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Tag: investing strategy

  • Responsible investing is growing in Canada. Which ESG factors matter most? – MoneySense

    Responsible investing is growing in Canada. Which ESG factors matter most? – MoneySense

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    According to the 2023 Canadian Responsible Investment Trends Report, released on Oct. 26 by the Responsible Investment Association (RIA), the answer is yes: investors continue to prioritize responsible investing, and more growth is expected as local and international reporting standards improve. Survey responses are from Canadian institutional asset managers and asset owners who answered questions in mid-2023. The data shared paints a picture of the industry on Dec. 31, 2022. Here are some highlights from the report.

    About half of assets under management are invested responsibly

    With $2.9 trillion of assets under management in responsible investments (RI) in Canada, this is no small industry. And while this number is a slight decrease from the previous year, that’s a product of market conditions: it actually reflects a higher proportion of all Canadian professionally managed assets than in 2021, and RI’s market share has grown from 47% to 49%.

    Responsible investing is a risk management strategy

    You might think the main motivation for anyone choosing responsible investing is what’s in the ESG acronym: environmental, social and governance factors. And while those are definitely important—14% of survey respondents said their organization’s primary reason for choosing RI was to fulfill its mission, purpose or values—there are many other factors at play. One of the big ones? A common goal for any type of investment: minimizing risk and maximizing value.

    In fact, 35% of organizations surveyed said that minimizing risk over time was their primary reason for choosing responsible investing, and a further 41% ranked it second or third. And 61% said that improving returns over time was one of the top three factors influencing their choice to prioritize ESG investments.

    Another issue that mattered to many respondents was fiduciary duty—their obligation to maximize their clients’ returns—which 26% listed as their organization’s primary motivation.

    Which ESG factors do organizations consider? All of them

    The risks facing our society due to climate change are top of mind for Canadians, and the investors here are no exception. This year, 93% of respondents said that greenhouse gas emissions were a factor they considered in their investment decisions, an increase from 85% in 2022. Climate change mitigation and climate change adaptation were the other top environmental factors mentioned by respondents, at 84% and 76% respectively.

    Top social factors mentioned by respondents include equity, diversity and inclusion (81%), human rights (76%), labour practices (76%), and health and safety (71%). The governance factors that respondents deemed significant included board diversity and inclusion (87%), executive pay (71%) and shareholder rights (70%).

    Many strategies make for comprehensive decisions

    Organizations surveyed use a number of tools to help themselves include ESG factors in their decision-making. These three topped the list:

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    Kat Tancock

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  • Making sense of the markets this week: November 5, 2023 – MoneySense

    Making sense of the markets this week: November 5, 2023 – MoneySense

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    Both hardware and software continue to siphon profits from all over the world back to the U.S.A. and into shareholders’ pockets. No big surprises.

    Air Canada and Cameco fly high

    Air Canada was so confident in its profits this quarter that executive vice-president of network planning and revenue management Mark Galardo stated:

    “We see relatively strong demand for (the fourth quarter) in almost every single geography that we operate in, in almost every single segment that we operate in. […] We’re not seeing any major slowdown at this point in time.”

    Canadian earnings highlights

    Three very different Canadian companies saw quite different quarterly results this week.

    • Air Canada (AC/TSX): Earnings per share of $2.46 (versus $1.60 predicted). Revenue of $6.34 billion (versus $6.09 billion estimate).
    • Cameco (CCO/TSX): Earnings per share of $0.32 (versus $0.13 predicted). Revenue of $575 million (versus $718 million estimate).
    • Nutrien (NTR/TSX, NYSE): Earnings per share of USD$0.35 (versus $0.65 predicted). Revenue of USD$5.37 billion (versus $5.74 billion estimate).

    Despite Air Canada’s results, share prices closed down slightly on Monday, as shareholders appear skeptical that the good times can continue. You can read more about investing in Air Canada at MillionDollarJourney.ca.

    Cameco’s quarterly report didn’t dive into operations too deeply, but instead it focused on the bigger picture for nuclear energy. President and CEO Tim Gitzel stated:

    “Increasing average global temperatures and the fires and floods that are becoming more and more frequent can’t be ignored. The evidence continues to point to our carbon-based energy systems as a key contributor to the problem. This has led to electron accountability and proposals by countries and companies for achieving net zero targets taking center stage. And today it’s clear, achieving those targets does not happen without nuclear power. That itself is a notable difference, but it goes even deeper. This time policymakers are not shying away from proposing nuclear as a key part of their energy mix, some even reversing their previously anti-nuclear stance.”

    Despite the positive long-term view and substantial earnings beat, share prices were nearly flat on Wednesday, closing at $56.88. That said, the stock is up about 10% this week, as we go to press.

    Nutrien’s bad quarter can be chalked up to the volatile price of potash. (Nutrien is a Canadian company based in Saskatoon, but trades on the New York Stock Exchange and reports in U.S. dollars.) As an almost pure play on the resource, Nutrien’s stock generally rises and falls with supply and demand in that single market. It’s similar to the dynamics behind an oil producer.

    With more potash products from Russian and Belarus slipping through the sanctions net and onto the world market, Nutrien’s brief period of market dominance is at its end. That said, the share price didn’t move much this week, so it appears the market somewhat anticipated the bad news. It rose 2.3% to USD$55.39 at the close Thursday. 

    The U.S. Fed tones down hawkishness 

    The U.S. Federal Reserve continues to be the predominant market mover. 

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    Kyle Prevost

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  • Don’t Waste Your Money — Here Are 5 Proven Tips for First-Time Investors to Build Wealth | Entrepreneur

    Don’t Waste Your Money — Here Are 5 Proven Tips for First-Time Investors to Build Wealth | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    It’s estimated that 42% of Americans don’t own stocks. There are plenty of potential reasons why so many people choose not to invest, from fear of losses and not feeling like they have enough money to start investing to simply being unsure of how to start.

    However, first-time investors can get started even with a small amount of money, and with sound investments, they can earn much more than they would from the interest generated by a savings account.

    Still, there’s always risk with any investment — there’s never a guarantee that you’ll get big returns. However, by following some key practices, you can reduce your risk of losses and avoid wasting your money.

    Related: Why Entrepreneurs Shouldn’t Invest in Stocks

    1. Establish an investing plan

    Every first-time investor should start by developing a basic investing plan. This doesn’t have to be so detailed as to list each stock you’ll invest in. Instead, it should set your parameters and goals that will help guide your investing strategy.

    For example, your investing plan should consider how much money you can afford to invest each month — most financial experts recommend a goal of 15% of your pretax income. You should also lay out your overall risk tolerance — including how much money you can afford to lose through your investments.

    Above all else, your investing plan should have a goal. A clear goal will help you determine how much and how long you’ll need to invest.

    2. Invest for the long-term

    One of the most frequently repeated pieces of advice every first-time investor should adhere to is to focus on the long-term rather than trying to achieve short-term gains. Stocks tend to be very volatile in the short term, with prices rising and falling rapidly. Far too many newbie investors fall into the trap of trying to constantly buy low and sell high, but this can easily lead to making impulsive decisions that waste money.

    Instead, it is better to view investments as a form of long-term financial growth. Buying and holding stock enables investors to benefit from long-term growth, which is usually far more consequential than short-term ups and downs. Rather than trying to time the market based on speculation or emotions, a focus on the long-term keeps you on track with your goals.

    Related: How to Live With Purpose and Stay Focused On Long-Term Goals

    3. Carefully vet your financial advisor

    Many first-time (and experienced) investors choose to work with a financial advisor to help them manage their money. A quality advisor can provide advice tailored to your goals and risk tolerance to put you on track for successful investing. But as with any other field, not all advisors are created equal.

    As a report from AdvisorCheck reveals, 12.74% of actively practicing financial advisors have a disclosure on their record for incidents such as bankruptcies, client complaints or a criminal record. Information on what disclosures are on an advisor’s record can be found online, but this isn’t something they are likely to broadcast on their own public-facing profiles.

    By researching whether an advisor has a disclosure (and what that disclosure means), as well as comparing advisors’ services, fees, assets under management and client ratios, investors can ensure they’re working with someone they can trust rather than just selecting the first advisor they meet with.

    4. Diversify in stocks you understand

    Diversifying your investment portfolio is key to mitigating risk. Investing in an individual stock — even if it is currently performing well — is extremely risky. No one can predict the market’s future with 100% certainty, and if the company you invested in goes bankrupt or suffers another major setback, you would stand to lose a lot. Investing in multiple companies across a variety of industries helps reduce the overall risk associated with your investment.

    As part of this, you should also make sure that you understand what you’re investing in. Cryptocurrency saw a flurry of investments in 2021, even though a lot of investors didn’t understand what it was for or how it worked. Then, in 2022, FTX and several other major cryptocurrency companies collapsed. Cryptocurrencies experienced a significant loss in market cap, causing many people to lose money.

    By investing in things you understand, you can better assess if they will provide a stable source of returns or if they are a risky investment.

    Related: 3 Major Advantages of Investing In Startups

    5. Be consistent

    Contribute to your investment accounts often. Even if you can only put aside a small amount at a time, regular investments will give you more opportunity for growth through compounding returns. The earlier you can put your money to work, the more time it has to grow.

    You can streamline this process by setting up automatic deposits from your checking or savings accounts into your investment account. You can even choose which stocks or mutual funds you want the automatic deposit to go to. This way, you won’t have to worry about forgetting to make consistent contributions, timing the market or other short-term worries that could keep you from achieving long-term gains.

    Invest with confidence

    The S&P 500 has delivered an average rate of return of 10% per year — well above what you can get from a savings account. First-time investors who avoid common mistakes and are wise with how they allocate their funds can start growing their wealth, even if they have relatively little to invest. The sooner you start, the more you stand to gain.

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    Lucas Miller

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  • Making sense of the markets this week: October 29, 2023 – MoneySense

    Making sense of the markets this week: October 29, 2023 – MoneySense

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    IBM’s business is split into two key divisions: IT consulting and software. The latter is the primary revenue driver. The software unit generated $6.27 billion revenue, up 8% versus the consulting division, generating $4.96 billion in revenue, up 6%. Like many tech companies, IBM’s software division is also investing in AI to drive future growth.

    Amazon

    Amazon announced record third-quarter profits after the close Thursday and surged 5% Friday morning (at press time) after strong growth in its highly profitable Cloud business. While the stock was up 40% on the year, shares had fallen 8% in the previous two days after rival Alphabet warned that cloud customers were curbing spending. 

    Growth is growing…

    While North American bank stocks answered the question about how the economy is fairing, technology stocks answered questions about growth. The big message with tech is that growth is still there, and it will continue to be going forward. In today’s market, investors looking for growth need to own at least a few big-cap tech stocks. These companies are becoming the consumer staples of tomorrow. That includes stocks from companies like food and grocers and utilities that ground portfolios. That’s because, when the market dips, people still have to buy food and heat their homes. In today’s digital age, the technologies we’ve been talking about are embedded in our everyday lives and are poised to continue to grow.

    Bank of Canada pauses interest rate hikes 

    The general consensus going into the week was that Bank of Canada Governor Tiff Macklem would push the pause button on another interest rate hike. And that’s exactly what he did on Wednesday. Even though interest rates didn’t go up another quarter point—which was the plan—the damage has been done. Some Canadian investors and the markets worry that another rise in interest rates could increase the pressure on individual households and businesses, ratcheting up the fear and likelihood of a recession. 

    Source: Bank of Canada

    The Bank of Canada (BoC) itself was under a lot of pressure from provincial premiers to hold off on a rate hike precisely for these reasons. That’s despite not being closer to the 2% inflation target the BoC has set its sights on. For me, though, the question has always been: Is 2% a realistic target? And even if it is, how much pain is the BoC willing to inflict on the economy to achieve it? 

    Personally, I’d rather see a 3% inflation rate target, along with strong employment and healthy consumer spending, over targeting 2% inflation and lost jobs and a recession. Some analysts are predicting that the recession that was expected this year will take hold next year.

    I’m surprised we’re here, in the third week of October, still talking about interest rate hikes. I thought by now the central banks would have stopped relying on them so heavily. The Bank of Canada has raised interest rates 10 times since March 2022.

    It’s interesting that both the BoC and the U.S. Federal Reserve keep referencing the lag effect between when a rate hike is implemented and when its effects show up in economic data. Yet, neither specify just how long this can and/or should take. How do we know if the hikes are working? Are they willing to blow everything up because we’re stuck on 2% inflation? 

    When you have the cost of borrowing tripled, in some cases because of all these interest rate hikes, I have to wonder whether the BoC is sending an inadvertent message to Canadians: “You are living beyond your means. You’ve enjoyed a run of many years of low interest rates, where money was basically free with no worry about what happens later, when the cost to carry debt rises. The days of high interest are here now for the foreseeable future.”

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    Allan Small

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  • How to plan for retirement for Canadians: A review of Four Steps to a Worry-Free Retirement course – MoneySense

    How to plan for retirement for Canadians: A review of Four Steps to a Worry-Free Retirement course – MoneySense

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    At $499, the course does represent a major investment, but the outlay could be considered a bargain if it helps some DIY retirees escape the clutches of conflicting securities salespersons who actually do care more about their own retirement than that of their clients.

    Consider some of the impressive testimonials. Long-time consumer advocate and former Toronto Star personal finance columnist Ellen Roseman asked Prevost “Where have you been all this time?! … Most of us need guidance on taking money out of our savings without depleting our resources once we leave work—and I suspect this interactive multimedia approach to learning will be far more interesting and memorable than simply reading a book. Kyle has done his research and provides plain-spoken views about what’s good and what’s bad in the process of making our retirement income last as long as we do.”

    Fee-only financial planner and financial columnist Jason Heath (of Objective Financial Partners) says “Kyle’s course is a great resource for someone preparing for retirement or already retired … His background as a teacher definitely comes across in the course. Too many financial industry people do a poor job of conveying financial topics in a way that makes sense. The approach of the course is meant to teach and empower, and it definitely does just that.”

    My review of Worry-Free Retirement

    So, let’s take a closer look at the course, which I dipped into in a few weeks in order to write this review. It comprises 16 units, each starting with a short audio-visual overview, followed by more in-depth backgrounders, videos and links to other content. I’d suggest focusing on a single unit per session, as there’s plenty to digest. 

    The first unit takes you through how much money you’ll probably need to retire in Canada. Subsequent units are devoted to the major government programs like the Canada Pension Plan (CPP) and Old Age Security (OAS), and employer-sponsored pension plans, including both defined benefit and defined contribution plans. Later the course also tackles that perennial retirement chestnut, the 4% safe withdrawal rule (to which Prevost isn’t married but sees as a good starting point for guest-imating retirement income). 

    I’m particularly partial to unit six, titled “Working for a Playcheck,” as that term was coined by Michael Drak and myself in our jointly authored 2014 book, Victory Lap Retirement. Units seven and eight go into some depth in investing: what to invest in and how to buy and sell securities. 

    Units nine and 10 go into depth on registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs), then handles the whole topic of decumulation and the crucial transition (at the end of the year you turn 71) from RRSPs to RRIFs. No doubt, I will personally revisit that module at the end of next year! 

    Unit 11 examines how you can create your own pension through annuities. Units 12 and 13 look at mortgages: whether one should retire with one (spoiler: one shouldn’t) and deciding between downsizing and reverse mortgages or home equity line of credits (HELOCs). 

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    Jonathan Chevreau

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  • Taking an active approach to ETF investing in Canada – MoneySense

    Taking an active approach to ETF investing in Canada – MoneySense

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    Although ETFs are often considered instruments for passive or index investing, actively managed ETFs are on the rise. If U.S. investment trends are a bellwether for what’s in store for Canada—and they often are—then active ETFs may have a bright future here.

    In the U.S., the share of ETF inflows that went to active ETFs in the first half of 2023 was about 30%, more than double the amount for all of 2022. A decade ago, active ETFs accounted for just 2.3% of fund inflows. How does the growth of active ETFs compare to that of passive ETFs? In the first half of 2023, passive ETFs grew at an organic rate of 3%, while active ETFs grew much quicker, at a rate of 14%. They’re gaining popularity in other global markets, as well. In Asia, active ETFs grew 78% in the first half of this year.

    Clearly, active ETFs are also attracting a lot of interest from investors. But how do active ETFs work, are they right for you, and how can you buy these ETFs in Canada for your registered retirement savings plan (RRSP)?

    The benefits of active ETFs

    In the investment world, there’s plenty of debate over which management style—active or passive—is better for investors, but both have their merits. If active ETFs fit your investment objective, time horizon and strategy, they could offer you the following benefits:

    1. Opportunity to invest in specific strategies: Active funds could offer investors a convenient way to invest in a certain sector or implement a particular investment strategy. While this can be achieved with passive ETFs too, the active ETF option could be used by investors who want to try to outperform the index in a particular sector.
    2. Possibility of outperforming the market: Although passive ETFs typically have lower fees than active ones, some investors are unsatisfied with simply getting market exposure; they want to outperform the market, which is primarily what active ETFs try to do.
    3. Easy to buy and sell: ETFs offer greater flexibility of trading intraday than mutual funds. You can buy and sell ETFs on a stock exchange anytime during trading hours. Also, unlike mutual funds, you’ll know the purchase or sale price of the ETF units when you place the order.
    4. Downside protection: Active ETF managers can prepare for or react to market events, including corrections and crashes. Unlike with an index fund, which mimics what the index itself does, the manager of an active ETF may increase their cash or fixed-income holdings in anticipation of a market downturn. In doing so, they attempt to limit their investments’ decline in value.

    Because of the above features, active ETFs could be the “core” portion of an investment portfolio (and, if held inside a registered account such as an RRSP, your investments can grow on a tax-deferred basis). Active ETFs could also form part of a “core and explore” portfolio in which passive ETFs could be the core. As the “explore” part of the strategy, active ETFs could be used to explore a particular sector or to attempt to outperform a market index.

    How to buy Fidelity Active ETFs

    If you decide that active ETFs are suited to your portfolio and investment style, there are two ways to access them.

    • A financial advisor: Financial advisors can access Fidelity’s ETFs and add them to their clients’ investment portfolios. A financial advisor can help you decide whether active ETFs are a good fit for your portfolio, which one(s) to buy and how much to invest.
    • An online brokerage: For self-directed investors who don’t work with an advisor, Fidelity’s ETFs are available through most online brokerages (also known as “discount”  brokerages). When logged in to your online brokerage account, search for the ticker symbol of the ETF you’re searching for—as you would search for a stock.

    In investing, one size doesn’t fit all. While some investors may prefer a passive-only portfolio of ETFs, others may want to implement specific strategies with the potential for higher returns. Also, many investors do both—hold passive ETFs as well as experiment with active options.

    Learn more about Fidelity Active ETFs.

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    Aditya Nain

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  • Making sense of the markets this week: October 22, 2023 – MoneySense

    Making sense of the markets this week: October 22, 2023 – MoneySense

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    Finally, A&W Revenue Royalties Income Fund (AW/TSX) reported earnings roughly in line with shareholders’ expectations. Share prices barely moved on Wednesday when it was announced that royalty earnings were up 5.4% in year-over-year comparisons. Perhaps the only thing juicier than the Papa Burger is its current dividend yield of 6.26%.

    Have you heard? The Canadian Financial Summit is free: 

    In case you missed it, the Canadian Financial Summit is taking place RIGHT NOW!  Don’t miss out FREE sessions with familiar faces from MoneySense (see below). Registering for the Summit is exactly $0, and you can click here for more details.

    Jonathan Chevreau 

    The Personal Finance Book Hall of Fame

    After reading every new book on the Canadian personal scene for several decades, (as well as writing a few himself), Jonathan Chevreau led an all-encompassing discussion on the best personal finance books ever written. He talks about books written exclusively for Canadians, as well as those written for international readers. We’ve got classics, new takes, lesser-known gems, and best-in-class selections. Don’t miss this one if you love to get your info from written text.

    Michael McCullough

    Top Canadian ETFs for This Year and Beyond

    With so many ETF options available, it can be hard for investors to know what to put into their portfolios. MoneySense’s executive editor, Lisa Hannam, hosts as journalist Michael McCullough looks at the makeup of the ETF market. Hewill share, based on MoneySense’s ETF All-Stars Report, the ETF products Canadians could consider buying today.

    Allan Norman, MSc, CFP, CIM

    All your FHSA questions answered

    The first-home savings account is brand spanking new, and Canadians have questions. In the similar format of MoneySense’s popular Ask A Planner column, executive editor Lisa Hannam will ask Certified Financial Planner Allan Norman real questions from Canadians about the FHSA, from what it is to where to open this account.

    Lisa Hannam

    Personal finance trends to plan for in 2023 and 2024

    MoneySense executive editor Lisa Hannam and columnist Kyle Prevost work together on the popular column Making Sense of the Markets. It contextualizes headlines for Canadian investors, so together the duo will be looking at the headlines from the year and those to come, including interest rates, crypto (remember that asset?), employment, AI, GICs and so much more. 



    About Kyle Prevost


    About Kyle Prevost

    Kyle Prevost is a financial educator, author and speaker. He is also the creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course.

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    Kyle Prevost

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