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It’s been a while since I checked the Q&A inbox and it’s getting full again, so let’s see what’s on your minds.

Raise cash?

Q - You have urged readers to be cautious of the global mess bring created by Trump and the possibility of a stock market crash. My question/conundrum is this: is it worth incurring the capital gains to move to a cash/defensive position to avoid a possible market fall? – Barry D.

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A – This is an excellent and timely question. I wish I could provide a definitive answer. But to do that would require clairvoyance, which I do not claim to have.

Here is what we know. This current-year bull market is the longest in modern history and won’t run forever. Stock prices are high, and the risks of an all-out global trade war are real, which will not be good for anyone’s economic prospects. Many respected market analysts are warning that there is trouble ahead.

You have to make your own decisions in that context. Review your portfolio and determine how vulnerable it would be if we had a repeat of 2008. Would the potential loss be worse than the capital gains tax exposure on your profits?

I would never suggest selling everything, since we can’t know how events will evolve, especially given the unpredictability of President Trump. But I do think that increasing cash reserves is not a bad idea at this point, especially for older people with a relatively short time horizon.

Hive shares and a 7-per-cent return

Q – I have a bearish outlook on global equity market especially after President Trump has imposed tariffs on all the U.S. trading partners. Below are my questions:

1. What is your opinion on Hive Shares? Since last year I have lost more than 75 per cent of its value.

2. I have around $5,000 to invest and I would expect to get at least 7 per cent annual return on it. Where and what can I invest in? – Hasnain H.

A – I assume you are referring to Hive Blockchain Technologies, which trades on the Toronto Venture Exchange under the symbol HIVE. I have never recommended this security and a look at its chart shows it has been a very bad investment. It has dropped from a high of $6.75 last November to around $0.80 as of the time of writing.

The company website describes it as follows: "HIVE is strategically partnered with Genesis Mining Ltd., the world's largest cloud mining company, to build the next generation of blockchain infrastructure. HIVE currently operates a total of four facilities (two in Iceland and two in Sweden) and are currently working on an additional two facilities in Sweden. Our facilities are capable of mining cryptocurrencies, like Ethereum, around the clock and will add our first Bitcoin mining facility by September 2018."

This description tells us this is a highly speculative stock that operates in a fledgling and uncertain market. Perhaps it some point it will make a breakthrough and the stock will move higher, but it is not the type of security I would ever recommend.

In regard to your second question, there are many securities that have the potential of giving you a 7 per cent return. The question is now much risk you want to take. You won’t get 7 per cent from a low-risk investment like GICs or government bonds. So, you need to look at stocks, ETFs, or mutual funds. I have offered many recommendations about securities that could generate returns or 7 per cent or more, but all come with some degree of risk. Right now, I would look at stocks or ETFs that focus on U.S. healthcare or technology companies.

Emergency fund

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Q - Can you advise on emergency funds? It would be nice to have about $10,000 stowed away, however, I don’t like the idea of keeping it in cash. What are your thoughts on keeping it invested in a few large caps or ETFs with good downside protection? If a major emergency occurred, like a major market pullback, and I needed funds, would this be too risky? If so, what would you advise? - Aaron

A – The key word here is “emergency”. That means you need the money immediately and it must be highly liquid and risk-free. That translates into cash. Even the most carefully constructed stock/ETF portfolio is not immune from a market crash. Look what happened in 2008. Everything in the market went down, including the blue chips. I understand you don’t want to hold cash. But if it’s a true emergency, that’s where you want your money.

TIPs funds

Q - I would like to know what United States TIPS funds (Treasury Inflation Protected Securities) I can buy in Canada. I am a Canadian citizen and am a resident in Canada. With U.S. interest rates rising, growing GDP, good corporate profits, low unemployment, and expected wage increases, more commentators are raising the possibility of increasing inflation. At present TIPS prices are low because most people still do not believe in the prospect of inflation. I do believe in the return of inflation and this could be a good time to buy TIPS funds while prices are still low. – Chris C.

A – I don’t know of any Canadian companies that invests exclusively in TIPS but there is nothing to prevent you from buying in New York. The largest fund of this type is the iShares TIPS Bond ETF (TIP), which has about $24-billion in assets. It invests in a portfolio of inflation-protected U.S. Treasury bonds with an effective duration of 7.63 years. As of the end of August, the fund had generated a modest return of 0.15 per cent for 2018. The five-year average annual return to July 31 was 1.32 per cent, so don’t expect to get rich here. Distributions are paid monthly and can vary significantly.

There are a number of bond funds and ETFs sold here that use Canadian inflation-protected securities. As you might expect, returns were weak in the low-inflation environment of recent years, but they have improved recently. The one-year average annual compound rate of return for the category is a respectable 3.96 per cent (to July 31). The 20-year average, which covers the higher inflation period before the Great Recession, shows an average annual gain of 4.84 per cent.

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TFSA withdrawals

Q - I have a TFSA question. If I put $5,000 in my TFSA and bought stock that doubled in price to $10,000 and then took out the $10,000 from the TFSA, can I put $10,000 back in without a penalty? Even though the original contribution was $5,000? – Randy W.

A – Yes, as long as you don’t do so in the same calendar year. The $10,000 withdrawal will be added to your contribution room in the year following.

Capital gains tax

Q - I’m in my mid-50s and interested in selling some of my RRSP mutual funds. I’ve had them for at least 10 years. So, I think I have had them long enough to not get charged a penalty fee for selling them within a couple of years. Do they get taxed the same rate as if I had capital gains from selling stocks in a company? – Randy W.

A – Profits aren’t taxed at all within an RRSP. You only pay tax on any money you withdraw from the plan (or from a subsequent RRIF). Those withdrawals are taxed at your marginal rate at the time.

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That’s it for now. If you have a financial question for me, send it to and write “Globe question” on the subject line. I’ll answer as many as possible in this space.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.

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