All posts by Financial Independence Hub

Cryptocurrencies 101: “So what the heck am I supposed to do?”

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By Tony Humble

Special to the Financial Independence Hub

If you are like 99.9% of Canadians, you are probably wondering what this crypto-thing is all about.  Your stream of consciousness likely goes something like this: What is Bitcoin?  And what the heck is Ether?  Will they change my life?  How can I make money on it? Could I lose money on it? What….?”

Allow me to open the secret door a crack for you.

At this moment in time, the early adopters are cleaning up.  They saw the potential of Bitcoin and Ether, and bought it when it was cheap.  Now they are sitting on a pile of value, much like Amazon investors who bought at the IPO price of  $16.00 in 1997 – except they have only seen a 64-times growth, to $1,010 today.  The cab driver in Calgary who took Bitcoin for a $5 fare a few years ago years ago is reportedly now a multimillionaire.

There is still money to be made, however, which is why you are seeing somewhat self-serving forecasts by service providers and pundits, of Bitcoin and Ether in particular hitting $20,000 and more.  That could happen, but so could Dow at 100,000, and as most of us know, the road to that particular Nirvana is full of potholes and unexpected dips and swerves.

Cryptocurrencies are not “securities”

Importantly, cryptocurrencies are not “securities” and do not appear to fall under the rules of most of the Western regulatory system that governs the sale of securities.  That of course would appear to free this new highly valuable (and growing) form of electronic money from the constraints faced by “unaccredited” investors.  Right now, if you want to buy a piece of a private company, you cannot buy their securities from a financial intermediary unless you meet the extremely high bar set by the regulators.

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5 overlooked costs when Upsizing Homes

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Planning to upgrade to a larger home? Trading in a petite Toronto condo for greater square footage is in the five-year plan for many homeowners. And the opportunities to trade up are better than they have been in years; recent provincial rules to calm the housing market have softened the pace of price growth and created frantic multiple offer situations, giving prospective home buyers some much-needed financial breathing room.

Whether buyers are looking to swap high-rise downtown living for options in other GTA markets —  such as a reasonably-priced detached home or condo in Hamilton,  for example —  the time is right to come off the sidelines and explore your real estate options.

However, upsizing your home can come with upsized expenses, which can take condo dwellers by surprise. Here’s what buyers should consider, beyond budgeting for a larger down payment and closing costs.

Blend A bigger Mortgage

Chances are moving to a larger property means taking on larger monthly mortgage payments. Just as you did with your starter home, it’s important to connect with a mortgage broker before starting the house hunt to determine your maximum budget, based on the down payment you’ve saved and the existing equity you’ve built up in your current home.

Depending on your existing mortgage, you may have a few options for new financing. If you have a fixed mortgage rate, the ability to port your mortgage, and are mid-term, you can simply move your mortgage over to your new home and get what lenders call a “blend and extend.” This approach combines your existing mortgage rate with what you’d qualify at for a new term, with your new interest rate the weighted average between the two.

For example, let’s say your existing mortgage has a remaining $250,000 balance, a fixed rate of 2.1 per cent, and two years left on a five-year term. Assuming interest rates have risen since signing up for your last mortgage and you now qualify at a rate of 2.69 per cent, your new, blended mortgage interest rate will be somewhere between those two rates.

However, while blending your mortgage can be a good way to take advantage of an existing lower rate and avoiding the fees associated with breaking a mortgage, it’s not an option that’s available to all borrowers. If your mortgage product doesn’t include the ability to port or transfer your mortgage (most variable-rate mortgages do not), you may be forced to refinance instead and pay the interest rate differential, or three months-worth of interest,  whichever is higher.

Ramp up your Reno Budget

Many larger, detached properties are considerably older than new condo stock, and you may need to shell out for a few upgrades. Be prepared for costs to add up quickly – older home renovations can range from cosmetic, like ripping up old carpeting, to important structural fixes. Some of the most common renovations in older homes include outdated electrical wiring — such as knob and tube, which is a fire hazard — and replacing old plumbing, like ki-tech or galvanized piping. Continue Reading…

Bonds: Ain’t no cure for the summertime blues

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U.S. 10-Year vs. 10-Year German Bund
By Kevin Flanagan , WisdomTree Investments
 
Special to the Financial Independence Hub

Since Election Day, the focus in the U.S. Treasury (UST) market has been essentially domestic-driven. In other words, market participants have been setting their sights on potential fiscal policy developments and, of course, the latest actions from the Federal Reserve (Fed).

However, as the calendar turned to summer, investors were greeted with a new twist for Treasuries: more-hawkish-than-expected rhetoric coming from other developed markets’ central banks, elevating global bond yields in the process. The question that lies ahead on the rate front is whether words become deeds; if so, the fixed income arena could be in for a case of summertime blues.

Two of the more noteworthy developments from the global central bank perspective involved the European Central Bank (ECB) and the Bank of Canada (BOC), each occurring in just the last few weeks. The genesis was at an ECB forum in Sintra, Portugal, where President Draghi made remarks that the bond market viewed as being on the hawkish side.

Although the ECB tried to walk back the comments, stating they were misinterpreted, the damage was done, and yields nevertheless finished higher. Interestingly, the FOMC minutes released early in July were a nonevent, but the ECB minutes were a different story, as the headlines stated that policy makers “discussed removing the easing biases in their policy communication,” specifically on their Quantitative Easing (QE) program. These news events were accompanied by earlier comments from BOC president Poloz that intimated that Canadian policy makers may be considering a rate hike at one of their upcoming meetings.

Unexpected shift in tone

Needless to say, the shift in tone was not expected in the global bond markets. Continue Reading…

Mid-year review of Aman Raina’s Robo Advisor portfolio

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By Aman Raina, SageInvestors

Special to the Financial Independence Hub

Aman Raina

As we cross the mid-pole mark in 2017, it seems like a good time to check in on my Robo Portfolio that I created two and half years ago.  For those jumping on for the first time, I wanted to try to find out if this new type of investment service which was taking the industry by storm a few years ago does any better job of creating wealth for investors compared to the traditional methods of investing (i.e. Do-It-Yourself or having a professional manage your money on your behalf).

I chose one Robo Advisor company here in Canada and invested $5,000 of my own money. When I set up the account I answered a series of questions about my financial literacy and risk tolerance. ROBO took my responses and crafted a portfolio that it felt reflected my profile.

As I am pretty experienced with investing and have a long-term investment horizon, ROBO determined that a portfolio mix of 85 per cent stocks and 15 per cent bonds would work for me. From there ROBO carved out allocations to a variety of equity and bond assets using ETFs to provide the appropriate exposure.

The objective of this exercise is to observe and blog about the whole experience and share with you any unique insights about the service. Most importantly I wanted to see what kind of returns this type of portfolio can generate. My experiment is by no means scientific but I think there is a lot that we can learn about this service if we go beyond the slick websites and marketing to truly look underneath the hood to see how these portfolios are managed.

Performance still reasonable

When we last checked in with my ROBO portfolio in late January, it was chugging along rather nicely, generating somewhat decent returns. It appears to be continuing the trend. Since the start of the year, the ROBO portfolio is up 5.5 per cent. Since I set up the account, the portfolio is up 14.2 per cent. The portfolio is up $298.71 this year, of which $53.59 was in dividend payments. Again, pretty reasonable for me. When you look at portfolio breakdown most of the returns have come from US stocks, Foreign stocks, and Emerging Market stocks.

ROBO Portfolio - 6 month performance chart

ROBO Portfolio – 6 month performance chart

ROBO portfolio - Asset Allocation breakdown - July 3, 2017

ROBO portfolio – Asset Allocation breakdown – July 3, 2017

Asset Allocation: Breaking News! 

It all seems decent enough; however, shortly after I posted my report in February, the portfolio has gone through some changes. Continue Reading…

Opinion: Morneau rings death knell for entrepreneurial spirit in name of “fairness”

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Finance Minister Bill Morneau

By Trevor Parry

Special to the Financial Independence Hub

Liberals are majestic creatures, always knowing what is better for the masses, and careful never to swallow a dose of their own medicine.  One can conjure up the Hogwartsian image of the Little Prince and “Red” Billy Morneau stumbling hand and hand through the torch-lit catacombs of the Department of Finance, where, to their great joy, hidden behind the cobweb-covered portrait of Alan MacEachen they find a secret passage to Chamber of the Knights of the Just Society.

For it can only be a long forgotten cell of Birkenstock-wearing discredited ideologues, clutching fervently to their well-worn copies of the Carter Commission Report that have vomited forth Tuesday’s discussion paper decrying the apparent abuses perpetrated by the shareholders of private corporations.

Mr. Trudeau likely can’t spell dividend, and Mr. Morneau dare not ask his father how his tuition to the LSE (coincidentally, founded by the Fabian Socialist Society) might have been funded. For these two, along with a good portion of the Liberal caucus, are completely unaware of the sacrifices that are made to create a successful business, or create a professional carreer, and who frankly shake hands with the Holy Spirit of Hypocrisy on a daily basis.

Entrepreneurialism is a plague to Liberals

No, to the Liberal Party of Canada entrepreneurialism is a plague to be eradicated, replaced by a compliant corporate oligopoly working in symbiosis with a burgeoning civil service, and of course legions of ravenous consultants.

The  Department of Finance Paper seeks to target corporate tax planning strategies that have been in place for over 30  years. Paying dividends to adult children, parents and other family members in lower tax brackets, often as a measure of generosity or as a means to pay for higher education (something Mr. Trudeau aspired to but could not achieve), multiplication of the capital gains exemption to preserve a life’s work, and realizing deferral as a means to create capital are apparently at odds with the omniscient and ubiquitous Liberal goal of “fairness.”

Tax fairness should be holding all to the lowest possible measure of taxation, not subjecting everyone to the highest. For in Trudeau’s lexicon fairness is synonymous with mediocrity.    For it is an unassailable lesson of history that the fundamental precondition for the creation of economic dynamism is the creation of surplus savings and capital by the entrepreneurial class. The tax strategies that Mr. Morneau and his Office of the Five Year Plan (formerly known as the Department of Finance) targeted on Tuesday had in some tiny measure allowed for that.

In Liberal Canada economic results must be ordained, not by a higher power, or by the ability or drive of the individual but by a collection of over-entitled, mentally ossified Liberal politburo. By every measure possible; some of which arguably violate the Charter of Rights and Freedoms, in that they directly and unabashedly discriminate against familial relationships, anyone who dare exceed the rigid definition of “middle class” (which for most of the country is “lower” middle class at best) will be assaulted by the great level of an over-50% tax rate. The product of this fairness will be the corpulent rewarding of Liberal sacred cows without even the pretence of accountability.

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