Investment Q&A

Q: Hello Folks:
Thank you again for your terrific service!
I am a 71 yr. old investor who has never kept any amount of cash in our accounts.
I feel there may be a serious negative re-evaluation approaching for world
markets; therefore considering moving to a half cash position, as we rely on returns for a good portion of our income. It is a difficult choice as dividend and rising equity prices have been very good since the recession, however nothing remains stagnant.
Our portfolio is primarily large cap US stocks and some quality dividend paying Canadian equities.
As always, I appreciate your point of view and suggestions
Brian

Q: Great new website.

My question is about interest rates. I saw an interview recently discussing interest rate cycles, stating that we have have had 30 years of interest rate decreases, that interest rates have now bottomed and we have begun a long term trend of rate increase. The guest also said that the last long term rate increase cycle was during the 1950s and 1960s. During that 20 year period, the interest payments on bonds were mostly offset by capital losses, resulting in a net return of less than a half of 1 percent annually over 20 years while stocks returned 19% annually over that period. In your opinion, what would be the catalyst for a repeat of this scenario? Does this mean that retirees should shun bonds in favour of stocks even though the risk might be higher?

Thanks and great work

Q: Hi! Are we getting a sustainable energy rebound? If yes could you arrange the following stocks in order of preference: TOG, BIR, NVA, KEL, SPE, TOU and perhaps Xeg.
Thank you!

Q: I would appreciate your thoughts on how one should diversify his investments geographically, (Canada, United States, and Internationally). What do you think would be the percentages I should allocate to each area? I realize allocation is a personal decision but I'm looking for some kind of general guideline. I consider myself to be an average investor and therefore willing to accept some risk.
Being a member of 5i, and following your guidance, I think I have the my Canadian investments under control but I would appreciate some help for the U.S. and international allocations.
I would also appreciate it if you would suggest your favourite ETF to invest in the United States and internationally.

Q: http://www.businessinsider.com/stock-market-news-could-be-headed-for-one-of-worst-disasters-in-history-2017-10

Do you think the article is right or is this article initself flawed?

Q: Taking a pessimistic view, if Nafta talks fail, and Trump abandons the agreement, then which Canadian based companies are likely to be hit hardest? i.e. can you provide a short list of companies that get very significant export revenue from the U.S. ?
Thanks,
Philip

Q: I would like your opinion on possibility of NAFTA termination.
What would be impact on Canadian stocks?
What sectors and companies would be most impacted?
Could it trigger recession?

Thanks,
Milan

Q: So given the increasingly pessimistic outlook on NAFTA coming from just about everyone, is it time to start considering which stocks, like Magna, might be worst hit in the event Trump cancels it and maybe moving into different sectors?

Q: The question of what to do when one is worried about the possibility of a sharp market correction often arises. In the past you have proposed increasing the portfolio allocation to cash. As a complement to that strategy, what about tilting the portfolio more toward low beta (less than 0.5, say) stocks? I’m thinking of stocks like L, ECI, CSH.UN, KBL, SJ, SLF. How much protection - qualitatively speaking -do you think that would provide against the possibility of a sharp correction of, say, 10-15%?

Q: Like many others, I rely on my stock portfolio for income. Fixed income won't provide it. The possibility of a significant correction seems to be not a matter of if, but when, and the prospect of another 40% drop portfolio value is scary, especially at this point in life. Based on the past couple of crashes it takes 4-5 years of agony to recover.
However with a portfolio of companies having a history of NOT cutting dividends through the market crashes, the income relied on would be preserved, and the recovery period somewhat less painful. So thats the type of portfolio I'd like to see 5i construct. Rosenburg's recent comments on BNN suggest good balance sheet, predictable earnings, low correlation to economy. I would add liquidity, ( I find that a number of the stocks 5i portfolios just don't have enough trading volume).
Whats your thoughts on this strategy? Is there enough of these companies, and suggestions?

Q: I am new to this forum but have been 'investing' faithfully for over 30 years (what that really means is that I have been funding both mutual funds and the investment advisor buying them - last year that was $9,000 for the investor for me and my husband combined for the mutual funds to earn net 4.4% (the SandP/TSX was at 17.51). I'm tired of the high anxiety fear factor he generates for 4.4%. For the fee, he can earn us between 2 and 4% in coming years and insists this is a good thing.
Why wouldn't I buy Berkshire Hathaway A with the money currently invested in mutual funds and the advisor and invest on my own using a couple of your portfolio models with the money I have stashed? At this stage I am 56 years old so not a big risk taker and want to preserve what I/we have. With thanks, Wendy

Q: I have a relatively large cash position in my RRSP which I would like to invest for 3 to 6 months in an ultra safe place due to the political uncertainty at the moment. Do you have any suggestions?

Q: Hi 5i,
When structuring a retirement portfolio (with no major pension for income) many investors try to optimize income from dividends and sometimes interest. Do you have any comments about using a total return approach that factors in not only dividends and interest, but capital gains as well? My thinking is that some of the capital gains could be realized as another form of income by selling a portion of a growth holding. Any further thoughts about how to decide what percentage of the equity portion of the portfolio should be dividends vs. growth (capital gains)? Also, in your view does this broader approach increase or reduce the risk/return tradeoff overall? I realize this is a complex question but any insights would be appreciated.
Thank you, Michael

Q: I have been an investor in small and midcap stocks for over 20 years with a willingness to accept additional risk in my portfolio.I am now transitioning my portfolio to a more Income focus, as i will need dividends to supplement my retirement.
Questions i have are about construction of income portfolio?
Do you feel it is still important to diversify in other countries and regions outside of Canada?You would lose some of the favourable tax benefits!

In trying to classify many dividend stocks in sectors i find that they cross the line into numerous sectors,(example many pipeline stocks are said to be oil and gas stocks, many are said to be utility type of investments)
What sector do you put an ETf in?Seems like a lot of investors drive themselves crazy in the allocation to sectors

I have looked at your income portfolio and your fixed income portion that is addressed by a few Etf.I have taken positions in individual preferred shares,debentures, a couple of instruments with bond like qualities.What is the percentage you would advocate for fixed income or there proxies?

Many Blue chip income stocks pay quarterly dividends,when i prefer monthly dividends.This again can skew my portfolio so that diversifying by sector and country becomes difficult

I find that the construction of my Income portfolio has given me many grey hairs(which i dont need help with"thank you very much")

Q: Do you think it wise to sell all securities until this US Korea problem gets fixed one way or the other. If hostilities do break out I imagine the world stock exchanges are going to break down.

Thank You
Craig

Q: I am a trader by obligation rather than by choice as I spend an important part of my time trading micro caps.
For obvious reasons these companies mostly have little or none revenues, expectations is all what is left.
However, there is another way of being sensitive to the balance sheet is expenses, and i am particularly sensitive to burn rates because that may be a key to future share offering with or without the dreaded warrant.
I just read this document: http://avc.com/2017/09/some-thoughts-on-burn-rates/?utm_source=Daily+AR&utm_campaign=871270e2bd-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_c08a59015d-871270e2bd-140326233
Would you give me your opinion on its value for future reference.
Thanks
CDJ

Q: Please explain the significant price differential between Canadian gas and oil wholesale prices to their US counter parts. How does the economics work for CDN companies with such a low price??
Thank you

Q: If you had two or three hundred thousand dollars (not in an RRSP or TFSA), and you wanted to grow it aggressively for a period of about three to five years, how would you invest it, and what kind of a return would you expect? Would your answer be different if it was only fifty thousand? Assume that I don't need any income from the investment, that I have maximal tolerance for risk, and that I've already tried tulips but I was 380 years too late. Thanks.

Q: A different question. As an active retail investor I often get advice to start trading options. Others claim that trading options often leads to losing money. What is your opinion on trading options for various purposes? Thank you.

Q: Re: Chinese stocks U.S. listed such as MOMO, TAL and others, were they formed via Reverse Takeover? would this be a concern??