All posts by Financial Independence Hub

Odds of outperformance in emerging markets stacked in favor of active managers

By Caroline Grimont

(Sponsored Content)

When investing in emerging markets, the odds of outperformance are stacked in favor of active managers. That’s because, unlike developed markets, emerging markets are a heterogeneous and inefficient asset class.  Each individual market and region possesses unique characteristics, risks and opportunities, which can be best leveraged through active, on-the-ground management.

The underlying truth is that indices such as the MSCI Emerging Markets Index that are used by passive managers to invest in emerging markets are a poor representation of opportunities in these markets. Indices typically include only the largest stocks by market capitalization and exclude potentially faster growing small and medium cap stocks which can be accessed by active managers.

And the fact that roughly two thirds of emerging market stocks are excluded from the respective indices means that investors in passive index-based investments lose the opportunity to participate in the growth of the majority of emerging market equities.

On the other hand, active on-the-ground managers have the advantage of being “free to roam” in making their investment decisions, compared to passive managers who are restricted to investing in stocks in an index over which they have no control.

As well, “in certain niche markets, like emerging market and small company stocks … it is possible for an active manager to spot diamonds in the rough,” states a Wharton, University of Pennsylvania article.[i] Conversely, the performance of passive managers is dictated by the index.

To put this reality in perspective, one of the world’s largest index providers, S&P Dow Jones Indices, highlights the shortcomings of using a broad-based passive strategy to invest in emerging markets in its research paper, Emerging Markets: What’s in your Benchmark?  It surmises: “Numerous factors, including country and regional combinations, can create vast differences in performance and return patterns. If you’re looking to boost returns through exposure to international markets, you may want to dig deeper and consider looking beyond traditional broad-based benchmarks to truly assess the value of an allocation to any of the world’s emerging economies.”[ii]

Unconstrained by sector bias

Another benefit of using active managers in emerging markets results from the fact that they are not constrained by the dominant sector bias in EM indices.

Continue Reading…

Looking under the hood of a Guaranteed Universal Life Policy

By Jessica Walter

Special to the Financial Independence Hub

Though it can be morbid and upsetting to think about, it’s important that seniors have life insurance in place so that their families don’t have to worry.

Despite this, 54% of Americans say they are unlikely to purchase life insurance. As well as this, according to research organization LIMRA, 51% of all households say they would rely on life insurance payouts to pay bills and maintain their lifestyle, in the event of the main breadwinner passing away. That’s why it’s so important to choose a life insurance policy that works for you, and brings you the best benefits and flexibility.

Understanding the different types of available insurance policies is vital, as it could make a big difference to the amount you pay in premiums, as well as how much the family will receive in the event of a death.

What Is a Guaranteed Universal Life Policy?

A guaranteed universal life policy is one of the best ways for seniors to get coverage for life, for the lowest possible cost. Whether you qualify will depend on your health, and your age. The main positive of a GUL plan is its ability to meet a wide range of budgets.

This type of plan is similar to a whole life insurance policy, but is made more affordable by gaining cash value in the initial years. This value is then used to offset an increase in premiums in the future. This is in contrast to a whole life insurance policy, which would continue to gain cash value, but requires higher premiums to be paid. A guaranteed life insurance policy is one of the most popular around, and will meet the needs of the majority of healthy people, but it isn’t the only insurance policy available.

The Benefits of a Guaranteed Universal Life Insurance Policy

Continue Reading…

A Millennial’s Jump Start on Personal Finance

By Trevor McDonald

Special to the Financial Independence Hub

Most millennials aren’t taught personal finance beyond the few who soaked up “lessons” from having an allowance or chores while growing up. Given the increasing use of digital currency, from tapping phones together to send money, depending on Venmo and utilizing bitcoins, ask a millennial how to write a check or balance a bank account and few can give a succinct answer: but does that even matter? Has personal finance changed so much in the past few decades that its definition is due for an overhaul?

Financial literacy and well-being is and always will be vital. How it’s defined and its best practices evolve as we do. Just like any type of “health,” financial health requires setting a strong foundation, teaching and practice. It’s strange that we have an entire generation in full-fledged adult categories without a clue of how to handle their finances.

Consider this the starter kit for millennials:

1.) Credit score management

 The importance of credit scores isn’t going anywhere. In fact, they’re more important than ever with some employers using credit scores to narrow down job candidates. Make sure to monitor your credit score, check your credit report regularly for errors, and make your payments on time. This will help ensure you maintain a healthy score. There are other ways improve your credit score that you might not know, too, such as snagging a tradeline where you’re added onto a person’s credit account who already has a solid score. A tradeline company can manage this, linking paying customers to a tradeline account so any messiness of blending finances with personal relationships is avoided.

2.) Buffering that nest egg

Having at least three months’ worth of living expenses in “liquid cash” that’s easily accessible is a reasonable starting point. Some financial experts recommend one year, but a year’s salary can sound very overwhelming. Start socking away funds in an emergency account by using an app that rounds up purchases and siphons funds to this account so you don’t even notice.

3.) If possible, entrepreneurs and business owners should seek out life in specific states or overseas

Millennials are the generation of entrepreneurs, and this makes personal finance even stickier. Where you live plays a huge role in your ability to build wealth. Obviously some regions have higher costs of living than others, but every state also has a different income tax. There are seven states, including highly desirable ones like Florida, that boast a zero per cent income tax rate. Moving abroad often allows for foreign earned income exemption in which you don’t pay any state income tax (of course) but also no federal taxes except social security and Medicare.

4.) Budget, budget, budget

Continue Reading…

When does your Business need a Merchant Account?

(Sponsored Content)

Credit and debit cards are among the most common payment methods, whether you run a retail store, an online store, or a combination of both. They are convenient and easy to carry, not to mention relatively easy to obtain. They make shopping easier because customers don’t have to worry about carrying enough cash.

But if your store isn’t accepting credit cards, you risk losing millions in revenue. That’s why it’s crucial to ensure that your business has everything it needs to accept credit-card payments. And to start accepting credit cards as method payments: a bank account, a payment processor, and a merchant account.

As a savvy business owner, you probably have a business bank account. But what about a merchant account? In this post, we’ll explain what exactly a merchant account is and when you may need one.

What exactly is a Merchant Account?

In short, a merchant account allows you to accept credit-card payments. Once a card payment is made, it passes through the merchant account and is deposited into your checking account after the funds have been cleared through the merchant account, which usually takes a few days.

You may be wondering why you need a merchant account when you can simply use a payment processor like PayPal or Stripe. However, having your own merchant account, which can be set up through payment providers like OnlineMerchantsHelp, offers more flexibility, control, and better security with online payments.

So, is your business in need of a merchant account? And when you should you get a quote?

When Does Your Business Need a Merchant Account?

Continue Reading…

The rising cost of buying homes near Schools

By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Buying real estate is a stressful enough endeavour,  but throwing kids into the mix adds a whole new layer of complexity to the house hunt.

While most buyers have a lengthy wish list of must-haves, usually centred around size, access to amenities and location, living close to a highly-rated school is a top consideration for 39 per cent of Canadians contemplating their next real estate purchase.

And you can certainly expect to pay more to live within a coveted catchment area, even in regions with softer conditions than the red-hot Vancouver and Toronto real estate markets.

“School districts have become a large factor that buyers consider when searching for a home. As a result, homes in better school districts tend to have greater demand and a larger buying pool,” says Chantel Crisp, broker of record at Zoocasa Realty. “Parents are motivated to get their children into great school districts even during economic downturns, so neighbourhoods with better school ratings are sought after in both times of economic growth and decline.”

Higher prices for higher learning

Just how much more do homes fetch in top school neighbourhoods? Buyers can expect to pay a whopping premium of over $800,000 in some cases, according to data collected via Zoocasa’s school search function. The fact that it’s not always clear whether a home lies within a school’s boundary can be a point of frustration for buyers trying to harmonize their home buying ambitions with their academic needs says Zoocasa CEO Lauren Haw.

“Homes across the street from one another may be in different catchment areas. Understanding where your home is within a certain boundary can help with long-term transition planning and reduce unnecessary moves,” she says. “Not to mention wealthy accumulation – school rankings are highly correlated to real estate prices.”

To get a better idea of how much living near a top-rated school will impact buyer budgets, check out the infographic below, based on the sale prices of homes with more than three bedrooms, and top EQAO-rated elementary schools in each of Toronto’s six boroughs. Continue Reading…