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Gordon Pape’s mailbag: Investing in Enbridge, RESPs and more

Although it's summer, no one seems to be taking a holiday from money. Your questions keep pouring in and I am happy to answer as many of them as possible. Here are some of the latest.

Investing in Enbridge

Q - I currently do not have a position in Enbridge. Do you think that this might be a good entry point or do you foresee further downside? – Gord Z.

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A – I cannot predict the day-to-day price movements in a stock. No one can, to my knowledge. What I can tell you is that, over the long term, I regard Enbridge as a core holding in any portfolio. I see the current price pullback as a buying opportunity. The stock pays an annual dividend of $2.44, to yield 4.6 per cent at the current price. The dividend provides a nice cash flow while you are waiting for the share price to turn around. – G.P.

Sprott Physical Silver

Q - I have shares in Sprott Physical Silver. Wherever I try to attain the latest price I am given a not available, "de-listed" result. The last price was at $6.57, not recent and a drop from April 30 price of $8.589. My broker, Raymond James, is having difficulty tracing the stock. I have spoken to an automated voice at Sprott, which gave an assurance of a reply within 48 hours. I have just celebrated my 90th birthday and still have plenty of time to see this one through. I have the greatest respect for your solutions to things (going way back). Help, please. – Malcolm H.

A – If your broker is having a difficult time tracing the stock, he/she is not trying very hard. It trades in New York under the symbol PSLV and closed on July 21 at $6.29 (U.S.) on a volume of over 352,000 units. Based on this price, 100 units represents a holding of 37.85 ounces of physical silver. – G.P.

CPP benefits

Q - I get the maximum CPP. When my spouse dies am I eligible to get survivor's benefits? - George V.

A - No. The maximum CPP retirement benefit plus survivor benefit this year is $1,114.17. That's the same maximum as for the retirement benefit alone. See www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html. - G.P.

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RESP investing

Q - My children have set up an educational fund (RESP) at a bank for their two-year-old son. They have the proceeds in a mutual fund with risk geared to a student (higher risk in early years). They find the fees high. Their risk tolerance is average. They are looking to switch to ETFs. Would you have any thoughts and recommendations? – Bernie S.

A – It sounds like they have invested in a target date mutual fund, which automatically adjusts the asset mix to a more conservative balance as the child approaches college age. I did some extensive research and I could not find a comparable ETF that is available to the general public. There are many such ETFs that are offered to institutional investors (pension plans, group RRSPs, etc.), including 10 recently launched by Vanguard. But none that I could find that your children could buy directly.

I'm sure some will be available soon to the public but for now if they move from a mutual fund they are going to have to take responsibility for adjusting the asset mix of any combination of ETFs they select as their son grows older. Most people are not very good at doing that so my advice would be to stick with the target date mutual fund until an ETF becomes available to retail investors. – G.P.

Worried about the market

Q - I am 67 years old and retired in May. I have approximately $250,000 in Royal Bank RRSPs (my spouse has $60,000). Based on your recent comments about a readjustment of the market I have concerns about maintaining what I have. During the last recession I took a bath and lost thousands, which took some time to make up. I don't believe that I have the luxury of time now.

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Can you please indulge me and answer these questions?

1. Can I assume that the Royal has RRSP investments that are not directly related to market performance? My investments are labeled "conservative" but still linked (I believe) to the stock market.

2. Is there any way of obtaining bonds or GICs in an RRSP? Should I transfer my RRSPs (and that of my spouse) into something more stable (e.g. bonds). I would like to keep them under the RRSP umbrella.

3. Would there be any obstacles to reverse this investment action should I decide I want to go back into a market driven investment?

4. Would you suggest that I do this now or will this be a short-term adjustment?

Thanks in advance for you kind consideration of these questions. – John R.

A – For starters, you need to clarify what type of RRSPs you have. Since you are with a bank but have stock market exposure I assume you are invested in mutual funds. You may also be able to hold GICs in the same plan but check with the bank.

Given what you want to achieve, you would be best served with self-directed RRSPs, which allow you to invest in any type of eligible security. However, this may require moving your RRSP assets to a brokerage firm.

If you want to stay with the bank, make sure your RRSP can hold both mutual funds and GICs. You could then reduce your risk by shifting some of your assets to a GIC and into bond mutual funds. RBC has several bond funds available. With a self-directed plan, you would also be able to consider bond ETFs.

The key is to decide on your desired asset allocation at this stage. Given your age and your concern about a market decline, you should probably have no more than 50 per cent of your assets exposed to equities, with the rest in GICs and bond funds. You could change direction at any time you wish. Talk to a bank advisor about the best funds for your situation.

As for your fourth question, I don't try to time the markets. It's a fool's game. You need to make a long-term decision about the extent of risk you are willing to take (and the amount of profit potential you are willing to forego) and then take steps to implement it. – G.P.

That's all for now. If you have a money question you'd like answered, send it to me at gpape@rogers.com and write Globe Question in the subject line. I can't guarantee a personal answer but I will be answering the most interesting questions periodically in this column.

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Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to www.buildingwealth.ca. Follow Gordon Pape on Twitter at twitter.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney

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About the Author

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

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