in my RRIF. Does it make sense to combine all of these ETFs into one. If so, would XSB be a suitable choice? Thanks very much. Ron

Read Answer Asked by Ronald on November 11, 2021

Q: Hello 5i Team

I currently hold a Canada Real Return Bond (Canada Dec-21) in a RRSP account which matures December 01, 2021.

I would like to maintain my current exposure to Real Return Bonds, however from experience I find it very difficult to purchase Real Return Bonds from my discount broker.

I am looking at the following current Real Return Bond ETF:

XRB MER = 0.39 % Effective Duration 15.26 year YTM 1.83 %

ZRR MER = 0.28 % Effective Duration 15.91 year YTM 1.65 %

Three newer ETFs based on the US short term TIPS are as follows:

BMO Short-Term US TIPS Index ETF (Hedged Units) [ZTIP.F] MER = 0.17 % Effective Duration 2.65 year YTM 0.24 %

iShares 0-5 Year TIPS Bond Index ETF (CAD-Hedged) [XSTH] MER = 0.15 % Effective Duration 2.60 years YTM 0.23 %

Mackenzie US TIPS Index ETF (CAD-Hedged) [QTIP] MER = 0.17 % Effective Duration 8.05 year YTM 1.13 %

Which ETF would be a suitable replacement for my Canadian $ Real Return Bond maturing on December 01, 2021?

Thank you

Read Answer Asked by Stephen on November 09, 2021

Q: Could you please comment on Closed end Municipal Bond Funds in the U.S.? How are they leveraged, and are they a good safe investments as a hedge against more troubled times next year? Any picks?

Read Answer Asked by Tom on November 09, 2021

Q: Hello 5i Team

I currently hold PH&N High Yield Bond Fund Series D (RBF1280) in a RRSP account.

I would like to transition from this mutual fund to an equivalent ETF.

What ETF would be a suitable replacement for this mutual fund, trading in Canadian dollars on the TSX?

Thank you

Read Answer Asked by Stephen on November 08, 2021

Q: Hello,

I am concerned in a rising interest rate environment CBO (5.0%), CPD (1.92%), XHY (7.4%), VAB (4.13%) are positions that need to change in my portfolio. Portfolio Analytics recommends holding 35% in fixed income. I currently hold about 18%.

Should I be selling some or all of these positions and then re-investing in other fixed income vehicles given the rising interest rates?

I would appreciate your feedback/suggestions on current position. Thanks again for all your great service.

Read Answer Asked by Mauro on November 08, 2021

Q: Expectations of sooner-than-expected rate increases have pushed short-term yields higher in recent days. If so, interest rates could be headed up faster than thought, with dismal consequences for stock prices and real estate speculators. Can you suggest a Canadian Bond EFT that would be suitable during this period of inflation? Cheers.

Read Answer Asked by Ronnie on November 03, 2021

Q: The short duration bond ETFs like these have declined in last few months with possibility of increased rates. If these are held for five years, would there still be loss of principal, if interest rates stay higher than today. I was assuming if bonds are held to maturity, there is no loss of principal. Hopefully, my question makes sense.

Read Answer Asked by Sudhir on November 03, 2021

Q: Hello 5i Team

In a taxable non-registered account denominated in US$ I hold Berkshire Hathaway (BRK-B) as a proxy for the US market in which no dividends are paid.

I would like to complement 20 % of the account value in US government bonds as a hedge against market corrections.

This account has a time horizon of greater than five years before any funds are withdrawn.

Which ETF (I used iShares as the ETF provider) would be most suitable for this account:

3-7 Year Treasury Bonds (IEI) duration = 4.66 years
7-10 Year Treasury Bonds (IEF) duration = 8.01 years
10-20 Year Treasury Bonds (TLH) duration = 14.89 years
20 Year Treasury Bonds (TLT) duration = 19 years

Or should I use a general US Treasury Bond ETF (GOVT) with a duration of 6.79 years.

If the same question is asked and US Government TIPS are utilized in place of US Government regular bonds which of the ETF below would be suitable:

0-5 Year TIPS (STIP) duration = 2.60 years
General TIPS ETF (TIP) duration =7.68 years

Thank you

Read Answer Asked by Stephen on October 28, 2021