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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 Everyone at 5i! My advisor is suggesting that I invest in a “Note” which invests in Canadian large cap stocks, pays 3.4% for two years, with 50% downside protection. These things leave me a bit leery. What’s the catch??? I keep trying to avoid them and she says I am missing a good deal and gets a bit annoyed. Could you please explain to me again why these are usually not a good deal? I am short on comeback lines when talking to her. Thanks, Tamara
Read Answer Asked by Tamara on September 01, 2020
Q: After reading a previous question about Bam.a and which account to place it. You suggested TFSA or non-registered where it is a growth name. I’m wondering of the 3 accounts I have regular cash (non-registered), TFSA, RRSP. What types of stocks does your team suggest should go into which account generally?
I was under assumption that a non-registered taxable account would be a good place for High Div stocks, not growth stories. There by eligible dividends be tax free and low capital gains to be actually taxed. Or is growth stocks good for there too because of claiming any possible losses?
Thank you for your clarification
Read Answer Asked by Allen on September 01, 2020
Q: Hi, are you willing to comment on a macro issue of the economy? I am perplexed by the housing market where volume of sales and prices seem to be hitting highs in some Canadian urban centers (not Alberta). Lumber companies are doing well. The long term Covid impact on the economy and jobs seems murky at best. Why is there so much confidence in the Canadian housing market? Due to historically low interest rates and some pent up demand? Federal policies designed to prop up the economy? I keep thinking this is all going to end badly if the jobs aren’t there to pay those mortgages. Appreciate your service. You may post this question publicly if you feel it’s Of general interest.
Read Answer Asked by Calvin on August 28, 2020
Q: I have been following a gradual dollar-cost averaging type approach to adding cash into the markets over the past several months.
With the US presidential election coming in the fall and a possibility of substantial political volatility there, would you advise deviating from this general approach? ie, is there a substantial chance of this event causing a market drop, that would merit changing a market approach?
Are there specific events that you are watching for that may act as triggers for coming market movements? The one that is holding my attention is Trump's overtures that he may not cede power if he loses, or if the election decision is unclear.

Thanks for your valued input,

Peter
Read Answer Asked by Peter on August 25, 2020
Q: Hello,

I know they don't ring a bell at the bottom (or the top), but I am wondering whether any of the airlines, hotels, cruise lines or restaurants seem compelling right here. Not really the restaurants that are Covid beneficiaries like the pizza joints or Chipotle, more than the ones that have yet to recover. I am very concerned that with more gov't money being plowed into these industries the pre-restructuring shareholders would be wiped out. Thanks.
Read Answer Asked by David on August 24, 2020
Q: I would like to thank Paul L for his reference on August 10th to a Seeking Alpha article about factor investing. I have since read both the Seeking Alpha article and the associated book "Your Complete Guide to Factor-Based Investing" by Andrew Berkin and Larry Swedroe.

This book contains historical charts which plot the premiums over time for the main factors (i.e. market beta, size, value, momentum, profitability and quality). Based on these charts, it appears that factors work for several years before their success switches to its opposite factor (e.g. value outperforms for a number of years, then there is a switch, and growth outperforms). Given that the factors outperform for a number of years, the charts can be viewed as long-term trend charts. On these long-term charts, it appears fairly easy to see when the switchover takes place. Unfortunately, the charts in the book only cover the period of 1927 to 2015.

Do you know where I can find updated chart information which clearly shows factor premiums? I would like to understand which factors are "working" now, and where they are in the cycle so that I can properly position for any switchover. For example, although value and size outperformed in the decade of 2000, for the last several years, large US growth firms are dominant. On a long term factor chart, based on historicals, it may be possible to predict when the switchover will take place again, and a portfolio should be positioned for small, value stocks.

Do you agree with this approach? Do you know where I can find this information?

Thank you for this excellent service.
Read Answer Asked by Dale on August 19, 2020
Q: I am looking for some guidelines on when one should trim a position exceeding 5% of your holdings. I have a 7.3% a 6.3%, a 5.6%, a 7.0%, a 7.5%, and a 6.2%. 4 of these I have already trimmed some time ago. Is trimming more of a gut reaction or do you have something more concrete to guide you? Combined with this problem, when you do decide to trim, what (and why) % do you trim down to?
I have this problem, mainly, by following your excellent advice.
Your thoughts will be much appreciated. ram
Read Answer Asked by Ray on August 17, 2020
Q: I'd like to get your take on a piece in the Globe and Mail yesterday by Scott Barlow related to the Canadian dollar. It's position is that on top of a large rise the loonie has already experienced, we can expect it to go much higher compared to the US$. This obviously doesn't bode well for those with investments in US dollar accounts so I wonder if you think it might be better to shift some of it back to Canada, perhaps into hedged ETFs with US holdings like XMH or VSP.
https://www.theglobeandmail.com/investing/markets/inside-the-market/article-the-strongest-force-behind-the-market-rally-could-push-loonie-much/#comments
Read Answer Asked by John on August 11, 2020
Q: I would appreciate your views about the benefits of specific factors. I have read a number of articles which claim that over time, dividend growing stocks do better than stocks with no dividends or stocks with overly high dividends. Similarly, there are research articles which claim that "quality" stocks outperform the indexes. Increasingly, I see articles which appear to indicate that other factors such as momentum, women-led companies, socially-responsible firms, etc. also have improved performance. The ETF industry is now offering a wide variety of funds based on these factors (with higher fees than the broad based index funds).

Which factors, if any, do you see as offering outperformance of the broader based indexes over long-term time frames? Are ETF investors better to look for low-cost broad index funds, or should they seek specific types of factor ETF funds recognizing the slight difference in fees?

Thank you for your advice and insights.
Read Answer Asked by Dale on August 06, 2020
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