skip to content
  1. Home
  2. >
  3. Investment Q&A
You can view 3 more answers this month. Sign up for a free trial for unlimited access.

Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I am curious about a comment you made earlier. Someone asked about photon control, and you pointed out that nothing had changed with regard to the situation or prospects at this company, which your regard as very good. Yet since late April, the trend in its stock value has been steadily downward. Savaria is another of your favorites with great prospects, but its trend over the last six weeks, has again been consistently down. If the actual underlying performance of the company has not changed, what causes a stock to fall off like this, not for a day or a week, but consistently over a long period, given most investment is being done by professionals?
Read Answer Asked by John on July 20, 2017
Q: With the recent strength of the CDN$ I am looking for opportunities to take advantage of this. One thought is to sell current dual listed holdings and convert from Cdn to US and the other thought is to look for other undervalued foreign investments. Would appreciate your input and suggestions.

Thank-you and appreciate the great service your team provides.
Read Answer Asked by Alex on July 20, 2017
Q: I would like to ask for your opinion and comment on my investment approach with reference to hedged to CAD or un-hedged versions of ETF's available from Canadian issuers. My approach has been the following:
- keep US equity ETF un-hedged;
- keep developed and emerging international equity ETF's hedged to CAD;
- keep US bond ETF's hedged to CAD.
I am aware that this approach was not too benefitial during the past month or two, and I am starting to have second thoughts, but I figure I better ask for a second opinion from a pro before I make any changes. This is where you guys step in...
Thank you.
Read Answer Asked by Rudolf on July 20, 2017
Q: Hi 5i,
Just a comment. For anyone looking at historical returns to evaluate the future prospects for a balanced (equity + fixed income) portfolio, it is extremely important to consider that the next 30 years of fixed income returns are virtually guaranteed to be significantly different than the past 30 to 40 years. Bond yields (interest returns) were in a generally declining trend, originally from nosebleed levels, for about 35 years from approximately 1980, during which even government bond yields dropped from double digit peaks to the negligible rates available over the past couple of years. The portfolios of investors who held bonds of significant duration early in that period reaped high interest rate bond returns while they watched the paper value of their bonds increase with each downward tick in interest rates. The fixed income component was potentially a tremendous contributor to very good portfolio returns over much of that extended period of declining interest rates.
Looking out over the next 30 years, the prospect is vastly different. Bonds don’t have anything remotely approaching the same kind of return potential. Current interest rate returns are still very low as rates are recently just beginning to move off what may later be viewed as ‘the bottom.’ The prospect for people who hold bonds of any significant duration while rates rise is that their holdings become less valuable. Low interest instruments may need to be held to maturity in order to avoid a loss of principal. In the meantime, those low interest bond returns will be a drag on any better portfolio returns that may be generated by equity holdings. If you have 50% of your portfolio in bonds that pay 2%, and you hope for an 8% overall portfolio return, you have to generate a return of 14% from your equities. Maybe bond yields will return to levels where they are not so detrimental to significant portfolio returns over the next 5 to 10 years but maybe they won’t. If they do, then holding bonds while the rates are rising can be painful. If they don’t, then they may go through an extended period where the chief value in bonds is the secure return of capital at maturity but the return prospects until maturity are relatively dismal.
The fact that someone buying a 10-year Canada Bond in 1982 got a 16% annual rate of return on it is not an indication of what anyone putting together a bond portfolio or balanced portfolio today can expect it to realize. It is completely irrelevant.
To assess the return prospects of a balanced portfolio today, you need to consider the relevant details and prospects for today's bonds, not the irrelevant details and portfolio contributions of bonds that have long since expired.

(Please print only if you think doing so may be helpful.)
Read Answer Asked by Lance on July 19, 2017
Q: Hello again. I’m interested to know how to consider currency when deciding between hedged, unhedged, and US dollar ETFs. In your answer to my last question, you mentioned that you prefer VPL over VAH; how was currency a factor in your judgment? Also wondering if you would approach European ETFs similarly, with respect to fluctuations between the Euro, USD and CAD (e.g. VEH, VE, VGK). Are there separate currency considerations I should take into account for each region, including EM? (e.g. VEE vs VWO)

When I hear professionals recommend CAD-hedged ETFs when the USD is falling, it sounds tactical but what if an investor has a long time horizon in mind? I’ve heard that unhedged ETFs yield better returns over time, say for a period of 15 years, but I’m wondering if US dollar ETFs are even more preferable, considering that I’ve already got some US cash ready to deploy.

Thanks for clearing up my confusion!
Read Answer Asked by Brian on July 18, 2017
Q: Hi,
Further to your reply: "ENB pays its dividend in Canadian dollars. You could buy it in the US, in a US account, and dividends would be converted, but you would incur exchange fees.
Rather than looking at this strategy, we might instead holding some US exposure in general, for general diversification, and avoid trying to predict currency movements"

Since I'm seeking USD income, I'm looking for the biggest bang for my buck (so the Dividend Tax Credit is something I would want to take advantage of). Would my strategy work with something like a ENB.PR.U (USD preferred)? Or does the same currency conversion issue occur. Thanks again.
Read Answer Asked by Carlo on July 18, 2017
Q: As a recent subscriber and investor, I note that several stocks that I own have the option of DRIP. My portfolio is large enough that the quarterly dividends allow for a substantial purchase of new or existing additions to stocks, like CAE or Boyd. As the cost of buying the stocks is not overly impactful to the purchase, is foregoing the drip, and the 5% discount, advisable, in order to allow a choice in selecting stock picks?

Thanks. KC
Read Answer Asked by Kelly on July 14, 2017
Looking for more? Sign up for a FREE 14 day trial! No credit card required

We invite you to sign up for a 14 day free trial of 5i Research!
Experience all the benefits and tools we have to offer; stock research, model portfolios, Q&A with our experts, and so much more. Join a community of like-minded investors today!