Investment Q&A

Q: If inflation is going to be a concern, do you have 5 company suggestions in the US and Canada that would have pricing and so earnings power? Thank you

Q: For the last 11 years - I have been investing in Canadian companies with a track record of dividend increases. I have been a 5I member for most of those 11 years and you have always provided very insightful guidance - Many thanks!

The strategy has worked pretty well and is very tax efficient owing to the Dividend Tax Credit. Recently there has been alot of political talk about "taxing the rich" particularly vis a vis the capital gains inclusion rate - with less - but still some talk about elimination of the DTC. ("Rich" of course means anyone with any taxable holdings at all).

Aside from the obvious impact on my tax bill if the DTC were reduced or eliminated - I worry that there would be huge impact on the Canadian market. What are your views on the likelihood of a change to the DTC and would you expect a large impact on the stock price of Canadian dividend payers.

Thanks!

Q: My 28yr old son is looking to build a diversified ETF portfolio with 100% equity exposure with a bent towards growth given his long investment horizon.  These will be spread across his TFSA, RRSP and Non-Registered accounts.  Since he will be contributing smaller amounts on a regular basis a zero commission platform such as Wealthsimple is appealing.  However, they charge 1.5% fee for all currency conversions making it only practical to hold Canadian traded ETF's.  As a result he is considering the following:

ZSP 40%
XIC 25%
TEC 20%
VIU 10%
VEE 5%

ZSP + XIC + VIU + VEE together create a mix of ETFs that are globally diversified and very similar to the structure of XEQT/VEQT.  Versus XEQT/VEQT This portfolio has a slightly lower weighted-average MER at 0.16% and also has 20% in TEC (in place of something like QQQ) which is more growth oriented. Here are how the sectors would be weighted with this portfolio:

Info 31%
Financial 15%
Cons Disc 11%
Industrial 9%
Healthcare 8%
Communica 7%
Cons Staples 5%
Energy 5%
Materials 4%
Utilities 2%
Real Estate 2%

These would be the top 10 holdings with this portfolio and these top 10 would account for 24% of holdings in this portfolio:

AAPL5.1% MSFT4.9% AMZN3.2% GOOGL1.8% FB1.7% GOOG1.7% TSLA1.5% SHOP1.4% RY1.2% NVDA1.2%

If this was you at 28, can you please comment on
- are the 5 ETFs he has chosen ones you would go with given his objectives, if not, what changes/substitutes would you make along with recommended % allocations?
- is his % allocation across the 5 appropriate or would you make changes? For example I thought there might be too much overlap between ZSP and TEC as they are both highly invested in AAPL, MSFT, AMZ and FB and he is looking at 60% going into these 2 ETF's. That may well be what you want at his age but  I wonder if he is better served by reducing ZSP to 25% -30% and TEC to 15% and add  the remaining 15-20% to CDZ or VGG (or something else?)
- given he will be making contributions to his TFSA, RRSP and Non-registered, which ETF would be best in which account and why? 

Thanks for all your help, 
Scott

Q: Hi
with inflation rising what sectors should we consider being in and which should we avoid

Thank

Q: A recent guest on BNN market call (Blackswan Dexterios) mentioned use index overlay to protect on the downside. Being in the sales game it is portrayed an the sprinkling of magic dust. Going under the hood they are obviously making the use of options.

What specific strategies involving options do you feel are useful for this type of strategy ? Buying or writing calls or puts or any strategies such as straddles etc. What are the pros and cons?

Thank you,

Paul

Q: Hi,

I recall conversations years ago where people were commenting that the market is expensive, but the quick rebuttal was always-were else are you going to put your money.

In your opinion, is there an interest rate level where institutions start to move out of equities and back into fixed income. Additionally, is there a 2-10 or 5-30 year spread level that would signal any potential issues for the equity market?

thanks as always for your valuable insight.

Q: I am a 74-year-old, retired, conservative investor. Please advise if investing new money into REITS and Preferreds would be advisable at this time when it is likely that interest rates will be rising in the near term. My portfolio is currently balanced with 50% in 5-year laddered GICs, 10% in corporate bonds, and 40% in income generating ETFs; 51% Canada, 32% U.S., 15% Europe, and 2% Asia. Thank you.

Q: I see anecdotal evidence that 25 to 40% of the population is unvaccinated and will not get the vaccine. What does our economy look like with 25 to 40% unemployment if mandates force these people out of the workforce?

Q: You have said that there is lots of money on the sidelines. How do we know that? Who’s money is it? Retail or institutional? If it’s retail and a recession comes will it come back into the market or be spent or elsewhere?

Q: Has the smart money turned bearish? If so, what does that look like?

Q: Hi Peter, Ryan, and 5i Team,

My wife and I need to reduce holdings in some stocks in our RRIFs to raise enough cash for the mandatory RRIF payments, which in our case is in late December.

Portfolio Analytics allows various ways to rank stocks, so I looked at the column "Total Portfolio Equity Weight" and ranked the stocks accordingly. For example, in my RRIF, my highest weight is with MG, and my wife's highest weight is with GSY. Not surprisingly, Portfolio Analytics also indicates that the Consumer Cyclical sector (MG), and the Financial Services sector (GSY) are overweight in our combined family portfolio (RRIFs, TFSAs, and non-registered accounts).

Is this a good way to determine the stocks that could be reduced to raise the required cash while at the same time putting sector weightings more in line with the recommendations of Portfolio Analytics?

I notice that many members ask questions about their holdings in various stocks, but 5i generally answers that weightings are personal.

Perhaps there's an alternative "rule of thumb" to use when going through this yearly process, and your valuable advice would, as always, be greatly valued.

Q: Canadian/USA dollar, where do you see it in 6 months/1 year according to economic uncertainty, which currency would you want to be involved in?
thanks

Q: Dear 5i,

does VIXY behave like a leveraged ETF such that they are not suitable for buy and hold investors. I understand that leveraged ETF's reset every day and there is price erosion so they are only suitable for short term investing. Would VIXY be ok for a buy and hold investor who believes that there was going to be a significant correction in the overall US market in the medium to long term? Your thoughts are much appreciated.

Q: Retired, dividend-income investor, who usually follows a fully invested, buy-and-hold strategy for the long term but trims-adds around core positions to achieve the targeted asset allocation. I currently have <4% cash in the combined family portfolio.

Question #1 = for new monies into my wife's account as they become available, please rank the order in which you would invest into BCE, LNF, NWC....and why? I'm looking at where is the most Total Return upside over the foreseeable future. Ignore asset allocation, I've got that covered.

Q#2 = ditto for my account, please rank for new money investment into LIFE, ZRE, BNS, WSP...and why?

2 questions...please deduct 2 credits.

Thanks for your help, much appreciated.....Steve

Q: Your Portfolio Analyzer tells me that I need more 'Healthcare" since I only have UNH and Well. Can you suggest an addition?

It also noted that I have zero consumer defensive. Can you suggest two for this sector.

A further note was being over weight in Canada.

Thanks again! Dan

Q: Given the consensus opinion that rates are likely to rise, do you perceive a risk that the US dollar might spike, driving down the price of commodities, especially oil? Could a 2014 scenario be in the cards?

If the dollar does rise significantly, could oil/gas rise in tandem? Would you be inclined to position a portfolio for higher oil and gas prices in the coming year or so, regardless of what the dollar does?

Q: Following up on Mary's question about compelling buys, can you explain why each stock made your list?

Q: Nasdaq is down again today (Monday) after a period of many down days. Sentiment right now is poor. Can you provide insight on what is happening and when and how this will reverse trend? Is this a time to be buying or sitting tight and waiting for things to start to turn?

Q: About 1 year ago you provided some general guidance on a retirement portfolio and I’m wondering what changes, if any, you might recommend given another year has passed. I’m not looking for specific guidance but rather suggestions for me to investigate further given how the investing landscape has changed this past year. Retirement horizon is 5 years and the portfolio has the following holdings: ZAG(26%), ZSP (3%), CDZ(65%), ZEA(6%). We have a large cash position that we’re ready to deploy. First, what is your take on the viability and allocation of the current holdings? Second, what are some ETF suggestions for the cash - add to existing ETFs or do you have alternative funds you’d recommend for us to investigate. Thanks so much!

Q: Hi 5i, I like to know what 5i thinks of the huge US & CAD government debt, this could be a very interesting topic for a column. What is the US credit rating today? When will the various credit rating agencies chime in with their view on US T-Bills. Do you think that it is very likely that the ratings will be down graded (rated)?