Investment Q&A

Q: The recent hand wringing (and rightly) over CRH (haven't owned for years) has made me question what rationale retail investors use to buy and sell. I understand why advisors suggest a buy and hold strategy. But can't understand why retail investors need to be tied to that philosophy. I'm making a leap and will assume most members of this site use a discount brokerage. Given the almost insignificant cost to buy and sell (assuming buys and sells of more than $10,000), isn't a more active approach to trading a reasonable proposition? I use technicals to take the emotion out of the equation and would love to know what buy and sell discipline you would suggest. Having personal buy/sell rules might help investors feel better about making these decisions.
Thanks for all your support and advice over the years.

Q: Peter
From Morgan Stanley, i think, a well written little dose of common sense...
print or keep for you

NEW YORK – The S&P 500 closed at a new high on Wednesday in what analysts hailed as the accumulated result of several hundred million people waking up every morning hoping to solve problems and improve their lives.

The index finished up 4 points. Goldman Sachs strategist Bill Blake said the move was the result of unidentified marginal buyers being a little bit more motivated than unidentified marginal sellers. “We’ve now had 241 years of people in daily competitive pursuits to do things a little better, and those benefits add up over time. Mix that with some good luck and where we happen to be in the business cycle, and here we are,” he said. “My job is to sound smart, but you can explain this stuff to a five year old,” he laughed.

Corporations earned $5.89 billion in after-tax profits. Financial advisors and middlemen took in $710 million in fees. The difference, Blake said, would accrue to investors over time.

Analysts warned of several metric tons of dopamine and cortisol careening through the global economy, which they said created a near certainty of poor financial decisions. At some point, Blake said, these bad decisions create social proof and feed on each other, leading to recessions. “When is the next recession?” he asked. “I don’t know. Whenever the second mortgage you took out to buy a boat to appease your insecurity convinces your brother in-law to do the same, and his boat gives the boat salesman enough misguided confidence to become a day trader, and then all three of you crack under a collective bout of geopolitical bad luck or something. But we’ll move on.”

About 9,000 new businesses formed on Wednesday. Another 8,200 dissolved. Analysts expect the trend to continue, calling it an “unmistakable example of basic capitalism.”

Fifty-five million American children went to school Wednesday morning, leveraging the compounded knowledge of all previous generations. Analysts expect this to lead to a new generation of doctors, engineers, and problem solvers more advanced than any other in history. “This just keeps happening over and over again,” one analyst said. “Progress for one group becomes a new baseline for the next, and it grows from there.”

Three dozen political pundits yelled at each other on TV in front of an audience of 75 million. Meanwhile, a couple hundred million people were reasonable and productive in front of an audience of zero.

Just over 1,700 patents were filed at the U.S. Patent and Trade Office, with a few expected to change the world over the coming decades. “Pretty damn cool” said Sarah Donald, a PTO spokeswoman. “I wish more people paid attention to this kind of stuff.”

Facebook stock fell $0.23 to close at $169.16. Four-hundred seventy one news outlets covered the move. No one knows why.

Analysts expect more of the same tomorrow, with the trend continuing into next week.

* Nothing, and yet everything, about this post is accura

Q: I bought a half position of KWH.UN July 10 and after only 3 weeks, it's down 7%. Do you recommend I add to my position and average down or wait for an certain event?

How do you determine when to add to partial positions?

Q: Marylin question.
I use this web site for dividende growth http://www.dividendgrowthinvestingandretirement.com/canadian-dividend-all-star-list/
Publish as you which

Q: can you refer to a few hedge funds or managers that generally produce excellent results year over year?
i like dkam but they are closed for new investments.

Q: Hello: I am trying to find the list of those companies (Canadian, US, global) who have increased dividends year over year +for ever+. I know I have seen it but am not able to find it right now. Can you please point me to this, I am going to try to use it more in my portfolio planning. Many thanks to you, Marilyn

Q: In response to John on Aug 1st, here is a link to the Bank of Canada CAD index against a basket of 6 currencies: http://www.bankofcanada.ca/rates/exchange/ceri/

Q: Please advise what is the effect of strong Can.$ on the aforementioned stocks.Thanks for u usual great services & views

Q: Hi the great 5I team, following Harry's question on ask and bid price, how unbiased is the market maker? Your answer seems to suggest never put in a market order ? Thanks always.

Q: I am considering realizing some capital gains now at the 50% tax rate in case there is an increase to say 75% in the fall federal budget. How and when will I get more info on the fall budget? Will there be an announcement at some point?

Q: Hello
Could you please tell me averaged over time what has returned more to an investor dividends or share price (broad market). Or worded another way how much money is paid out in dividends and how much is from share price increase. More of an economics of the stock market question. Is there a value? Example on average $2Billion is paid in dividends and $2Billion is share price increases. This question pertains to the TSX but are all stock markets similar in their returns. Thank You
Jeremy

Q: Can you explain currency hedging with a SIMPLE example. Maybe include when it would be advantageous to use a hedged product versus unhedged. I don't think I'm slow, but it's just not clear to me, and I may not be alone.
Len

Q: Hello Peter and Gang,

Would you please enlighten me on how prices are determined for stock trades. For example if I put in an order to buy a stock at a limit price of $1.00 (max that I would buy at). At the same time, someone puts in an order to sell the same stock at a limit price of $0.98 (minimum the seller would accept). Under this scenario, at what price would the trade be consummated? $1.00 or $0.98?

Also, if I put in an order to buy a stock at market price. Meanwhile for the same stock, one seller is asking $5.00, another one is asking $5.20 and yet another one is asking marking price. How would the "trade" price be determined in this case?

Thanks....

Q: Feature suggestion: Are you considering showing the portfolios directly on the website in the members section? I think this would add some convenience. Thanks for a great service.

Q: Hi 5i
I hope you could clarify an issue for me. When a Canadian company, say Methanex, declares a dividend in ($ USD) but the holdings have been purchased on a Canadian Exchange, would you expect the dividend hitting one's account (which can and does hold multiple currencies) be in CDN or USD $ currency? Does the base currency of the exchange play a part in this and/or is it up to the brokers' discretion to apply a certain policy in these cases?

Thanks

Q: A couple of years ago a guest on BNN stated that when a Canadian citizen has over $100,000 IN U.S. stocks, they have to inform the U.S. government. I this is so how does one go about telling the correct U.S. government department ? Thanks.

Q: Greetings Peter and team,

Your answers to members' questions are impressively lucid and objective. So, here is another one for you.

Jack Bogle, the father of the hugely successful concept of passive, US index fund investing does not recommend rebalancing in an individually selected asset allocation strategy. "If you want to do it, once a year is probably enough," he has stated.

Taxes and transaction costs diminish the benefits of rebalancing but Canadians have a lot of tax-deferred and tax-free room in their registered portfolios. Further, transaction costs keep coming down so that with trades above $10,000, investors can (almost) ignore them. With a million dollar trade they can do so, absolutely.

So why not rebalance every time that a given imbalance, say 10% develops?

Q: You have emphasized that it is better to invest in good companies than to try and time the market. However, when considering a new position, I have read that it may not be a good idea to enter a private equity fund near the end of a business cycle. Do you concur with this idea? Why or why not? Thank you kindly for your discussion of this issue.

Q: I have seen my investments total value in US stocks and non hedged ETFs going down lately, although individual stock price are doing OK.
I know it is very difficult to predict currency fluctuations, I would like your view and recommendation on how to protect my portfolio. Is buying hedged ETFs is the solution and what about your view on the Canadian dollar against the US $ and the Euro.
I value your opinion
Raouf

Q: Doing the tire-kicking here on your service (have received magazine for years)...looking over the company reports, at what point to you update them - every 'x' years or if there is a material change to the company? So when I see a company that has a report a year or two old, is that because nothing really has changed regarding the company or you just don't update them every year? Thanks.