Investment Q&A

Q: Dear 5i team.
The following was your response to a bond question I asked in '24.

"Nothing is guaranteed, but bonds' leverage is highly correlated to their maturity. CLF has a relatively low duration of 2.8 years, whereas XLB is 15 years. As a general rule, for every 1% increase or decrease in interest rates, a bond's price will change approximately 1% in the opposite direction for every year of duration. With a bond ETF in theory the move should be similar, and thus XLB in theory should see a much larger move than CLF when rates move (either way). In reality it is not so concrete, and depends on variables in the yield curve and other factors (supply/demand). But we would be very confident in saying that if rates move lower XLB's bond portfolio should do significantly better than CLF. Owning XLB is essentially a 'bet' that rates will drop. As such, we would be fine owning both XBB and XLB for a bit more diversification of bonds. XBB's duration is 7.5 years so a good middle ground between CLF and XLB."

Been watching XLB/XBB for some time now, and both appear to be in downward trends in terms of share price, and close on yields. Rates have been steady, or in decline, so I'm completely confused.
Please take a look and try to make sense of this for me?

Many thanks for your help.

Q: Good afternoon 5i;

I have been a holder of the TLT ETF for some time; only a very short period was it in the green. While the yield has been decent, I am now down 14% as the Jerome Powell cage gets rattled.

My question is simply, are the Trumpian risks becoming too much to hold this ETF? I believe he is radical enough to remove Powell, but likely won't and will just continue to make noise. Even the noise is having impact.

If yes, do you have a Canadian Bond Fund you might recommend of similar characteristics?

Q: In an effort to balance my portfolio, I’ve invested in both short-term (XBB, currently +0.9%) and long-term (XLB, currently -2.74%) bond ETFs, all held within a registered account. Despite these being commonly recommended by industry analysts for portfolio diversification and stable returns, I’m seeing losses across both and finding it difficult to understand how to generate positive returns from bonds in the current market environment.

Given this, I’d appreciate your guidance. Should I consider:
• Selling XBB and XLB and moving the funds to a high-interest savings account?
• Adding to my bond holdings by including alternatives like XSB or VAB?
• Holding my current positions and staying the course?

I’m open to adjusting my strategy but would value your insight on how best to approach bond investments right now.

Q: Hi Peter and 5i Team,

Just a followup to my question about ETFs that focus on long term and mid term Treasury bonds, are there any ETFs that focus on Canadian Treasury bonds, or are the ones that you suggested (TLT, SPTL, VGLT, IEF), the best options?

Thanks again for your great work!

Q: I am looking to increase my fixed income percentage but this current market has me bamboozled. Major markets are basically even YTD despite Trump's tariffs still being on the books. There was a significant rally the other day because the US is “only” going to levy 30% tariffs and China will drop theirs to “only”20%! But while the markets go up, long term bonds continue to drop which I thought was a negative market indicator. So are things as mixed up and incoherent as I think? And with this background is now a good time to buy long bonds, short bonds or equal amounts of both?

Appreciate your insight.

Paul F.

Q: What type of bond funds are best to invest in right now? Long term duration or short term, funds or can I buy individual bonds? Could you make recommendations for investing in todays market for the bond side of portfolio. I would prefer to make a 4-5% dividend but don't know if that is possible. Thank you!

Q: Which fixed income investment instruments would be your most favourite at this time based on cost and potential returns?
Thank you,
Miroslaw

Q: Thank you and your team for all the helpful information and advice. What might be a good place to park cash for about 90 days?

Q: Could I have your opinion on XHY?

Thank you

Q: Canadian HISA accounts do not have such good yields anymore. And the income is taxed as interest. I was looking at my 2022, 2023 tax returns and the revenue from canadian ETF like ZAG, XSB, XLB was mostly ROC. If I’m not wrong, thus, much more tax efficient? Wouldn’t be a good idea to switch from HISA to XSB, XBB, etc to park money in the next few months?

Do you know if high-Yield ETFs are taxed the same way (ROC) ?
USD-HISA are more generous so the logic might be different.
Thanks.

Q: For long term investment what would be a neutral proportion of bonds in terms of distribution among these 4 or are there better options? Currently sitting on 17% cash which I intend to redeploy in stocks when we have better clarity, 36% XBB, 26% XLB, 12% XHY and 9$ XSB for 100% of my bond/cash portfolio.
Thank you.
Yves

Q: Hello. David Rosenberg’s latest per a Globe article today:

“Best to hide in cash, bonds (Treasuries, Ginnie Mae mortgages, high-quality corporates), gold and the miners (silver too), defensive bond-proxies in the stock market that have decent yields and consistent dividend payout growth (stable dividend stocks are up +5% year-to-date), Japanese money market funds (ride the most undervalued currency on the planet and a BoJ set to raise short-term interest rates sooner rather than later), and diversify into the European Defense and Capital Goods sectors which now have more fiscal-related visibility.”

Can you provide some specific ideas (stocks and or ETFs) that match up with his recommended areas to ride this out?

Thanks!

Q: I have $100,000 of cash in an investment account, am looking for some conservative ETF’s with 1/3 going to fixed income, same to Cdn Equity and balance to Global. Any suggestions? Given the trade war with the USA, I might sit on the sidelines for a few weeks so ny thoughts on best way to invest the cash with good liquidity. I was looking at HISA ETF’s but they are very low currently.

Q: Good morning all; I've a two part question for you, First, the listed investments are in a RRIF. The current plan is to extract only dividend income, and have some modest stock growth.

I have funds for one more position and I'd like 3 of your suggestions that would add decent dividend income with modest growth of stock value.

Second question is about XLB. It was originally purchased as a post-inflation investment looking for some appreciation as rates declined. While Canada may get a bit more downward adjustment I believe Trump policy will be inflationary. What would be a sound replacement, meeting the dividend and growth goals for the account?

Thanks as always.

Dave

Q: I have a lot of cash and am planning to trim some tech stocks.
I have no ETF.s or bonds in my portfolio. Can you recommend some safe and growth bonds.

Q: Hello,

Considering selling a combination of XBB, XLB, and ZMP and purchasing some CAP REIT. Would you see this as a good move? Or hold the bond ETFs? Looking for a longer term hold.

Thanks!

Q: As per Tom Czitron in today's Globe:

An index ETF of long-term bonds should perform well, especially one with U.S. bonds but with the currency hedged back to Canadian dollars.

Please comment Mr. Czitron' point and name your favorite ETFs if there are such any available currently.

Thanks

Yves

Q: Can you recommend a proxy for zfl for tax loss selling?
Thank you

Q: Hi Peter, looking for a suggestion of where to park $400k (from a house sale) for the next 1 year. Besides GICs and Cash ETFs is there a slightly higher risk play you would consider at this time if it was your own money ? Thank you, Paul

Q: Hello,

Thoughts on long term durations in Canada? Good entry for XLB?

Thanks.