Investing for Grandchildren’s Future

Q: What ETFs and allocations do you recommend for my grandkids’ RESP portfolios, considering the trade war? – Joe V.

A: With a time horizon of approximately 12 years for your oldest grandchild, it’s wise to build a portfolio focusing on equities. Consider diversifying primarily with U.S. securities which, in the context of a trade war, are generally more resilient compared to Canadian stocks. A sample portfolio could look like this: - iShares Core S&P 500 Index ETF (CDN-Hedged) (XSP-T) – 60% - iShares S&P/TSX 60 Index ETF (XIU-T) – 20% - iShares Core MSCI EAFE IMI Index ETF (CAD-Hedged) (XFH-T) – 20% This allocation provides a balance across different markets while taking advantage of the U.S. economy’s relative stability.

Concerns About Market Volatility

Q: I have around $900,000 in cash from stock sales and I'm worried about the TSX and ongoing tariffs. Is it wise to put this cash into a high-interest savings ETF? – Roy B.

A: The Global X High Interest Savings ETF, known as CASH, can be a viable temporary haven. While it currently pays a competitive 4.34%, be cautious as interest rates could decline. As rates drop, so will your returns, meaning your payout could shrink significantly over time. It’s crucial to prepare for the possibility of further declines, especially if the Bank of Canada reacts to prolonged trade tensions with additional rate cuts. Also, diversifying into other similar products like the iShares Premium Money Market ETF can help safeguard against market dips.

Hedging Against Currency Fluctuations

Q: Is it wise to hedge U.S. stocks with Canadian ETFs given the risk of loonie depreciation? – Ron L.

A: Hedging your U.S. equities against a depreciating loonie may not be necessary. If the loonie falls, the Canadian dollar value of your U.S. holdings would actually rise. Hedging makes sense primarily when expecting the loonie to strengthen, which is counterintuitive with the current trade war climate.

Exploring U.S. Dollar Savings Opportunities

Q: Can you clarify if HISU.U is a pure U.S. dollar high-interest savings ETF? – Dennis F.

A: Yes, HISU.U operates on the TSX but functions like a U.S. dollar high-interest savings account. It invests in U.S. dollar accounts, providing you with direct exposure to the U.S. market without the currency hedging. Keep an eye on the changing interest landscape, as declining rates may impact yield.

Seeking Reliable Investment Strategies

Q: As a 73-year-old widow, I’m concerned I’m too heavily invested in equities despite a good return last year. Is my current strategy sound? – Charline R.

A: Your portfolio manager is correct in reducing your equity exposure to 10%. With a significant allocation to fixed-income investments and a healthy cash position, you're poised for stability. However, shifting that 10% equity into U.S. stocks could shield you from the volatility affecting Canadian markets, especially given the trade tension outlook.

Conclusion: The Investment Climate Ahead

Navigating investments amidst tariff uncertainty requires strategic thinking and adaptability. As the landscape evolves, staying informed, diversifying your assets, and reassessing your risk tolerance will be crucial in safeguarding your financial future. Investors are advised to remain vigilant and consider professional guidance to better withstand potential turbulence in the markets. Don't wait until it's too late—take control of your investments now!