Investment Q&A

Q: This is a follow up to my question about EM ETFs.

The way I see it, XEC holds only IEMG, but in Canadian funds. With XEC, there are 2 layers of foreign withholding taxes, one from the EM countries, and one from the US, neither of which are recoverable. This amounts to up to 27.75% (15% + 15% of the remaining 85%) withholding taxes on dividends, none of which are not recoverable.

With IEMG, the US withholding taxes are recoverable, so the total withholding taxes are up to 15%. That is a significant difference.

The same holds for VEE (holds only VWO).

ZEM looks like it holds about 15% US based ETFs, and the rest are direct holdings. That means that the withholding taxes are mostly recoverable (4.16% are non recoverable (from 15% of the holding times 27.75% from the above calculation), but the rest may be, depending on the treaties Canada has with each EM country).

Is this correct reasoning?

If it is correct, are there any other EM ETFs that have mostly direct holdings in addition to ZEM? Also, why would you recommend XEC over IEMG and VEE over VWO, especially considering the lower MER for IEMG and VWO?

If my reasoning is not correct, why, and which ETFs would be best from a taxation perspective?

Thanks, and I hope my question is clear,

Fed

Q: I am wondering if any of the following do not hold all their international stocks directly (ie if they are an ETF of ETFs). I am pretty sure that XEF, IEFA, and IEMG do own all stocks directly, and I think VEE does not, but please correct me if I am wrong. I cannot seem to find information about the rest.

IEMG XEF VEE XEC IEFA VGK SPDW VWO

Thanks again,

Fed

Q: Hello 5i
I have to increase the international component of my portfolio, according to the Analytics program. By a lot. I therefore have a couple of questions, as the analytics program gives only Canadian hedged products and I will be buying in US dollars.

First, VWO is currently 2.5 per cent of our portfolio. You often suggest that an etf should compose at least 5%. I have been hesitent with emerging markets. But, do you think that this would be a reasonable increase?

Second. Again in US dollars, I would like something to compliment this. I am thinking that it would be good to have one fund. An all the world except North America fund. In the analytics you suggest VDU. But, as I say, I am buying in US dollars. So, I am looking first of all for an etf suggestion. And secondly, whether this one stop shopping is the best approach. I have to raise about 27% in international, according to your program. I am pretty close to the US allocation, though, so don't need any US.
thanks

Q: I am looking for a US dollar Emerging Market ETF that I can purchase for my portfolio

Q: Hi, thank you for the article on international stocks and the portfolio analytics.
I am now trying to decrease my Canadian home bias (40% to 25%) by increasing my international exposure (20% to 35%) and maintaining my US at 40%. My wife and I own XWD, VE and XEF in our TFSAs. I was thinking of selling XWD and adding VEE or VWO (RRSP) and/or VDU or VEA (RRSP). The switch to RRSP additions is to benefit from US withholding tax exemption.

Could I have your thoughts on the above changes. Is there too much overlap in owning all four ETFs? Could I simplify to one, two or three?

Thank you.

Q: Good morning. My daughter is working in the US and is looking for low to moderate risk, low fee, ETF funds or fund families in which to invest her 401k monies. What would you recommend. Thanks.

Q: Investments in emerging markets might make sense at this stage.
What would be your assessment? Would you have another recommendation?
Thank you, Team!

Q: I have 11% ZLU, 19% CDZ, 50% SDY, !% VWO, 15% VEA and 3% CGL in a RIF. I need to sell $12K from a RIF. Is there something you would recommend selling, or just move in kind?

Q: Hi,

Thank you for your valued advice and also fantastic job with the new site as well.

I am looking to diversify my portfolio to the SE Asian market through my TFSA account. I am unfamiliar with investing outside of Canada and am hoping for some advice. In order to alleviate risk, I am looking at the above mentioned 3 ETF's. If you could please provide your input on each of these ETF's it would be appreciated. If you have any alternative suggestions on how to enter SE Asian markets, please let me know. Your input is appreciated.

Thank you,

Paul

Q: Hi 5i team,
I would like to purchase two ETFs. One for developed Europe and the other for Emerging Markets. I would use US$ for these purchases. Please advise your top pick for each category. And what is the minimum portfolio percentage to make these purchases meaningful? Thanks.

Q: In your response to a previous question where I was looking to replace VWO with a Canadian equivalent, you suggested VEE. The TD Webbroker site shows VWO with a dividend yield of 2.15% and VEE with 1.34%. Can you confirm these numbers and if they track the same index why would there be any noteworthy difference?

Q: Most of my international (non-USA) holdings are ETFs that trade in US dollars on US exchanges. This adds a layer of FX (US dollar) into the equation when considering the performance of these holdings. With the quick and drastic FX moves that are becoming more common, I’m starting to loathe the FX volatility and believe that my other US equity holdings already provide sufficient (US) currency diversification. What advantage/disadvantage is there in holding international equities in US dollars, and if I wanted to replace each of the above ETFs with a Canadian dollar equivalent what ETFs would you recommend?

Q: Hello 5i,
I have been thinking about increasing my allottment to emerging markets funds. I already hold vwo and was wondering whether to just increase that, or whether it would be better to diversify. I would appreciate your thoughts on that question and suggestions as to what might be etf's. I am an Average, moderatly conservative investor, with a good diversification
Thanks

Q: Hi, I am holding EMQQ and VWO. Would it be better to switch to VFV or an India fund ( FIH.n or ZID?) ?
I appreciate your advice. Helen

Q: Hello 5i,
I have recently made some changes in my portfolio and have some U.S. dollars to invest and was wondering the best positioning, considering that I have a fairly balanced portfolio. I follow Barry Riholtz and have found him to be pretty good. He says basically that the US may be in for a slower growth for the next little while, while emerging markets would be best. Here is his post, if it is of interest:
https://www.bloomberg.com/features/2016-how-to-invest-10k/
He suggests VWO. I was wondering what your thoughts on this thesis would be?
Also, another question. If you were going to invest in US etfs, the great investor Warren Buffet, says the best thing is to just buy a vanguard etf for the S&P and forget about it.
I notice, however, that you often suggest other options like VIG, which I believe is a dividend appreciation etf for the American market. Do you think it is worth the extra trouble to diversify from Buffet’s original suggestion?
Thanks again

Q: I would like to buy some etfs but am concerned about liquidity. I would prefer to buy US Europe and emerging markets in US currency. Can you recommend the best etfs in canada US europe and EM thar have a large nuber of shares traded daily?

Q: I have 100,000 US to invest in RSP. would you recommend a mix of these 3 OR put it all into VWO? Suggestions?

Q: Thanks very much for your recent reply. I’d like to get your opinion on the Active Beta ETFs from Goldman Sachs, particularly GEM (Emerging Markets) and GSIE (International). They charge a higher MER than Vanguard funds, but would you say it’s worth it because investors benefit from the expertise of top managers? Between VWO and GEM, which would you prefer and why? Thanks again.

Q: I'm interested in VGK, VWO and VPL. They've all been doing quite well for some time now. Would you wait for some weakness before buying, or do you expect that all these funds will continue to outperform? I notice that the first two funds are doing a bit better than their Canadian-dollar counterparts, VE and VEE. Would you attribute that mainly to the composition of the funds? Thanks very much for your advice.

Q: to invest in Emerging mkts, what is difference between VEE and VWO and which would you prefer? Or could you name 2 or 3 EM stocks that you prefer instead. thx. Helen