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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: Hi 5i:
Thank you for the continued great advice, insight, and the opportunity to renew at the existing membership rates.
I would like your opinion on an article in the Globe and Mail last week – Scotiabank’s AT1 security a hit; other banks expected to follow suit.
BNS issued 1.25B$ internationally through a sale of a new hybrid security that has many of the attributes of a preferred share, but is legally classified as debt. This note qualifies as additional tier 1 capital, pays interest at 4.65% for 5 years and floating thereafter, has no scheduled maturity and converts into equity in times of distress. The new hybrid security also gets around the 25% tax on any passive income generated by investors who are not resident of Canada.
There are more details in the article.
If other banks follow suit what do you think will be the effect on the retail rate reset preferred share market in Canada? Would there be a probability of the banks redeeming their preferred shares currently issued when the first redemption option comes due and replacing with this new hybrid instrument?
Thank you.








Read Answer Asked by Dennis on October 20, 2017
Q: Thank you for your comments to the person with the Federal Government defined benefit pension. I am in the same position and I have always regarded my pension as my fixed income component and my investments are 100% equity. In terms of income, my fixed income component pension is over 50% of my income which exceeds the usually recommended 60-40 equity/fixed income split. Most public investment advice is geared to people with no pension, in my opinion.
Read Answer Asked by Earl on October 20, 2017
Q: I have chosen ten stocks from John Heinzl's dividend growth portfolio which are: AQN-T,AW.UN-T, BCE-T, BMO-T, DGRO-N, EMA-T,FTS-T, T-T, TD-T, TRP-T. From my previous question you had suggested these 10 Canadian dividend stocks: PBH, ZCL, SIS, FTS, GSY, ENB, ET, BEI.UN, AQN, and T. My question is should I invest in the 20 stocks or would I be better off sticking to the 10 suggested by 5I?
Read Answer Asked by Jennifer on October 19, 2017
Q: Peter, I cannot imagine how difficult it must be to come up with an idea a column every week or two. Please allow me to humbly make a suggestion.
I know in broad strokes the difference between the TSE and Venture, but I know nothing about the CSE. Perhaps an article on this and how it may affect me as a DIY investor.
Gord.
P.S. I rarely ask a question but enjoy reading the answers to the questions. Publish at your discretion.
Read Answer Asked by Gord on October 19, 2017
Q: Like it or not there are market corrections. My question is about understanding investments and how they might react or respond to one, specifically ETFs.

On both Cnd and US business programs some commentators have expressed concerns about how ETFs could (would?) in their opinion be susceptible to far greater corrections than the markets themselves or what they track? The prime reason, they believe they are so broadly held, it could force a massive selling frenzy of their components? There is even some talk of a very large US private fund which uses them. It is considered by some rather secretive and creating suspicions as to their reasons? Sorry I do not recall the name. It would seem their fear, in a bad market, this fund might trigger serious downside consequences all on its own?

A seasoned professional with intimate knowledge and understanding of mutual funds said they are required to hold a certain amount of cash reserves for redemptions. If they become too high, they can actually suspend redemptions? The person identified one fund involved in the real estate sector which actually did during a sever correction. I understand real estate is a far less liquid investment but...?equities

My question, what safety measures exit with ETFs to avoid excess redemption impacts? Are there risk(s) a correction could expose, a potential Achilles’ heel of sorts? Something they have not yet revealed as an inherent structural risk?

I like their immediate diversification especially for foreign investments. Maybe I sound alarmists but I would like to believe I take the time to understand the products I use for investment and what to expect in both good and bad times. Are some types more vulnerable than others?

Any insights would be very much appreciated. Thank you



Mike
Read Answer Asked by Michael on October 18, 2017
Q: Hi 5i Team - Would you be able to suggest a few companies with good growth prospects over the next one to two years. They can be from any sector even all from the same sector if that fits best. Dividends are not needed, in fact it's probably preferable that this type of company not pay a dividend. Any market cap size is fine and stocks not held in any of your three portfolios are fine too. Thanks.
Read Answer Asked by Rob on October 18, 2017
Q: Jean earlier today listed a number of stocks in his/her portfolio as being in excess of 10%. You do not suggest there's a problem with this, so I'm wondering if it's okay to own larger percentages of individual stocks if one has diversified ETFs. I have been buying ETFs to consolidate holdings as I move farther into retirement to make withdrawals simpler. But I still have a lot of individual stocks that I'm keeping in the 5% range. I think I noticed elsewhere you recommend not holding more that 5% of a portfolio in ETFs( now can't find it, so perhaps I misremember). I suspect I'm just not getting something here. What do you recommend regarding this use of ETFs and individual stocks (and %s) for a person past the accumulation stage?
Read Answer Asked by M.S. on October 18, 2017
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