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Tag: DIY investing

  • Can you build a 40/30/30 portfolio with ETFs? – MoneySense

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    From January to December 2022, the Vanguard Balanced ETF Portfolio (VBAL), which holds a 60/40 mix, lost 15.04%, nearly as much as the 16.88% decline posted by the 100%-stocks Vanguard All-Equity ETF Portfolio (VEQT). The problem wasn’t the stocks; investors should expect volatility with them. It was the bonds. 

    As interest rates spiked to combat inflation, the bond component of VBAL was hit hard. Its higher-than-average intermediate duration (a measure of rate sensitivity) meant that prices fell more sharply than shorter-term bond holdings might have. This caught many conservative investors off guard, particularly those who believed fixed income would provide ballast in a downturn.

    In response, many portfolio strategists began proposing a new model: the 40/30/30. That’s 40% equities, 30% bonds, and 30% alternatives. 

    While institutions and advisors have access to sophisticated private alternatives to make this work, the question is whether Canadian retail investors can replicate a similar structure using publicly listed ETFs. Here’s my take, and some suggested ETFs to obtain exposure to the alternative space.

    What is the 40/30/30 portfolio?

    The 40/30/30 portfolio is a conceptual framework that modifies the traditional balanced portfolio by carving out space for alternative assets. The idea is to introduce a third asset class that behaves differently from the other two. 

    In periods like 2022, when both stocks and bonds declined together due to rising inflation and interest rates, traditional diversification strategies failed. The extra alternatives sleeve is designed to preserve capital in times when the other two pillars of a portfolio move in tandem.

    It’s not a one-size-fits-all prescription. The 30% allocated to alternatives can vary widely depending on the portfolio manager’s preferences. In most institutional and advisor-led implementations, that portion could include:

    1. Hedge fund-like strategies such as long-short equity, managed futures, long volatility, and market-neutral approaches that rely on quantitative models and multi-asset exposure to generate absolute returns.
    2. Hard assets or digital stores of value like gold, commodities, or cryptocurrencies such as bitcoin, typically used as static allocations to offset traditional financial asset volatility.
    3. Private market investments such as private equity, private credit, and direct real estate holdings, which offer long-term return potential in exchange for liquidity risk and limited pricing transparency.

    MoneySense’s ETF Screener Tool

    Does the 40/30/30 portfolio work?

    It’s hard to draw firm conclusions because two factors limit the usefulness of most data used to support the 40/30/30 thesis. 

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    The first is survivorship bias. It’s easy to look backward and identify strategies that delivered low correlation and solid returns, but that’s hindsight. Investors didn’t necessarily have access to these funds or conviction in them when it mattered most. The danger is cherry-picking success stories that weren’t widely known or available at the time.

    Second, results are highly time-period dependent. The performance of any diversified strategy can vary meaningfully depending on the start and end dates. A few good or bad years in alternatives can drastically skew the overall return and risk profile of a portfolio.

    That said, there is a relatively robust benchmark with over two decades of data that helps assess the viability of the concept: the MLM Index. This benchmark tracks a systematic trend-following strategy across 11 commodities, six currencies, and five global bond futures markets. It weights each category based on historical volatility and equal-weights individual contracts within each basket. While not a perfect proxy for all alternatives, it offers rare long-term, transparent, and rule-based data in a space often lacking both.

    Using data from Nov. 12, 2001, through Aug. 19, 2025, a 40/30/30 portfolio built with the S&P 500, Bloomberg U.S. Aggregate Bond Index, and KFA MLM Index (rebalanced quarterly) underperformed a traditional 60/40 mix on total returns, with a 6.89% compound annual growth rate (CAGR) versus 7.46%. However, it significantly outperformed on a risk-adjusted basis, with a Sharpe ratio of 0.71 versus 0.56.

    Source: Testfolio.io

    More importantly, the diversification benefit showed up when it mattered. The 40/30/30 portfolio demonstrated better downside protection during key stress events like the bursting of the dot-com bubble, the 2008 financial crisis, the COVID-19 crash in 2020 and the bear market of 2022.

    Source: Testfolio.io

    Investors can access the KFA MLM Index through a U.S.-listed ETF: the KraneShares Mount Lucas Managed Futures Index Strategy ETF (KMLM). It directly tracks the benchmark and provides exposure to trend-following futures strategies across commodities, currencies and fixed income. 

    The catch? Since KMLM is U.S.-listed, Canadians face a few hurdles: currency conversion, a high 0.90% management expense ratio, and a 15% foreign withholding tax on distributions unless it’s held in a registered retirement savings plan (RRSP).

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    Tony Dong, MSc, CETF

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  • Private equity, private debt and more alternative investments: Should you invest? – MoneySense

    Private equity, private debt and more alternative investments: Should you invest? – MoneySense

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    What are private investments?

    “Private investments” is a catch-all term referring to financial assets that do not trade on public stock, bond or derivatives markets. They include private equity, private debt, private real estate pools, venture capital, infrastructure and alternative strategies (a.k.a. hedge funds). Until recently, you had to be an accredited investor, with a certain net worth and income level, for an asset manager or third-party advisor to sell you private investments. For their part, private asset managers typically demanded minimum investments and lock-in periods that deterred all but the rich. But a 2019 rule change that permitted “liquid alternative” mutual funds and other innovations in Canada made private investments accessible to a wider spectrum of investors.

    Why are people talking about private assets?

    The number of investors and the money they have to invest has increased over the years, but the size of the public markets has not kept pace. The number of operating companies (not including exchange-traded funds, or ETFs) trading on the Toronto Stock Exchange actually declined to 712 at the end of 2023 from around 1,200 at the turn of the millennium. The same phenomenon has been noted in most developed markets. U.S. listings have fallen from 8,000 in the late 1990s to approximately 4,300 today. Logically that would make the price of public securities go up, which may have happened. But something else did, too.

    Beginning 30 years ago, big institutional investors such as pension funds, sovereign wealth funds and university endowments started allocating money to private investments instead. On the other side of the table, all manner of investment companies sprang up to package and sell private investments—for example, private equity firms that specialize in buying companies from their founders or on the public markets, making them more profitable, then selling them seven or 10 years later for double or triple the price. The flow of money into private equity has grown 10 times over since the global financial crisis of 2008.

    In the past, companies that needed more capital to grow often had to go public; now, they have the option of staying private, backed by private investors. Many prefer to do so, to avoid the cumbersome and expensive reporting requirements of public companies and the pressure to please shareholders quarter after quarter. So, public companies represent a smaller share of the economy than in the past.

    Raising the urgency, stocks and bonds have become more positively correlated in recent years; in an almost unprecedented event, both asset classes fell in tandem in 2022. Not just pension funds but small investors, too, now worry that they must get exposure to private markets or be left behind.

    What can private investments add to my portfolio?

    There are two main reasons why investors might want private investments in their portfolio:

    • Diversification benefits: Private investments are considered a different asset class than publicly traded securities. Private investments’ returns are not strongly correlated to either the stock or bond market. As such, they help diversify a portfolio and smooth out its ups and downs.
    • Superior returns: According to Bain & Company, private equity has outperformed public equity over each of the past three decades. But findings like this are debatable, not just because Bain itself is a private equity firm but because there are no broad indices measuring the performance of private assets—the evidence is little more than anecdotal—and their track record is short. Some academic studies have concluded that part or all of private investments’ perceived superior performance can be attributed to long holding periods, which is a proven strategy in almost any asset class. Because of their illiquidity, investors must hold them for seven years or more (depending on the investment type).

    What are the drawbacks of private investments?

    Though the barriers to private asset investing have come down somewhat, investors still have to contend with:

    • lliquidity: Traditional private investment funds require a minimum investment period, typically seven to 12 years. Even “evergreen” funds that keep reinvesting (rather than winding down after 10 to 15 years) have restrictions around redemptions, such as how often you can redeem and how much notice you must give.
    • Less regulatory oversight: Private funds are exempt from many of the disclosure requirements of public securities. Having name-brand asset managers can provide some reassurance, but they often charge the highest fees.
    • Short track records: Relatively new asset types—such as private mortgages and private corporate loans—have a limited history and small sample sizes, making due diligence harder compared to researching the stock and bond markets.
    • May not qualify for registered accounts: You can’t hold some kinds of private company shares or general partnership units in a registered retirement savings plan (RRSP), for example.
    • High management fees: Another reason why private investments are proliferating: as discount brokerages, indexing and ETFs drive down costs in traditional asset classes, private investments represent a market where the investment industry can still make fat fees. The hedge fund standard is “two and 20”—a management fee of 2% of assets per year plus 20% of gains over a certain threshold. Even their “liquid alt” cousins in Canada charge 1.25% for management and a 15.7% performance fee on average. Asset managers thus have an interest in packaging and promoting more private asset offerings.

    How can retail investors buy private investments?

    To invest in private investment funds the conventional way, you still have to be an accredited investor—which in Canada means having $1 million in financial assets (minus liabilities), $5 million in total net worth or $200,000 in pre-tax income in each of the past two years ($300,000 for a couple). But for investors of lesser means, there is a growing array of workarounds:

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    Michael McCullough

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  • Fractional trading puts pricey stocks within reach of new and younger investors – MoneySense

    Fractional trading puts pricey stocks within reach of new and younger investors – MoneySense

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    The basic investing rules still apply—so do your own research

    Marques warned trading, whether whole or fractional, isn’t for everyone—especially those who can’t make time to research a company before buying. 

    “Although it makes (trading) easier to do so fractionally with a smaller budget, that takes a lot of research,” Marques said. 

    “In many cases for your average Canadians who may not have the time or the interest or the expertise in researching companies or taking this kind of a gamble on just one company, it’s still more appropriate to work with managed portfolios,” she suggested.

    The basics of investing still apply to fractional investing, Boisvert said, such as keeping in mind your time horizon and risk tolerance. 

    For instance, if you have a goal to put a down payment on a home in the next year, the investor shouldn’t be putting that money into equities that can be volatile in the short-term, she explained.

    Instead, rely on tried-and-true investment concepts like diversification, which is also easier to achieve with fractional units, she said. Fractional shares also make it more accessible to purchase stocks at various price points, especially when the purchases are spread across months. 

    It’s important to not put all of your eggs in one basket, and have no more than 5% of a portfolio in any one holding, Boisvert added.

    “When we’re talking about buying units of shares, keep in mind to avoid FOMO (fear of missing out),” Boisvert warned. 

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    The Canadian Press

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  • Reddit is preparing to sell shares to the public – MoneySense

    Reddit is preparing to sell shares to the public – MoneySense

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    While it’s not clear from the perspective just how many of those 1.76 million shares will end up in the hands of Reddit users, the number is likely large enough for those users to exert meaningful pressure on Reddit’s share price. The main concern is that a surge of demand for shares that aren’t locked up could create a sudden run-up in the share price, followed by an equally sharp decline once the initial excitement wears off and short-sellers—investors who effectively place bets that a stock will decline—begin to gather.

    That’s pretty much what happened with Robinhood Markets, which operates a simple-to-use and low cost trading platform aimed at novice investors that also offered IPO shares to its users. The company’s stock opened at $38 on its first day of trading in July 2021, shot up to $85 five days later, then plunged back to roughly $40 after just six weeks. Robinhood closed Monday at $16.86.

    “Mishandling this process could result in [Reddit] alienating their most ardent supporters, potentially turning them into critics,” warned Deiya Pernas, co-founder of Pernas Research.

    But, Don Montanaro, president of the trading platform Firstrade, argues that Reddit may not have had much choice but to go this route.

    “They’ve been running a business where their clients, their users, are their product,” he said. “It’s a case of, ‘What else could we do? This is who we are, how could we not offer this to these people?’ ”

    Can I get in on this offering?

    If you don’t already have a Reddit account, you’re probably out of luck. The offering is only available to users who had established accounts as of January 1, 2024.

    Beyond that, shares will be distributed to Redditors and moderators via a formula that accounts for their measurable contributions to the discussion boards. Redditors with high “karma” scores—a measure of their contributions to the community, such as posts that other Redditors find useful, amusing or insightful—will be grouped into six priority tiers for access to the stock offering.

    Moderators who have taken significant numbers of “moderator actions” will likewise be sorted into those tiers. Such actions can include anything from designing a new discussion group—a.k.a. a “subreddit” in the jargon of the site—to removing spam or duplicate posts, to enforcing subreddit rules. Moderators will also be rated on membership trends in their subreddits.

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    The Canadian Press

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  • Webull Canada Review 2024 – MoneySense

    Webull Canada Review 2024 – MoneySense

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    Is Webull available in Canada? 

    Yes. Webull Corporation, a popular Cayman Islands-owned and -operated digital brokerage, opened for business in Canada in January 2024. Prospective clients are invited to join a waitlist to set up an account at webull.ca. Like some other providers, Webull uses a waitlist to manage the pace of new client onboarding and avoid glitches. Generally after two business days, you can access the app and website with your account.

    Can you use Webull in Canada?

    The big difference between Webull Canada and the Webull version in the U.S., where it’s been operating since 2018, is the commission structure. Whereas basic trades in the U.S. are free, Webull Canada will charge $2.99 per trade for Canadian-listed stocks and USD$2.99 for stocks listed on American exchanges following a 90-day commission-free period for new clients. 

    “Canada, as a whole, is… more expensive (in the broker/dealer world) in terms of costs and fees to do business than the U.S.,” explains Michael Constantino, CEO of Webull Securities (Canada) Limited. He also noted that Webull charges commissions in most of the countries where it operates. Still, the commissions were a disappointment to a lot of Canadian investors commenting on Reddit. 

    Webull desktop vs. Webull app

    Webull has a phone app you can download via Apple’s App Store and Google Play, and the login process is easy. You get the sense it’s geared for wireless generally. You can also access your account by desktop, which boasts bigger, more readable graphics, but the pages can take a bit of time to load.

    Webull promises 24/7 support by email and phone.

    Webull trading

    Webull Canada only supports stock trading for now, not the award-winning options trading platform available stateside. (Also, cryptocurrency trading is available through a separate app called Webull Pay.) On the positive side, there are no charges for deposits and withdrawals from your Webull Canada account. The company’s clearing firm charges a fee for wire transfers, however. On margin accounts, it charges interest rates a tad below 10%.

    In addition to equity trading, Webull offers users real-time quotes and market data, more than 20 charting widgets and 60 indicators and paper trading for practice.

    Webull is a member of the Canadian Investor Protection Fund, meaning any cash or assets sitting in your account are insured in case the firm becomes insolvent.

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    Michael McCullough

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  • ’Tis the season for tax-loss selling in Canada – MoneySense

    ’Tis the season for tax-loss selling in Canada – MoneySense

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    For Canadian investors who have achieved significant taxable capital gains, now is the time to implement a tax-loss selling strategy—the most effective way to find tax savings.

    What is tax-loss selling in Canada?

    Tax-loss selling is an investing strategy designed to offset taxable capital gains and reduce your tax bill. It involves selling investments to trigger a capital loss and claiming them against capital gains.

    Definition of tax-loss harvesting

    Tax-loss harvesting, or tax-loss selling, is a strategy for reducing tax in non-registered accounts. Investors sell money-losing investments, triggering capital losses they can use to offset capital gains incurred the same year. Tax losses can also be carried back three years or carried forward indefinitely. When using this strategy to save on taxes, take care to avoid triggering the superficial loss rule.

    Read the full definition of tax-loss harvesting in the MoneySense Glossary.

    Capital gains and capital losses

    In Canada, when you sell appreciable assets such as stocks, bonds, precious metals, real estate, or other property for more than the purchase price of the investment plus any acquisition costs—a.k.a. the adjusted cost base (ACB)—this is called a capital gain.

    The math is pretty straightforward. If you bought a stock for $100 and sold it for $200, the capital gain is $100. The Canada Revenue Agency (CRA) requires you to report the capital gain as income on your tax return for the year the asset was sold. And, 50% of its value is considered taxable, based on the rate of your income tax bracket.

    In this example, the taxable income is $50 ($100 x 50%), which is taxed at your marginal tax rate. The CRA does not tax capital gains inside registered accounts such as registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs).

    On the flip side, when you sell an investment for less than its ACB, this is considered a capital loss. The CRA allows Canadian taxpayers to use capital losses to offset any capital gains.

    Unlike capital gains, capital losses can be reported on your tax return in any of the three years prior to the loss or to offset future capital gains. Capital losses have no expiration date.

    As an investment advisor in Canada, I track my clients’ portfolios throughout the year to have a clear view of their capital gains’ position and opportunities to minimize tax. That’s when tax-loss selling comes into play.

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    Allan Small

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  • What Canadian investors can do in times of world crisis and war – MoneySense

    What Canadian investors can do in times of world crisis and war – MoneySense

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    Emotions in investing

    The humanitarian crises taking lives and garnering headlines are heart-wrenching—particularly for Canadians who have family and friends in the affected regions. More broadly, no one knows for sure how these crises will affect global economies, access to resources and financial markets. It’s understandable that investors are scared and making investment decisions based on their fear. Some people are selling their equities and leaving the markets. As an advisor, it’s my job to help take the emotion out of investing.

    We know from previous wars, terrorist attacks, pandemics and other terrible events that people, governments and markets are resilient, and can even become stronger than they were before. This happened after 9/11, the global financial crisis and the global COVID-19 pandemic. The historical evidence suggests that the best thing investors can do when the world experiences a crisis is to separate feelings about the tragedy from the facts about the businesses you’re invested in and look for buying opportunities. 

    Impact of global crises on investments

    The impact of wars and other traumatic events on the markets tend to be relatively short-lived. That’s because unlike fiscal policy—such as raising interest rates—the events themselves are not “economic” in nature.

    For example, if war breaks out in an oil-producing country, will that affect the price of oil? Theoretically, it shouldn’t, because other, larger producers can offset any lost supply from the war-torn country.

    But, as we know, perception can be more powerful than reality when it comes to the stock market. The initial, automatic reaction could be a spike in oil prices—and then prices should adjust with time.

    What is a Canadian investor to do?

    So, what do you do as an investor in Canada? Not an awful lot. As investment advisors, we get paid to grow people’s wealth. When markets sell off for reasons that are more temporary than related to economics and performance, it’s important to take emotion out of decision-making and not go into panic mode about your investments.

    Markets may dip, but they don’t usually collapse. It’s possible your portfolio’s value may drop for a period of time. In the past, after a crisis has ended—and regardless of the outcome—the markets have regained stability, and investment returns have bounced back.

    A crisis investment strategy

    My best advice in the face of a world crisis: Stay calm, take a deep breath and focus on the fundamentals. Keep your risk profile front and centre, and think about where you want to put your money. My approach is to be sector agnostic and look for good value wherever I can find it.

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    Allan Small

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