By Som Seif

Special to the Financial Independence Hub

I think we can all agree that investing in the U.S. stock market is a valuable exercise. There are global companies in the U.S. that are great long-term stocks that we should own as well as important diversification benefits that Canadians achieve by investing away from Canada.

Canadians like to invest at home, but what we really need to understand is that Canada’s stock market is one big illiquid sector bet. Our market is dominated by three major sectors – financials, energy and commodities. On the other hand, the U.S. stock market is huge, with deep and broad representation across all the major industry sectors. That said, investing in the U.S. comes with a unique challenge that you don’t have when investing at home: currency risk.

There are two ways to approach fluctuating currency when investing in the U.S. market. The first is to adopt a thesis by which you buy into the U.S. market knowing and accepting that there will be times when the U.S. dollar strengthens or weakens versus the Canadian dollar. The second is to use a currency hedge solution. There are advantages to each approach.

To hedge

For those of us who are individual investors, hedging is generally not a good option. You need to accept the currency risk when investing in individual U.S. stocks. Continue Reading…

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Diana used to come to work with bags around her eyes. Her co-workers would always ask her if she was alright, and if everything was okay at home. Diana was tired of being sick, and she was also tired of people asking questions about her personal life. Diana had many sleepless nights, and it was now showing on her face.

There were a number of things that were contributing to Diana’s sleepless nights. Problems at work and home were among those issues. She was also struggling with credit card debt. Diana had managed to accumulate a credit-card balance of more than $10,000.

Diana had a good credit score and a good-paying job, so she did not expect to end up in credit-card debt. She had used her credit card to pay for a getaway with her husband to the Caribbean. As readers of the Financial Independence Hub know, using a credit card as a borrowing tool can lead to trouble quickly.

Diana believed she could pay off the debt before interest was charged to the card. However, a crisis happened and she had to cover an unexpected dental expense and a leak. Diana’s expensed trip to the Caribbean caused her to carry a credit-card balance that she was now struggling to pay off.

Diana was now living the personal finance nightmare: stuck in high-interest credit-card debt.

Diana’s new debt made life extremely difficult. She felt like she was in a sinking boat with no lifeline. She was feeling out-of-control, stressed and anxious. Diana struggled to budget in the minimum payments every month, but they never seemed to make a dent on the balance.

It is easy to understand Diana’s predicament when you take a look at the math involved.

Continue Reading…

By Som Seif

Special to the Financial Independence Hub

Many, even most, Canadian investors suffer from a bias by which they invest in what they know: home.

This is short-sighted and dangerous for an investor’s portfolio, as the Canadian market is very small and concentrated in comparison to the U.S., especially around three primary sectors. Canadians really don’t have to go away to far flung places for diversification – they only need to look southward to the U.S. market, which is one of the broadest, deepest and most liquid financial markets in the world.

For those considering investing in the U.S., really focus on these three areas that are the core to growing and diversifying an investment portfolio.

1. Go for the big treasure chest of companies. Go for diversity.

Continue Reading…