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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 have positions in several ETFs trading on the TSE. I like to keep up to date on major holding changes and weightings within each ETF. Is there a good (one stop shop) source of updated information, other than going on to the separate ETF company websites?
Read Answer Asked by Edward on August 05, 2020
Q: Hello,

Thank you for your very prompt response to my question concerning how this ETF is able to pay such a high distribution. I now however have a few follow-on questions.

Since you indicated that a vast percentage of the distribution the ETF paid in the past year was simply a return of investors capital, wouldn't that make the likelihood of the ETF being able to continue payment of the current high yield very suspect over a rather short period of time? If investors are predominantly receiving a return of their own capital back to them, over time, then at a rate of 9% plus per year, won't the fund simply run out of funds to make these payments with over a period of 10 or so years? How would this differ from putting one's money under the mattress and simply withdrawing 10% of it each year?

Does the Evolve Global Healthcare (LIFE) ETF also engage in this practice, in order to support its roughly 6.75% yield?

If ETFs are supporting high yields by returning investor's capital to them and if that practice is inherently unsustainable, then I imagine that including information of that nature in the answer to any and all inquiries about such ETFs, would be very beneficial to all your members.

Thank you
Read Answer Asked by Richard on July 30, 2020
Q: Hi,

I'm wondering if you might be able to provide me with some insight as to how you believe the Harvest Healthcare Leaders ETF appears to be able to sustain a yield of over 9%, when the vast majority of the investments it holds don't pay a dividend of anything close to that level of return and in fact in some cases pay no dividend at all?

I understand that they write covered calls on up to 33% of the portfolio but the difference between the return being paid by this ETF and the investments it holds seems too vast for those premiums to be able to make up all the difference. Am I perhaps mistaken in that belief or might this ETF being sustaining its current payout on "borrowed time"? I cannot afford any more investments like CPG or VET or any other examples of times I've reached for yield only to end up losing a massive percentage of my very hard earned money.

Thank you!
Read Answer Asked by Richard on July 27, 2020
Q: I am considering buying LIFE, or maybe HHL. I understand the "withholding tax" issue is best handled by having these ETFs being held within ones RRSP.

A clarification question = If the foreign country withholds income taxes, is this reconciled at the time of filing ones income tax? I thought there was a tax agreement or tax treaty that ensured there was no double taxation. So if one paid taxes to the USA on a certain investment, then you didn't have to pay taxes also in Canada...in other words...no double jeopardy. Or...is my understanding incorrect?

The reason I ask is I like the way my portfolio is constructed and have the funds available to purchase either of these ETFs from within my Cash account.

Thanks for your help...much appreciated...Steve
Read Answer Asked by Stephen on July 21, 2020
Q: Retired dividend-income investor with minimal healthcare exposure (2% of equities). If I wanted to increase my health care exposure via an ETF and receive a dividend, which ETF would you chose? Which type of account would you buy them in...RRSP, TFSA or Cash (I'm thinking about income tax implications and USA withholding issues)? In a previous comparison, you indicated you preferred LIFE over HHL, although in another question you preferred XHC overall. I am sitting on roughly 8% cash and currently think I may wait for 2nd Qtr earnings to unfold, or possibly wait until the USA election...I know this is market timing, but I just don't trust where we are at right now. Once Q2 earnings are in, I might invest the $/month over the next 6 months strategy.

So, which ETF would you choose and would you wait for Q2 earnings to be done?

Thanks...Steve
Read Answer Asked by Stephen on July 14, 2020
Q: Hi 5i team
What are your top picks for Global/US health care sector ETFs that are listed on TSX , for non hedged and for hedged? Are these better to be in non registered account?
Many thanks.
Read Answer Asked by Willie on April 21, 2020
Q: Hope everyone at 5i is doing well in these times!

I have been sitting on mostly cash in my RRSP/LIRA and would like your recommendations on the best ETFs to consider for my full US and International exposure. All of these would need to be listed on the TSX as I am purchasing in CAD $. While I know you prefer non-hedged, I’d greatly appreciate if you could explain benefits/workings of hedged vs. non-hedged considering the current environment. And provide ETF recommendations for each.

I am looking to achieve a balance of diversification, reasonable MER, minimizing any withholding tax while optimizing the potential in market recovery. For US, I would like to have a technology ETF, health care ETF and a broader spectrum ETF – but also open to ideas. Also, looking for recommendations on International – one broad ETF or perhaps that and a mix of ETFs. I recognize there can be overlap (e.g. between a tech and broad sector fund), so if you can give me a sense of the degree of duplication that may be present in your recommendations. Perhaps going heavier on tech right now could be a good thing.

While I started off thinking ETF selections would be relatively simple, in reading various Q&A there seem to be many important considerations - your assistance is appreciated. Again, all of these are being purchased in RRSP/LIRA accounts with the goal of optimizing my returns over a 10 year window.
Read Answer Asked by Loretta on March 30, 2020
Q: Could I get your thoughts on how HHL might behave in a recession. I understand Healthcare as a sector would be a Defensive sector however I also understand 5i is not to crazy about the cover call aspect, believing it would not protect again the down side. So how would HHL behave? Would the price fall greater than the average defensive share price, or would investors still consider it a defensive play and hold steady the price. Or would the cover call aspect cease to work and the dividends reduce? If it's more an impact on the dividends, is there a way of telling how much the
cover calling is adding to the dividends and therefore what dividends could be expected in times of a recession. Thanks
Read Answer Asked by Phil on March 19, 2019
Q: Health care sector: I own GUD, COV and RHT (I did not get out of RHT in time so will hold) in Canadian health sector - all are down significantly. I follow BE portfolio and have diversified non- Canadian mutual funds and etfs. What are your thoughts on USA health sector, which if any of the IBB, HHL, ZUH would you add for long term (5+ yrs)?
Read Answer Asked by Glen on January 04, 2019
Q: As a retired person I am always looking for high yield investments.
So I look at something like HHL from Harvest. It holds 20 equal weighted mainly US healthcare stocks. A solid sector with good long term demographics. I see their current yield on what they are paying out is 8.67% - all capital gains - great! But I see the average dividend yield on the stocks held is only 1.96%. How can that be? Seems it’s done using covered calls Not sure how that works but sounds like it creates added risk. What if the covered call $ generated isn’t enough to meet their intended distribution? Where does the extra $ go if covered call exceeds the distribution.

So I investigate the industry a little more and I see words like- total return swap based, inverse, currency hedged, low/ high volatility, fund of funds, proprietary methodology, 2x returns etc., and I start to wonder what’s going on?

Then I remember the term “ flow through shares” of some time ago and say to myself “ it’s déjà vu all over again.

Derek
Read Answer Asked by Derek on November 20, 2018
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