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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: I own all of the above in roughly equal weights in my TFSA. I am attempting to replicate your Balanced Equity Portfolio. I am also trying to get more defensive. I think I am overweight in the Info Tech sector. I am looking at a 5 year hold. I have cash to buy another position. What would your advice be - hold the cash or make a purchase. If purchase what would be your recommendation for defensive position?

Thanks for your help.
Read Answer Asked by Ron on February 22, 2019
Q: I have a question about fixed income ETFs and the bond market. Is this the time to be putting large sums of money into fixed income ETFs like ZAG, VAB and ZCM? What risk do these ETFs pose in a rising interest rate environment? Should one even be concerned with the price fluctuations over a month, 6 months or a year?
Read Answer Asked by Jeff on January 10, 2019
Q: Greetings 5i,

My question is twofold, so please deduct two credits if you see fit. I have some cash to deploy into the bond portion of my fixed income allocation, and would like your advice about how to proceed. Currently, I have VAB.TO and AGG for broad based bond market exposure, and XRB.TO for inflation linked bonds. To this, I am considering adding an ETF strictly devoted to Canadian government bonds in an attempt to add increased long-term safety (I am becoming a little skittish of corporate bonds).

This addition would be a very long-term hold (likely 20 years or more), and would bring my bond allocation to roughly 15% of my total portfolio (the majority of my fixed income investments are comprised of GIC ladders).

I am 37 years old, debt free, and fairly conservative in my risk tolerance. My investments are solely for the purpose of providing for my retirement, and I will have no need of their funds for the foreseeable future.

My research has led me to either an overarching fund such as XGB.TO or VGV.TO, or to one with laddered maturities like CLF.TO or CLG.TO. Given my situation and style, do you feel as if the addition of a Canadian government bond ETF makes sense for my portfolio (as opposed to simply adding to VAB and AGG)? Moreover, if you do approve of said addition, which of the aforementioned funds would you consider to be the most beneficial?

Thank you.
Read Answer Asked by Lucas on November 28, 2018
Q: I am retired and have significant positions in vsb and vab and both are valued less today than a couple of years ago.
I was thinking to sell one or both and purchase xhb and /or xcb and bep.un and/or ala.
I look forward to your comments. Thank-you
Read Answer Asked by JOHN on October 01, 2018
Q: I'm a young investor (early 30s) and have previously had all of my portfolio in equities. I'm concerned about risk and want to put about a quarter of the portfolio into safer, fixed income type investments. I'm struggling to understand the benefits of investing in GICs (currently with rates of 2.8-3.5%) vs Bond ETFs (like VAB or ZAG). Can you help explain the difference and benefits between Bond ETFs and investing in a direct GIC? Can you recommend the better choice for me; GICs or Bond ETFs?
Read Answer Asked by Michael on July 04, 2018
Q: To add to Julien’s post from today on bonds. I am in a very similar situation, younger (early 30s) with no bond exposure, all equities in the portfolio. I’d like to start adding some bond exposure through ETFs and did appreciate your suggestions on specific names. My question is, what etf would you say is a ‘one stop shop’ for bond exposure, as I like to keep it to one or two names at most. I’ve seen ZAG or VAB mentioned before. I’d like to keep it in CAD as I don’t want to add exchange risk. The purpose for the bond exposure would be to add uncorrelated assets and reduce volatility. Thank you as always
Read Answer Asked by Aaron on June 28, 2018
Q: I have 25% in fixed income in the above ETFs. In my TD account they are all showing a small negative return. Wouldn't cash be better or a GIC. I would really like to understand the logic of holding these rather than say a GIC. Thanks so much.
Read Answer Asked by Dan on June 18, 2018
Q: Hello 5i team,
I was wondering if there is an ETF in canada that contains provincial bonds. I am guessing VAB may contain these as well as Canadian bonds.

Also what is the best website that would have breakdowns of what is in canadian ETFs?

Thank You,
Andrew
Read Answer Asked by Andrew on April 11, 2018
Q: I am holding all of these ETFs in fairly equivalent amounts in both TFSA and Cash accounts. I will need to sell some to pay my 2017 tax bill, as the sale of an investment property has me realizing some significant capital gains.

Do you have a recommendation for which ones to sell over others, or would you maintain an equal weighting? These will be long-term investments.
Read Answer Asked by C Shane on November 15, 2017
Q: Dear 5i,

I am aiming to configure a fixed-income allocation that is an equal compromise between safety/security and long-term total return potential. I would like to choose ETFs that are versatile enough that they may continue to be reasonably held irrespective of changes in market, interest rate, inflation, and economic conditions. Which configuration do you think would be most appropriate for fulfilling this mandate:

1. 100% VAB
2. 50% VAB, 50% VCB or ZCM
3. 25% VAB, 25% VSB, 50% VCB or ZCM
4. 50% VCB or ZCM, 50% intermediate-duration (~5 years) Canadian government bond ETF (does one exist?)
5. another configuration (please suggest)?

I would prefer to avoid the higher risk XHY and CPD. Why does 5i prefer CLF (VSG is cheaper and similar) and CBO (VSC is cheaper and similar)? VCB is relatively new and has only $12.7M in net assets at this time, is this a problem? Or should I opt for the costlier but similar ZCM?

I realize there are actually many embedded questions in this 'question', so please deduct as many credits as appropriate. I am sure your answer will be well worth it.

Thank you.
Read Answer Asked by Walter on June 26, 2017
Q: Hi 5i team,
I currently have the above ETFs. I find that the dividend are a bit low (~2%). I was wondering if there are alternatives to the above in the 4-5% dividend range for income?

Andrew
Read Answer Asked by Andrew on June 16, 2017
Q: Greetings, I've always had a bit of a difficult time understanding bond ETF's or more specifically how they may be expected to react to economic events. Some observers interpreted recent comments from the BOC as perhaps indicating they may not be as opposed to a rate hike as they have been for the last 7 years. If rates were hiked even a little in Canada, I assume bond ETF's would react somehow. Does it depend on the nature of the holdings? Or is the underlying reason for the rate hike more important? Could a bond ETF ever respond neutrally (or even positively)? I think I understand how an individual bond reacts, and how if I held it to maturity it really wouldn't matter, but I am thinking specifically of ETF's like VAB and CLF. I would really appreciate your thoughts,
Thanks

Read Answer Asked by Stephen R. on June 13, 2017
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.
Read Answer Asked by Brian on January 20, 2017