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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 team. About a year ago I sold out of ZAG and replaced it with ZST. This has worked well as ZAG dropped about 16% while ZST was relatively flat. I would have thought that with rates still rising, ZST would be a safer place to be but I have heard a number of recommendations on BNN and elsewhere that it is time to get back into longer term bonds. I have noticed that the share price of ZAG has been turning up recently. Is it time to switch back into ZAG?

Read Answer Asked by Ken on July 08, 2022

Q: Many months ago, everybody and their brother was predicting interest rate increases, so I sold the bond funds in my RRSP (primarily ZAG) and bought short term bond funds like ZST and XFR. And for some fun /an experiment, I bought some TBF. I try not to time the equity market (as per your sage advice), but I could not resist with bonds (because it seemed like everyone was convinced about the interest rate direction). Good news is that TBF is up 22% YTD; and ZAG is down 13% YTD, but I do not understand why I do not hear anyone promoting TBF as a solution for this rising rate environment. What am I missing? Is there a liquidity risk for sellers when the rates start to flatten out; or is there a significant and quick price plunge risk; or...??? Thanks in advance for your comments.

Read Answer Asked by David on June 27, 2022

Q: Between January and March of last year (13-16 months ago) I sold my bond holdings in ZAG and CLF and moved the money into the short-term bond fund ZST. As a capital preservation strategy it limited the downside from rising interest rates. ZST is down 2%, while CLF is down 6% and ZAG 9%. I saw an analyst on BNN this morning recommend it is time to start easing back into longer term bonds. It feels a bit early to me. Won't the short term bond funds benefit first from rising rates while the longer term funds will continue to decline? If capital preservation and rate of return are weighted about 50/50, what do you think of moving back into longer term bond funds at this time and would you do it gradually?

Read Answer Asked by Ken on April 06, 2022

Q: Hi Everyone at 5i! I need your advice. I have a non registered portfolio, half I have invested in Canadian and US growth and income stocks. The other half I would like to invest in something more secure. GICs come to mind, but with low interest rates, inflation and unfavourable taxation, they seem like a loosing proposition. Any low risk suggestions??? Thank you for all that you do!!! Cheers, Tamara

Read Answer Asked by Tamara on December 03, 2021

Q: A couple questions on ZST. Deduct credits as needed.

Assuming this etf is held in a taxable account but the payout is taken in cash and not reinvested, will it make for a headache at tax time?Would HSAV be a better place to park cash in a taxable account?

It looks like every time this etf pays a distribution the price drops so even though the current yield is 2.17%, in reality you're only getting ~.5% return. Do I have this correct?

Thanks

Read Answer Asked by Dennis on August 23, 2021

Q: Looking for both US and Cdn (GIC replacement) ideas for an 80+ year old, looking for some income, not looking to shoot the lights out. Sitting in cash is tough. 4-6 suggestions would be appreciated. Thanks.

Read Answer Asked by David on April 28, 2021

Q: I currently own half my bond holdings in ZAG. I put the other half in ZST as I was looking for something that wouldn't go down as much as interest rates go up. But ZST is a mix of govt and corporate short term bonds and Ive been reading that short term corporate will be less affected by interest rates than govt bonds. Would you recommend another ETF for very short duration corporate bonds that I could replace ZST with?

Read Answer Asked by Carla on March 25, 2021

Q: Further to my earlier question about ZST and HFR, I don't think you have addressed the issue. The l0yr average total return for HFR is practically 25% more than for that for ZST. (as per your references). They are both ultra-short bond funds but their behaviour is vastly different. Why?

Read Answer Asked by richard on March 10, 2021

Q: The etfs ZST and HFR are both classified as ultra-short term bond funds. HFR has an active designation and a slightly higher MER (0.47% vs 0.16%) but their long term behaviours are markedly different. Over 10 years, ZST has lost ~15% of its value whereas HFR has remained flat. In the covid-spring of 2020, HFR briefly lost 20% of its value (now regained) but ZST hardly moved. Do you have any idea what accounts for this different behaviour?

Read Answer Asked by richard on March 08, 2021

Q: Your opinion on using FSB ETF to park cash. Looks to have better returns than any high interest savings or GIC with minimal risk.

Any better ideas for returns from cash are appreciated.

Read Answer Asked by Chris on March 05, 2021

Q: Good morning team,
A few years ago I purchased ZAG as my bond portfolio for a long-term hold. It did will rising to $17.15, but as interest rates rose and it declined to my purchase price of $16.40, and given that I am over 70 years old, I sold out to preserve capital. I am looking for an alternative, safer place to put the fixed income portion of my portfolio. GICs and money market funds offer weak returns. I am looking at ZST (and ZUS for $US). Do you think these are a good places to go for safety of capital and rising return assuming interest rates continue to go up?

Read Answer Asked by Ken on March 05, 2021

Q: I just recently retired and within my portfolio have approx 60% in Bonds (As per above) - while these have been a great hedge against the equity holdings, I am considering either selling some of the bonds listed above - approx 10% and moving these monies into either high yield bonds - ie CHB or ZHY or if not into high yield bonds possibly a high yield dividend fund like XEI or ZWC or ?
While I would like to increase the income on these monies - do you think this is a good time to make this move?

Read Answer Asked by Greg on September 25, 2020

Q: I'm looking for a safe place for cash with a decent yield. This could be for several months or several years. How would you compare ZSH to PSA? Is one better than the other? With uncertainty over interest rates, do you have any recommendations for the fixed income portion of an investment portfolio?

Read Answer Asked by Jack on January 21, 2020

Q: Hello 5i team, I am slowly reducing my exposure to equities for two reasons: position my portfolios ( US + CDN) for a possible recession or slowdown and also, I am 66 year old and my portfolios are 80% equities.
I have taken small positions to above bonds ETFs.. May I have your comments and also, would you recommend short/long or medium bonds and treasuries? As well, do you have other recommendations for someone my age? Thanks CR

Read Answer Asked by Carlo on November 14, 2019

Q: With respect to Larry's earlier question about ZST, I was surprised that you did not mention HFR as a better alternative. Althought ZST has a lower MER than HFR (0.17% vs. 0.4%) and a better distribution (2.9% vs 2.4%), its value has declined consistently (-15%) in the past eight years unlike that of HFR (0%). I see no reason to recommend ZST in preference to HFR so why would you?

Read Answer Asked by richard on July 30, 2019