Investment Q&A

Q: I've recently sold my ZRE position and am looking for some suggestions on what to consider purchasing with the extra funds on the fixed income side of my portfolio. My equity portfolio is balanced; I am about 8 years from retirement, and am conservative in my approach. I am about 30% in laddered GICs, 5% individual bonds, 3% CPD and 5% in cash. I don't have any bond ETFs (and am concerned about the principal in a rising interest rate environment). What to do with the extra cash? More CPD? Or an international REIT? Or a bond ETF, Canadian or International? Or something else?

Q: I am looking for investments which will respond positively to rising interest rates. I suspect CPD has anticipated a rise and I am told E*Trade will substantially benefit from rising rates - why? what are E*Trade prospects and for that sector in the current environment? Can you recommend an ETF for the US regional banks and do you think they will outperform? Thanks for your consideration

Q: I have the above mentioned stocks and receive dividends.How would they perform if interest rates were to rise.Is there a comparable ETF that would be better. I am up approx. 12% on both.Should I just keep them.

Q: Hello Peter, Like most of us, are concern about the effect of the coming rate increases. How safe will the above preferred shares be, would you consider them as good choices for income and safety? Also, can you suggest equivalents in the Canadian market? Many thanks for your valued advise, J.A. P. Burlington

Q: Hi Peter and Team,

Could you please give me your thoughts on preferred shares in general given the current interest rate environment and the pending rate hike by BOC in about a week's time. Please also provide some names of ETFs of preferred stocks in both Canadian and US denominations.

Cheers,
Harry

Q: Many of the preferred reset shares are trading at large discount. In the expectation of higher interest rate which of them do you see delivering higher returns when the reset dates approache?

Thanks

Q: What ETF(s) might you consider best choice(s) for dependable tax efficient income with no concern for capital appreciation whatsoever but capital preservation being very important in both CAD and USD please? Thanks.

Q: Dear 5i
Can you confirm the following yields and MER`s for the following Bond ETF`s;
CLF yield 3.04% & MER .17%
CBO yield 2.91% & MER .28%
CPD yield 4.54% & MER .51%
XHY yield 5.47% & MER .67%
Thanks
Bill C.

Q: Hi,
I would like to buy some preferred shares as I don't have any Preferred's in any of my accounts but with so many different descriptions out there I'm not sure what I should be looking for. For instance I would like to have a high yield ( > 4.5% ) and a guaranteed return of capital on a set date if held until that date (if there is such a thing out there). I see many new offerings come out through TD & Scotia iTrade but these are usually closed very quickly.

For instance this one came out this morning:
"TD Direct Investing would like to inform you that the following New Issue has just been announced.

Element Fleet Management Corp. - 5.75% 5 Year Rate Reset Preferred Shares, Series I

Short Description: Offering of Cumulative, 5-Year Rate Reset Preferred Shares, Series I via Bought Deal
Price: $25.00 CDN per share.
Settlement: On or about May 5, 2017."

This sounded good but by the time I tried finding out more about the offering it was closed already.

So, is there some guidance you can give on what "buzz words" to look for when a new issue comes out so I can put my "expression of interest" in before the offering is closed?
I guess what I would really like to know are the following:
1) Are 5-Year Rate Reset Preferred shares the best option for capital preservation?
2) Is it best to try and buy Preferred shares on a new offering or to look in the open market?
3) Is there a Preferred share Class that guarantees your original capital outlay?
4) Any other guidance you can offer in looking for the best: time / place / kind when looking for Preferred's?
5) And finally, once I find a suitable Preferred offering - which account type would you recommend best to hold in for tax purposes (i.e.- reg. vs non-reg.)
Thank you.

Q: What are the pros and cons of these two ETFs? Looking forward, which of the 2 do you believe has the best price appreciation potential? Are there better ways to get exposure to preferreds? Please explain. Thanks so much for the guidance.

Q: Monday's list of stocks at 52 week highs included an enormous number of preferred shares? What are the reasons behind this sudden surge? Any prognosis? Thank you!

Q: In the Rate Reset Preferred space, what do you like? Any ETFs that you prefer for an income-focused small holding?
Len

Q: Hi 5i Team,
I would like to take some money out of a savings account and have it accumulate dividends in my TFSA over a 5 year time period (I will need it at that time). I was wondering in the income portfolio, which of the ETFs/stocks would be the least volatile or the smallest of price movement that pays a good dividend over this amount of time?

Thank you,
Andrew

Q: Can't say enough times what a great service you guys offer.

Is there an EFT similar to CPD but with a focus on American preferreds? Thanks.

Q: I have 2 preferred share ETFs (CPD and HPR) that are both up about 6 percent over the last few months. I have noticed a slight outperformance with the actively managed ETF (6.01% vs. 5.59%). The fees are slightly higher with the actively managed ETF (0.64% vs 0.51%). Is it advisable to switch my holdings in CPD and put everything in the actively managed ETF? Is it worth it or is the outperformance a red herring because of the short time period?

Thank you,
Jason

Q: I have a note from you wrt to CPD so am aware of its rate reset properties - which should be positive in the anticipated rising rate environment. However, I have not followed prefs before and wondered how they might perform should we get a significantly negative equity market, and - additionally - whether the managed version might do significantly better in those circumstances. Appreciate your opinion. Thanks.

Q: I am interested in beefing up the fixed income portion of my portfolio. My adviser recommends PMO005. I see a MER of 1.39%. What do you think of this mutual fund? Are there similar ETF's at a lower MER. I know you don't usually like Mutual funds but your commentary in the questions and answers seems good on Pimco. Should I diversify fixed income into several bond funds? If so could recommend a few of your favourites please. Thank you for your great service.

Q: Hi 5i team, which of the above preferred ETF's would you recommend right now primarily for income and some price appreciation. Which one has the most to gain from increasing interest rates.
Thanks

Q: Hello 5i team,
What would be a good Canadian preferred shares ETF with a decent dividend?
Thanks,
Andrew

Q: To add to your response to Carl's question "why would anyone ever buy pref shares" - Hymas Investment Counsel specializes in Pref Shares and has a number of publications available on their website including "Why Invest in Preferred Shares" and "Security of Income versus Secrity of Principal". These might be helpful. www.himivest.com.