All posts by Financial Independence Hub

Embracing Entrepreneurial Wisdom: A Guide to Financing, Funding, and Starting Your Business with Podcasts

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Phil Bliss (on left) interviewing Brad Krieger (right)

By Philip Bliss

Special to Financial Independence Hub

Starting a business can be both exhilarating and daunting. Aspiring entrepreneurs often find themselves navigating through a sea of uncertainties, seeking guidance on financing, funding, and launching their ventures successfully. In today’s digital age, podcasts have emerged as powerful platforms for disseminating invaluable insights and wisdom.

One such beacon of knowledge in the Canadian entrepreneurial landscape is the “#1 Podcast for Entrepreneurs in Canada” by canadaspodcast.com. In this blog post, we explore the profound importance of listening to entrepreneurs’ words of wisdom and advice, and how this podcast can become your go-to resource in your journey towards building a successful business in Canada.

Empowerment through Experience

The beauty of a podcast hosted by successful entrepreneurs is that it provides you with firsthand accounts of their experiences, challenges, and triumphs. These entrepreneurs have weathered the storm, overcome obstacles, and tasted success. By listening to their stories, you gain insight into the real-world dynamics of business, which textbooks and theories often fail to capture. Their experiences can empower you with the knowledge to avoid common pitfalls, make informed decisions, and stay motivated through tough times.

Insights into Financing and Funding

Financing and funding are critical components of starting and sustaining a business. Entrepreneurs featured on Canada’s #1 Podcast share their journeys of securing capital, whether it be through angel investors, family investment, venture capitalists, or traditional loans. Their advice can enlighten you on creating a compelling business plan, preparing a convincing pitch, and choosing the right financing options for your venture’s unique needs. Additionally, understanding the financial landscape in Canada and how to navigate it effectively can significantly improve your chances of success. Continue Reading…

Low Volatility Investing: Benefitting from Alternative Weighting

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By Chris Heakes, CFA, M.Fin., BMO Global Asset Management

(Sponsor Content)

Most investors look to equities to provide the primary growth component of portfolios, and for good reason: the S&P 500 has returned an average 10.9% annualized over the past 50 years[1]. However, while the attraction of long-term growth is there, the drawback, as most investors know, is risk and volatile markets, such as the collapse of the Information Technology (IT) bubble in 2001, or the great financial crisis of 2008.

What is Low Volatility Investing?

Low Volatility investing is an approach which attempts to achieve the benefits of equity investing (upside return), while mitigating the inherent risk within equities.  A soundly constructed low volatility Exchange Traded Fund (ETF) will generally achieve this by overweighting defensive stocks (using some measurement of risk – at BMO, low volatility ETFs use Beta as a measure) as well as overweighting traditionally defensive sectors such as Consumer Staples and Utilities, while underweighting more aggressive stocks and sectors, such as Energy and Materials.

By embracing a methodology that is different from broad indexes, low volatility strategies fall into a category of ETFs we call Factor ETFs or Smart Beta ETFs (the terms are interchangeable). In this sense Low Volatility strategies seek to preserve more capital (relative to broad markets) when markets are volatile, due to the weighting to defensive stocks.

How do Low Volatility ETFs perform?

Classic finance theory supposed a relationship between return and risk.  All things being equal, an investor should get more return for assuming more risk (and vice versa).  However, the concept of the “low volatility anomaly” comes from the empirical observation that this relationship doesn’t hold true in practice. Lower-risk stocks generally have as good, if not better, returns than higher-risk stocks.

How can this be the case? Investors, or perhaps more accurately, traders, often chase higher-risk stocks, which to their detriment often don’t live up to expectations.  No better example is there than the recent meme-stock behaviour, where a social-media organized horde chased returns on various small-cap stocks, in the often misguided “shoot for the moon.” Low volatility investing is the opposite of meme-stock investing. It’s about winning by not losing. Batting for singles and doubles, but not going for home runs and striking out.  Keeping the ball in the fairway … and on and on.  A good low volatility strategy can deliver the benefits of equity investing over the long period, while also providing better cover and portfolio protection, when the markets aren’t working.

It’s beyond the scope of this blog post to get into the plethora of academic research around the low volatility anomaly, but for those interested readers, see an article linked on the CFA website.

What are the risks of low volatility investing?

Simply put, the different weighting methodology can both work for, and against, the investor, particularly in the short term.  Higher-risk stocks will enjoy their days in the sun at times, and low volatility investors may lag, in these exuberant style markets. Like other factor investing strategies (value, momentum, etc.), performance is generally best analyzed on the long term, which is to say through business cycles. Lastly, low volatility strategies tend to be overweight more interest-rate sensitive stocks, so in periods of interest rate increases, this may pose a headwind to the overall strategy. Continue Reading…

I Will Teach You to be Rich (Review)

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Amazon.ca

By Michael J. Wiener

Special to Financial Independence Hub

 

There aren’t many financial gurus willing to call out financial companies by name for their bad behaviour, but Ramit Sethi is one of them.  In his book I Will Teach You to be Rich, he promises “a 6-week program that works,” and he includes advice on which banks to use and which to avoid.

The book is aimed at American Millennials; Canadians will learn useful lessons as well, but much of the specific advice would have to be translated to Canadian laws, banking system, and account types.  The book’s style is irreverent, which helps to keep the pages turning.

It may seem impossible to fix a person’s finances in only 6 weeks, but this is how long Sethi says it will take to lay the groundwork for a solid plan and automate it with the right bank accounts and periodic transfers.  The execution of the plan (e.g., eliminating debt or building savings) will take much longer.

Sethi is rare in the financial world because he will say what he really thinks about banks.  “I hate Wells Fargo and Bank of America.”  “These banks are pieces of shit.  They rip you off, charge near-extortionate fees, and use deceptive practices to beat down the average consumer.  Nobody will speak up against them because everyone in the financial world wants to strike a deal with them.  I have zero interest in deals with these banks.”  For the banks he does recommend, “I make no money from these recommendations.  I just want you to avoid getting ripped off.”

People have many reasons why they can’t save and are in debt, but Sethi sees them as just excuses in most cases.  “I don’t have a lot of sympathy for people who complain about their situation in life but do nothing about it.”  “Cynics don’t want results; they want an excuse to not take action.”  He urges readers to “put the excuses aside” and get on with the business of making positive changes.

The Program

The first step in the program is to “Optimize Your Credit Cards.”  I found it interesting that Sethi focused on credit card perks before he covered eliminating credit card debt.  He wants readers to “play offense by using credit cards responsibly and getting as many benefits out of them as possible” instead of “playing defense and avoiding credit cards altogether.”  This approach sets him apart from many other experts on getting out of debt.  While he does teach methods of eliminating debt, his focus is more on building wealth steadily.

The second step is to open “high-interest, low-hassle accounts.”  Interestingly, he wants readers to open a chequing account at one bank and a savings account at another bank.  Among his reasons are that the psychology of a separation between accounts makes us less likely to raid savings.  Some might think opening a savings account is pointless if they have no money to deposit, but Sethi insists that you need to lay the groundwork now for a better future, even if you’ve only got $50 to deposit.

The third step is opening investment accounts.  The author favours very simple investments, such as a Vanguard mutual fund account invested in a target date fund.  “Don’t get fooled by smooth-talking salespeople: You can easily manage your investment account by yourself.”  Unfortunately, Vanguard mutual funds are only available to Americans.  Canadians can find one-fund solutions with certain Exchange-Traded Funds (ETFs).

To create the cash flow to reduce debt and invest, the fourth step is about “conscious spending,” which is “cutting costs mercilessly on the things you don’t love, but spending extravagantly on the things you do.”  Achieving this involves tracking spending in different categories, but not traditional budgeting. Continue Reading…

Starting a Business to attain Findependence

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Unsplash: Chris Liverani

By Devin Partida

Special to Financial Independence Hub

Many people seek the life Findependence [aka Financial Independence] can bring. While there are many ways to achieve this status, one great way is to start a business.

Building a company can be daunting, but it’s vital to consider if it’s something you really want to do.

How does starting a Business help you reach Findependence?

Many business owners trying to obtain findependence implement an exit strategy. This is where the company still operates normally but doesn’t rely on the person who started it to do the work. In other words, the company is automated to function without intervention from the owner. Other people prefer to sell their organization and live on the profit they get from it.

Instead of selling the enterprise, another route is to invest the capital in different areas. Some entrepreneurs use the profit their business generates to create additional passive-income streams.

You can invest your money in many different areas to reach findependence. Here’s a summary of a few popular avenues:

● Roth IRA: This individual retirement account [in the U.S.; similar to Canada’s TFSA] offers the investor tax-free growth and withdrawals. To withdraw money from an IRA, the owner must own the account for at least five years and exceed the age of 59 and six months.

● Property: Many entrepreneurs decide to invest their capital into real estate to sell or rent it again. Buying property could be an excellent chance to obtain passive income, which can aid with the end goal of reaching findependence. However, real estate might have additional costs, such as hiring someone to manage the investment for you.

● The stock market: You can’t talk about investing and not mention stocks. Most people are already familiar with this option, where someone purchases a portion of a company and receives shared ownership. Stocks can also generate monthly passive income via dividends, but many consider them high-risk investments.

If investing company profits to reach financial goals is something you’re interested in, there are other opportunities to look out for. Consider researching bonds and index funds to determine if they’re something you want to invest in.

What kind of Business should you start?

The type of organization you should start comes down to personal preference. Consider looking at your interests and what excites you. Many entrepreneurs create a company around what they already know. For example, if they have coding experience, they could build a business offering customers web development services. Whichever idea you choose, ensure you conduct sufficient research to know what it will take to make it a success.

Here are a few popular business ideas: Continue Reading…

How Aging Populations affect the Healthcare Sector

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Populations are aging, creating opportunities for investors in health-care stocks or ETFs. Image licensed to Harvest ETFs from Shutterstock.

By Paul MacDonald, CFA

(Sponsor Content)

In much of the developed world, the population pyramid is inverting. Population pyramids are a demographic tool used to visualize the age of a country’s population. Typically they look like a pyramid, with a broad base —representing a large number of young people—and a gradually narrowing tip representing the natural loss of population as individuals age.

However, as birth rates have declined and life expectancy has increased in developed countries like Japan, France, and Canada those pyramids are looking more upside-down. The United Nations estimates that by 2050 almost 30% of the population of North America will be over 60; that number is projected at over 35% for Europe.

The aging of the developed world is one of the most important demographic trends of our time. An older population means a smaller proportion of the population will be working and paying taxes, while more people aging require the support of social safety nets. But this shift is not all negative. From an investor’s perspective there are a wide array of opportunities in aging populations. At Harvest ETFs, we see this demographic trend as one of the key drivers of the Healthcare sector.

Why the developed world is aging

Aging in North America, Europe, and parts of East Asia reflects a myriad of key factors. One of the most significant contributors to population aging is the remarkable progress in healthcare and medical technology. Reduced mortality rates from diseases and improved treatments for chronic conditions have led to longer life expectancy.

At the same time, birth rates are declining. That is due in part to increased access to education and family planning, as well as changing cultural norms. Families are choosing to have fewer children, or have children when they are themselves older and more established in their careers.

Other factors like urbanization, economic pressures, the cost of living, and the prioritization of personal well-being over raising children have contributed to this demographic shift. With this demographic shift, however, comes a significant economic shift.

As populations age, economies age with them. A shrinking pool of younger workers and a growing group of retirees can create a new set of challenges and opportunities. Most notably it can challenge workforce productivity and the overall tax base of an economy as a smaller percentage of the population will be working.

However, a growing number of older individuals opens up opportunities for many companies, notably in the Healthcare sector.

The investment opportunities of an aging population

At Harvest ETFs we believe the U.S. Healthcare sector is among the areas best poised to benefit from aging populations in the developed world. Taking the United States as a core example of these populations, we can see that healthcare spending increases significantly when the population gets older.

According to the Centers for Medicare & Medicaid Services National Health Statistics Group, the per-capita total personal healthcare expenditures of a U.S. individual aged  19-44 is US$4,856. For an individual aged  45-64 that number is $10,212. For individuals 65 and older, it’s $19,098. Continue Reading…