Unless you’ve been living under a rock, you probably have heard that the global stock market has been on a downward spiral. Yup, the bear has entered the room and many of us are seeing beet-red market conditions over the last number of months.
Year to date the TSX is down more than 13%.
Meanwhile, the S&P 500 is down more than 22% year to date.
The typically high-flying NASDAQ is down more than 30% year to date.
For those investors who only started investing in 2021 or those who are used to the only-going-up-bull-market condition, the recent downward trend is undoubtedly hard to stomach.
Given that we’ve been DIY investing for more than a decade, some readers have reached out and asked what we’re doing in this bear, beet-red market condition.
So what are we doing?
Allow me to explain.
Think long term
First of all, it’s essential to think long term. If you’re still in the accumulation phase, like us, you should be wishing and hoping for an extended bear market.
How often do you see the likes of Royal Bank and TD having an initial dividend yield of over 4.1%? The 10-year historical average dividend yield for Royal Bank is 3.92% while the 10-year historical average dividend yield for TD is 3.8%. Continue Reading…
What is one way to make extra money on the side? To help you find creative ways to make extra money on the side, we asked career coaches and business leaders this question for their best insights. From doing freelancing through Upwork to engaging in pet care, there are several easy ways to start making extra money in addition to your regular day job. Here are 14 creative ways these leaders recommend for making extra money on the side:
Do Freelancing Through Upwork
Put Ads on Your Car
Sell Informational Products
Offer Gaming Services Online
Do Social Media Marketing
Become a Food Delivery Driver
Donate Blood Plasma
Sell Old Electronics
Try Random-Rewards Banking
Rent Free Space on Airbnb
Work as a Virtual Assistant
Become a Video Game Tester
Teach English Language
Engage in Pet Care
Do Freelancing through Upwork
We have hired a lot of freelancers from Upwork over the years who have their normal day jobs but do the same type of work on their own through Upwork in their spare time. Upwork makes it very easy to list your skills and have a company hire you for small projects. We have worked with one candidate through Upwork for over 5 years now. We will have website redesign projects and he will help us. I know this is a side gig for him and we work around his schedule, but it also saves us a lot of money not having to hire through a marketing company and getting the same level of talent. If you have any good computer skills you can find a task that you can help someone with through Upwork. It can be as simple as data entry or replying to emails, there are all types of jobs available. Being an online freelancer is nice because all you need is a computer and internet connection, there is very little up front cause to start earning extra money on the side. — Evan McCarthy, SportingSmiles
Put Ads on your Car
A super easy way to make anywhere from $100-$300 in extra income is by simply driving your car as you normally would through car-wrapping ads. There are usually a few general requirements for legitimate car wrapping ad companies in larger cities: such as a minimum driving time as well as driving a newer car that is still in good condition. Assuming you meet these requirements, however, you can comfortably earn an extra income without making any changes to your day-to-day life. –– Kristine Thorndyke, Test Prep Nerds
Sell Informational Products
If you’ve got enough knowledge or hands-on experience in a particular field of interest, selling informational products like e-books, audiobooks, or courses is a great way to make some extra money. The best part about informational products is that once you’ve poured in your time and energy to create them, they won’t need constant attention or time: literally making you money while you sleep. — Harry Morton, Lower Street
Offer Gaming Services Online
If you’re an ardent gamer or someone who dedicates a lot of time to video games, you could make some extra money by selling gaming services online. There are a few different ways of going about this. You could offer coaching services to help others improve their gameplay or even sell in-game items and currency that you’ve acquired. You could also stream your gameplay on platforms and earn income from advertisements. The amount of income depends on how many hours you’re willing to commit and the type of services you offer. But if you’re able to build up a large following, you could potentially make a career from this side hustle job. –– Demi Yilmaz, Colonist.io
Do Social Media Marketing
In this digital world, businesses are always searching for strong social media marketers. The millennial generation or Gen Z can thrive in these positions as they spend the majority of their time on popular platforms such as Instagram and TikTok. This side gig can easily be done on your own time as freelancers can schedule posts through third-party apps like Later, and work on an influencer marketing strategy through Aspire IQ. Graphics can be made through free websites such as Canva, and all community management can be handled straight from your home office. While a content role such as social media may feel like it’s never-ending, it’s a great side hustle for those looking to advance their digital skills. — Corey Ashton Walters, Here
Become a Food Delivery Driver
One way to meet fitness goals while making cash on the side is to run food for a food delivery app. Professionals can handily make over a thousand dollars a week part-time by working in busy delivery areas during peak hours. Depending on the area, delivery drivers can bike or use a car to maximize total deliveries during their shifts. In particularly busy cities for food delivery, such as New York, orders are certain to be nonstop on specific days of the week, guaranteeing flexible supplementary income. Continue Reading…
Target date funds are a fantastic investment tool, particularly for Canadians who are saving for retirement. Despite their benefits, though, they have not been made widely available to the masses yet.
If we look at our U.S. neighbor, target date funds are already taking off. In fact, target date funds hit a record US$3.27 trillion in assets in 2021, up from $52 billion in 2020. The market value speaks for itself: target date funds are here to stay, and they’re growing in popularity.
We have seen target date funds play out well in the U.S. If Canada is able to further adopt this form of investing to the market, we can close this retirement investing accessibility gap.
In order to understand the opportunities that target date funds provide for investing for retirement, it’s important to break down how they work.
How Target Date Funds work
At their core, target date funds are a one-stop-shop for long-term saving and investing. Target date funds use a systematic or rules-based asset allocation where the mix of stocks and bonds changes over time as you approach the target date. The funds are a mix of stocks and bonds that increase and decrease their risk levels according to the person’s age. This “glide path” model increases risk as you’re younger, and decreases risk as you get closer to retirement because, simply put, you’ll need that money to draw upon in retirement! Target date funds are also easy to choose. You simply pick the year you want to retire and select the target date fund with that year.
Of course, with any investment strategy, there are risks. The inherent risk here is that you are investing in the market. Stocks and bonds go up and down: they ebb and flow but in the long term, markets have increased in value. A key feature of target date funds is that they are diversified across asset classes, geographies and sectors, and that diversification helps whether there is a downturn in the market or not. Target date funds weather the storm. Continue Reading…
Well, readers of this site will know I’m a big fan of companies that reward shareholders with dividends.
And why not love dividends?
Although I use a few indexed products in my investment portfolio, for extra diversification just in case, getting paid on a consistent, growing basis from Canadian and U.S. stocks: that’s a beautiful thing. I got another raise this week that I’ll link to below!
Digging deeper, I’m not that worried about the markets or inflation right now. There is a reason why dividends matter to me. Why do dividends really matter?
Beyond the Canadian dividend tax credit, beyond consistent payments and ever growing income I’ve experienced to date, dividends help me stick to my plan.
There is no financial advisor in my plan, nor fees paid to any advisor in my plan.
There is no day trading, there are no wasted fees or losses for trading.
There is no wild market speculation, I’m not trying to time anything.
I focus on my savings rate for investing and I invest more money when I have it. It’s that simple.
Recall that dividends paid is real money paid from real company profits. Buying and holding an established company that has paid dividends for decades is a good sign (at least from a historical perspective) that this company had enough cashflow to reward shareholders and stay in business.
Companies that don’t pay dividends tend to use their money for other means, grow their business; make acquisitions or buy back shares, pay down risky debt, therefore driving the stock price higher over time.
These are not poor management decisions by any means: far from it. There are lots of ways shareholder value is created and to be honest, acquisitions, share buybacks and other company reinvestments could be better company decisions in the long-run!!
When it comes to the capital gains versus dividend income debate, there really isn’t a debate to be had, since every dollar you earn in capital gains from a stock is worth just as much as your dividend dollar paid. I love the graphic shown at the top of this blog.
Dividends from established companies however are paid consistently, and dividend payments might even rise over time by some, so this level of predictability can provide some financial security especially when you’re invested in a diverse portfolio of stocks.
Indexed investing, when done properly can be an efficient and low-cost way of gaining exposure to various markets. Investment vehicles such as exchange-traded funds (ETFs), make it possible for individuals to invest in these indexes, i.e., the Nasdaq-100 index.
Nasdaq-100 & Exposures
Launched in 1985, the Nasdaq-100 is one of the world’s most well-known large-cap growth indexes. The companies in the Nasdaq-100 include over 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. It is mainly comprised of technology, consumer, and health companies – with a slight exposure to industrials and telecom.
When looking at what is powering economic growth in the 21st century, we look to those new economy sectors that are highly digital. These are disproportionately tech or consumer companies like Amazon, Microsoft, and Google. This index gives you exposure to the biggest Nasdaq-listed names, along with others that follow closely behind these leaders in technology.
Nasdaq-100 vs S&P 500 Volatility & Performance
When looking at volatility, one may think of the Nasdaq as being a more growth-oriented index, and if looking at returns alone, these have certainly shown to be significant over the years. Investors may assume that the indexes’ higher performance leads to higher volatility compared to other leading indexes. However, if we take a look at the chart below, which is more of a longer-term picture, you are getting a pretty significant consistent volatility range. Of course, if you look at this year in comparison inflation has been at the forefront of headlines, growth-oriented companies have been taking a harder hit than more cash-up-front companies: you see more volatility in the Nasdaq this year vs the S&P 500.
Both the Nasdaq-100 and the S&P 500 have had very similar volatility over last 15+ years
Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.
The big story for everyone is the performance of the Nasdaq-100 vs. the S&P 500. The long-term performance of the Nasdaq-100 shows an upward trend. If we look at post-2008, generally monetary policy had been very supportive of market growth, and companies had been able to invest in research, helping them grow over time. You see this reflected in the Nasdaq-100, where thanks to the underlying companies in this index, there is outperformance. The chart below showcases this quite well. It tells us that the Nasdaq-100 is a valuable holding in a portfolio based on performance.
Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.
Market Considerations: Performance vs Interest Rates
The chart below shows what happened the last time rates went up by a similar amount. You can see a gradual stairway up from almost 0% to about 2.5%. You can see the dip in the NDX price (grey line), which looks like a blip, almost not noticeable (but it was 23%). This isn’t very far from the drawdown this year to date. Albeit the Fed is raising rates much faster.
Based on experience, the Fed may keep rates high until inflation gets under control into that sort of two to three per cent range. The question for investors is, what happens to stocks if rates get to 3%, 4% or maybe 5% and perhaps stay at that level for a few years? This is where it is imperative to look at the amount of debt these companies have on their balance sheet, how much the interest costs will go up and what their earnings power looks like. Will they be able to remain competitive with the price of everything rising? Will consumers continue to pay for these products vs. downsizing or even substituting for cheaper alternatives? Continue Reading…
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