Globe Investor

July 5, 2020

Dividend stocks struggle to recover, investors position for a Biden win, and when using an adviser makes the most sense

Kevin Lamarque/Reuters

Dividend stocks struggle to recover, investors position for a Biden win, and when using an adviser makes the most sense - A roundup of investment ideas for active investors
Retirement can be a golden period for do-it-yourself investing because there’s more time to manage your portfolio with care.

But some self-directed investors feel that retirement is a good point to consider handing off their portfolio to an adviser. So it is that a reader who did well in the market rally earlier this year sent this question: “We are retired and need someone to take over [our portfolio],” she wrote. “What are the (dis)advantages of using a wealth management firm? Particularly in the ‘new post-pandemic’ economy?‘”

Ideally speaking, handing your portfolio to a wealth-management firm to run is like hiring experts to take a vital project off your hands. You pay a fee, probably 1 to 1.5 per cent of your account assets, in return for having someone build and maintain your portfolio for you. Other services covered by that fee should include some degree of financial-, estate- and tax-planning.

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The pandemic by itself has not changed investing, though self-aggrandizing investment people may tell you otherwise. Diversification with stocks and bonds is still the foundational principle of portfolio-building. And yet, the next couple of years could be quite the challenge for investors. We simply don’t know how damaged the economy was by COVID-19 and how long it will take for growth and corporate profits to return to the old level. A disciplined, experienced wealth-management firm can navigate a portfolio through the uncertainties ahead without getting faked out by bursts of market volatility. That’s a clear benefit for a DIY investor.

The disadvantage of using a wealth-management firm is the cost. Fees paid for advice will cut into returns at a time when interest rates are very low and stocks may be constrained by slow economic growth. Why accept the diminished returns you would very possibly get from using an adviser?

It’s not because the adviser can deliver market-beating returns that exceed what you’d get from owning cheap, market-tracking exchange-traded funds. Advisers who can consistently do that are rare. No, the real benefit of the adviser is in supplying a package of services with real value – guiding a portfolio through a post-pandemic world while providing the planning that gives investing much-needed context.

-- Rob Carrick

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The Rundown

High debt holds back dividend payers amid rebound

Hockey isn’t the only national pastime being undermined by the pandemic. Dividend stocks – the great obsession of legions of Canadian investors – have been rendered anemic by the disruptive power of the novel coronavirus. As a whole, dividend-yielding stocks in Canada offered no protection through the market crash in the winter, nor did they keep pace with the rally that elevated global indexes in the spring. Why is the market suddenly allergic to dividends? The answer may lie in the high levels of debt that dividend payers tend to carry. Tim Shufelt reports. (for subscribers)

The case for just owning a tight portfolio of big blue chips dividend stocks

Investing theory holds that exposure to the full extent of the stock market beats a focus on big companies alone over the long term. Yet, Rob Carrick has yet to see the proof. (for subscribers)

Three overlooked income stocks weathering the COVID-19 storm

Income-oriented investors should have a roster of key holdings, especially during these difficult times. Those may include big, steady performers such as BCE Inc., Fortis Inc., Emera Inc. and TC Energy Corp. But there are many smaller companies that may have been overlooked by investors, even though they are performing well in the COVID-19 era. Gordon Pape tells us about three of them. (for subscribers)

‘Broken’ asset classes may offer opportunities for rebound

Investors have done spectacularly well in recent decades by snapping up “broken” assets. If the same trend holds true this time around, investors in value stocks and emerging markets are poised for much better times ahead. Ian McGugan takes a closer look. (for subscribers)

Think twice before adopting the Munger method of picking select stocks

Charlie Munger studies the market for years before loading up on select stocks at good prices. He suggests that skilled investors should concentrate their bets in a handful of stocks they know a great deal about. Yet, Norman Rothery tells us, this strategy may not work for most investors. (for subscribers)

Preferred shares are in the dumps. And companies aren’t issuing new ones

Something odd is happening in the preferred share market: It’s disappearing. The securities, which pay a fixed distribution like bonds but trade on stock exchanges like stocks, have long been a draw for investors who like income-generating investments with tax advantages. But new issues have become a rarity. In fact, just one Canadian company has issued preferred shares in the first half of 2020. David Berman looks for reasons why. (for subscribers)

Investors are waking up to a possible Biden victory in U.S. presidential election

Investors are increasingly preparing for market volatility ahead of the U.S. presidential election, with some shifting stock positions and selling the U.S. dollar, as Democratic contender Joe Biden maintains a lead against President Donald Trump in opinion polls. Saqib Iqbal Ahmed and David Randall of Reuters tell us more. (for everyone)

Clouds may be parting for U.S. dividend investors

U.S. companies are cutting their dividends less than investors anticipated, providing a potential boost to a stock market rally that has clashed with concerns over a recent surge in coronavirus infections. Noel Randewich of Reuters tells us more. (for everyone)

Wall Street shifts bets to big pharma as COVID-19 vaccine race progresses

Wall Street is moving some bets on COVID-19 vaccines to large pharmaceutical companies with robust manufacturing capabilities, signaling that a love affair with small biotech firms might be ending after the sector’s best quarter in almost 20 years. Carl O’Donnell and Sujata Rao of Reuters report. (for everyone)

Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

John Heinzl’s model dividend growth portfolio as of June 30, 2020

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Tuesday’s Insider Report: Operating division CEO is a buyer of this high-yielding dividend stock

Thursday’s Insider Report: Chair cashes out $7-million as this dividend stock soars to a record high

Winners and losers: How every stock in the TSX Composite performed over the first half of 2020

Number Cruncher: Ten tech stocks showing revenue growth and bullish price momentum

Number Cruncher: Which of these 10 oilfield services stocks could be primed for a rebound?

Ask Globe Investor

Question: My wife and I hold all of our investments with one of the bank-owned discount brokers. Our accounts are worth about $1-million in total and are almost 100 per cent in equities. We like the convenience of dealing with a single institution, but are we taking a risk by holding all of the investments with one broker?

Answer: No. In the unlikely event that a broker becomes insolvent, the industry-funded Canadian Investor Protection Fund ( will cover up to $1-million in stocks, bonds, cash or other assets that are missing from a client’s account. The limit applies to each of several account categories; for example, if you have a non-registered account, registered retirement savings plan and registered education savings plan at the same institution, all three would be covered for up to $1-million each (tax-free savings accounts are included in the non-registered account limit).

It’s important to understand that CIPF coverage does not apply to market losses on your investments, but to the securities themselves. For example, if you own 100 shares of Fortis Inc., the CIPF would work to return the shares to you or – if the shares can’t be recovered – compensate you for their value at the time of the investment dealer’s insolvency.

Given that you and your wife have about $1-million of assets in total, it is unlikely that any of your individual accounts is currently near the coverage limit. But even if that were the case, you likely wouldn’t need to worry: If a broker becomes insolvent, typically only a portion, if any, of client assets are unaccounted for. The odds of any single client account suffering a $1-million loss are very small.

In addition to the convenience of dealing with a single broker, there may be financial benefits to keeping your investing accounts under one roof. At many brokers, clients with combined household assets above a certain dollar threshold qualify for perks such as reduced fees, in-house research or priority access to customer service agents.

You should, however, keep diversification in mind when it comes to chequing accounts, savings accounts and guaranteed investment certificates. Coverage for deposits is provided by a different agency, the Canada Deposit Insurance Corp. (or, in the case of credit unions, provincial deposit insurers). CDIC covers deposits up to $100,000, including principal and interest, for each of several categories (non-registered accounts, RRSPs and TFSAs, for example). To make sure you are fully insured in the event of a bank failure – which is different from a brokerage insolvency – make sure not to exceed the $100,000 CDIC limit in any one category for each institution. (More information is available at

Also note that, as of April 30, CDIC expanded its coverage to include foreign currency deposits and term deposits with maturities of greater than five years.

--John Heinzl

What’s up in the days ahead

Sean Silcoff this weekend takes an indepth look at why the Canadian biotech sector is so hot. And Rob Carrick has an interview with Kurt Reiman, chief investment strategist at BlackRock Canada, on his outlook for the second half of this year.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff

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