Archive for March, 2010


Bonds v. Bond Funds

March 29, 2010

In my previous post, I looked at the uneasiness many investors have about bonds when interest rates are poised to go up. Some readers of this blog and others (see these discussions on Financial Webring Forum and have argued that this discomfort can be alleviated by buying individual bonds rather than index funds or ETFs. Let’s look at whether their arguments hold up.

Individual bonds do offer benefits: you know precisely how much interest you’ll be paid, and how much you’ll receive when the bond matures. The payouts from bond funds, by contrast, aren’t known in advance, and funds never mature. This can make planning difficult for those who rely on their bond portfolio for current income, or those who need a specified amount of money on a certain date in the future. No quibbles with that.

The other main argument in favour of individual bonds is much less convincing. It goes something like this: “If I invest $10,000 in a bond fund, its value will go down when interest rates rise. But if I buy an individual bond, I don’t have to worry about interest rate movements, because as long as I hold the bond to maturity, my principal is guaranteed.”

Behavioural economists love this kind of logic. While it’s true that holding a bond (or a GIC) to maturity allows you to collect the full principal, you’re fooling yourself if you think you’ve avoided a loss. Consider a bond that has two years left to maturity and pays 4% interest when the current rate for comparable bonds is 5%. Over the next two years you’re locked into an investment earning 4% interest, when you could be earning 5% with no additional risk. You may not have lost your capital, but you have forfeited $200 in interest. This opportunity cost may not feel the same as losing capital, but in the long run it affects your investment returns the same as any other kind of loss.

There are several other advantages of using index funds or ETFs rather than individual bonds:

Diversification. Canadian government bonds are highly unlikely to default, but corporate bonds certainly can. Just ask the investors who put their retirement savings in bonds from General Motors. You can dramatically reduce default risk by investing in an ETF like iShares’ Canadian Corporate Bond Index Fund (XCB), which holds 350 different issues. A wide selection of bonds with various maturities can also reduce interest rate risk.

Low minimum investment. Many bond issues require $10,000 or more, so building a customized bond ladder is out of the reach of many small investors. By contrast, Claymore’s 1–5 Year Laddered Government Bond ETF (CLF) includes a ready-made ladder of 25 bonds, and small investors can buy in for any amount. Bond index funds also have very low minimums ($100 to $1,000) and you can take advantage of dollar-cost averaging by adding money each month, something you can’t do with individual bonds.

Liquidity. You can redeem all or part of a bond fund at any time if you need the cash, typically with no fee (except perhaps the small trading commission on an ETF). While you can always sell individual bonds on the secondary market, many corporate, provincial and municipal bonds are not highly liquid and may have high bid-ask spreads.

Simplicity. Index funds and ETFs eliminate the need to choose individual bond issues, some of which include embedded options that are difficult to understand. Funds also conveniently reinvest all interest payments so you can take full advantage of compounding. (This is harder with ETFs, but Claymore and BMO do offer dividend reinvestment plans.)

Cost. Some investors say they prefer to avoid fund fees, seemingly unaware that buying individual bonds also carries costs. It’s difficult to know just how much mark-up you’re paying, as the bond market is far less transparent that than the stock market, since bonds trade over-the-counter rather than on an exchange. In his book In Your Best Interest, Hank Cunningham says the average mark-up on bonds is 1%, and points out that this fee is payable only once, while bond funds may carry fees of 1.5% or 2% every year. But Couch Potatoes know better than to pay those ridiculous MERs. Bond index funds and ETFs are among the cheapest in any asset class: Claymore’s CLF charges just 0.17%, while the iShares Canadian Bond Index Fund (XBB) gives you access to the entire Canadian market for just 0.30%. With fees this low, any cost benefit of buying individual bonds shrinks dramatically, and many investors will accept the small fee in exchange for the benefits outlined above.

Like all investment decisions, there’s no one right answer here. Building a ladder of individual bonds is a perfectly good strategy, particularly for income-oriented investors with a six-figure sum to invest, a good knowledge of bond features and access to a low-cost broker. But for Couch Potato investors who are in the “accumulation phase” of their lives, a low-cost bond index fund or ETF can deliver market returns far more easily.


The Bond Dilemma

March 25, 2010

With interest rates poised to rise later this year, I’m getting a lot of emails and comments from readers who are wary about investing in bonds. There seem to be a lot of myths and misunderstandings about bonds, which isn’t surprising: fixed-income investments can be difficult to get your head around.

Let’s start with the most relevant issue: when interest rates rise, the value of bonds goes down. To understand why, imagine buying a five-year bond with a face value of $1,000 that pays 5% interest annually. Now imagine that 12 months later interest rates have risen one percentage point. Your bond now has four years left to maturity and it’s still paying $50 a year in interest, while new four-year bonds are paying 6%, or $60 a year. If you decide to sell your bond now, you won’t get $1,000 for it. Why would anyone buy your bond with its 5% yield when they can get one that pays 6%?

Of course, your bond isn’t worthless: you just need to drop the price to make it more attractive. If you sell it for $965, the buyer would still earn $50 annually in interest, plus he’d make a $35 capital gain when he collects the full $1,000 at maturity. His total return over the four years would be $235 (4 × $50 +$35) on a $965 investment, or 6% annually—the same as new four-year bonds selling at par. (You can check my math with this handy yield-to-maturity calculator.)

This example illustrates why bonds lose value when interest rates rise: their market prices decline in order to bring their yield in line with those of newer bonds. The longer the term of the bond (that is, the greater the number of years until maturity), the bigger the loss in value when interest rates go up.

If you own a bond mutual fund or ETF, virtually all of its holdings will lose some value when rates move higher. That’s why so many investors are reluctant to put money in a bond fund today: the Bank of Canada has all but assured us that rates will move up in the second half of this year. Isn’t buying a bond fund now guaranteed to lose you money?

Not necessarily. Remember that the vast majority of a bond fund’s return comes from interest payments, not from changes in its net asset value (NAV). If the fund’s market price drops 2% one year, but the bonds inside the fund pay 4% in interest, the investor’s total return is still 2%. Notice what happened to the first investor in our example above: he bought a bond for $1,000 and sold it a year later at a $35 loss. In the meantime, however, he collected $50 in interest. That’s a net gain of $15, or 1.5%. Sure, he’s disappointed, because he was expecting 5%. But he didn’t lose money.

It’s not surprising that many investors don’t appreciate this. When you check your account holdings, all you see is your funds’ net asset value, not the distributions you’ve received. In my own account, I have a bond ETF that’s showing a 2.5% loss since I bought it 10 months ago. I had to use a spreadsheet to figure out that my total return, including interest received in cash, is actually slightly positive.

One reader recently noted that the NAV of the iShares Canadian Bond Index Fund (XBB) was about $27 in late 2001, and is about $29.50 today, which looks like an anemic return of barely 1% annually. But when you include the quarterly interest distributions, XBB’s annualized return over the last nine years is 4.8% — almost five times higher. No wonder people are so pessimistic about bonds.

So, is it smart to buy a bond fund or ETF now? Who knows. You may well be able to get in more cheaply if you wait just a few months. But if the interest rate hike is smaller or later than you planned for, you may pay in opportunity cost.

In the next post, I’ll look at the difference between buying individual bonds and investing in bond funds and ETFs.


A Mutual Fund Refugee

March 19, 2010

I hear from a lot of investors who are mutual fund refugees: they’ve abandoned their overpriced, inappropriate funds and the advisor who sold them, and they’re trying to move ahead on their own. Darren, a reader in British Columbia, recently wrote to me with his story and gave me permission to share it. [Note: This post has been revised since it was first presented.]

Darren and his wife, Sarah, are in their 60s and have been retired for seven years. Until last year, most of their RRSP savings were in mutual funds handled by a adviser they thought was trustworthy. Only after the markets plunged in 2008–09 did they fully understand their situation: the adviser had all of their savings in equities. Not only did they lose a huge chunk of their nest egg, but when they went to sell their funds in disgust they faced the added insult of deferred sales charges. “After that episode we have become rather jaded with financial advisors,” Darren says.

A year later, he and Sarah are still sitting on $283,000 in cash, plus $57,000 in stocks from Darren’s former employer, a telecom, which he does not want to sell. They’re ready to get back into the market and want to build an ETF portfolio they can manage themselves. Unlike their adviser, they understand that 100% in stocks is too risky for retirees. “We want a portfolio focused on preserving principal, while at the same time providing a fair level of growth and income,” Darren says. “We don’t plan on dipping into any investments for at least two years.” They feel comfortable with 40% in bonds, 20% in cash, and 40% split between stocks, preferred shares, REITs and gold.

The problem is that the couple’s cash is spread between several accounts: two RRSPs and a taxable account. They also have two Tax-Free Savings Accounts they’re using to hold some of the telecom stocks.

When Darren first contacted me, he wasn’t sure whether he should treat all of the accounts as a single portfolio, or whether he should make sure each account included 40% bonds and 20% cash. I explained that since all of their money will be used for the same purpose, they can think of it as one big portfolio: as long as the overall allocation is on target, the asset mix in any one account doesn’t much matter. However, he should strive to keep transaction costs and taxes to a minimum. Ideally, none of the ETFs should be duplicated, and most importantly, he should pay careful attention to his asset location. That means putting all the bonds, cash, REITs and foreign stocks in registered accounts, while using the taxable account for Canadian stocks and preferred shares to take advantage of the dividend tax credit. (Since gold pays no distributions, it’s also fine in a taxable account.)

So Darren sat down with a spreadsheet and came up with this portfolio:

Claymore 1-5 Year Laddered Government Bond (CLF) 20,000 6%
Claymore 1-5 Year Laddered Corporate Bond (CBO) 20,000 6%
iShares Real-Return Bond (XRB) 48,000 14%
iShares Canadian REIT (XRE) 10,000 3%
Laddered GICs 10,000 3%
Cash 7,000 2%
iShares Canadian Long Bond (XLB) 40,000 12%
iShares US High-Yield Bond (XHY) 7,500 2%
Laddered GICs 7,500 2%
Cash 5,000 1%
Telecom stocks 20,000 6%
Telecom stocks 37,000 11%
Vanguard Total World Stock Market (VT) 17,000 5%
Vanguard Total Stock Market (VTI) 7,500 2%
Claymore S&P/TSX Canadian Dividend (CDZ) 14,000 4%
Claymore S&P/TSX Canadian Preferred Share (CPD) 14,000 4%
Claymore Gold Bullion (CGL) 17,000 5%
GICs 33,500 10%
Cash 5,000 1%

“We’re asking for some critical feedback on our plan,” Darren writes. “Please don’t be shy as we’re learning a lot here.” Readers are welcome post their comments below.

Thanks for sharing your experience, Darren, and good luck with your investing!


Under the Hood: iShares Core Portfolio Builders

March 16, 2010

This post is part of a series called Under the Hood, where l take a detailed look at specific Canadian ETFs or index funds.

The funds: iShares Conservative Core Portfolio Builder Fund (XCR) and iShares Growth Core Portfolio Builder Fund (XGR)

The indexes: Both XCR and XGR are actively managed funds that do not track an index.

The cost: The MER of each fund is 0.60%. This is the all-in cost, as the MERs of the underlying funds are waived so investors are not charged twice.

The details: The iShares Core Portfolio Builders are “ETF wraps”: all-in-one portfolios made up of iShares ETFs in various asset classes: bonds, equities, and commodities. They appear to be designed for investors who like the idea of investing with ETFs, but aren’t comfortable building their own portfolios from scratch.

Although their names suggest quite opposite strategies, both ETFs are extremely bond-heavy: the Conservative version (XCR) currently holds 76% in bonds, 19% in equities, and 5% in commodities. The Growth fund (XGR) is 63% bonds, 26% equities, 9% REITs and 2% commodities.

It’s important to understand that both XCR and XGR are actively managed funds: the building blocks are index-tracking ETFs, but the asset mix is adjusted regularly based on market forecasts. If you’re a believer in the Couch Potato strategy—which is founded on choosing an asset allocation and sticking with it over the long term—this should make you turn and run away.

Indeed, the managers don’t simply make little tweaks: sometimes the moves are huge. At the time of its last quarterly report on December 31, 2009, XCR held a whopping 42% in short Canadian bonds, while today that asset class is only 8.4% the fund. Even more striking is how much both Core Portfolio Builders currently devote to foreign bonds: the single biggest holding in each is a 20% allocation to Treasury Inflation-Protected Securities (TIPS), which are the American equivalent of Canadian real-return bonds. XGR adds another 13% in emerging market bonds, while XCR holds 16% in US corporate bonds.

The US currency is hedged, but it’s still hard to see why a Canadian investor would want so much foreign fixed income. Diversifying internationally is important with equities because our stock market is small and focused on a few sectors, but Canadian investors can do just fine holding only domestic bonds. A smattering of foreign bonds might add some benefit, but more than one-third of the entire portfolio? It’s way too much.

Not surprisingly, the asset allocation decisions for the Core Portfolio Builders are handled in the US, even thought the products are marketed to Canadians. Last month, I criticized BMO’s model ETF portfolios, which are also grossly overweight in US bonds. I’ll make the same comment about these iShares ETFs: the fund managers in New York clearly don’t appreciate why holding so much foreign fixed-income makes no sense for Canadian investors.

The alternatives: Claymore also offers a pair of all-in-one ETF portfolios: the Balanced Income CorePortfolio (CBD) and the Balanced Growth CorePortfolio (CBN). I’ll look at these in detail in a future post.

The bottom line: The ETF wrap is a good concept, but iShares hasn’t found the formula. The Core Portfolio Builders might be a better choice than run-of-the mill balanced mutual funds, which can carry MERs four times higher. But with an hour of research on this blog, you can build a simpler, cheaper and more appropriate indexed portfolio on your own, even with a small initial investment. The marketplace seems to agree: both Core Portfolio Builders have only a few million dollars in assets and are very thinly traded, which means they have large bid-ask spreads that make them even less attractive.

Disclosure: I do not own XCR or XGR in my own portfolio.


Under the Hood: Claymore Corporate Bond

March 11, 2010

This post is the first in a planned series called Under the Hood, where I’ll take a detailed look at a specific ETF or index fund.

The fund: Claymore 1–5 Year Laddered Corporate Bond ETF (CBO)

The index: CBO tracks the DEX 1-5 Year Corporate Bond Index, which appears to have been custom-made for this fund. The index lays out a set of rules for building a laddered portfolio of short-term, investment-grade corporate bonds. It includes 25 bonds divided into five equal “buckets”: five of the bonds have a term to maturity of 1–2 years, five others have terms of 2–3 years, and so on up to 5–6 years.

The cost: The MER is 0.28% as of June 2009, including a management fee of 0.25%.

The details: Claymore launched this ETF just over a year ago and it has been very popular, with an average daily trading volume of about 115,000 shares. It’s a well-designed index: the laddering technique is an excellent way to achieve a balance between good yield and a minimum of interest-rate risk. (In most cases, bonds with longer terms have higher yields, but their market value will fall more sharply when interest rates go up.)

CBO currently pays a quarterly distribution of $0.24, which works out to a yield of about 4.6%. However, the average yield to maturity is about half that. Without getting too deeply into bond math, what this means is that all of the bonds were bought at a premium (a price higher than their face value). Eventually the fund will probably suffer a series of small capital losses as these bonds are sold, so the total annual return on the ETF may be lower than that 4.6% yield suggests. That’s not a knock against CBO specifically: with interest rates at rock bottom and likely to rise this year, just about every bond fund is in this boat.

I was confused when I looked at the individual bonds in this fund. Because this is a short-term fund, I was expecting to find only bonds with maturities between 2010 and 2015. In fact, one matures in 2020, and two are dated 2049. I contacted Claymore to ask why, and they explained that these bonds are callable within five years, which means that the issuer can redeem them before the maturity date. In the past, these bonds have always been called by the banks after five years, so for all intents and purposes, they behave like short-term bonds.

The alternatives: CBO’s closet competitor in the marketplace is BMO’s Short Corporate Bond (ZCS). BMO’s fund is more diversified (it holds 66 bonds rather than just 25), but it’s also more expensive (0.35% MER) and it doesn’t use the laddering strategy.

iShares Canadian Corporate Bond (XCB) and iShares Canadian Short-Term Bond (XSB) are similar, but with important differences. XCB holds mid- and long term corporate bonds as well those with less than five years to maturity; XSB is about 70% government bonds and only 30% corporates.

The bottom line: Claymore’s 1–5 Year Laddered Corporate Bond ETF is an excellent choice for the corporate bond portion of a Couch Potato portfolio. I feel that its low cost and laddered structure give it an edge over its competition. It’s also eligible for Claymore’s dividend reinvestment plan (DRIP), which is a nice feature in a bond fund that pays a substantial yield.

Disclosure: I own CBO in my own portfolio.


How Much Risk Do You Need to Take?

March 9, 2010

Every book on index investing stresses the importance of asset allocation: the percentage of equities and fixed-income investments in a portfolio. Of course, more stocks means more risk but higher expected returns, while boring old bonds provide safety and promise less growth. But just what is the long-term difference in risk and returns between stocks and bonds? How does a 50-50 portfolio compare with one that holds just 20% bonds, or 20% equities?

Paul Merriman, who runs the Seattle-based investment firm that bears his name, recently wrote an article that included a table of historical stock and bond returns going back to 1970. It compares the performance and risk of portfolios with various stock-bond mixes. The returns are hypothetical, but they represent a reasonable estimate of what you might expect from a portfolio of low-cost index funds that track the broad markets.

Merriman assumes that the equity portion of each portfolio is split equally between the S&P 500 and international stocks, and the fixed income side is half intermediate-term, 30% short-term and 20% inflation-protected Treasuries. They also deduct a 1% management fee and assume the portfolio is rebalanced monthly. Here’s a summary of the results:

Annualized return
Standard deviation
Worst 12 months
Worst 60 months
100% fixed income 6.9% 4.6% -4.8% 14.1%
10% equities 7.5% 4.6% -5.3% 14.3%
20% equities 8.2% 5.1% -11.6% 10.1%
30% equities 8.8% 5.9% -17.5% 5.9%
40% equities 9.4% 6.9% -23.1% 1.6%
9.9% 8.2% -28.5% -2.7%
60% equities 10.5% 9.5% -33.5% -7.0%
70% equities 11.0% 10.8% -38.3% -11.3%
80% equities 11.5% 12.2% -42.8% -15.5%
90% equities 11.9% 13.7% -47.1% -19.7%
100% equities 12.4% 15.1% -51.1% -23.9%

There are a couple of lessons in these numbers. First, if you’re saving for the short term—say, five years or so—think carefully about how much you invest in stocks. Even a 50-50 portfolio can lose money over a five-year period, and in 2008–09 that allocation would have lost 28.5% in just 12 months. Meanwhile, the worst five-year return for an all-bond portfolio was 14.1% (or 3.7% annually), and you’d never have lost 5% in any year. That’s something to keep in mind if you’re saving for a child’s education, or a down payment on a house.

You’ll also notice that a portfolio of 20% equities—which most investors would consider extremely conservative—produced an annualized return of 8.2%. Many people would find that sufficient to fund their retirement. Admittedly, you would have had to weather some five-year periods of dreary returns, but even the worst of these saw 10.1% growth (1.9% annually). The 20-80 portfolio never experienced a one-year loss of more than 11.6%. By contrast, even a plain vanilla 60-40 portfolio is vulnerable to losing a third of its value in 12 months.

The take-away here is this: figure out the rate of return required to meet your financial goals and take only as much risk as necessary.

Let’s say you’re putting $200 in an RESP for your six-year-old daughter with the goal of saving $50,000 by the time she’s 18. You’ll meet that target with an annual return of just 5%. If you’ve got $100,000 in your RRSP and contribute $5,000 annually, you need 8% returns to retire in 25 years with a million bucks. If the last 40 years are any guide, both goals are achievable with quite conservative investments.

Sure, you might get 10% or 12% with a very aggressive portfolio. The question is, why take the unnecessary risk? As Warren MacKenzie writes in New Rules of Retirement, “Investing is not about trying to shoot the lights out. It is not about trying to make as much money as you can without any regard for risk. Smart investing is about trying to reach your financial goals. If you can reach your financial goals with little risk, all the better.”


Put Your Assets in Their Place

March 5, 2010

Couch Potato investors hear a lot about asset allocation, but asset location is also an important consideration. Asset location refers to the type of account you use to hold the stocks, bonds, cash and real estate in your portfolio. It’s important because the growth and income from your investments is treated in different ways by the taxman:

Interest from bond funds and bond ETFs (as well as individual bonds, GICs and money market funds) are taxed at your marginal tax rate, just like employment income.

Dividends from Canadian stocks are eligible for a generous dividend tax credit from the federal government. For the 2009 tax year, eligible dividends are first grossed up (increased) by 45% and declared as income; the investor then receives a tax credit of 19% on the grossed-up amount. Some provinces offer an additional dividend tax credit.

Foreign dividends are taxed at your marginal rate. In addition, if you hold US-listed ETFs, the Internal Revenue Service will take a 15% withholding tax on all dividends unless the funds are held in an RRSP.

Capital gains are profits earned from selling a security for more than your cost. You report 50% of your capital gains as income and pay tax on that amount. Mutual funds must also pass along their capital gains to unitholders, although index funds (and especially ETFs) rarely do so.

Here’s a table highlighting the dramatic differences in how each type of investment income is taxed, assuming a marginal rate of 22%:

Canadian Capital
Interest Dividend Gain
Amount received $1,000 $1,000 $1,000
Taxable income $1,000 $1,450 $500
Federal tax (at 22%) $220 $319 $110
Dividend tax credit (19%) -$275.50
Total federal tax owing $220 $43.50 $110

The tax rates above apply to securities held in non-registered investment accounts. Registered accounts offer several opportunities to defer or avoid paying tax on investment growth and income:

  • If your retirement savings are in an RRSP or RRIF, you pay no tax on interest, dividends or capital gains until you withdraw the funds. At that time, you pay tax on the entire withdrawal at your marginal rate. (You can’t claim the dividend tax credit or enjoy the lower tax on capital gains.)
  • With a Registered Education Savings Plan (RESP), you pay no tax until you withdraw the funds. At that time, all the growth is reported as income in your child’s hands. You pay no tax on the amount you put into the account, since contributions were made with after-tax dollars.
  • In a Tax-Free Savings Account (TFSA), all the growth is tax-free, and no tax is payable when the funds are withdrawn.

So, what’s a Couch Potato to do with all this information? If you’re able to hold all your investments in an RRSP or other tax-deferred accounts, you don’t need to worry much about this at all. However, if you also hold ETFs or index funds in a taxable account, review your asset location to make sure you’re not paying more tax than you need to:

Canadian equities deliver their returns from lightly taxed dividends and capital gains. So if you need to hold some of your investments in a taxable account, start with Canadian stocks.

REITs pay generous distributions, but these are not considered dividends. The bulk of the payouts are classified as income and taxed at your full marginal rate. (The rest is usually return of capital.) REITs are therefore best held in a tax-sheltered account.

Income trusts, like REITs, pay most of their distributions as income. However, beginning in 2011, when trusts must convert to corporations, their distributions will start being classified as dividends and will therefore be eligible for the tax credit. For now, hold them in a tax-sheltered account if you can.

Bonds (as well as GICs and money market funds) are best held in a tax-sheltered account, since their interest is fully taxable at your marginal rate.

Preferred shares are considered fixed-income investments, but they pay dividends, not interest. For income-oriented investors who have no more RRSP or TFSA room, Canadian preferred shares are a good choice in a taxable account because they’re taxed more favourably than bonds.

Canadian-listed ETFs that hold international stocks include the popular iShares XSP and XIN. Although these are traded on the TSX, their underlying holdings are foreign stocks, so the dividends are not eligible for the tax credit. These ETFs are best held in a tax-sheltered account. However, as Canadian Capitalist has pointed out, XSP and XIN (which simply hold US-listed ETFs in a Canadian wrapper) are still subject to the US withholding tax even if they’re held in an RRSP.

Dividends from US-listed ETFs are fully taxable in Canada and get dinged by the additional 15% withholding tax unless you hold the funds in an RRSP. Note that you still pay the withholding tax if the fund is held in an RESP or a TFSA. The good news is that you may be able to recover the withholding tax if you hold them outside an RRSP. A taxable account also allows you to buy and sell ETFs in US dollars and avoid currency exchange fees—most discount brokers do not allow you to hold US dollars in an RRSP. (Questrade and QTrade are the exceptions.)

Pulling all this together, here’s an example of how you might divvy up an ETF portfolio across different accounts with an eye toward keep taxes to a minimum:

Vanguard Total Stock Market (VTI)
Vanguard Europe Pacific (VEA)
Vanguard Emerging Markets (VWO)
iShares Canadian Bond (XBB)

iShares Canadian REIT Sector (XRE)
Cash (GICs or money market fund)

Taxable account (assuming no more RRSP or TFSA room)
iShares Canadian Composite (XIC)
Claymore S&P/TSX Preferred Share (CPD)

As you can see, tax planning is complicated, so if you have a large portfolio, consider seeking help from a financial or tax advisor.