Investment Q&A

Q: My question is about selling puts on bns as an example. Any advice on how to start out as I am new with options. Have done quite a bit of reading on the subject. I have my account with TD set up for options 2y ago. What would you recommend as a strike price and how far out would you go. I was thinking about 3 to 6 weeks. What sectors would you currently recommend for selling puts. Any reading you might suggest. What are the taxes paid on the premium received. Thanks for the great service and the more elaborate the answer the better. This is a large question please charge 5 credits. Thank you. Chris

Q: I am trying to determine how/if to incorporate foreign exchange gains or losses when doing my portfolio weightings. Assume I started with $100k Cdn and I buy 9 Cdn stocks and 1 US equally. If none of the stocks changed in value, except the one US stock was now worth $14,000 due to foreign exchange gains, that one stock would now represent 12.3% of my portfolio when valued in Cdn dollars. If I wanted to keep my original 10% per share holding Would I then sell 2.3% to get back to my original 10% holding or do I ignore the conversion for now and say it is still just 10% of my portfolio.

Thanks for your help.

Paul F.

Q: I would like your suggestions for replacing the three interest income positions and the preferred shares position with dividend like equity positions. Thanks.......Tom

Q: I am reviewing your Macroeconomic Report Card. Thanks for that, I find it interesting.
Two questions:1) How are the TSX and S%P 500 average P/E ratios calculated? Are these a straight average of all stocks in the exchange or are the weighted in some way? 2) For the TSX and S&P yields, are all stocks included or just those with dividends or something else? and is it a straight average or weighted by capitalization or something else?
Thanks, you provide a great service.

Q: While I am not yet 89 , I understand the older gentleman's desire to still have a hand in the market. Would keeping 50 per cent for emergency and putting the remaining in laddered GICs work for him? He could still get at the GICs even if he had to pay a price. What do you think? (not wiser than you, but older!)

Q: Hi Folks,

I read this note this a.m. from Bill Dickey at RBC in his 'technical corner' I thought it was very appropriate to the interests of the readership here and with the numbers included from Bloomberg really brings what you've been saying to those that worry to light.

"Much is made of the stock markets daily direction, but watching the movement too closely likely makes it more difficult to tell what the trend may be, but the allure and excitement of the process makes it an irresistible thing to watch for some investors. Often it seems that the market changes direction on a daily basis, with the reason for the move sometimes being a pretty weak excuse. This is because the daily market moves are driven more by the emotion that gets tied to the daily news rather than the trend of the fundamentals that determine the long- term success in investing. If the markets moved only in relation to the facts, they would be easier to understand, but once you throw opinion and emotion into the mix, it gets very confusing and uncertain. The table below illustrates how the daily market movement is close to a coin-toss in which direction that it may be as the emotion of investors is a lot harder to predict than the market itself, while the longer-term view generally supports the theories and benefits of a long-term investment plan."


Percentage of time S&P has been up over the past 65 years

Daily : 53%
Weekly : 64%
Monthly: 59.3%
Quarterly: 64.3%
Yearly: 73%

Source: Bloomberg news

Best

Sheldon



Best

Sheldon


Q: Hello, can we get your opinion on the market return GIC offered by many banks (maximum return capped with the principal guaranteed - few years commitment). Does not seem to appealing but would it be ok to replace some fixed income assets with this given the low rate environment (some upside vs 2-3% for bonds) . Is there a lot of fees in these products ? Thank you

Q: My father (89 years old) has sold his home and moving into an "over 55" facility near me. He lives on social security, plus some distributions from some prior investments (currently worth about $70,000). That covered all his expenses (his home was mortgage free).



He has just sold his home, and will have about $100,000 in proceeds at closing from the sale. When I asked own investment adviser what my dad should do with the 100,000, he was reluctant to offer more than "put it in the bank". My dad will need to withdraw from these funds monthly, probably a few hundred $ per month to meet anticipated expenses.

At the age of 89, seems the SEC takes a critical look at advisers investing money for people of that age. I should add my father is in very good health, given he is 89.



So, keeping my dad's money in an interest bearing account is unappealing to him, (and me, tho I understand that may be the wise choice). He is keen to invest it somehow, but is less than a novice in that area.





My main questions are these:



Should his money be invested at all? Should it sit in a savings account in a bank?



Or, in spite of his age, would the risk of owning a solid dividend paying stock(s) be worth the extra income?

Q: i like your long term outlook on gud. is their other companies like this you would recommend for a long term hold .management superiority, insider ownership at a solid level etc.best bang for your buck considering growth with yield.i feel like i am too late in buying bep .un or aw.un as a long term holder these are probably going to keep growing long term and should buy these

Q: Some additional hints for Bob, regarding Alerts, if he chooses to go with TMX system. Quite apart from using the "Stock Screener" system, there is also a handy tool on there called "My Alerts" and once you set it up, it will email you directly any of a dozen parameters that are set, such as 52-week high/low, volume, news filings, price change, percentage change, etc. It's quite a useful little tool. You do have to set up an account, as noted by 5 I, but it's free, so you can't beat the price.

Alternately, each broker has very excellent Alert systems built into most portfolio features. I'm with TD, and you can choose a couple dozen alert points which will also be mailed directly into your inbox. I used to be with BMO and they had the same system -- so I can't imagine that all brokers don't have the same tools. Sometimes it just takes a bit of snooping around on all the features that are actually available to you before you find what you're looking for. Hope this helps.

Q: Could you recommend a site for stock screening that could also sent alerts when parameters are breached?

Q: When purchasing positions in a particular traded equity, and my 5% position is equal to $5,000, how many separate purchases should I make to get to a full position? (Trading fees are 9.99 per transaction.)......Thanks......Tom

Q: anyone experiencing problems with webbroker today. I was unable to make trade for the most part of the day!

Q: 5i's reassurances for a market recovery makes sense, but I find myself wondering which sectors or enterprises should catch the updraft the most. Sometimes it seems that it's the marginal plays - for example, miners with the highest costs - which get the greatest boost from a trend-reversal, but I'm not sure I'm comfortable working at the far ends of the risk spectrum. Is there any other way to conceptualise this problem to take advantage of differential rates of recovery?

Q: General Comment:

For information of other members. Here is an interesting article with a few clues as to what to look for when the market might be at a bottom. Its from a UK investment newsletter but the principles are essentially the same for North American markets.

http://tinyurl.com/ju24sld

Q: Any idea what the average % of Black Pool trades is to the average total daily trades on the TSX?

I have info for the U.S. markets and know how to identify them but not yet for the the CDN. markets.

I assume the rules are the same for this side of the boarder as they are south of the boarder. That being that the "big boys/girls" do not have to publish their trades until: after it is complete, at the end of the day or at the start of the next day.

This often explains why there are often price spikes with volume but they did not actually happen when retail investors think they did!

Q: For income generation for the next 3-5 years, is there one or 2 sectors to overweight on or is it still better to diversify across sectors?

Thanks

Q: I am going to give you another chance to answer Keith's question from earlier today about what caused the big drop in some 5i "market darlings" yesterday. I cannot believe it is just coincidence that this happened to these stocks on a day when the TSX was the only North American exchange that was open. Somehow I have to believe that there was some, if not manipulation, at least coordination with the Canadian fund managers. My list of stocks that were impacted by about 5% down on the day were BYD, ATD.B, CSU, ESL, CCL.B and SJ. My capital gains on these stocks range between 55% (SJ) and 260% (CSU). My reaction was to buy some CSU yesterday to increase my ACB from 115 to 140 which will at least delay to some extent the day of reckoning when the tax man will get his hands on my capital gains when I want to sell something (which was definitely not yesterday). I thought that might be what Canadian fund managers were doing as well, (ie the funds which have low ACB's on these stocks were willing buyers from those funds who got into these stocks later in the game and were willing to sell for whatever reason. But your answer to Keith said that was not likely. So again, please wrack your brains and see if you can come up with some kind of answer to what happened yesterday. Thanks.

Q: In response to Bill's request for a DRIP site where shares are exchanged I highly recommend the following. I have used it for well over a decade and it is moderated and we have never had an issue with anyone.


http://www.dripinvesting.org/boards/boards.asp

Q: Hi 5i team

I'm trying to put together a excel spread sheet of my portfolio for better analysis based on the financials. What would be the best way to calculate the free cash flow? Is ROIC an important measurement of profitability or is ROA sufficient? Thank you.