Will Ottawa move to deflate the housing bubble by taxing gains on principal residences in today’s federal budget?
By John De Goey, CFP, CIM
Special to the Financial Independence Hub
By now, you’ll know that I have been alarmed by stock market valuations for a long time. Late 2019, in fact. Recently, I pointed out that the bond market is severely stretched based on current valuations. It is now time to complete the TINA Trifecta by examining real estate.
Depending on which market you live in, real estate in Canada is likely somewhere between “pricey” and “there is no hope in hell for my kids to ever be homeowners.” In the greater Toronto area where I live, the consensus price increase in real estate over the past three years or so is about 30%. No wonder there’s speculation that today’s federal budget will include a capital gains tax inclusion on principal residences.
From a financial planning perspective, it is considered prudent to expect real estate prices to increase at about the same rate as wage inflation. Inflation has been hovering at around 2% for over thirty years now. Wages have been essentially stagnant over that timeframe. Stated differently, we’re already gone nearly a third of a century with real estate outpacing prudent expectations. That’s what TINA [There Is No Alternative] does. There is literally no alternative because everything is expensive to buy, but ridiculously cheap to own: in terms of financing and the cost of carry.
The Great Covid Bubble?
Central banks started lowering rates aggressively in early March 2020. Government cheques started to be sent out about a month later. Over the past 13 months or so, we’ve reached the point where the combined effects of fiscal and monetary stimulus have created a valuation monster that touches on all major asset classes. Stocks, bonds and real estate are all flashing red in terms of historical valuations. Someday, people could look back on this unprecedented confluence of circumstances and call it the “Great COVID Bubble.” Continue Reading…
By Amit Sahasrabudhe, Vice-President, Home Equity Financing, RBC
(Sponsor Content)
The road to home ownership isn’t always an easy one and the pandemic has made it even more complex, bringing new challenges and opportunities for prospective homebuyers. For some, lifestyle changes have created opportunities for increased savings. Others find themselves priced out of the housing market.
RBC conducts an annual Spring Housing Poll to learn more about Canadians’ attitudes around home buying and the housing market. This year’s results show that despite some Canadians – especially non-homeowners under 40 – reporting they have given up on the dream of home ownership, there has been an increase in those who say they’re likely to buy in the next two years.
Even amidst an increasingly expensive housing market, most Canadians feel that housing continues to be a good investment and that it is still better to buy than rent.
Should you buy now or buy later?
The first step in knowing whether it is the right time to buy is understanding how much you can realistically afford. This includes having a full picture of your current financial situation and how it may change in the future. It is also important to consider external factors like the overall housing market and economy, as they can also have a big impact on your ability to purchase a home.
In fact, our research found that many Canadians are planning to wait to purchase a home because of the state of the economy, concerns about their job security and affordability, especially in hot housing markets. For others, historically low interest rates and the fear that housing market will become increasingly unaffordable are motivating the decision to purchase a home sooner.
While Canadians now have a lot more factors to consider when buying a home, they don’t have to embark on this journey alone. Buying a home is one of the most important decisions you will ever make and there’s no substitute for doing your research and receiving expert advice on how to fit your home purchase into your overall financial plan. RBC Mortgage Specialists are available to help you with your home buying journey from start to finish, and appointments can be booked virtually, by phone or in-branch.
Saving for a down payment
When it comes to purchasing a home, saving for a down payment can often be the biggest barrier to entry. While everyone’s financial situation is different, some Canadians have taken advantage of reduced spending during the last year to build up their savings. Our research found that most Canadians who are likely to buy in the next two years are setting aside monthly savings to put towards purchasing a home, saving an average of $789 each month. Continue Reading…
Retirement is for winding down, while Bitcoin is ramping up. It might seem like the two things do not have much in common, but on closer inspection, there is definitely room for some crossover.
Recently, CNN reported that Bitcoin was going mainstream, with one of the reasons being popular innovators like Elon Musk making substantial investments. More people are taking part now, using Bitcoin to its fullest potential. When it comes to retirement, it can certainly enrich that stage of life a great deal.
Here some reasons as to why Bitcoin and retirement could well be a perfect match.
A Sense of Freedom
Retirement is for enjoying a sense of freedom, taking your life in whichever direction that suits you when you are free of obligations. Coincidentally, Bitcoin presides over a similar ethos.
In an article by Forbes titled ‘How Bitcoin Fits In A Retirement Portfolio’, they insightfully note that “If you could invest with hindsight, you’d go back in time, put 100% of your money in crypto and hold tight to the roller coaster […] over a long stretch it has, unlike lottery tickets, delivered a positive return, and most of the time goes its own way, oblivious to the stock market.” No doubt many people of retirement age look back on numerous points in their life and wonder: what if?
As Bitcoin is trending up, a decent investment today can turn into a small fortune after a few years. Remember, Bitcoin was under US$5000 last year and is currently priced at US$55000. If a retiree had bought 1 BTC last year, his investment had increased tenfold. Price swings like this have become quite common, just imagine what the value of Bitcoin could be after a decade. All one had to do is buy Bitcoin and hold it. Continue Reading…
The interest in Blockchain has surged in recent months as Bitcoin goes on a record run. Naturally, the two are inherently linked but one common mistake investors make is to assume one equals the other.
Unfortunately, it is a mistake made by many and one that could not be further from the truth. Blockchain is not Bitcoin, and Bitcoin is not Blockchain.
Without going into great technical detail, Blockchain is the technology that underpins the Bitcoin cryptocurrency. Blockchain powers Bitcoin and while it was initially created for Bitcoin, they are not one and the same.
Decentralization
Blockchain is a decentralized database or a ledger that is distributed across many computers. Hence, why it is referred to as decentralized. Arguably, it is what makes Blockchain’s technology so revolutionary and why the use cases expand far beyond that of cryptocurrencies.
Many believe that Blockchain’s decentralization will revolutionize the way companies do business. For one, it is largely considered to be safe as there is no single point of attack for which to target. Secondly, Bitcoin has made the use case for making digital transactions much easier (and secure). Finally, given its nature blockchain leads to greater transparency, increased accuracy and ultimately, can lead to significant cost reductions.
The potential use cases for Blockchain are too many to list but include things such as executing contracts, maintain records and auditing. Today, organizations worldwide are investigating how they can utilize and adopt Blockchain technology.
How can investors benefit?
Exchange Traded Fund (ETF) investing, is one of the simplest ways of gaining exposure to a broad base of assets. Canadian ETFs cover markets, sectors, industries and in some cases, get down to specific niche industries. Blockchain is one such niche industry and in Canada, there are two solid options for investors.
Harvest’s Blockchain Technologies ETF (TSX:HBLK)
It is worth noting that there have been a few failed attempts at Blockchain ETFs in the past and today, Harvest’s Blockchain Technologies ETF is one of the only one’s left standing. The fund aims to track the performance of the Harvest Blockchain Technologies Index. HBLK (TSX:HBLK) invests in equity securities of issuers exposed, directly or indirectly, to the development and implementation of blockchain and distributed ledger technologies.
he fund is now two years old having first launched in December of 2018. A $10,000 investment in HBLK would be worth $13,699 as of end of November. Worth noting that the fund was underwater until it made a big comeback this past June.
Holdings include a mix of well-established large caps and stand-alone emerging blockchain companies. As of end of November, emerging and large cap companies accounted for 55% and 44% of the fund. It carries a high 0.65% Management Expense Ratio (MER) fee and is eligible for most account types.
As of writing, the company is trading at $15.00 per share, a 9.4% premium to its net asset value (NAV) of $13.70 per share. It is a smaller ETF, with holdings of approximately $10.5 million and as such, is prone to greater volatility.
The ETF appears to be well diversified with no holding accounting for more than 6% of the fund. Combined, the Top 10 account for approximately 50% of assets. Among the notable names, there are upstarts and hypergrowth stocks such as DocuSign and Square which are complemented by large players such as Intel and Oracle.
Horizon’s Big Data and Hardware ETF (TSX:HBGD)
Although it is not explicitly stated in its name, Horizon’s Big Data and Hardware ETF (TSX:HBGD) is a blockchain focused fund. The fund seeks to replicate the performance of the Solactive Blockchain Technology & Hardware Index which tracks companies focusing on blockchain innovation and development, and companies providing hardware and hardware-related services used in blockchain applications.
Horizon’s ETF has a reasonable MER of 0.55% and at today’s price of $48.70 trades at a steep 20.15% premium to its NAV of $40.53. The fund was launched in June of 2018 and a $10,000 investment in HBGD at the time of inception would be worth $17,487 as of end of November. Much like HBLK, most of those gains have come over the past six months.
TSX:HBGD Dividend Adjusted Return
Somewhat surprisingly, the fund also pays a modest annual distribution of $0.3701 per share (0.76% yield). Distributions are rare for ETFs that track technology and growth stocks. Horizon’s ETF is made up of approximately 50% mid-to-large cap stocks, while 23% of holdings are microcap stocks. Once again, this is a small fund with only $7.1M in assets and is a higher-risk investment.
This is accentuated by the makeup of the company’s holdings.
The company’s Top 10 holdings are vastly different than that of HBLK. For starters, none of the Top 10 overlap. Although the Top 10 also account for approximately 50% of fund holdings, two companies – Hive Blockchain (TSX:HIVE) and Riot Blockchain (NASDAQ: RIOT) – account for ~30% of holdings. This means that the fund is more reliant on those two companies to drive performance.
Furthermore, half of the top 10 holdings trade on exchanges outside of North America and approximately 31% of total holdings operate in Asia. This makes it the more globally diversified fund of the two.
HBLK vs HBGD
Interestingly, both ETFs offer something different and can be held together without worry of much overlap. Harvest’s fund is likely to be less volatile given its exposure to some of the larger and more traditional tech companies. Continue Reading…
What is your strategy for managing the stress of running a small business?
To help you find new strategies for managing the stress that comes with running your small business, we asked small business owners and entrepreneurs this question for their best advice. From taking time to enjoy nature to setting boundaries, there are several different ways you can manage your stress.
Here are twelve strategies to managing stress while running a small business:
Remember Your Why
Regular Trips Out In Nature
Think About All The Impact You’re Making
Spend Time With Your Pets
Take Longer Breaks When You Need Them
Schedule Self Care
Personal Retreat Sessions
Give Autonomy To Your Team
Mindset Routines
Blocking Time
Setting Boundaries
Use The Pomodoro Technique
Remember your Why
When times get hectic, like they often do, it’s important to have your why statement clearly defined and visible to see at all times. Usually, when I’m feeling stressed, it’s because I am too caught up in the weeds and working “in” the business. By regularly scheduling time to work “on” the business, I start by remembering our why statement which brings my focus back to the big picture. This helps me get pumped and feeling way less stressed. — Jenn Christie, Markitors.com
Regular trips out in Nature
Here at Cruise America, we believe in working hard and playing hard. That is why the majority of our executives take advantage of our RV fleet and take regular trips out in nature. We find that this time out of the office reminds us of why we started this company years ago and the amazing experiences we provide for our customers. That’s what makes every day in the office well worth it! — Randall Smalley, Cruise America
Think about all the Impact you’re making
It is so easy to get caught up in the stress of running a small business and losing sight of why you first launched your company in the first place! Whenever I feel overwhelmed, I just think about all the good my company has done for cities and their communities over the last 37 years and it makes it all worth it. — Blake Murphey, American Pipeline Solutions
Spend time with your Pets
The best part of working remotely is that I get to spend all day with my dog! Whenever I start to feel stressed or overwhelmed, I love taking him on a walk or playing fetch with him on the beach. It is a great way for me to step away from my desk, get a healthy dose of Vitamin D, and of course spend some time with my fur baby. –– Carol Bramson, Side by Side
Take longer Breaks when you need them
Many people stress at work. They do overtime and compensate by accumulating extra holidays and taking spare time off. But by doing so, there’s also the impending fear of stress from having to go back to work. I make the most of every day at work, with myself, and with colleagues. I take longer lunch breaks when I want to—an extra hour to go to the lake or stroll around the city. And if you find yourself dozing off, ask colleagues to get a coffee outside of the office—or if you’re still lucky enough to get some sunshine—go for a gelato run collectively! Nobody ever says no to ice cream. — Hung Nguyen, Smallpdf
Schedule Self Care
Schedule self-care and breaks into your daily schedule. When you map out each week in your digital calendar or physical planner, schedule self-care, family time, and exercise first. These are your non-negotiables. Then schedule everything else work-related around these non-negotiables. Your self-care is unique to you! It may vary from a scheduled meditation time to daily walks, to 30 minutes reading a fiction book. But if you don’t plan for it, work will chip away at life, leaving you little in the way of work-life balance. — Reese Spykerman, Design by Reese
Personal Retreat sessions
Personal retreat sessions are a wonderful strategy to help manage the stress of running a small business. Retreat sessions create plenty of downtime and space for reflection, which is exactly what small business owners need to move naturally towards solutions that can solve stress-inducing issues. Continue Reading…
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