ReportWire

Tag: invest

  • Making sense of the markets this week: January 7, 2024 – MoneySense

    Making sense of the markets this week: January 7, 2024 – MoneySense

    [ad_1]

    A look at 2024

    Since we made this crystal ball thing look pretty easy last year with our 2023 markets forecast, we’re at it again for 2024. And, it’s always good to begin a market predictions column with the caveat that this stuff is really hard to do.

    It’s impossible to make accurate predictions consistently, especially about the markets, as there are just too many variables at play to always get it right. I mean, if you could tell me the outcomes of wars, upcoming elections, more pandemics and unexpected natural disasters of 2024, then I could give my some predictions with a little more confidence. 

    All that said, there are some big-picture trends and general rules of thumb that Canadian investors can apply to their thinking about the year ahead. 

    So, with those caveats out of the way, here’s a look at how we see the markets playing out this year.

    Canada’s TSX 60 will gain 15%, outperforming the 8% gain for the S&P 500

    It’s not that Canada’s economy is going to do better than America’s, or that our domestic companies have any hidden advantages. A prediction for TSX 60 outperformance is simply a bet that lower valuations may suffer less from the negative headlines than any higher-priced valuations of the S&P 500 composite index.

    The 500 biggest companies in the U.S. had a fabulous 2023 and finished up 23% for the year. The markets always look ahead, true, and I think they foresaw sunny skies for late 2024 as early as spring 2023. Consequently, there would have to be additional excellent news coming to light for a repeat of such a strong year.

    Canada, on the other hand, saw its TSX 60 index go up about 8%. There were a lot of negative headlines about lack of economic growth in Canada, and no equivalent of an “AI bubble” to drive a positive narrative for boring companies like Canadian railways or pipelines.

    Right now, a TSX 60 exchange-traded fund (ETF), such as XIU, trades at about a price-to-earnings (P/E) ratio of 13x. An S&P 500 ETF, like SPY, clocks in at about 24x. I don’t think there’s any debate that the U.S. has more world-beating companies and a much more favourable tax environment than Canada. But are American companies that much better that they should be valued so much higher? Based on historical averages, we’re betting no.

    [ad_2]

    Kyle Prevost

    Source link

  • 10 SMART financial goals to set for 2024 – MoneySense

    10 SMART financial goals to set for 2024 – MoneySense

    [ad_1]

    You may have to book more sessions after your initial visit, or one might suffice to help you get organized. Heath says, it’s ultimately up to you to determine if you need an ongoing relationship that’s valuable to you and justifies the ongoing fee. “Some clients like the peace of mind and discipline,” he says. “Many couples appreciate having an impartial third party to mediate their financial decisions. Plenty of singles benefit from having someone to talk to candidly about finances in lieu of a partner.”

    The best way to prep for a financial planning session is to ask the planner what they require from you, and then have your documents ready to meet with them, Heath says. That way you can get the most out of your time together, and come out with a solid plan. 

    7. Invest in GICs or other investments

    Arguably, the best financial gift you can give your future self is investments. Depending on where you put your money, you could grow it with compounded interest.

    GICs, for example, are low-risk investments that are great for saving towards life goals like tuition or a wedding. Putting your money in a GIC is like making a loan to a financial institution. You deposit your money for a set amount of time like 30 days up to 10 years, depending on the term, and the institution gives you back your money plus the interest earned on your deposit at the end of the period. If you think there’s a chance you’ll need the money sooner, consider a cashable or redeemable GIC. The interest rate will be lower than with non-redeemable GICs, but you can cash out anytime. 

    One thing to note is the risk/return tradeoff with investments. Riskier investments like stocks can come with higher potential returns. Many young investors start out with exchange-traded funds (ETFs), which are a basket of assets like stocks. ETFs have built-in diversification, which helps reduce your portfolio risk. If you’ve never invested before and you’re not sure how to begin, consider speaking with a financial advisor and signing up for the MoneySense Invest newsletter. And keep reading. Find out if investing is right for you and how to get started:

    8. Make a will and powers of attorney 

    An Angus Reid survey found that 80% of Canadians under 35 don’t have a will. If you’re just starting out in your career and haven’t accumulated many assets, you might wonder why you’d need a will.

    If you were to pass away without a legal will, the government would divide up your estate—your bank accounts, possessions, investments and other assets—between your parents or next of kin. It might not be split up in the way you wish it to be, and if you have a common-law spouse, they would likely be left out. This could cause a lot of worry and distress for your loved ones in an already difficult time. 

    If you want to write a will and you don’t have a complicated tax situation, an online will platform like Willful or Canadian Legal Wills could work. However, if your situation is a bit more complicated, you may wish to speak with a financial advisor or lawyer who works with estate plans.

    [ad_2]

    Margaret Montgomery

    Source link

  • What should Canadian investors do: Sell or hold with preferred share losses? – MoneySense

    What should Canadian investors do: Sell or hold with preferred share losses? – MoneySense

    [ad_1]

    1. Rate reset preferred shares

    These became popular following the financial crisis in 2008/2009 to entice investors to buy preferred shares despite low interest rates at that time. They generally “reset” every five years with the dividend rate for the next five years based on a premium over the 5-year Government of Canada bond rate at the time. Rate reset preferred shares currently represent 73% of the Canadian preferred share market.

    2. Perpetual preferred shares

    These represent 25% of the Canadian preferred share market. Perpetuals have no reset date. Their dividend rate is set when they are issued, and they continue in perpetuity.

    3. Floating or variable rate preferred shares

    These are like rate resets in that the rate changes, but those changes are more frequent—typically quarterly. The rate is generally based on a premium to the 3-month Government of Canada treasury bill rate. Together, floating/variable rate and convertible preferred shares represent less than 3% of the Canadian preferred share market.

    4. Convertible preferred shares

    A convertible security can be converted into another class of securities of the issuer. For example, a convertible preferred share may be convertible into common shares of the company that issued the shares.

    Preferred shares Indexes for Canadian investors

    The S&P/TSX Preferred Share Index is currently 57% financials, 20% energy and 12% utilities. Communication services, real estate, and consumer staples makes up the remainder of the market. The financials are tilted slightly more towards banks than insurance companies.

    The current distribution yield of the S&P/TSX Preferred Share Index is about 6.1%. This is the dividend income an investor might anticipate over the coming year. The trailing 12-month yield is about 5.9%. These are attractive rates, Mario, but you can earn comparable rates in guaranteed investment certificates (GICs) with no risk or volatility. So, the high yields need to be put into perspective.

    What to do with preferred shares at a loss

    One consideration, Mario, is if you own your preferred shares in a taxable non-registered account, you could sell them to trigger a loss, if you have other investments that you have sold or intend to sell for a capital gain.

    “Tax loss selling” is when you sell an investment for a loss to harvest the tax benefit of that loss. You can claim capital losses against capital gains in the current year. If you have a net capital loss for all investments sold in your taxable accounts in a given year, you can carry that loss back to offset capital gains income you paid tax on in the previous three years. Or you can carry the loss forward to use in the future against capital gains.

    [ad_2]

    Jason Heath, CFP

    Source link

  • Will GIC rates keep going up in 2024? – MoneySense

    Will GIC rates keep going up in 2024? – MoneySense

    [ad_1]

    As a result of these rate hikes, the interest rates available on guaranteed investment certificates (GICs) have risen as well—leading to renewed interest from savers and investors. In fact, over the past 12 months, the average one-year Canadian GIC rate has shot up from 2% to 4.90%. As a result of this move-up in rates, even market-linked GICs—which offer a lower guaranteed interest rate because of higher potential gains linked to the stock market—are offering a minimum guaranteed rate over 2%, as of mid-December 2023.

    How high will GIC interest rates go?

    The interest rates you pay on various types of debt, like a mortgage or a line of credit, depends mainly on the benchmark rate set by the BoC. This, in turn, depends on the prevailing rate of inflation. Simply put, the higher inflation is in Canada, the higher the BoC’s benchmark rate, and the higher the interest rate you pay on your loans. On the bright side, a high-rate environment also offers high GIC interest rates—a boon for Canadian investors.

    When you buy a GIC, you lend money to a bank or other GIC issuer in exchange for a guaranteed amount of interest at the end of an agreed-upon period (such as one, two or five years). 

    We can’t predict future interest rates, but for now, here are some interest rates you can get on long-term non-redeemable GICs at Scotiabank as of mid-December 2023.

    Term Interest rate
    1-year 5%
    2-year 4.3%
    3-year 4.1%
    4-year 4.45%
    5-year 4.35%
    Rates are provided for information purposes only and are subject to change at any time.

    It’s notoriously tricky to pinpoint precisely where interest rates will go, but we can expect that GIC rates will remain relatively high as long as inflation persists in Canada. While inflation is down from the scary heights of 8% in June 2022, it’s still above the BoC’s target rate of 2%. So, rates may remain flat until we see significant cooling in the Canadian economy. This means that while GIC rates may not spike further, the current rates could persist for a while.

    GIC vs. high-interest savings account (HISA)

    Just as the rates for GICs are up, so are those offered on high-interest savings accounts (HISAs). As a result, Canadians are exploring HISAs and drawing comparisons between these and GICs to determine the better investment. While a HISA may be more flexible than a GIC, if you’re looking for higher guaranteed rates of return, GICs could be the way to go. For example, as of early December 2023, money held in a Scotiabank HISA for 360 days will offer you 2.55% to 2.65%.

      HISA Cashable GIC Non-redeemable GIC
    Term 360 days 1 year 1 year
    Interest rate 2.55% to 2.65% 2.85% 5%
    Rates are provided for information purposes only and are subject to change at any time.

    Choosing a GIC

    If you’re considering investing in a GIC, here are the various types on offer:

    • Non-redeemable GICs: You buy a GIC for a set period (called the “term”), with a fixed and guaranteed annual interest rate. At the end of the term, you get your principal back, along with the interest earned. These GICs cannot be cashed in prematurely.
    • Cashable GICs: Unlike non-redeemable GICs, cashable GICs can be cashed in prematurely—before the term of the GIC is complete. You must hold this GIC for at least 30 days, and you can keep the interest earned up to the date you redeem it.
    • Personable redeemable GICs: At Scotiabank, these GICs are currently available for a two-year term. They offer a higher rate of interest than a cashable GIC, and they can be redeemed early, either partially or fully.
    • Market-linked GICs: Market-linked GICs offer investors the safety of traditional GICs and the potential to earn higher returns linked to the stock market. Like a conventional GIC, your principal is protected, and you get a minimum guaranteed interest rate (though it is typically lower than for other GIC types). Additionally, the GIC is linked to a major U.S. or Canadian stock market index—such as the S&P 500 or the S&P/TSX 60. For example, if the index rises 8%, you will get 8% on your GIC instead of the minimum guaranteed rate of about 2.4%.

    Market-linked GICs: pros and cons

    Before you buy a market-linked GIC, here are some points to consider:

    [ad_2]

    Aditya Nain

    Source link

  • Making sense of the markets this week: December 24, 2023 – MoneySense

    Making sense of the markets this week: December 24, 2023 – MoneySense

    [ad_1]

    So, given that context, we’re pretty proud of how these predictions held up.

    Inflation will continue to dominate the news

    “People who are unemployed feel the unemployment rate: but everyone feels the inflation rate.

    “Nothing gets people’s attention faster than paying higher prices for housing, gas and groceries. That’s what makes it such a tempting news story to keep reporting on. It also makes it almost impossible for politicians and policy makers to ignore.

    “Until the inflation rate comes down, to at least 4% (it’s currently 6.8%), I don’t see most investment commentators talking about much else.”

    Making sense of the markets this week: January 1, 2023

    Grade: A

    OK, admittedly, I started with a layup. Given how important inflation and interest rates are to the pricing of assets in almost every market, it was a high-probability bet that this would dominate markets in 2023. That said, it’s undeniable that the rapid pace of interest-rate rises took up most of the oxygen in the room this year. Over the last few months inflation has been coming down to the 3% to 4% level. And, as predicted, we’re finally seeing some other stories emerge. This week, for example, the Bank of Canada (BoC) announced a headline inflation rate of 3.1% and it failed to lead the news anywhere I looked (despite being slightly higher than predicted).

    The Russian invasion remains predictably unpredictable

    “None of the experts I read about a year ago predicted Russia would invade its neighbours and send geopolitical shockwaves reaching every corner of the planet.

    “None of the experts I read about 10 months ago predicted the Ukrainian military response would be able to stand up to the Russian war machine for more than a few days.

    “At some point maybe it would be best to admit that the experts really have no idea where this conflict is headed. Despite the tragic loss of life and catastrophic disruption of society, it seems to me that there is little evidence that either side will back down as we enter 2023. 

    “If—and this appears the more likely situation—the war drags on or escalates, it becomes difficult to quantify the damage inflicted on economies, like Germany’s, which are so dependent on Russia’s energy. 

    “Sure, demand destruction and the Green Revolution are coming… eventually… and at substantial cost. Even scarier is the unpredictable nature of the response to food shortages in desperate countries around the world. Generally speaking, food riots aren’t good for business (or humanity).”

    Making sense of the markets this week: January 1, 2023

    Grade: B+

    It’s not fun predicting that war will be awful. The tragedy taking place in Ukraine continues to be a struggle for all parties involved, and I don’t think we’re much closer to a long-term peace than we were at this time last year. The war has definitely contributed to high food costs around the world and continues to be quite disruptive within specific industries.

    That said, much of Europe adapted to new energy supply chains more quickly than originally anticipated. A new market equilibrium appears to have been established, but there is no question that the war continues to be a worldwide drain on resources and, more importantly, an absolute tragedy.

    The much-talked-about recession will continue to be talked about

    “At this point, I feel like we might forecast a recession forever.

    “Whether a recession will ever actually arrive or not is another story. 

    “With inflation in the U.S. falling to an annualized rate of 3.7% over the last three months, I’d argue we’re not only past peak inflation, but are actually well on our way to some sort of ‘new normal.’ With a substantial lag between when monetary policy is announced, and when its full effects are felt, we might not need a recession to lower inflation despite all of the headlines.

    “Of course, I continue to refer to the fact that whether we see two quarters of -0.1%, and -0.1% GDP shrinkage, or a quarter of -0.3% growth followed by a quarter of 0.2% growth, the distinction of ‘recession or not’ is irrelevant. The first scenario is a technical recession by most definitions. The second scenario is just a bad quarter followed by a less bad quarter. Whether we have a recession or not really isn’t that important in the long term.

    “Have the asset markets (such as stock or property markets) in which I’ve invested my money already anticipated the bad stuff coming by ‘pricing it in’?

    “Almost assuredly.

    “Remember that the stock market and the economy are not the same thing. Professional investors look past current events—they’re aware of the recency bias. They foresaw some rough waters ahead throughout 2022, but that doesn’t mean 2023 will also be so bleak.”

    Making sense of the markets this week: January 1, 2023

    Grade: A+

    Given the gross domestic product (GDP) situation Canada announced two weeks ago, we’re comfortable saying we knocked this one out of the park. Considering how many experts were predicting a recession at the end of 2022 and calling for falling markets, the theory that markets had priced in a pretty rough ride was the correct one.

    [ad_2]

    Kyle Prevost

    Source link

  • Should you consider ETFs that include crypto? – MoneySense

    Should you consider ETFs that include crypto? – MoneySense

    [ad_1]

    But 2023 has been different. Aside from a few prominent scandals, it’s been a year of resurgence and renewed investor interest. The price of bitcoin (BTC) has risen from about $16,500 at the start of the year to about $41,300, as of Dec. 18, 2023—an eye-popping gain of about 150%. But is crypto too volatile to invest in—especially if you’re a conservative investor? Is it worth exploring, or should you stay away from all the hype?

    What are cryptocurrencies? A quick refresher for Canadian investors

    Cryptocurrency is a form of digital money based on blockchain technology, which securely and permanently records transactions in a digital ledger. Unlike traditional fiat currency, crypto isn’t created, managed or backed by banks. Bitcoin, for example, operates on a multitude of computers around the world (called “nodes”) that run a specific algorithm. Together, they contribute massive amounts of computing power to create new coins, process transactions and maintain the decentralized ledger of these transactions.

    In the past, Canadian crypto investors bought coins, or fractions of coins, via crypto exchanges. Today, you can invest in exchange-traded funds (ETFs) that hold bitcoin and ethereum, making crypto more accessible to a wide range of investors.

    The potential benefits of investing in crypto

    Many Canadian investors remain cautious about crypto, wary of the dizzying volatility of crypto prices. Nonetheless, crypto is quickly emerging as an asset class for some long-term investors, exemplified by Fidelity’s All-in-One ETFs—which blend a small yet potentially impactful allocation of 1% to 3% of cryptocurrency into diversified portfolios of stocks and bonds. Adding a sprinkling of crypto assets to your portfolio could have these advantages:

    Diversification and hedging against traditional markets

    Diversification has typically meant allocating your portfolio to a certain percentage of stocks and bonds. However, bonds have had a torrid couple of years, and high inflation rates are spooking stock markets. So, investors are seeking fresh ideas. Diversifying with crypto could be promising because—although volatile and risky in itself—crypto does not suffer from all the same systemic risks that some stocks and bonds do. However, investors need to consider other crypto risks, such as regulatory uncertainty and technology risks.

    Potential for higher returns

    In diversified portfolios, stocks have so far been the growth engine. But, with crypto offering higher historical returns over the past 10 years, even a small allocation of 1% to 3% to crypto can potentially enhance an ETF’s returns.

    A slice of the future

    A small allocation to crypto gives you a slice of (what could be) the future of money and investments. Nobody knows how big the crypto market will be in 10 years and what role crypto will play in the future. A Fidelity All-in-One ETF with a small 1% to 3% allocation to crypto allows you to participate in the (possible) future without managing or storing it yourself. 

    Pure crypto ETFs vs. all-in-one ETFs

    Fidelity’s All-in-One ETFs allocate 1% to 3% to crypto. It’s a low percentage, but BTC has delivered annualized gains of over 50% over the last five years, so even a small allocation can give your investments a big boost. While many Canadian investors will be content with this 1% to 3% crypto allocation, some experienced investors may want to manage their crypto allocation themselves—with the ability to increase or decrease their crypto allocation independently. For these investors, there’s the Fidelity Advantage Bitcoin ETF, which invests substantially all of its holdings in bitcoin. In fact, Fidelity’s All-in-One ETFs gain exposure to BTC through this very ETF. Here’s an overview of Fidelity’s All-in-One ETFs that include crypto in their neutral asset allocation mix (as at Oct. 31, 2023).

    [ad_2]

    Aditya Nain

    Source link

  • What is a cashable GIC? – MoneySense

    What is a cashable GIC? – MoneySense

    [ad_1]

    How cashable GICs work

    Traditionally, GICs offer Canadian investors three core benefits:

    • Principal protection to ensure your money remains safely invested
    • A guaranteed interest rate to ensure you get a fixed return on your investment
    • Canada Deposit Insurance Corporation (CDIC) coverage of up to $100,000 per depositor (in the event of bank insolvency), subject to CDIC rules and regulations

    In addition to these three core benefits, a cashable GIC offers investors the option of getting their money back even before the term of the GIC has ended, if they so choose. For example, as of Dec. 14, 2023, you could buy a one-year cashable GIC from Scotiabank at an interest rate of 2.85%. If you need your money back sooner than anticipated, you can redeem the GIC. There is no interest penalty for cashing out early—so you will get the interest earned to date—but you must hold the GIC for at least 30 days before you can do so. Cashable or redeemable GICs offer investors great flexibility but note that banks typically offer higher rates for non-redeemable GICs—currently even 5% for a one-year GIC, as shown in the table below.

    1-year non-redeemable
    GIC
    (paid annually)    		 1-year non-redeemable
    GIC
    (paid semi-annually)    		 1-year cashable GIC
    (paid at maturity)
    Interest rate 5% 4.92% 2.85%
    Redeemable early No No Yes
    Eligible for registered accounts Yes Yes Yes
    CDIC-eligible Yes Yes Yes
    Rates are provided for information purposes only and are subject to change at any time.

    Are cashable GICs a good investment?

    Here are some reasons why cashable GICs may be a good investment:

    • They’re eligible for non-registered and registered investment accounts, including registered education savings plans (RESPs), registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), registered disability savings plans (RDSPs), first home savings accounts (FHSAs) and tax-free savings accounts (TFSA).
    • They can be used for tax planning—for example, by buying a GIC in an RRSP account to get a tax deduction, or by holding a GIC in an FHSA to get a deduction and tax-free growth—as long the money is eventually used towards buying a first home.
    • They are flexible—giving investors the option of fully or partially redeeming their investment, depending on the type of product chosen.
    • These GICs have a low minimum investment amount of $500 and no investment fees—making them accessible to smaller and newer investors.
    • Cashable GICs are eligible for CDIC protection, up to $100,000 per depositor, at CDIC member institutions.

    Given these benefits, a cashable GIC may be suitable for an investor who wants to combine the benefits of traditional GICs—like principal protection and a guaranteed interest rate—with the flexibility of cashing out anytime. (Note, however, that if you redeem within 30 days of the GIC’s issuance, you will forfeit the accumulated interest.)

    If you’re saving up to buy a car or a home, for example, GICs are a safe and reliable way to grow your money and access it when you need it.

    Can I transfer my GIC?

    Canadians are accustomed to transferring their investments from one institution to another if needed—say, from one bank to another. However, unlike mutual funds, exchange-traded funds (ETFs) and stocks, GICs typically cannot be transferred. This is because a GIC is a contract between you and the institution, and each institution offers its own GIC interest rates, terms and conditions. So, if you’re buying a GIC, be prepared to hold it at the financial institution where you bought it. If you have a cashable GIC and you need to move your investments to another institution, you could cash in the GIC and reinvest the cash in a GIC at the new institution.

    How to buy Scotiabank cashable GICs

    If the ability to access your cash early is what you need, here are two options available through Scotiabank:

    Cashable GIC Personal redeemable GIC
    Minimum investment amount $500 $500
    Term 1 year 2 years
    Annual interest rate 2.85% 4.75%
    Partially or fully redeemable Fully or partially Fully or partially
    Investment fees No No
    Principal protection Yes Yes
    Guaranteed interest rate Yes Yes
    Eligible for registered accounts Yes Yes
    CDIC-eligible Yes Yes
    Rates are provided for information purposes only and are subject to change at any time.

    How do you buy a cashable GIC?

    Cashable GICs are typically available wherever you buy your other GICs. For example, you can purchase Scotiabank GICs, including cashable/redeemable GICs, through a Scotiabank advisor. Book an appointment with an advisor online or by phone. Read more about Scotiabank GICs.

    [ad_2]

    Aditya Nain

    Source link

  • Bitcoin is surging—what’s the prediction for crypto in 2024? – MoneySense

    Bitcoin is surging—what’s the prediction for crypto in 2024? – MoneySense

    [ad_1]

    In Canada, spot bitcoin ETFs were approved in 2021. (The first North American bitcoin ETF, the Purpose Bitcoin ETF, launched in February 2021.) However, approval of these funds in the U.S. holds greater significance due to the larger market size and broader investor accessibility. It would also signal crypto’s continued progress towards mainstream acceptance.

    Growing institutional interest in crypto

    Bitcoin is gaining mainstream acceptance, as institutional investors continue to warm up to cryptocurrencies, particularly BTC and ethereum (ETH). Bitcoin’s limited supply, its upcoming halving event (expected in April 2024), and the possibility of a spot bitcoin ETF have further added to the digital currency’s allure for institutional investors, which have poured more than $1 billion into BTC this year.

    Scarcity-seeking institutional investors are particularly enthused by the prospect of bitcoin halving, a process that halves the reward for mining, or validating, new blocks on bitcoin’s blockchain, thereby reducing the supply of the coin. A halving event happens once every four years and effectively makes the asset more attractive to investors.

    Falling bond yields

    Bitcoin’s fortunes are closely tied to U.S. bond yields. Bitcoin and bonds move in opposite directions due to their sensitivity to market sentiment regarding economic stability and inflation.

    The inverse relationship means that at a time when bond yields are trending lower, bitcoin prices are ticking higher. However, when yields are rising, as they did in the first half of the year, investors have less incentive to chase returns from other assets, including cryptocurrencies and equities.

    What to expect for bitcoin in 2024

    Looking forward, the consensus among analysts is overwhelmingly positive for bitcoin. However, their degrees of optimism and price forecasts vary widely. Some crypto watchers are expecting the digital currency to return to its 2021 all-time-high price of more than $69,000. Considerably wilder predictions for 2024 call for bitcoin to hit $120,000 and even $250,000.

    However, the usual warnings apply. Investors should proceed with cautious optimism. Any unforeseen geopolitical, financial or regulatory events could derail investor sentiment yet again and send bitcoin’s price tumbling, bringing with it the value of the broader crypto market. Crypto analysts remind investors that cryptocurrencies remain a risky bet.

    If the short history of bitcoin has proved anything, it is that the digital coin’s value tends to be highly volatile, and its fluctuations can wipe out millions of dollars in minutes. As a digital asset, bitcoin also continues to exhibit sharp sensitivity to a host of factors including, but not limited to, geopolitical events, regulatory oversight, high-profile lawsuits, crypto scams and cybercrime. Investors seeking to gain bitcoin exposure should invest only what they can afford to lose. To borrow from a universally acknowledged gambling caveat: know your limit, play within it.

    [ad_2]

    Vikram Barhat

    Source link

  • 'Smidcap' companies are becoming a big deal. Here's a look at some of the best.

    'Smidcap' companies are becoming a big deal. Here's a look at some of the best.

    [ad_1]

    The stocks of long-neglected small companies are finally showing signs of life as the market rally broadens. But these tiny companies still remain vastly undervalued. So, they are one of the best buys in the stock market right now.

    Small- and medium-cap companies, or smidcaps, have not been this cheap since the Great Financial Crisis 15 years ago. “Smidcaps relative to large caps look very attractive,” says says portfolio manager Aram Green, at the ClearBridge Select Fund LBFIX, which specializes in this space.  “Over the long term you will be rewarded.” 

    Green is worth listening to because he is one of the better fund managers in the smidcap arena. ClearBridge Select beats both its midcap growth category and Morningstar U.S. midcap growth index over the past five- and 10 years, says Morningstar Direct. This is no easy feat, in a mutual fund world where so many funds lag their benchmarks. 

    The timing for smidcap outperformance seems about right, since these stocks do well coming out of recessions. Technically, we have not recently had a recession. But there was an economic slowdown in the first half of the year, and the U.S. did have an earnings recession earlier this year. So that may count. 

    To get smidcap exposure, consider the funds of outperforming managers like Green, and if you want to throw in some individual stocks, Green is a great guide on how to find the best names in this space. 

    I recently caught up with him to see what we can learn about analyzing smidcaps. Below are four tactics that contribute to his fund’s outperformance, with nine company examples to consider.  

    1. Look for an entrepreneurial mindset: Green’s background gives him an edge in investing. He’s an entrepreneur who co-founded a software company called iCollege in 1997. It was bought out by BlackBoard in 2001. He knows how to understand innovative trends, identify a good idea, secure capital and quickly ramp up a business. This experience gives him a “private market mindset” that helps him pick stocks to this day. 

    “Founder-run companies regularly outperform.”

    Green looks for managers with an entrepreneurial mindset. You can glean this from company calls and filings, but it helps a lot to meet management — something most individual investors cannot do. But Green offers a shortcut, one which I regularly use, as well. Look for companies that are run by founders. This will give you exposure to managers with entrepreneurial spirit. 

    Here, Green cites the marketing software company HubSpot
    HUBS,
    +0.79%    ,
    a 1.9% fund position as of the end of the third quarter. It was founded by Massachusetts Institute of Technology college buddies Brian Halligan and Dharmesh Shah. They’re on the company’s board, and Shah is chief technology officer. 

    Academic studies confirm founder-run companies regularly outperform. My guess is this is because many founders never lose the entrepreneurial spirit, no matter how easy it would be to quit and sip Mai Tai’s on a beach after making a bundle.  

    In the private market, Green cites Databricks, a data management and analytics company with an AI angle. This competitor of Snowflake
    SNOW,
    -0.92%
    is likely to go public in 2024. If you feel like an outsider because you lack access to private market investing, note that Green says he typically buys more exposure to private companies on the initial public offering (IPO), and then in the market.  “We like to spend time with them when they are private so we can pounce when they are public,” Green says.

    2. Look for organic growth: When companies make acquisitions their stocks often decline, and for good reason. Managers make mistakes in acquisitions because they overestimate “synergies.” Or they get wrapped up in ego-enhancing empire building. 

    “We favor entrepreneurial management teams that do not make a lot of acquisitions to grow, but use their resources to develop new products to keep extending the runway,” says Green. 

    Here, he cites ServiceNow
    NOW,
    +2.62%    ,
    which has grown by “extending the runway” with new offerings developed internally. It started off supporting information technology service desks, and has expanded into operations management of servers and security, onboarding employees, data analytics, and software that powers 911 emergency call systems. Green obviously thinks there is a lot more upside to come, given that this is an overweight position, at 4.6% of the portfolio (the fund’s biggest holding).

    Green also puts the “Amazon.com of Latin America” MercadoLibre
    MELI,
    +0.17%
    in this category, because it continues to expand geographically and in areas such as logistics and payment systems. “They have really morphed into a fintech company,” Green says. He puts HubSpot and the marketing software company Klaviyo
    KVYO,
    -5.73%
    in this category, too. 

    3. Look for differentiated business models: Green likes companies with offerings that are special and different. That means they’ll take market share, and face minimal competition. They’ll also enjoy pricing power. “This leads to high margins. You don’t have someone beating you up on price,” he says. 

    Green cites the decking company Trex
    TREX,
    +0.10%    ,
    which offers composite decking and railing made from recycled materials. This gives it an eco-friendly allure. Compared to wood, composite material lasts longer and requires less maintenance. It costs more up front but less over the long term. Says Green: “The alternative decking market has taken about 20% of the market and that can get to 50%.”

    Of course, entrepreneurs notice success, and try to imitate it. That’s a risk here. But Trex has an edge in its understanding of how to make the composite material. It has a strong brand. And it is building relationships with big-box retailers Home Depot and Lowe’s. These qualities may keep competitors at bay. 

    4. Put some ballast in your portfolio: Green likes to keep the fund’s portfolio balanced by sector, size, and business dynamic. So the portfolio includes the food distributor Performance Food Group
    PFGC,
    -1.69%    .
    The company is posting mid-single digit sale growth, expanding market share and paying down debt. Energy drinks company Monster
    MNST,
    -0.85%
    also offers ballast. Monster’s popular product line up helps the company to take share and enjoy pricing power, Green says.

    It’s admittedly unusual to see a food companies in a portfolio loaded with high-growth tech innovators. But for Green, it’s all part of the game plan. “Rapid growth, disrupting businesses are not going to work year in year out. There are times they fall out of favor, like 2022. So, having that balance is important because it keeps you invested in the equity market.” 

    In other words, keeping some ballast means you’re less likely to get shaken out by sharp declines in high-growth and high-beta tech innovators when trouble strikes the market.

    Michael Brush is a columnist for MarketWatch. At the time of publication, he owned AMZN, TSLA and MELI. Brush has suggested AMZN, TSLA, NOW, MELI, HD and LOW in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks

    More: Nvidia, Disney and Tesla are among 2023’s buzziest stocks. Can they continue to sizzle in 2024?

    Also read: Presidential election years like 2024 are usually winners for U.S. stocks

    [ad_2]

    Source link

  • How to buy Fidelity ETFs in Canada – MoneySense

    How to buy Fidelity ETFs in Canada – MoneySense

    [ad_1]

    ETFs may have lower management fees than comparable mutual funds. And, with such a wide variety of ETFs with different asset allocations to choose from—including funds that combine equities with fixed income and even cryptocurrency—there are ETFs for a range of investors, from conservative to aggressive. You can choose ETFs that try to replicate an entire stock index, such as the S&P 500, or focus on a specific sector or geographical region. Most ETFs are passively managed, but a growing number of funds are actively managed.

    Plus, you can hold ETFs in both non-registered and registered investment accounts. Examples of registered accounts include the registered retirement savings plan (RRSP), tax-free savings account (TFSA) and first home savings account (FHSA).

    Investing in Fidelity ETFs

    In Canada, Fidelity Investments offers a variety of ETFs for investors with different investment objectives, time horizons and tolerance for risk. Investors can consider ETFs in the following categories:

    • Equity ETFs invest in stocks across a broad range of sectors, market capitalizations and geographies.
    • Fixed income ETFs invest in bonds and can be used to generate income, with the potential for capital preservation. 
    • Balanced or multi-asset ETFs invest across asset classes, including stocks and bonds.
    • A sustainable ETF that invests in companies with favourable environmental, social and governance characteristics.
    • Digital asset ETFs have direct exposure to cryptocurrency, such as bitcoin and ether.

    Fidelity ETFs are available through financial advisors and online brokerages. Learn more about Fidelity ETFs.

    Learn more about ETFs

    On this page, we’ll share articles to help you learn about and evaluate ETFs for your investment portfolio. Check back often for more insights.

    • How many ETFs can Canadian investors own?
      ETFs offer Canadian investors an appealing combination of convenience, diversification and low fees. But how many ETFs should you own, and which ones?
    • What investments can I put in my TFSA?
      The TFSA contribution limit for 2024 was recently announced. TFSAs can hold more than just cash. Get to know your TFSA investment options, including some Fidelity All-in-One ETFs that offer portfolio diversification.

    Know your investing terms

    Brush up on investing basics with helpful definitions from the MoneySense Glossary.

    This article is sponsored.

    This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.

    Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in mutual funds and ETFs. Please read the mutual funds or ETF’s prospectus, which contains detailed investment information, before investing. Mutual funds and ETFs are not guaranteed. Their values change frequently, and investors may experience a gain or a loss. Past performance may not be repeated.

    The statements contained herein are based on information believed to be reliable and are provided for information purposes only. Where such information is based in whole or in part on information provided by third parties, we cannot guarantee that it is accurate, complete or current at all times. It does not provide investment, tax or legal advice, and is not an offer or solicitation to buy. Graphs and charts are used for illustrative purposes only and do not reflect future values or returns on investment of any fund or portfolio. Particular investment strategies should be evaluated according to an investor’s investment objectives and tolerance for risk. Fidelity Investments Canada ULC and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered.

    Portions © 2023 Fidelity Investments Canada ULC. All rights reserved. Fidelity Investments is a registered trademark of Fidelity Investments Canada ULC.

    The presenter is not registered with any securities commission and therefore cannot provide advice regarding securities.




    About Jaclyn Law

    Jaclyn Law is MoneySense’s managing editor. She has worked in Canadian media for over 20 years, including editor roles at Chatelaine and Abilities and freelancing for The Globe and Mail, Report on Business, Profit, Reader’s Digest and more. She completed the Canadian Securities Course in 2022.

    [ad_2]

    Jaclyn Law

    Source link

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

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

    [ad_1]

    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.

    [ad_2]

    Allan Small

    Source link

  • Making sense of the markets this week: December 10, 2023 – MoneySense

    Making sense of the markets this week: December 10, 2023 – MoneySense

    [ad_1]

    The S&P 500 (index of the 500 largest U.S. stocks) was up over 8%. That’s significantly better than its November average of 1.54% going back to 1950. November is historically the best month in the U.S. stock market.

    The Toronto Stock Exchange’s S&P/TSX composite index was up 7.2% in November. There are only five single months since 2002 when there was a higher return: November 2020, April 2020, January 2019, May 2009, March 2009. By the way, January 2023 was pretty great too at 7.13%.

    Stock markets across the globe also did pretty well in November, with an all-world index up 9%.

    Remember, the stock market goes up most of the time.  

    It pays to be an optimist!

    Forget “girl math,” here’s “old man math”

    One of the most popular personal finance gurus of all time is Dave Ramsey. He’s incredible at promotion, and he’s written more books than the number of times a Canadian NHL team has ever won the Stanley Cup. Ramsey hosts radio shows, appears constantly on network TV, and is generally a one-man financial content machine.

    But, does any of this mean that Ramsey actually gives good advice?

    I’m sure there is someone somewhere who Ramsey has helped. But the number of times he makes absolutely outlandish, nonsensical claims is incredible. Thanks to Dollars and Data for the assist, here’s his latest take, which is an unedited quote from Ramsey’s show. 

    [ad_2]

    Kyle Prevost

    Source link

  • Will Canadian HISA ETFs survive the new rule change? – MoneySense

    Will Canadian HISA ETFs survive the new rule change? – MoneySense

    [ad_1]

    The Office of the Superintendent of Financial Institutions (OSFI) issued a ruling on Oct. 31, 2023, that requires banks taking deposits from ETF issuers to have 100% of the capital needed to support those deposits in case they get rapidly withdrawn.

    The most popular HISA ETFs 

    The reason for HISA ETFs’ popularity with investors is not hard to see. After a couple of the worst years ever for fixed income, they present a place to park your money with essentially zero volatility, combined with yields tracking ever-higher interest rates (now more than 5%). Not only do these funds find some of the best deals in savings accounts for you, but you can also buy and sell them on a whim.

    As of Oct. 31, the CI High Interest Savings ETF (CSAV) ranked as the fourth largest ETF in Canada, with $8.7 billion in assets under management, CEFTA figures show. And HISA ETFs’ appeal seems undiminished, even as fixed income reasserts its position in investors’ portfolios with interest rates expected to top out soon, if they haven’t done so already. Over the month of October, the Horizons High Interest Savings ETF (CASH) and CSAV were the number two and number three ETFs in Canada, respectively, in net inflows.

    Are HISA ETFs safe?

    The sudden shift of capital into HISA ETFs caught the attention of the OSFI, which oversees banks operating across the country. The regulator was concerned about the potential for instability in the banking system should investors withdraw their money as fast as, or faster than, they deposited it, as the ETF format enables them to do. The OSFI undertook a public consultation process last spring, considering “systemic concerns with contagion, potential for regulatory arbitrage, and the absence of guarantees or deposit insurance typically found with traditional savings accounts,” it said in its ruling on Hallowe’en.

    When new regulations around HISA ETFs take effect

    The OSFI ruled that, as of Jan. 31, 2024, “any deposit-taking institutions exposed to such funding must hold sufficient high-quality, liquid assets, such as government bonds, to support all HISA ETF balances that can be withdrawn within 30 days.” 

    What it means for Canadian investors

    While the decision is directed at the banks offering HISAs, it will have indirect effects on the ETFs holding these savings accounts. Some Canadian investors have expressed concern that the new rules might restrict the number of banks taking deposits from fund companies and might constrain yields as a result. 

    An analysis by TD Securities suggested yields would drop around half a percentage point come January. However, Naseem Husain, senior vice president and ETF strategist at Horizons ETFs, emphasizes the upside of regulatory clarity.

    “At the end of the day, the OSFI decision regulates and confirms the ongoing viability of HISA ETFs, ensuring they’re here to stay and will continue to be a viable investment option,” says Husain. “This decision will likely lead to greater competition in the space from a product perspective, and that could incentivize more investors to consider using HISA ETFs in their portfolios.”

    [ad_2]

    Michael McCullough

    Source link

  • Making sense of the markets this week: December 3, 2023 – MoneySense

    Making sense of the markets this week: December 3, 2023 – MoneySense

    [ad_1]

    When a recession is not a recession

    This week saw a perfect example of why the word “recession” has now largely been rendered irrelevant. 

    Recession notes

    Before we get to why all this recession talk can be misleading, here are the facts:

    • A recession means two consecutive quarters of negative gross domestic product, GDP. (Read my recession explainer from a year ago). 
    • In the past few years, several economists argued about whether the definition of recession should be that simple. Now, there’s also the term “technical recession” to describe two consecutive quarters of a contracting GDP, while reserving the generalized term “recession” for a vague set of parameters that include unemployment and whatever else they want to include. 
    • Three months ago, Statistics Canada told us that our GDP had contracted 0.2% from April to June.
    • On Thursday, Statistics Canada said our GDP had contracted 0.3% from July to September.

    So, obviously we’re in a recession, or at least we’re in a technical recession, right?!

    Nope.

    In its Q3 announcement, Statistics Canada revised its second-quarter GDP measure. To me, it says: “Yeah, so we had another look at the numbers, and, uh, it turns out instead of a slight contraction of GDP, we actually had a very small growth in GDP. So, if you look at the six months from April to September, there was a very small overall shrinkage in Canada’s GDP, we’re not in a ‘technical recession’.”

    Source: CBC News

    The much bigger story here could be that Canada’s large immigration numbers are creating an overall GDP number irrelevant to the average Canadian. After all, most people want economic reporting to explain if their own personal situation is likely to get better or worse.

    When you look at our GDP-per-capita and overall production-per-capita numbers, Canada is right where it was in 2017. 

    That’s not to say that increased immigration is a problem or that it has a negative economic effect. I personally feel quite the opposite. 

    It’s simply a question of how to explain math to Canadians. Whether Canada’s economy grows by 0.2% or shrinks by 0.2% from quarter to quarter is much less important than the fact we’re increasing population by 2.7% per year, and getting nowhere near the level of GDP growth. If our collective economic pie is staying essentially the same size (or perhaps growing very slowly), but we’re cutting it into more and more pieces at an increasing rate, then the most relevant statistic isn’t GDP. Rather it’s the real GDP per capita.

    [ad_2]

    Kyle Prevost

    Source link

  • Making sense of the markets this week: November 26, 2023 – MoneySense

    Making sense of the markets this week: November 26, 2023 – MoneySense

    [ad_1]

    Source: Google Finance

    In a report full of positive figures, perhaps the most impressive highlight was that data centre revenue (mostly from cloud infrastructure providers like Amazon and Microsoft) was up 279%, to USD$14.51 billion. Only a few years ago, Nvidia was basically known as a fairly simple (albeit still profitable) company that made computer chips for video games. As long as it maintained its competitive advantage on AI chips, it essentially has license to print ever-increasing amounts of money. We’ll see how long it takes the other chip heavyweights to catch up.

    The fly in the ointment of Nvidia’s earnings report, though, was a warning that export restrictions from China and other countries were going to have a negative effect on the fourth quarter’s bottom line.

    When should we expect the stock market to hit new highs?

    Ben Carlson is back, on A Wealth of Common Sense, with an interesting look at how often the U.S. stock market breaks its previous all-time high.

    With all the negative news headlines these days, you might be forgiven for assuming things must be pretty rough at the moment. Heck, you might even have thought we were a long way away from a new market high.

    The truth is the U.S. stock market is fast approaching its all-time high. And it looks like this gap between market peaks will be the fifth longest on record. In other words, the recent bear market has caused substantial pain, but it’a far from the worst-case scenario.

    In Canada, the TSX Composite index index hit 22,213 in April of 2022. Today, we sit at about 20,114, so we’re still down about 10% from all-time highs. That said, we wouldn’t bet against the Canadian stock market crashing through that ceiling in early 2024. (Predictions column to come soon!)

    It’s also important to remember that the companies that make up Canada’s stock market index pay out higher annual dividends than their U.S. counterparts. That isn’t reflected in these index comparisons.

    Of course, one might want to consider that while stock prices are bouncing back they’re still pretty far away on a “real” basis if we adjust for inflation. In other words, if you’re selling stocks to pay for life’s expenses, then you will have to sell more of those stocks (even if they’re back up to 2022 levels) to buy the same stuff that you used to. That price difference is obviously due to the high inflation rates the last couple of years.

    [ad_2]

    Kyle Prevost

    Source link

  • Is Canada in a recession? A look at the state of our economy – MoneySense

    Is Canada in a recession? A look at the state of our economy – MoneySense

    [ad_1]

    When will the Bank of Canada lower interest rates?

    Soon, said Donald, soon. She went on to suggest the BoC will cut interest rates in early 2024. “Probably in Q1 or Q2, and we’re ahead of the pack on that one. The [U.S. Federal Reserve] could be cutting interest rates by mid-year.” Those of us looking to buy a home or renew their mortgage will be very happy to see a change in mortgage rates in Canada.

    Photo of Bill Morneau by Joseph Michael Photography

    What about fiscal policy? 

    Morneau was the PMAC conference’s lunchtime keynote speaker. When asked about the state of the economy, he said: “I wasn’t surprised by the continued strong performance in the U.S. economy. And that, I think, is at least a positive indicator.” He added that a recession will drag on in both Canada and the United States, and that the government is feeling pressured to take action on spending and keep up with services.

    “What the government needs to do is to make sure that, fiscally, it’s acting in a prudent fashion,” Morneau said. “From my perspective, I don’t think it’s time for introducing new programs. I think it’s time to carefully open the world’s expenditures.”

    Do Canadians have enough savings?

    That depends. Not just on who you ask, but also the numbers you look at, said Donald. “One of the reasons why we have not yet experienced a recession in the United States, and why it’s been slow in Canada, is because apparently there was excess savings everywhere,” she said. “Here’s the dirty little secret: we actually have no idea how much excess savings is in the system.” The ranges in reports go from $0 to USD$1.5 trillion, and that’s because there are no historical models for what’s happening right now, and none applicable to the current state of the economy.

    There are Canadians concerned about their current finances and having enough savings, as well as the ability to save for retirement. Low-risk investments like guaranteed investment certificates (GICs) and high-interest savings accounts are looking pretty favourable with their higher-than-typical rate of return (say, compared to when the BoC rates are lower).

    Next steps in fixing the economy and inflation

    Repairing the economy isn’t about savings or defining a recession. “The excess savings story actually masks the forest for the trees, because we’re talking about the largest transfer of government spending that we have seen in a post-war period in Canada and the United States,” said Donald. 

    The government typically spends money during hard times, including recessions, to move the economy back into a good state. But government debt is high, and Canadians and Americans feel “worse off.” “For the first time in my career, we were looking at the 10-year yield, and we’re trying to figure out what’s going on in the bond market,” said Donald. 

    Typically, during a recession in Canada, inflation would fall because Canadians would spend less money. But in today’s global market, taming inflation isn’t just about consumer behaviour, but also about weather, war and other geopolitical issues. “It’s actually coming from a myriad of factors. But moving forward, we know that the drivers and the ways that we calculate inflation are shifting.”

    [ad_2]

    Lisa Hannam

    Source link