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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: Hi,

My partner I are doing financial planning, we will need a relatively significant (to us) amount of cash in the next 2-5 years for replacing aging cars and a down payment on a larger house.

I am always hesitant to hold cash/GICs for fear of missing out on growth opportunities. Currently, almost all the funds in our RRSPs and TFSA's are invested EXCEPT a long term GIC that came to term and is now sitting in cash (some in TFSA, some in Non-registered). We will need all this cash in the next 2-5 years.

I am looking for ideas on how to manage the cash.

Right now, the best option I can see is GICs with various terms, do you have any other suggestions or ideas to consider?

(we have already owned a house, so cannot use RRSP loan or the new FHSA)

Thanks
Read Answer Asked by Mark on March 15, 2024
Q: Good morning, I’m looking to park some cash, both CAD and USD in a savings account ETF. What are your favorite, high yielding, ETF options? Thanks
Read Answer Asked by Seamus on March 14, 2024
Q: I understand this is a new ETF issued by TD Asset Management. There is a little information on its website. I am interested in it as a short term cash management option. I could not determine the yield. If you look at the current holdings, it states over 90% is invested in other than Canada. In its top 10 it holds a number of Trusts and when you look into these they represent a range of money market investment options including car loans, credit card debt, etc. Though it states the risk is low, its holdings would seem to suggest otherwise. Firstly, can you compare TCSH yield with that of GICs or HISAs. Further, do you have an opinion of this ETF as a place to park money. If you prefer other like ETFs would you also state how you would rank them. Thank you.
Read Answer Asked by Ken on March 11, 2024
Q: Good morning,

I have a fairly large amount of money to invest for a short period of time ( 1 month ).

Can you please suggest a money market fund ( ETF ) with interest that pays daily?


Regards

S.Gilbert
Read Answer Asked by Stephen on March 07, 2024
Q: Sir: some people are suggesting that seeking high income vehicles yielding north of 8% might be a better way to go. The following have been mentioned: 1. Preferred Stock closed end funds 2. CEF connect 3. High yield bond closed end funds 4. Senior loan closed end funds. Do you agree? and how does one find a winner in each of the categories? In a recession, this makes sense to me..
Read Answer Asked by James on March 07, 2024
Q: Thank you for the Money Saver's email " Avoiding The Yield Trap " on covered call ETF's. Garth’s question and your answer from February 25, sparked more questions. Also read all the Q&A on HBND.

My understanding HBND is 50% covered call on Treasury ETFs (eg: TLT, VGLT, VGIT, etc.) with target yield of 10%. Dividend growth is reliant on interest rate rising. You answered on Oct 6, 2023: “…But if rates stagnate or decline….the yield on this ETF may come under pressure, but its unit price can see capital appreciation”. Expectation is interest rate may go down this year.

Is it better to invest in HBND or dividend grower in the long term? So, I created a spreadsheet to determine the breakeven period where a dividend grower will match the annual dividend paid by HBND if dividend yield stays around 10%. I choose four random dividend growers FTS, SLF, TD, T with average historical annual dividend growth of 5%, 9%, 6% and 7% respectively. Starting point: Annual dividend payment as of January 2, 2024, no DRIP and no additional stock purchases.

If HBND dividend yield target yield remains around 10%, the number of years, when the annual dividend grower payment would exceed HBND annual dividend payment for FTS in 18 years, SLF in 13 years, TD in 16 years and T in 8 years.

Based on these results, if a person requires dividend income is the next 10-12 years, than HBND is a possible income source. However, if the dividend income is not required for more than 10-12 years, a viable option is to purchase a dividend grower since the annual dividend amount should exceed HBND and continue to grow.

Note: This is a simplistic point of view since HBND target of yield may drop with interest rate expected to drop later this year, a dividend grower rate may drop, no drawdown in capital for more than 10 years or black swan events. This exercise is focus on dividend not capital appreciation. This exercise could be applied to other income stocks (eg: XHY, HPYT),

Is this logic flawed? What other points should I consider? Is there a role for HBND or other high yielders in wealth accumulation portfolio vs wealth decumulation phase? Inflation in the last couple of years has reinforced (for me) to consider dividend growth to be able to fund retirement income for hopefully a few decades.

Thank you for your thoughts.
Read Answer Asked by Karen on March 05, 2024
Q: Hi Peter & Team,

If I understand bonds correctly, we are in a period right now where we could see them do quite well over the next number of years. Do you agree or disagree with this statement?

If you said agree.... Some of the best performing in the past have been Municipal bonds. Could you please share your thoughts on Municipal bonds specifically regarding risk? If you think they would be a good to hold in a long term portfolio? And do you have any Municipal bonds you could recommend that might do well by us?

If you said we disagree with my statement in paragraph one... could you please explain why?

Thanks for all you do

gm
Read Answer Asked by Gord on February 29, 2024