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Happy New Year! However, this first business week of the new year promises to snap investors rudely out of their holiday moods, given political events south of the border.
As of last Friday, January 1st, Canadians could add another $6,000 to their TFSAs, taking their total cumulative lifetime contributions to $75,500. As I outlined in my latest MoneySense Retired Money column, it’s generally a good idea to do this early in January just to maximize the time value of money.
However, I’d hold off committing to particular equity investments until the dust settles, given that this morning’s headlines no doubt focus on the incredible political drama taking place in Georgia on Tuesday, Jan. 5th and then in Washington on Wednesday, Jan 6th.
After this weekend’s dramatic capturing on tape of soon-to-be-ex President Trump’s attempt to persuade the State of Georgia to “find” (aka steal) almost 12,000 votes, both the Georgia runoffs and Wednesday’s supposedly ceremonial formal certification of the state electors votes confirming Joe Biden’s victory promise to be full of fireworks.
Fireworks almost inevitable in Washington this Wednesday
Things were simmering even before Sunday’s saturation TV coverage of what seemed yet another impeachable offence from Trump. Violence from far right-groups fomented by Trump’s fanning the flames in anticipation of Wednesday’s ceremony in Washington already seemed to be in the cards even before this weekend. That can be hardly good for stock markets although pre-market Monday futures were strongly up in the three major US indices.
Add in the ongoing stress of the still-raging pandemic and recent euphoria over vaccines, and the fact US and many global stocks have been hovering near record highs: not to mention cryptocurrencies and Bitcoin, which this weekend smashed through US$30,000 for the first time.
So it hardly seems like there’s a need to rush to invest new TFSA money when all these portents mean prices could be cheaper later this week. Whether this creates yet another proverbial buying opportunity remains to be seen.
Some ideas for how to invest new TFSA money
Those in doubt who would rather invest sooner than later on any anticipated market downturns Monday could always hedge their bets with value-oriented balanced mutual funds or the Asset Allocation ETFs often mentioned on this site, from BlackRock iShares, BMO ETFs, Horizons ETFs or Vanguard Canada. Hard to believe it was just three years ago that the Hub published this blog about these “game-changers” and they seem to me to make a lot of sense for the large “core” of most portfolios.
For “Explore” bets outside core positions, given US valuations I’d personally be more inclined to add to better-valued Emerging Markets, as recent Hub blogs have indicated here and in this one: The most under-owned asset class. Those still in thrall to US tech stocks might consider the “Innovation” approach of the ARK Funds (US$ and Canadian$), nicely summarized in this blog by Robb Engen. While primarily US stocks, there is a smattering of foreign stocks in innovative technologies like AI and Robotics, Next Generation Internet and 5G, genomics and fin-tech. Returns in 2020 were so strong, however, that I’d be cautious, given the massive recent money flows into the ARK ETFs: there are many videos on YouTube about them.
Similarly, I’d be cautious about dipping into cryptocurrencies at these elevated levels, even though I have personally dabbled in them in the last few months. There are ways to put crypto into TFSAs via certain Canadian ETFs, or for non-registered accounts the Grayscale trusts for Bitcoin and Ethereum trading on US markets. Those brave enough to invest in “native” crypto of the same two crypto currencies can try WealthSimple Trade. Some big institutional investors are helping move prices up and even noted investors like Paul Tudor Jones have suggested taking modest positions of perhaps 1% of a total portfolio.
For now, get the new cash into your TFSAs by all means, but perhaps leave it there a day or three.
