Investment Q&A

Q: What’s your opinion on these new fixed income products?

Thanks and have a great day.

Q: Hello, I’ve watched this fund destroying wealth since 1995 ish. If the 30 plus years of declining rates were the result of poor performance do you think it’s possible something has changed and this could be a slow mover up in the future. Thankyou

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.

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

Q: Could you please recommend two 100% safe and liquid holdings, one Canadian and the other American. Could you advise the current interest rate they each pay?

Q: What do you think of senior loan funds in general, and this one in particular. Seems like a safe and diversified way to earn steady income. Any other information sources on this asset class? What would be your best pick?

Q: In the last couple of days there has been a few references on BNN to some regulatory changes that will have the effect of reducing the rates paid on HISAs at banks, etc. Can you pls explain exactly what is happening and how much effect there will be from this? Last, are there reasonable alternatives (ie secure with good rates) available if the rates go down in any significant way? Thanks for your excellent service

Q: Hey Peter & Team,

Apologies if I missed the answer when I searched, but I found it difficult to find my answer when I looked for a U$ dollar equivalent to "CASH." What would you suggest 3 - 6 months hold??? OR is there a U$ ETF representing GICs?

Thanks for all you do

gm

Q: I have part of my portolio in a self-managed account and another part in wealthsimple's roboadvisor. My fee only Financial planner said that he does not like the bonds in the roboadvisor which has an equal amount of ZFL (long bond) and WSGB (average duration of 5 years). It is not possible to change the percentage of ZFL to WSGB in a roboadvisor. Although I have really appreciated the service from the roboadvisor (I can have phone calls with a wealthsimple advisor) and love their platform, I am considering moving out of the roboadvisor because it is impossible to change the distribution of long to short bonds. In my self-directed account I hold ZAG - an aggregate bond. My question is: how does an equal distribution of ZFL and WSGB compare to an aggregate bond such as ZAG? Am I exposing myself to much longer duration in the roboadvisor compared to the self-directed account?

Q: Please recommend the best fund for sitting on US cash. Thx.

Q: Morning Peter & Team,

Please recommend a minimal risk minimal volatility minimal fee ETF that will generate a good dividend? I am looking at liquidity within 6 months.

Thanks for all you do.

gm

Q: Hi, can you provide your current thoughts on Long term US treasuries. TLT is down 2.5% so far today. Thanks
Mike

Q: Hello 5i team,
You recommended in a previous question TUHY instead of HYI (being terminated in March of this year). I also have XHY in my TFSA. Is not TUHY and XHY almost the same except that XHY is CAD-hedged and is larger in market cap?

I am wondering which one has Canadian high yield bond exposure as well as US? Or is it that there is not much coverage in CAN in general?

Andrew

Q: Tom Czitron had an interesting article in the Globe and Mail for January 30. Would you agree with his thesis? He concluded with this paragraph: "This year may prove to be a wild ride for financial markets. An increasingly volatile global political situation adds to the appeal of North American bonds, and mid-term government bonds may be a relatively headache free place to be. A good way to gain exposure is the BMO Mid Provincial Bond Index ETF. It covers a promising area of the yield curve with some extra yield and no corporate credit risk." The ETF he recommended is ZMP.

We have decided to allocate 80% to equities, and 20% to bonds, and would appreciate your views on ZMP being part of our fixed income holdings.

Thanks for your insight.

Q: Hello 5i team,
I received notice that Horizon will be canceling certain ETFs including HYI affective March 20 2024. Can you give me other ETFs that are equivalent?
Andrew

Q: Hello. I am reaching out to express my interest in acquiring some corporate bond contracts for supplementary income. Specifically, I am considering the Genworth Mortgage Insurance corporate bond with an expiry in 2027 and a yield of 5.6%, graded A.

Could you please provide insights into the risk associated with this particular company? I find that Genworth Mortgage Insurance is the sole bond issuer within the high-yield bonds category with an A-grade quality.

I appreciate your expertise and assistance in guiding me through this decision.

Thank you

Q: Good Morning
I would like to invest some of the proceeds from a recent sale in my RIFF into a bond etf I would like a dividend in the 5% range that would also provide some room for growth.
could you provide 2 bond etf that would meet that criteria
Thks
Marcel

Q: Would XSB be a suitable holding for an 18-month holding period in a RESP?

Q: HI,

What is a good time to sell these units/ETFs? To lock in the distribution of that month's interest? I am looking at taking some cash off these and be ready to deploy the capital. Not in a rush. But want to be prepared.

Q: Good morning,
Happy New Year to the team !
This question is on structured notes (maturity monitored barrier ??) for an 89 yr old.
My 89 yr old aunt, who is in ill health, with a substantial, relatively well-balanced portfolio, (26% in Canadian banks), she reinvests dividends. Her advisor is suggesting investing in a 7-year auto callable note securities - maturity monitored barrier - linked to the Solactive Canada Bank 40 AR index. His reasoning: for portfolio diversification.
Due to her age, and the complexity of the investment (i.e. hard to understand all the nuances/outcomes) I am uncomfortable in agreeing with his suggestion.
Would you recommend such an investment to an 89-year-old in ill health, who's pension covers all her expenses?

Can you give your comments on structured notes.

Deduct the number of points you think is necessary.

Kind Regards,

Élaine