Gold glitters amid Persistent Inflation and Rate Uncertainty

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Image courtesy BMO ETFs/Getty Images

By Chris Heakes, CFA

(Sponsor Blog)

Gold prices have gained more than 14% since late last year, renewing market interest for the precious metal.

Recent gains have been driven by an expectation that the U.S. Federal Reserve (Fed) is getting closer to reducing its trendsetting overnight rate, which led to a weaker U.S. dollar index to close 2023.

In recent months, inflation concerns have ramped back up with recent U.S. CPI data coming in slightly ahead of expectations. While consumer prices continue to trend in the right direction, higher shipping costs are becoming a concern with cargo ships having to avoid the Suez Canal. Shipping costs have surged 150% as a result, potentially add 0.5% percentage points to core inflation1: and re-igniting worries that CPI could accelerate again.

These developments have created a favourable environment for gold, given bullion tends to be used as a multi-purpose hedge for portfolios.

BMO Global Asset Management has launched a gold ETF that is backed by physical bullion. This ETF stores physical 400-oz. bars, secured in a local vault operated by BMO. Investing in the new BMO Gold Bullion ETF is efficient for investors as it is listed on the Toronto Stock Exchange (TSX) and trades like any stock or ETF. Additionally, since the underlying bullion holdings are professionally vaulted, investors do not have to worry about safe-keeping on their own. The BMO Gold Bullion ETFs are available at a cost-efficient management fee of 0.20%.

The BMO Gold Bullion ETF

Benefits

  • Amid reaccelerating inflation concerns and interest rate uncertainty, gold could be used as a defensive hedge.
  • Macro as well as weaker-U.S. dollar risks have risen in recent years, and could remain elevated going forward.
  • Gold offers effective diversification from stocks and bonds, which have experienced a notable rise in correlation3.

Why Gold could continue to Glitter

Gold is often used to hedge three main risks: macro-economic/geopolitical and inflation risks, as well as against a weaker U.S. dollar and fiat currencies4. All of these risks have risen in recent years and it is quite possible and perhaps probable that they will remain elevated going forward, spurring further demand. Continue Reading…

7 crucial tips for Homebuyers navigating the market in 2024

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By Jack Roberts

Special to Financial Independence Hub

2024 brings exciting opportunities for homebuyers in the real estate market. The market is poised for growth with the ongoing demand for housing and favorable economic conditions. However, buyers must navigate this landscape with informed decision-making. 

With interest rates expected to be cut by the Fed, the real estate market could experience a boom, and there are various options available for homebuyers. That said, it’s essential for potential buyers to prepare their finances ahead of time and explore affordable mortgage options. In addition, buyers should prioritize must-have features and location preferences to narrow their search. 

Below, you’ll discover 7 crucial tips for homebuyers in 2024. Homebuyers can confidently navigate the market by following these tips and achieve successful results in 2024.

 

Importance of Informed Decision-Making

In the competitive real estate market of 2024, informed decision-making is crucial for homebuyers. Buyers can make well-informed choices that align with their goals and preferences by conducting thorough research and staying updated on market trends. 

Being informed allows buyers to understand the current market conditions, such as housing inventory and pricing trends, enabling them to make competitive offers and negotiate effectively. 

Moreover, buyers can ensure they are investing in a desirable location by gathering information about the neighborhood, schools, amenities, and future development plans. 

Informed decision-making also involves assessing the property’s condition, conducting inspections, and considering potential renovations or repairs. By making informed decisions, homebuyers can minimize risks, maximize their investment, and achieve long-term satisfaction with their purchase.

Financial Readiness and Budgeting

Financial readiness and budgeting are essential for homebuyers to navigate the 2024 real estate market. It is crucial to carefully assess personal finances and establish a realistic budget to ensure a successful buying process. 

Typically, banks have more stringent requirements than other lenders when trying to secure a mortgage to buy a home. That said, homebuyers should strive to save for a down payment and maintain a strong credit score to increase their chances of securing a favorable mortgage rate. 

Buyers can enhance their financial position and have a stronger negotiating stance by managing debts and ensuring sufficient savings. 

Additionally, it is important to consider other costs associated with homeownership, such as property taxes, insurance, and maintenance. 

By creating a comprehensive budget and sticking to it, homebuyers can confidently navigate the market and make informed decisions that align with their financial capabilities and long-term goals.

Now, if you’re looking to buy a home to fix and flip it — there’s financing for house flipping available.

Must-have Features and Location Prioritization

When buying a home in 2024, it is important to identify the must-have features and prioritize the location based on personal preferences and needs. Homebuyers should consider factors such as the number of bedrooms and bathrooms, the size of the yard, and the availability of amenities like parking and storage space. 

It’s also important to assess the proximity to schools, healthcare facilities, and transportation options. Making a list of non-negotiable features will help streamline the home search process and ensure that the chosen property aligns with the buyer’s lifestyle and long-term goals. 

By prioritizing the features and the location, homebuyers can find a property that meets their needs and enhances their overall living experience.

Due Diligence: Inspections and Property Conditions

During the home buying process, one critical step is conducting due diligence, specifically inspections and assessing property conditions. It is crucial to thoroughly examine the property to identify any potential issues or concerns before making a final decision. Hiring a certified home inspector can provide a comprehensive report on the property’s structural integrity, electrical systems, plumbing, and other essential components. 

Inspecting the property’s exterior, including the roof, foundation, and drainage systems, is also recommended. Evaluating property conditions helps buyers understand the potential costs and repairs they may incur. 

Homebuyers can make informed decisions by conducting due diligence and negotiate any necessary repairs or modifications with the seller.

Crafting competitive offers and managing Negotiations

Once you have found your ideal home, it’s time to craft a competitive offer and effectively manage negotiations. Start by determining the property’s fair market value based on recent sales and comparable properties in the area. This will help you make a strong, yet reasonable, offer.

Consider including contingencies in your offer, such as a home inspection or appraisal contingency, to protect yourself from potential issues. Remember, negotiations are a give-and-take process. Be prepared to negotiate on price, repairs, or other terms with the seller. Continue Reading…

Building the Canadian Stock Portfolio

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By Dale Roberts, cutthecrapinvesting

Special to Financial Independence Hub

It is so easy to build a simple but very effective Canadian stock portfolio. Canadian self-directed investors will often hold a few financials, telcos, utilities and pipelines. At times they will also (wisely) add some of the lower-yielding stocks, including the railways and grocers. Other favourite picks are Alimentation Couche-Tard, Canadian Tire, Restaurants International and the Brookfield assets. Canada is home to many oligopoly sectors. While that’s not “good” for customers it can be profitable for investors. In this post we’re building the Canadian stock portfolio looking at the wide-moat sectors, plus lists from BMO and RBC.

Wide moats and beating the TSX

Readers will know that I’m a fan of the Canadian Wide Moat Portfolio. To be more precise, make that the Wider Moat Portfolio that includes the grocers and railways. There is a very nice history of outperformance with lower volatility. You can check out the assets in that link.

Another popular market-beating route is the Beat The TSX Portfolio. That is a value strategy that simply holds the top ten yielding stocks from the TSX 60. You buy on January 1, and rebalance each year. You will certainly find many of the higher yielding Wide Moat Stocks in the BTSX.

Canadian stocks from BMO and RBC

And here are two interesting lists.

From Brian Belski’s at BMO, here’s the growth at a reasonable price portfolio – GARP. That is a very good selection model. While we want to buy current attractive earnings, the growth history and growth potential certainly factors into the equation.

The stocks on the GARP list are Rogers Communications, Quebecor, Telus Corp., Canadian Tire, BRP Inc., Magna International , Restaurant Brands International, Saputo Inc., Loblaws Co. Ltd., ARC Resources, Canadian Natural Resources, Cenovus Energy, Enbridge, Parex Resources, Suncor Energy, Tourmaline Oil, TC Energy, Bank of Montreal, Brookfield Corp., CI Financial Corp., Canadian Western Bank, EQB, Manulife Financial, National Bank, Royal Bank, Sun Life Financial, TD Bank, CAE Inc., Canadian national Railway Co., Finning International, Stantec, TFI International, Evertz Technologies, CGI Inc., Open Text Corp., B2Gold, Equinox Gold, First Quantum Minerals , New Gold Inc., Nutrien Ltd., Teck Resources, Altagas Ltd., Emera Inc. and CT Reit. Continue Reading…

Stocks for the Long Run at your Peril?

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Image MyOwnAdvisor/Pexels

By Mark Seed, myownadvisor

Special to Financial Independence Hub

This article from Larry Swedroe recently caught my eye: Should Long-Term Investors Be 100% in Equities? (Own stocks for the long run at your peril).

Interesting headline and catchy, but we know stocks for the long-run can work for long investing periods. Otherwise, nobody would take on this form of investing risk for any reward…

That said, Swedroe does raise a few interesting factoids from his reference in the article about stocks in the long-run:

“Over the 150 years from 1792 to 1941, the performance of stocks and bonds produced about the same wealth accumulation by 1942.”

AND

“Results for the entire 227 years were weakly supportive of Stocks for the Long Run: The odds that stocks outperformed bonds increased as the holding period lengthened from one to 50 years. However, the odds never got much higher than two in three and increased only slowly as the holding period stretched from five years (62%) to 50 years (68%).”

The problem I have with such information, while interesting, is our modern economy is fundamentally different than 1942, let alone 1842, or 1792. I simply don’t see the value or point in referencing any stock market data that goes back 200+ years for the modern retail investor.

But I do agree with Larry in that stocks may not always beat bonds, at least over short or modest investing periods. I have participated in a bit of a “lost decade” in my own DIY investing past.

It could happen again.

Looking back at a broad measure of the U.S. stock market, such as the S&P 500 index, over the past 20 years, you would see (or experience as an investor) very different results from the first decade (2000-2009) and the second (2010–2019).

In fact, for large-cap U.S. stocks in particular, this “lost decade” from January 2000 through December 2009 resulted in very disappointing returns: an index that had historically averaged more than 10% annualized returns before 2000, instead delivered less-than-average returns from the start of the decade to the end. Annualized returns for the S&P 500 (CAD) during the market period were -3.18%.

Reference: https://woodgundyadvisors.cibc.com/delegate/services/file/1614689/content

Of course, we only know the results of stocks in hindsight after bad market periods are over and preferably for me, a few generations back makes sense to measure some relative stock market history vs. going back to horses and buggies in the form of a few hundred years…

What do I think? Is 100% equities investing at your peril?

No.

I remain invested in mostly equities at the time of this post with conviction although I do keep cash (or more recently cash equivalents on hand) and always have to some degree. Continue Reading…

Retired Money: How to double CPP benefits while also hedging against inflation and longevity

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My latest MoneySense Retired Money looks in more detail at the National Institute of Ageing’s recent series of papers on CPP (and OAS). As the Hub reported on April 11th, few Canadians are aware that delaying CPP benefits to age 70 can more than double (2.2 times actually) eventual monthly benefits compared to taking it early at age 60. That blog reproduced a chart from the NIA that showed just how much money Canadians are leaving on the table by NOT deferring benefits as long as possible.

The other major chart from the NIA paper is reproduced above, showing just how important most retirees view the guaranteed inflation-indexed income that CPP and OAS provide. As the new column points out, for many retirees — especially those who worked most of their careers in the private sector and don’t enjoy a Defined Benefit employer pension — CPP and OAS are the closest thing they’ll have to a guaranteed-for-life inflation-indexed annuity.

The new MoneySense column focuses on how delayed CPP benefits not only generate higher absolute amounts of income  but also carry with it the important related benefits of more longevity insurance and inflation protection.

You can find the full column by clicking on this highlighted headline: How to double your CPP income.

It features input from several well-known retirement experts, including noted finance professor and author Dr. Moshe Milvevsky, retired Mercer actuary Malcolm Hamilton, author and semi-retired actuary Fred Vettese, TriDelta Senior Financial Planner Matthew Ardrey and the lead author of the NIA report, Bonnie Jean MacDonald.

Delaying CPP is “the best annuity-buying strategy you can implement.”

Milevsky sums it up well, when he says “delaying CPP is the best ‘annuity-buying strategy’ you can implement. Everything else is just Plan B.” Audrey makes a similar point: CPP is “an annuity and an indexed annuity at that … This helps protect the purchasing power of this income stream through retirement. Many people wish they had an indexed DB [defined benefit] pension and in fact we all do. It is the CPP.”

You’ll probably see much more press on this topic as the NIA is releasing a paper each month between May and December. May 8th will be general education on the Canadian retirement income system while July 17th will explain the mechanics of delaying CPP (and QPP) benefits.