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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: 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
Read Answer Asked by Raoul on July 28, 2017
Q: The 8% gain of the Cdn dollar over the past few weeks could have a huge impact on stocks like NFI and others in a negative way.
With the Cdn dollar on a terror lately what sectors if any would stand to gain from this currency move and what would be two individual stocks that you think could gain by the US/Cdn exchange rate moving closer to par.
Always appreciate your perspective.
Thank you
Terry
Read Answer Asked by Terry on July 25, 2017
Q: My overall portfolio is down 3% the last 6-8 weeks which I justify as the downside of having equities in the portfolio. I am 40% in cash so the drawdown could have been worse. My concern is that the 3% drawdown is just over $20000 and that is a lot of money. We are 70 with defined benefit pensions and really don't need any more capital; just want to preserve what we have. You preach the downside of market timing, but I see $ 20000 worth of paper gains slipping through our fingers. Short of investing 100% in gic's should someone with my profile be more of a trader ie use tight downside tolerances and sell when a predetermined gain or loss is met rather than buy and hold. Please comment as I very much value your opinion. Thank you.
Read Answer Asked by Richard on July 24, 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: Greetings Peter and company,

Having been a do it yourself investor for over 50 years and a committed index ETF investor for the last 10, I am very impressed with what you are doing.

Assume that investors put half their money into a US index ETF (say SPY) and the other half into a US money market fund. They re-balance when the ratio changes by 10% in either direction and withdraw 1% quarterly to cover living expenses. Will this no-brainer portfolio grow over the next decade? Will it equal or even outperform the i5 Growth Model Portfolio? (Projected 12% annualized long term return. Since the bottom of 2008, the S&P 500 has had a 14.5% annualized return.)

I would appreciate your views on this. Your responses, as far as I have seen, have been uniformly thoughtful.

Thank you.

Milan
Read Answer Asked by Milan on July 18, 2017
Q: Hello 5i team,
I’m 74 years old; with due diligence and with the contribution of people like you, my RRIF portfolio is behaving very well. My plan is to deplete the RRIF portfolio at age 90. The revenue from this portfolio will continue at the same level if I get a 7% compound annual total return in the next 16 years.
Unfortunately, we expect a recession sometime during those years. If I were to ride the recession, the value of the portfolio would stand still for (let’s say) 5 years and if the portfolio were to grow by 7% in each of the remaining years, my revenue would drop by a whopping one third. In order to maintain the expected level of revenue, my excel projection model indicates that I should obtain a 20% growth per annum instead. That is unrealistic.
Alternatively, I could do what I did in 2008. I sold my holdings after incurring a 15% decline and re-entered the market a few months after it bottomed and started on its recovery path. If I did that and planned for a 7% growth per annum, the revenue would drop by 13% only. That is quite acceptable because there is a 10-15% safety margin in my revenue forecast…a cushion of sorts.
If, however, I knew when the recession will occur, I would exit the market ahead of time and re-enter after the bottom…”but that is another story”.
I would greatly appreciate your collective opinion.
Best regards,
Antoine

Read Answer Asked by Antoine on July 10, 2017
Q: Hi Peter: I see another question on the % in each of the 10 sectors. Would it be possible for you to add this to the bottom of your 5i Coverage Summary each month with the up and down arrow if you feel a sector weight should be adjusted? I follow your sector %s and believe it helps me to sell high and buy low. The last time I saw this list energy was 5% and industrials was 20%. Thanks, John.
Read Answer Asked by Robert on July 07, 2017
Q: With interest rates likely increasing this month in Canada and also the USA, would you put any extra cash into bond funds (like CBO,XHY) or preferred shares right now; or wait to see if the prices decline with the new higher interest rates?

Thank you.
Read Answer Asked by Donald on July 05, 2017
Q: Hello Peter,
I'd appreciate your insight.

What do you think about the suggestions that money is moving out of technology and some of it will find its way in the biotech sector? I do not hold any US tech but do hold the biggish position in IWO and IWM combined. With no fresh money, what do you think of reducing the positions in either or both IWM/IWO combine and invest in IBB?
The second aspect where I would like your thoughts is on the Financials both side of the border. With BOC likely to raise rates atleast once, the TSX may drift down, maybe even a sharp reaction. What do you think of reducing TSX exposure, buying US dollars and investing in US financials for the second half of the year?
As always, appreciate your views.
Regards
Rajiv
Read Answer Asked by Rajiv on June 30, 2017
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