$450K to invest for six months -- what would you do?

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
DanH
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Re: $450K to invest for six months -- what would you do?

Post by DanH »

I'd expect that in most years you'll see mostly fully taxable income. Until February 2016, CSD used an equity forward to re-characterize income. So pay no attention to distribution characteristics pre-2016. But I'd urge anyone tempted by CSD to really dig into it.

It holds ~16% in term loans. Not liquid securitized bonds; but term loans. The former are relatively liquid (T+2) while the latter are much less so (T+5 to T+40). On the plus side, recovery is very high in the event of a default (e.g. Toys R US loan vs. bond).

Also, it hedges which adds cost because they use forwards not futures. Forwards cost more but are more flexible in terms of currencies and amounts to hedge.
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Re: $450K to invest for six months -- what would you do?

Post by JaydoubleU »

I don’t disagree but the OP seemed fairly eager to earn more.
Hmm. The OP would like to earn a little more, but requires most of the money back in six months.

Common consensus would be to put the lot in a HISA and accept the 2% (or so). How about putting 350K in a HISA and investing 100K in XEI , XDV, or CDZ (as someone mentioned)? Take a little risk for some extra gain, but not the lot.

Here's an idea you could put a little money in: Altagas Receipts (ALA.R). Issued at $31, they are now trading at $28.87. If the deal to acquire WGL does not go through, you get $31 back. Meanwhile, you are entitled to the dividend, currently yielding 7.59%. If the deal is approved, and I think it will be, your receipts will be converted into common shares of ALA, currently trading at $29.17. My opinion is that ALA will jump when the deal closes, but that is only my opinion. Getting late to act on this one, as it is expected to close in the second quarter of this year.
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AltaRed
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Re: $450K to invest for six months -- what would you do?

Post by AltaRed »

I consider anything in equities as insane capital risk for a finite period of time with a hard stop at the end.
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JaydoubleU
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Re: $450K to invest for six months -- what would you do?

Post by JaydoubleU »

I consider anything in equities as insane capital risk for a finite period of time with a hard stop at the end.
"Insane capital risk" mildly hyperbolic, no? I was merely suggesting that if the OP is determined to earn more and is willing to take some risk, then.... the key word here is "some." You won't get greater than HISA without taking SOME risk.
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Re: $450K to invest for six months -- what would you do?

Post by AltaRed »

The downside capital risk is huge. Multiples of any income upside.
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fireseeker
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Re: $450K to invest for six months -- what would you do?

Post by fireseeker »

For those curious about the end of the story:
I took a quarter of the funds and bought AAR.un. On another thread, someone wondered who would buy it above $8 with the takeout at $8.10. I was one of those buyers. We pocketed 1.5% (mostly dividends, plus a small cap gain) for a 4.5 month hold, which works out to 4% per annum. Much better than a HISA, and taxed more lightly.
I took another quarter and bought PJC, which was also being taken over. In that case, we pocketed 1.2% (half dividends, half cap gain) for only a one-week hold. Because it was not an all-cash takeover -- meaning the effective takeout price was shifting with changes to Metro's price -- I wasn't comfortable holding for the takeover to complete.
I did consider continuing to try to trade around PJC/Metro. But I surely did not expect to be earning 1% a week and, in the end, concluded the risk-reward scenario around that trade did not surpass the sleep-at-night factor.
So, after obtaining an enhanced gain from half the proceeds, I put the other half plus the money from PJC into an HISA.
Two weeks ago, I collapsed the HISA to help pay for the new house. As it turned out, we did not immediately need the AAR.un money, so I let it ride till the takeover completed this week. Had we needed the money, I would have had to sell back into the market, slightly hurting our gain.
In the end, I'm not sure the extra profits were worth the extra trouble. But I did buy some additional education -- plus a house.
Thanks for the advice.
-fireseeker
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Peculiar_Investor
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Re: $450K to invest for six months -- what would you do?

Post by Peculiar_Investor »

Thank you for reporting back and glad it worked out for you.
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