Investment Q&A

Q: it is quite often suggested that so called allternatives can be benefical to diversify. could you advise? and also what would your opinion as to the weight and could you please comment on xal for this purpose? thank you kindly Larry

Q: I was wondering what you thought of Prem Watsa's statement about a 'monstrous' real estate bubble set to burst in China. If it does, would there be a major impact on CDN markets? And if it would, which sectors would be hit worst or least?

Q: For a young new investor just starting a RRSP, in which product would you accumulate initial savings? Would something like XWD be an appropriate starting point, and how much would you accumulate before diversifying to a typical portfolio approach.

Q: Hi 5i,
Given the recent announcement regarding Peladeau (sp.?) joining the PQ and the impending election, one might reasonably anticipate increased uncertainty re: the "Sovereignty Issue". In the event that this issue percolates to the forefront of Canada/Quebec politics over the next few years what, if any, stocks/sectors in the TSX would you see being the most impacted? The least (i.e. a defensive play on the issue)? Also, the dollar? I believe Peladeau's entry into the equation to be a potential game-changer for the sovereigntists and could cause some market turmoil. Just speculation; would love your insights on this issue from an investment perspective. Issue or non-issue?
Thanks,
Cheers,
Mike

Q: The objective of this question is to find out if I can further refine my stock selection process and enhance my win/loss record.

Specifically: given that several stocks have similar p/e ratios and similar financial strength, would looking at the Sharpe Ratio and Momentum (as in average monthly return numbers) help with the final decision?

For example, would you be more likely to select a stock with a Sharpe Ratio of 2.1 and a growth rate of 7.8% over a stock with a SR of 1.4 and a GR of 4%? If so I would assume that you consider these to be reliable (but knowing that nothing is perfect) indicators of likely future stock prices.

On the other hand, if I am wandering off into the "wilderness" with this approach, would you please let me know; and then also why these metrics would not be suitable for this purpose.

Thanks again for all your insightful observations and suggestions.

Q: Hi - In the event that the PQ wins a majority in the Quebec election and starts another referendum process, what sectors / companies in Canada (especially amongst the companies you follow) do you think would benefit the most or be hurt the worst?

Q: Hi Peter + Group do you have any thoughts on Ballard Power (BLD) + Plug in (PLUG) both are jumping over the last few mths. Do you like any others in the space and what is your Outlook / Risk for this sector going fwd...Thanks

Q: Hi,
I bought a couple of stocks (BB and MU)a few days ago that were highly recommended on Seeking Alpha. They do not seem to be doing too much. What is your opinion?
Momentum Stocks like TKM, HYG and ARWR-US just keep going up forever. Would this be a better way to invest?
Watching the financial news which I do regularly due to the fact I am retired, everyone is talking (waiting) for a 5% pull back - it has been a long wait - will it be coming by July, 2014?

Q: My husband and I have self directed RRSP's with 10 years to go until the RRSP's become self directed RRIF's. The annual minimum RRIF withdrawal starts at 5% at age 70, and increases each year. At age 85 the withdrawal rate is 10.33%. My question is - would the investments in the RRSP's be best as an income portfolio to preserve capital but also allow for the required cash withdrawals? Or do you think a portfolio combination of growth and income is more advantageous given the 10 year time frame? Thanks!

Q: What Canadian stocks are most vulnerable in the event of a P.Q. majority government in Quebec? Thanks. Michael

Q: Hi Peter,

Hoping you and team can provide some advice on when to sell a stock. I consistently struggle with when to hold and when to sell so have always erred on the side of holding. This has generally worked out for me with the exception of cyclical stocks. I have held Magna for a very long time and it is creeping over 8% of my portfolio and wondering if this is the time to trim a bit. However, the momentum in the stock is quite strong and so I continue to dither and sit on the sidelines. Your advice would be helpful.

Q: I've been reading quite a few articles recently about the high level of margin debt in the US. What is your opinion on the correlation between margin debt levels and major stock market corrections. Apparently margin debt levels are very close to where they were just before both the 2000 and 2007 corrections.
Thanks for the great service.

Q: Hi Peter and 5i: I have been reading Ben Graham's “The Intelligent Investor,” on your recommendation among others. Thank you for that. It is a wonderfully provocative read. It has me considering the increasingly defensive positioning one might come to in the later stages of a bull market through balancing and rebalancing the fixed-income and equity components of one’s portfolio. I am considering capital preservation strategies including diversification between components of conventional bonds, cash & short term income vehicles on the fixed income side of things, and (ironically?) gold on the equities side. But I am also wondering about the inclusion of non-leveraged short or “inverse” ETFs (MYY, HIU and the like) specifically to hedge the risk of the long equity positions I might be inclined to hold or accumulate throughout a market downturn, and also to provide the possibility of some positive equity-based returns in a declining equity environment. I wonder though about how reliable they will be in delivering the suggested returns, especially in what may be perceived as “crisis conditions” in the markets. Have they been tested over sufficient time and sufficiently variable market conditions to warrant confidence for capital preservation purposes? They seem to be investments in derivative instruments which are likely not well understood by many investors (me included!). That description reminds me of the “black box” ABCP investments that caused a significant crisis of confidence prior to the 2008 market meltdown. I also wonder about the dynamics of a derivative products market which becomes increasingly larger than the supposedly underlying repositories of value (the equities themselves). Should one be concerned that the next major market crisis may result from a loss of confidence and unravelling of the same derivative products that people may be depending on to protect them from a bear market? Am I completely off base or would you suggest any parameters for restricting one’s approach to investing in specific kinds of “non-leveraged” inverse ETFs or ETFs in general? Thanks for any thoughts! (Please feel free not to post this if you think it is unsuitable.)

Q: How can the average investor determine how much of a stake the company insiders have in the game? Some of us think it's an important factor in making our investment choices.Is it?
Thanks
Garry

Q: hello, Peter and your team,
Thank you so much for your good service, could you please tell me where I can learn the basic knowledge of technical analysis ever though I am not a trader. Thank you!
Yingzi

Q: I am a senior and have built my portfolio to be able to withstand
a 20% drop in the market.Do you think this is acceptable for safety long term?

Q: Hi Peter,
I noticed that the Dow is on the rise after a head and shoulders pattern. I also saw a superimposed image of the DOW in 1929 that shows a similar pattern. If the market does start to fall off abruptly after this recent rise, where should money go? I am recently retired and have BNS and a GIC with about 50% in cash. I was planning to invest, but a little hesitant now. I would really appreciate your advice. Thank you. Gail

Q: Hi Peter,
I have approximately $14000 to reinvest in a non-registered account. I'm looking for "safer" capital gains, dividend optional, to be held for 1-3 years. What are your top recommendations?
Also, since it's almost the end of RRSP season, do you suggest I wait a month or so before I make the purchase? (I realize you don't advocate trying to time the market but....)

Q: sir
In your Jan Portfolio You have rated stocks A,B,NR etc. I would like to know how these ratings are composed of and how much weight is allocated to each item in your score
Thank you

Q: Peter, I wanted to say I agree so much with Pauls question of Feb. 5. I think you are helping a lot of GIC refuges, such as myself.When Gics dropped years ago we slowly stepped into the market with Pembina, IPL, K bro, Cinaplex Rio Can, Keyera. All were paying between 8 and 10 percent dividends at that time. It seemed no one wanted them. Well of course hind sight is 20 20 but as they say the rest is history.. I believe so many of us are looking for the next one of these stocks. They seem very few and far between today. I, like Paul, will not invest in anything that does not pay 5%.Banks, although o.k. have been one of our poorest performers over the years. That is why I think high dividend payers are soooo important. Yes a person takes a hit on the odd one ie. ATP and YELLOW but what we are looking for, I believe is the next K bro or IPL or ect. ect. That is for you to decide. I know it is not as easy now but some gems must still be there. That is what is so valuable to me. Thanks Ken