The Canadian Investor - Mailbag episode - ETFs, payments, gaming, bonds and more!

Episode Date: March 29, 2021

We’re back this week with another mailbag episode. We answer voicemail questions left by our listeners. We received some great questions on  ETFs, retirement, payment companies, gaming companies, screeners, forex & bonds.  Tickers of stocks and ETF discussed: CP.TO, VCN.TO, VUN.TO, CRE.TO, VAB.TO, IVV, IGBL, XUU.TO, XIC.TO, VTI, ITOT, XAW.TO , TCEHY, U, SLGG Want to send us a question? Check out our Anchor.fm link in the description below and leave us a voice message! Getstockmarket.com Candian Investor Pod Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital https://stratosphereinvesting.com/blog/how-to-convert-cad-to-usd-norberts-gambit-questrade --- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Live from the great white north, this is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger. The Canadian Investor Pod. It is March 26th.

It's Friday afternoon. Sun is shining. Simon, how we doing? I'm doing well. It's definitely not shining over here, but I'm doing very well. Well, maybe that's because the Leafs beat the Senators last night. So maybe that could be a reason for that. I mean, could be. You have no horse in that race. No, I'm a Habs fan and they've been, you know, they're getting closer to playoffs even while

being in quarantine because Calgary and Vancouver probably, they look like they have no idea how to win hockey games. So Montreal is still in the playoff race, but now like four, five or six games in hand over both of them. It's all getting very interesting. Okay, speaking of Canada, can you talk about CP Rail? This is a blockbuster. We've had two weeks of blockbuster deals now with mergers. Yeah, it's a big deal. So Canadian Pacific CP Rail is looking to acquire Kansas City Southern. So they're two of the smaller players when it comes to the railroad industry.

The deal is interesting because it would give them coverage altogether from east to west to Canada and then all the way into Mexico. So it would give them a lot more coverage and should help in terms of the competitive advantage versus some of the other major players like canada canadian national rel cnr we'll see whether it will be approved or not so there there's a history of merger attempts in that space that have been declined by the various governments involved and even cp is still unsure whether it will be approved or not. They're saying they should have final regulatory approval by mid-2022. So it kind of shows that even them, they're not 100% sure. But it is a major deal.

It's $29 billion in the value of the deal itself. I'm assuming that's in U.S. dollars. I don't have it in front of me, but yeah, it's a big deal. It'll be interesting if it goes through or not though. Yeah, it's huge. And it creates the first Canada, US, Mexico rail network. So that provides, that's very accredited to CP.

So I mean, that's pretty cool. Yeah, exactly. And it should help shippers in general because right now there are agreements between CP and Kansas City Southern, but because they're still two different companies, oftentimes there are going to be some delays between those transitions.

So, we'll see whether it's approved or not, but definitely something interesting. And rail is good, man. Rail is good environmentally if you look at like tons of greenhouse gas per the weight that it moves rail is very clean compared to the alternatives and it won't get stuck in a canal no sorry too soon yeah too soon for the suez It could still derail, but yeah. Yeah, it could derail. Have you seen the pictures, the satellite pictures,

how they show the boats that are waiting to get in? It's insane. Yeah, it's wild. Yeah. It's wild. If you're not familiar with the story that's happening, I guess you're living under a rock, but there is a very large boat that is currently sideways in the Suez Canal, and it's causing all kinds of issues.

All right, let's switch gears. It's mailbag day, so we have a bunch of questions. Thanks for people who have submitted those, and we will be answering them today on the show. them today on the show. Really quickly, before we do that, I've been getting lots of wordage from new investors calling this market volatility a crash. And I really just want to kind of give some context to people. I do not think this is a market crash. I mean, you experience a real market crash and you'll know. There's a pullback and a contraction in some multiples,

especially the software as a service 50 times sales crowd. Those ones are coming back a lot. And it might be well warranted, but stocks have done so exceptionally well that, you know, something that's 50% off the highs, but still up 200% on a trailing 12 month basis, you know, that is really good performance. That is really good performance. So broaden your view a little bit, manage expectations, and realize that the only thing normal is that stocks are volatile. So just really quick before we get into the mailbag, because I'm seeing some words about a crash, and we're just not there.

All right, so let's roll the first question from kai uh and uh yeah so you'll hear the recording of some of our fans we appreciate you guys a lot and then we'll uh we'll answer them so here we go hi brady and simone big fan of your show um so this question is more for my dad he's getting close to retirement um he was looking for some etfs and index funds to invest in preferably canadian but open-minded to us ones as well um what would you recommend thank you okay kai well that's a great question so um and that's great that you're uh you're helping your dad that's close to retirement and the fact that he's looking for some ETFs or index funds, preferably Canadians.

So depending how close he is to retirement, the first thing I would say is a good practice will be to at least have two or even three to five years of living expenses in low risk assets or even cash equivalents. So the reason behind that is you want some guaranteed money, if you'd like, for your living expenses, because that'll give you a buffer. It'll give your data buffer in terms of if there's a significant market correction, because if he's 100% invested in equities, that could be a really dangerous game, especially when you're close to retirement and you need that money for living expenses. The problem with that right now is fixed income is not very attractive because of low interest rates. Bonds are not yielding all that much, even when you look at corporate and even like junk bonds, which I would not recommend. like junk buns, which I would not recommend. One of the things you can look into, they're called,

it's a product called market-linked GICs. I think I've probably talked about that before. So what market-linked GICs are, they're Guaranteed Investment Certificates. So they're like, they're GICs. They basically vary depending on the market returns. So they're linked to a specific sector of the market. And depending if the market goes up or down, your return can actually increase. Usually there's going to be a cap though on the total returns that you can get. And there's also a floor. So usually you'll have at least your capital back. But if the market doesn't perform well during that period of time, you'll get like almost zero interest. So that is a bit of a downside there. But considering what you can get in other types of fixed income products, that may represent a bit more upside. So there might be some interest right there. So when it comes to your specific question in terms of ETFs,

there's a lot of ETFs that are really interesting out there, a lot of low cost index funds as well. So I'm going to suggest a few, but by all means, do your own research. And there's some, sometimes it's just keeping it simple is the best approach. And I know Brayden will have a few things to add to that as well. It may be a good idea, though, to diversify outside of Canada, especially if your dad will be, you know, collecting his pension from an employer in Canada, Canada pension plan, so CPP, if he owns a house in Canada. So a lot of it is linked to Canada itself. So in those cases, it's a good idea to diversify a bit more, whether they're US-based companies or Canadian-based

company that do businesses in the US or around the world, and same applies to the US companies. So some Canadian ETFs to look into. But again, these are just examples. And make sure if you select more than one ETF, make sure you look at the top holdings and make sure they don't overlap. So one to look in, a couple to look into in Canada is VCN.TO. That's the Vanguard Canada All Cap Index. Very low fees, 0.05%. VUN.TO, U.S. total market, 0.15% fees. VRE.TO, that's the Canadian REIT index. So if you want to be more focused in real estate, that one is a bit higher in fees, so 0.35%.

VAB.TO is a mix of corporate slash government bonds. So that's also if he's looking a bit more at fixed income, low fees as well. So 0.08%. So these are all fairly low fees. And then in terms of U.S. ETFs, a few to look into is the IVV iShares. So that's a S&P 500 index fund. Super low fees, 0.03%. And then the IGBL, those are iShares 10 plus years investment grade corporate bonds ETF, again, very low fees at 0.06%. So those are just some examples by if you look at Vanguard, or even BlackRock, you'll see they have a whole list. You can sort usually by fees,

if you'd like. And like Brayden, I think it'll say is, you know, a couple of basis point in difference in fees is not the end of the world. Obviously, if you have one that's 0.05% versus one that's 1%, that's a big difference. But Braden, do you have anything to add on that? Yeah. So when it comes to ETFs, my number one recommendation is just don't overthink this, because it's so easy to overthink this and you'll be pulling hairs over something that just really is not important. Because what might be the lowest management expense ratio that MER number we talk about this year might be you know the second lowest next year and it's not worth switching them out for like a 0.01% change or what some people call basis points which is basically just 0.01%. So if one is a one basis point better the next year,

it really is not going to affect your performance very much. That's so little. So the ones I use for buying US stocks on the TSX is XUU, the iShares Total Market ETF. XUU, the iShares Total Market ETF. For Canadian stocks, XIC, which is the iShares TSX Composite ETF. Again, those are both listed on the TSX. And these are the iShares ones.

I mean, Simon mentioned the Vanguard ones. Again, just pick one. It's the same product. Don't overthink this. It's really the same product. Don't overthink this. It's really the same product. If you want to buy US listed US stocks in US dollars, what a tongue twister. I like VTI from Vanguard or ITOT from iShares. Again, they have a MER of 0.03%. It's the same product, their total market. So they own, you know, thousands of stocks. You're instantly diversified. You could just own that and go to sleep. Again, don't really

don't overthink this because a lot of these products are identical in nature. They just have a different name. So don't split hairs over it. all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com.

All right. Derek from Montreal. Let's roll this one. Derek from Montreal. Let's roll this one. Derek, a finance student in Montreal. So just to put you in context, I got my mom out of the grip of her financial advisor. He was charging about 2.4% fees. So now that her funds are in her brokerage account, we're wondering what to do with it. So me, I think that markets are overvalued. I'm looking for more passive investment for her, but she's getting a little bit impatient She wants her money to be placed right away So I have two questions because I think the markets are overvalued should I wait or start dollar cost averaging in at the index funds or ETFs and My second question is if we decide to wait which financial instrument

Do you recommend that offers some return for close to no risk and very high liquidity so when the time comes uh my mom and i can just jump on an opportunity uh warren buffett style thanks so much for your answer and i really love the podcast keep it up goodbye well first of all derek um congratulations on getting your mom to ditch your financial advisor who was charging 2.4%. I went through the exact same situation with my parents three, four years ago. And I think right there, it's just a great thing saving on that 2.4%, which can make such a huge difference over several years.

And especially if they're closet indexing. I just want to add that. Yeah, especially if they're closet indexing because just want to add that yeah especially if they're closet indexing because they're doing the strategy we just talked about and charging you 2.4 percent so i mean there's nothing wrong with getting financial advice it's you know that's just bad value for money if they're going to be closet indexing which is just buying index for funds for you and we see that so often so i just want to chime in on that. Yeah. And even if they're not closet indexing, they might have a fund that with the fund manager is just not that good either. So you have to keep that in mind. But just getting rid of those fees, because if you're using an

index fund, chances are you're saving about 2.3% of that 2.4%. And based on the answer we just provided and some of the MR, you'll understand that, right? So in terms of, you know, thinking the markets are overvalued or not, and should you DCA? So you have to be careful in terms of saying if the market is overvalued or not, because if you're using traditional metrics, of course, the market is looking overvalued right now. There is a risk, though, in waiting on the sidelines because, especially in the current environment that we are with the super low interest rates, you may have a lot of trouble finding investments that will be able to perform as well as stocks or equities right now, even if they look overvalued. There's a couple of ways you could do that to address those concerns. So you could DCA over a longer period of time with smaller installments. So that would lower your variance. So you could do that

over for example if you have a hundred000, you could do it $10,000 increments every month over a 10-month period. You could do it $5,000 increments over a 20-month period. There's different ways you can go about it. The longer you go with a DCA, though, there is an additional risk that the market could still be going up, and then your mother only has a small portion of the money invested in the market could still be going up and then you only your mother only has a small portion of the money invested in the market so you have to kind of create a good balance for that you know something to look at in terms of passive investments some of the funds that we just mentioned brayden mentioned a few total market index xaw.to is a total market index fund that's quite interesting. But do your research. I mean,

there's a lot of passive investing vehicles out there that are low fees. And like we just said, keep it simple and don't worry about a few basis point when it comes to selecting a product and just kind of you set it and forget it when it comes to passive investing. In terms of your second question, if we wait, is there a good something that provides a low risk with good returns, low risk, high liquidity? If you know of a good vehicle that provides that, please let me know because I don't really know of any right now. But having said said that I'm kind of joking a little bit but the thing that probably makes the most sense here is just a high interest savings account and you'll probably get one to one point five

percent annual interest rates on that which is most likely negative returns when you compare it to the inflation so there is some risk of holding too much cash. The last thing you could do is kind of a balance of both, right? You could do a dollar cost average strategy over a smaller period of time and then keep a 10%, 15%, 20% more in cash so your mother can actually pounce on the market if there's a pullback and a correction. I mean, I know it's not ideal. But right now, there's just not that many option in terms of offering a lot of liquidity

and low risk fixed income is at record lows. And that's just a reality. So there's different ways you can kind of edge that risk, though. Brayden, any comments on that yeah so uh really quick just two quick things i heard you say you want to buy something that gives you returns with no risk unfortunately that's a a mythical creature a fairy tale it just doesn't exist and if you know let us know yeah if you find it you know you already know how to leave a message. So use that button again and let us know. And the other point is dollar cost averaging or DCA. It's proven time and time again that is the most effective way to run a portfolio for the long term

because trying to time the market is a complete waste of time, a complete loser's game. No one is able to successfully do it consistently. So yeah, it's just a manage expectations thing here for me. Okay, George, roll the question and we'll let you know what we think. Hello, guys. My name is George and I'm from Europe, Greece. So forgive my pronunciation. I hope you understand me well. Well, basically, I work in the computer science sector.

So I can understand technology sector. computer science sector, so I can understand technology sector, but I've been looking for some screening techniques concerning the consumer defensive sector, which is completely different from the technology sector. And I really love your show and I'm looking forward to listening to your answer. Thank you, guys. Okay, first off, we have listeners in Greece for the Canadian Investor Podcast, which is incredible. So thanks for the support, George. That is awesome. He left a couple of questions and he said it was his favorite podcast.

So we're feeling pretty good about that. Yeah, thanks a lot, George. feeling pretty good about that yeah thanks a lot george okay so not to like pump my own uh business here too much but stratosphere does have a screener that i use to do this exact thing by the exact industry and it gets you can drill it down really really specifically um so a business like consumer defensive um when it comes to consumer defensive businesses, look for really high moat established businesses that have been consistently producing results for a long time. Like I'm talking like decades. And they want to,

you want to see that they've been increasing revenue like over time, like clockwork. And if there's a, if they're a lasting business in this area that has been able to demonstrate that over time growth of earnings, revenue, and cashflow, they're probably doing it from accreditive acquisitions. So you'll see a lot of these consumer defensive names be large holding co's of various brands. So they're doing a credit of acquisitions. And then they're continuing to flex their pricing power over time, you know, matching inflation and and then some over time. And that's, that's really what you want when you own one of these names. That's a good place to start for rock solid businesses that have, you know, defensible positions.

They have patents. They have valuable intellectual property and branding. They perform well in every environment. So I don't have too much to add more than that. Just look at their financial statements over like a long period of time and see, you know, have they been able to do that? Again, a lot of these businesses, not all of them, a lot of them have been from accredited acquisitions,

building that brand into a hold, go flexing that pricing power, and they have reliable revenue and cash flow in every environment just from the nature of the business. So think like grocery store versus something very cyclical. And if you want this to be a good, boring, but effective portion of the portfolio, then that's a pretty good place to be. Especially if they're able to flex in pricing power over time. especially if they're able to flex in pricing power over time. These are the dividend aristocrats of the world. And yeah, there could be a good place for them in your portfolio given you said you work in tech.

So yeah, nothing really more to add there. Do you have anything there, Simon? No, not too much. The only thing I would say most of them, so especially consumer non-discretionary, you'll see most of them, like Braden said, will be dividend payers. So make sure you keep an eye on the payout ratio when you look at those. And the moat is really important because some of them are facing more and more competition. more competition um you can just ask warren buffett what uh you know how that kraft heinz acquisition worked out for berkshire and which was supposed to be one of those and they um it's it's not gone really well so that's uh probably my two cent but everything else braden said

i would agree with and that's a good example of you know even something that seems like such a staple and reliable as Kraft Heinz saw, huge drawdowns. Unfortunately, there's two lessons there. Every business has volatility and risk. Those aren't the same thing. Volatility and risk are the same thing, but every business has them. And that too, even the GOAT, Warren Buffett himself makes makes some mistakes sometimes.

Some things that are impossible to foresee. So there's two learning lessons there. You're going to make mistakes. That's normal. And the only thing you can do is learn from them and be better over time. Devin. Devin's got a question. We're getting lots of ETF questions today.

But hey, I mean, it's important. I love that people are taking advantage of these instruments because they're really not that new in Canada. I think Vanguard Canada was like 2013, launched their first TSX listed ETF. Don't quote me on that, but that's about the vintage. So realistically, it's fairly new and very good compared to paying those 2.5% mutual funds that people used to get hosed on.

Okay, Devin, let's hear it. Hey guys, this is Devin from Calgary. I would like to buy an S&P 500 ETF in my RRSP and I need to decide between a US dollar ETF or Canadian hedged ETF. It looks like the US dollar ETF has significantly outperformed the Canadian hedged ETF over 10 years. How much of this is due to a weaker Canadian dollar and how much is due to lower fees in the US dollar ETF? Do you prefer investing in US dollars or Canadian hedged dollars when you have an option? Thanks. Okay, so that's a really good question in terms of investing in a Canadian hedge ETF versus a non-Canadian hedge. So there's actually both are available on the TSX. And just to break down to people, just to wrap their head around what hedging means in terms of currency, a really good example, and we will probably make a few hockey references over here, but let's say

my favorite team, Montreal Canadiens. So they get most of their revenues in Canadian dollar, but the salaries that are paid to players are in US dollars. So there's a big discrepancy on the revenue that they get versus the money that's paid out because a big part of their expenses is obviously players' salaries. So one of the ways that they can actually create some certainty in their expenses is they'll hedge the U.S. dollar. So they'll basically lock in a rate in advance to make sure that they have certainty in their expenses that can play to their favor but it call it can also be a disservice as well it really depends how the Canadian dollars is acting versus the US dollars so and that's really what you need to

understand when it comes to currency hedging that's probably the biggest thing to understand right there. Like you said, traditionally, and I pulled just a few graphs on Yahoo Finance, and I used the VSP.TO and VFV.TO. VSP is the one that's hedged, and the other one, it's not hedged. And over the long run, the non-hedged one has actually, like you said, performed quite better. But then if you look at the past year, it's interesting because the hedge one has performed better. And that's a simple explanation because the Canadian dollar has actually gotten stronger versus the U.S. dollar over the past year.

the US dollar over the past year. So what happened is that the Canadian dollar, the fact that it's gotten stronger, the hedging actually came into play right there. Whereas the non-hedge version, which the stocks are all denominated in US dollar because the US dollar has gone down in value, it's actually affected the value of the ETF itself. But over the long run, I mean, it's hard to argue with the returns of the non-hedge version. I mean, it all depends really how it's going to be acting going forward. But yeah, if we look historically, it looks like it's really the non-hedge version that has the edge or no pun pun intended the edge on that um and the fees that you were referring i don't think that's really going to make a huge difference it's really the hedging here um brayden anything else to add on that not really uh i'll just say that trying to

predict currencies is a loser's game be Be cautious when anyone tries to tell you that they know where the Forex rates are going. I see these scams all over the internet. They're a complete joke. They bother me a lot. It's just impossible to predict. And if anyone was able to reliably predict them, just like market timing,

they'd be worth a lot more money than they currently are. So just take that into account. I personally would own the non-hedged one. That's what I've done in the past. Me too. It's been the right call, but that doesn't mean I'm right because, like I said, moving forward, trying to predict which one's going to outperform the other one is kind of silly uh so go with whatever you feel is right i think owning the non-hedge versions right but again

that's just my opinion um so nothing more to add there uh we got another question here kind of relates to currencies so i can expand more on that thought again here. So Brian, let's hear it, man. Hi guys, Brian here from Ennismore, Ontario. I want to start some positions in US stocks. Letting Questrade do the currency conversion would cost me about $1 per $100 US. So since I want about a thousand US, I decided to try Norbert's Gambit and save about $5. I purchased a little over $1,300 Canadian of the DLR.TO EFT and then used chat to instruct Questrade to journal those units over to DLR.U.TO. That all worked flawlessly. However, today I see that my position in DLR is down about $12 in two days of trading.

My question is, and I don't think I've ever heard this discussed, is it possible for my purchasing power in US dollars to decrease based on movement in the market value of DLR.TO while I wait for the journaling to be completed? I'm not sure how DLR EFT works and would appreciate your insights. Thanks. Yeah, so this relates back to the previous question on currency. This can happen with the market value of DLR and DLR.U.

Those are the horizons ETFs that you use to do Norbert's Gambit. And how CAD and USD interact is basically why you're going to see a difference in those spot prices. But this can happen, but it can also happen the other way. Like, I've been lucky, to be honest, that I've made a little bit of money on the settlement dates, like those two days with currency changing. currency changing. But at the end of the day, if you're moving a large sum of money to US dollars, you save the 2% on your brokerage fee on the spread when you move it from CAD to US dollars. So you can't predict the currency movement. And what you can focus on that is in your control is minimizing that 2% fee and not paying it at all by, by using Norbert's Gambit. And that's what I do.

So if you've never used Norbert's Gambit, it's an absolutely elite way to convert us dollars, uh, sorry, to convert your CAD into us dollars within your brokerage. I have a full guide blog posts completely for free. Uh, we'll link that in the show notes. The guide is for Questrade, like the screenshots are for Questrade, but you could do the exact same thing with your brokerage. And yeah, if you're moving a fair bit of money, I would personally do it. Again, you could get unlucky on currency conversions, but trying to predict that, I mean, You could get unlucky on currency conversions, but trying to predict that, I mean, you're just never going to get it right. So don't spend a second worrying about it and focus on what you think is the right move at the time.

And perhaps it's an orbit gambit. Yeah. And you said, I think the best word you use was lucky when it worked out your way. Exactly. Pure luck. Exactly. And what you really can control is the fees right here. And the higher the amount that you're converting, the bigger the advantage will be compared to using what Crestrate is offering or whichever your brokerage firm is offering. But yeah, it really can go both ways. It's too bad that it didn't go the right way for you, but you might do it again and might turn out to your advantage. Yeah, well put. Moving on. Kami from BC.

She's got another question here. Let's, let's see this one. Hey, guys, it's Kami from British Columbia. I had a question today about bonds. So I just recently started a position in some equities ETFs, as well as the BMO Aggregate Bond ETF, ticker ZAG.TO. And I thought stocks and bonds usually behave differently, but I'm seeing this ETF go down. And I was wondering if the same basic advice like buy low, sell high, dollar cost averaging no matter what, even if it's going down. And you know, you can't time the bottom, still apply when it comes to bonds. Thank you so much, guys. Bonne journée. Merci. Well, thank you for your question, Kemi. So it's definitely good to

be talking about bonds, especially right now, because they're low, definitely lower than they have been historically in terms of yields. But it's definitely a good thing to be approaching bonds in a similar fashion to equity ETFs or equity index funds and do a dollar cost average approach. That's always good. Bonds can definitely go down or up in value. It will usually be tied to the interest rates that are being offered on the market. So just an easy example to wrap your head around that. So if you have a yield of 10% and you're investing $100, then your interest for the year will be $10 that you'll receive. for the year will be $10 that you'll receive. Now if the yield on the market has gone down to 5%,

you'll still receive $10 in interest, but the value of those bonds will actually double to $200 to equal that 5% yield. So if you actually go on the market and sell it, you'll get more for your original investment. And then you can have the other way around where you have a $200 investment, you get $10 interest for the year, you get a 5% yield, and then yield rates, actually interest rates go up to 10%, then you'll actually have your value will go down to $100. Still get that $10 per year, but the yield will be up to 10% because that's what the market demands. So that's how bond funds and typically even treasury bonds will react. They'll actually react compared to what the market is offering in terms of interest. So that's how they'll increase or go down in value. If you're actually investing in treasury bonds, for example, whether it's the

Canadian government or the US government, there's kind of two ways to make money with bonds. So you can make money by selling them if the price increase, because typically you'll have a pretty high yield on your original investment. And then if the yield goes down, the value of your bonds go up. You can do that. You can sell it or you can just wait to maturity and get your principal back and get the interest payments for the whole duration. So there's kind of two ways to make money on bonds. Again, you can still use a lot of the same principles that you mentioned. So dollar cost average to minimize the volatility, but typically bond funds will be less volatile than the equity indexes or equity funds. But over the long term, just keep in mind, I don't know how old you are, Kemi, but bonds tend to not

perform as well as stocks. So keep that in mind. I'm not saying not to be into bonds at all, but just keep that in mind, especially if you have a super long horizon to invest, you may want to keep a smaller bond allocation in your portfolio. In terms of Zag.to, it's a good bond index fund. There's a lot of government related bonds. I think it's about like 65%, 70% mix between provincial, federal, and municipal bonds. And then there's some corporate bonds sprinkled in there. So that's what you have when you're investing in that index bond fund. Anything else, Braden, to add? Yeah, two things and this might not relate exactly to the question but

more so about bond etfs uh so bond etfs interesting things can happen right because because they are etfs they are listed like equities you know they're exchange traded funds. So they can trade off the NAV off that net asset value. And I've seen them trade at like a pretty deep discount to the NAV last year. So because they can trade different than the actual net asset value of the bond fund, you can see more volatility than you're hoping for when you own something like bonds. So a bond ETF is kind of an oxymoron when you think about it, Simon. It's a bit of an oxymoron because they're they're these bonds but they're trading as these vehicles which are etfs so i i it wouldn't be how i do it personally but this is one of the one of the one of the cons of

using an etf is you can see more volatility than you probably should because it can trade at a discount to the net asset value or what you might see on the fact sheet as a nav. And then another just kind of unrelated. When I was 18 years old, and I set up my TFSA, and it was like a kid on Christmas, I could finally do that. I was just basically going off what I saw on the internet, I was buying these ETFs, I was like, Oh, this is so great. basically going off what I saw on the internet. I was buying these ETFs. I was like, oh, this is so great. And it was great. It was awesome. But I did like an 80-20. So I had 80% stocks and 20% bonds. Now, if I could talk to my 18-year-old self saying, what the hell are you doing owning 20% of your portfolio in bonds at 18 years old you have such a long horizon you can withstand volatility be 100 in equities that's what i would say to myself so

something to consider again this podcast is not financial advice but that's what i would say to my 18 year old self is what the hell are you doing in bonds man so thank god i figured that out yeah yeah and i i'm fully in equities too so i totally agree with that and i'm a little older than you but um the one thing i would definitely caution people and goes back to what you were saying earlier remember when you said some people are asking you about oh is this like a market crash and things like that? And just keep in mind how you react when there are some possible corrections to the market. And if you think you're going to panic if you're 100% in equities, then that might be a sign that you need a little more exposure to something that might be less

volatile. Again, less volatility doesn't mean better returns, but it may actually be good for you in the end because it would avoid that panic and potential kind of sell action, right? So that's probably the one thing I would caution. Like Brayden and I are pretty, like we don't get rattled at all if the market goes down 15, 20, 30, 40%. Get excited. all if the market goes down 15 20 30 40 percent get excited exactly but not everyone's like that and make sure you're you're aware of how you react and especially if you were investing last march and just remember how you reacted did you panic did you sell and keep that in mind and if you did panic and sold a big chunk of your portfolio then maybe you'll want a bit more fixed income to

kind of not set that panic again if we have another correction like that. All right, moving on. We got a question about payments from Juan. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you

have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Let's roll that and then Simon, I'll hear your fiery hot takes first. You're looking at me on the Zoom.

Okay, I'll take my fiery hot takes first. All right, here we go. Juan. Hey, guys. Quick question regarding mobile payment companies. I'm looking to get into the game, get into that sector. Would you guys recommend just holding, for example, iPay, an ETF that holds MasterCard, Visa, Square, PayPal, American Express, etc.

Or just going for, you know, just buying shares of the individual companies. Would love to hear your input. Thanks, guys. All right. So he's talking about the IPay ETF, 0.75% expense ratio on this thing. So to me, when I see ETFs that, you know, they're sector related, or they're like a secular, this one, I would say like as a secular trend ETF, which is payments, digital payments, I think it's called mobile payments is the ETF name is digital payments in my mind. So let me just read off the top 10 holdings.

They vary from about 6% to 3%. MasterCard, Fidelity National, American Express, Visa, PayPal, Fiserv, Square, Aiden, Global Payments, Inc., and Discover Financial. So you've got the big credit card payments. They got, you know, Fisser is a very cool company. Square and Aiden are very cool companies. You know, do I love this basket? Yes.

And would I just own them on their own? Probably. And that's what I do. And I know Simone, you're aligned on this as well. Now, I do back the idea of you want to get your feet wet in some secular trend. So you buy some ETF while you do maybe some more research. You figure out what you want to do. I back that.

But at the same time, there's not that many names in this ETF and you can probably just go with like the basket approach and own four of them equally weighted or something like that that's what I would do I mean these are these are a lot of these are really great companies some of them some of them greater than others Aiden is like public listed European stripe so that got me interested but you know how I feel about stripes so I feel like I'll be cheating on stripe if I Aiden is like public listed European Stripe. So that got me interested. But you know how I feel about Stripe. So I feel like I'll be cheating on Stripe if I buy some Aiden shares. I'm curious to hear your thoughts on this.

I think we've talked about this exact question before. Yeah, we definitely talked about IPA in some of the early episodes. Yeah, I'm personally, I own a basket of them. And I think that's a really good approach and doesn't have to be just like three or four, you can own like six or seven if you'd like. The IPA is definitely good if you want broad exposure to the payment space, and you really don't want to pay much attention to it. The manage the expense ratio of 0.75% is not cheap though. So that's kind of on the higher end. That's definitely one of the reservations I have with that. And there are some names that I don't love as much, specifically American Express, because it is a bank. Of course, Berkshire Hathaway owns that. But that is one of the names I don't love as much

and Discover Financial Services another one I don't really really love and both of them represent nine percent part of that ETF so keep that in mind but again I don't think you can really go wrong there's enough of the concentration with some of the bigger name whether you're looking at MasterCard, Visa, PayPal, Square. They're all in there, and they have some pretty good exposure to those. So I really don't think you can go wrong overall with either the ETF approach or the basket approach like Brayden said. Yeah, 0.75%. Just own the names individually.

Unless you're just moving a really small amount of money, then maybe you want to go the ETF route. All right, let's move on. We got Andrew. He's got a question for us about gaming. Let's fire this one off and I'll take the lead on it. Hi, Braden and Simone. It's Andrew from Ontario calling.

Right off the top, guys, I want to say thank you so much for all the information you've been giving your listeners. I'm sure they'd agree with me. I really appreciate it. I've personally learned a lot, so thank you so much. Anyway, I wanted to call you guys about SLGG is the ticker, Super League Gaming.

This stock in the past week as of March 4th has just popped right off. It's already a bagger for me. I got it around three. It's now almost five and a half, six. Like, it's actually crazy. So I was just wondering what you guys thought about the gaming space in general.

Maybe some good ETFs in Canada or America that would be interesting choices. And specifically, Superleaf Gaming, SLGG. Thank you kindly for all your help, guys. Again, you guys have a great day. Go Leafs go. All right, so we got a Leafs fan, so go Leafs go.

Big win over Ottawa last night. Austin Matthews is absolutely disgusting. That guy has the puck on a string. Okay, so SLGG Super League Gaming. Good find on this. Hell yeah, man. You've already made some good money on it. Awesome.

I can't go into detail on this business because, frankly, I believe it's a disservice for me to comment on a business I'm just hearing about like this very second. So if you have some insight on why it's great, that's awesome. And you already have a very good attitude towards this. So I can tell you're already on a good track. They did double revenue last year. I looked on their website. They have a million active users on the platform, about 3 million users in total. So that's pretty cool. I bet you a lot of them are like unpaid users based

on their revs um i'm wondering why you'd use it over like a discord which has a very good market share again i don't know this product so this is just a bird's eye view but i know discord has a really strong foothold on that i i think microsoft is trying to buy discord right now for 10 billion that was the headline earlier this week so i guess the difference here is that it specializes in competitive esports which is a very fast growing segment i believe it's going to be bigger than real sports eventually if it already isn't honestly because there's a game called dota 2, and there's an annual tournament, and they play for $40 million prize pool in this tournament called The International.

It's the biggest prize pool in gaming, and I think it's coming up soon, but that is wild. I mean, this is like a legit career. If you're a pro at this, I mean, it's probably so saturated but this is this is happening and if you're not in tune with it you might think it's not happening but i trust me it's happening and twitch is massive people like watching video games um so it's just it's here to stay so

it's going to be really hard to value this specific thing you're talking about. It's going to be very volatile. It's only $100 million in market cap. So do what you will with that information. But good job, Andrew. That's a good find. One last point is that you're asking about other gaming companies tencent is looking great at this price personally in my opinion it's the largest gaming company on the planet

they own the unreal engine unity is the other gaming engine it's way off the highs i've already had a good stock pitch on this podcast about that so there's lots of exciting opportunities in gaming right now it is a secular trend that i would definitely have a horse in the race and um yeah keep up the good work man honestly yeah well put i mean i don't have too much to add to there um i that's aside from yeah it's in the esport arena and i don't have too much to add there. That's aside from, yeah, it's in the eSport arena, and I don't know too much about eSports. I know generally what it is, but like Brayden, I couldn't really provide any value in terms of feedback.

I had a quick look at the YouTube video with their platform, so it was interesting. But, you know, congrats on the returns, and it sounds like you've done some digging on this company because I've never heard of it before, but it's something I'll look into a bit more when I have a chance. I appreciate when people come up with some of these small cap names because you've got to really look for them.

You've got to actually be actively looking for them, and that's a, that's a hundred beggars lesson is you gotta be, you gotta be actively looking for these things if you want to find them. So well done. All right. Is this the last question? Last question from Ryan.

He's got a question here, but 10 cents and TFSA. So roll this one. Hey Braden. Hey Simon. It's Ryan. Is that a question about 10 cents and its TFSA eligibility? It's tax season and I was going through just some of the eligible exchanges that you can use in a tax-free savings account. You can use in a tax-free savings account. And through my Questrade account, it looks like that Tencent is listed on PINX, which isn't listed on the CRA's website. I was just wondering if, as a holder of Tencent, Braden, what your thoughts are on it not being listed on the CRA's website and whether or not you think it's eligible for your TFSA.

Thanks. Love the podcast. Yeah, so speaking of Tencent, from the last gaming company question, I've answered this question a few times on the Stratosphere Community Forum recently. So, there's a little tidbit of information on the, on the government's website that changes everything. So over the counter stocks are typically not able to be held in a TFC or RRSP, but Tencent is an ADR that's listed on an eligible international exchange because it's listed in Hong Kong. So this is an actual quote from the Fed's website. Over-the-counter quotation systems, such as the OTC Bulletin Board or OTC Link, formerly known as Pink Sheets, in the U.S. are not designated exchanges. As a result,

securities that trade over-the-counter are generally not qualified investments. However, securities can still qualify if they are cross-listed on a designated stock exchange, aka Tencent meets that last little however point on the Fed's website, and you can hold them in your TFSA. the Fed's website, and you can hold them in your TFSA. Now, since Tencent pays a very small dividend, it's probably not worth even mentioning, but they do pay a small dividend. So you're going to be subject to withholding tax on that in a TFSA. Because that's what happens when you hold international companies in a TFSA but it's a small portion and we've talked about withholding tax a lot you can look it up withholding tax it's a tax on the

dividend only on TFSA and it is not going to be a big deal with Tencent I mean what's the yield on Tencent I haven't looked recently but it's not it's not a lot. So don't lose any sleep about that. So the short answer is yes, you can. And I think, is that where you hold it? No, I have it in my RSP. Oh, you have it in your RSP. But they typically have the same, very same, I think it's pretty much the same rules in terms of eligible investments. But I haven't had any issues. And something to add, there's actually a pretty famous case

for someone who made a killing their TFSA. Do you remember hearing about that, about Fannie Mae after the financial crisis that got delisted and was on the, I think on the pink sheets or over the counter. And then the person pointed out that it was also listed in Germany at the time. So they would have been eligible for the TFSA. Yeah, I can't like I remember vaguely.

I just while you were talking, pulled up a quick article. There's some precedent set. Yeah, there's some precedent set. Exactly. So it was there's a really famous case. I think the guy had like done a killing, did like half a million dollars or something like that. Yeah. All right. That does it for this episode, guys. Thank you for listening. We have listeners from Greece. Hell yeah. I just wanted I know it's in the disclaimer at the end of every episode, but again, let's make this very clear. This is not financial advice because we are answering your questions. This is an opinion base only. This is what we would do. This is what we do do in our own portfolios. so you know do your own research do what you think is right um and hopefully some of the things you take away from this podcast will will help you make good decisions yeah yes sir all right we'll see you guys next week uh summer's coming so uh you know go get some fresh air

we'll see you next week take care bye-bye the can Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.