All posts by Financial Independence Hub

Should you have 100% of your portfolio in stocks?

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The 100% equity ETFs from iShares and Vanguard/Canadian Portfolio Manager

By Mark Seed, myownadvisor

Special to Financial Independence Hub

A reader recently asked me the following based on reading a few pages on my site:

Mark, does it make sense to have 100% of your portfolio in stocks? If so, at what age would you personally dial-back to own more cash or GICs or bonds? Thanks for your answer.

Great question. Love it. Let’s unpack that for us. 

References:

My Dividends page.

My ETFs page.

Should you have 100% of your portfolio in stocks?

Maybe as a younger investor, you should.

Let me explain.

Members of Gen Z, which now includes the youngest adults able to invest (born in the late-1990s and early-2000s), represent a cohort that could be investing in the stock market for another 60 more years. 

According to a chart I found on Ben Carlson’s site about stuff that might happen in 2023, over 60+ investing years in the S&P 500 (as an example) historical indexing performance would suggest you’d have a better chance of earning 20% returns or more in any given year than suffering an indexing loss. Pretty wild.

S&P 500 - 100 stocks

Source: A Wealth of Common Sense. 

Shown another way as of early 2023:

S&P 500 Returns Updated

Source: https://www.slickcharts.com

This implies younger investors, in my opinion, should at least consider going all-in on equities to take advantage of long-term stock market return power when they are younger given:

  1. As you age, your human capital diminishes – your portfolio (beyond your home?) can become your greatest asset.
  2. Younger investors can also benefit from asset accumulation from periodic price corrections – adding more assets in a bear market; allowing assets to further compound at lower prices when corrections or crashes occur (i.e., buying stocks on sale).

Consider in this post on my site:

In the U.S.:

  • a market correction occurs at least once every 2 years, of 10% or more
  • a bear market at least every 7 years, where market value is down 20% or more
  • a major market crash at least every decade.

And in Canada for additional context:

The C.D. Howe Institute’s Business Cycle Council has created a classification system for recessions, grouping them together by category.

According to the council: Continue Reading…

Managing your Finances after Immigrating to the United States

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Pexels photo by Matt Barnard

By Devin Partida

Special to Financial Independence Hub

Every day, the United States welcomes people worldwide who epitomize the American dream. After settling into their new country, many buy homes, launch businesses, become outstanding citizens and live prosperous lives.

However, moving to another country often presents financial challenges. Those new to the U.S. should remember these tips when setting up and managing their assets after immigrating.

1.   Open a Spending Account

A spending account will allow you to store your money and make everyday transactions safely, such as clothing or groceries. It may help to see if your bank in your native country has international branches. In that case, you could likely open an account in the U.S. without changing institutions.

TD Bank and RBC Bank are just some of the Canadian financial institutions with U.S. branch offices. If not, many banking institutions simplify opening a new spending account and may even offer some perks.

2.   Ask Questions

There is much to know about financial management in a new country. The best way to learn is to reach out for support. Some experts — bankers, accountants and financial advisors — specialize in helping immigrants and will offer guidance on taxes, investing, and other benefits.

Likewise, seeking community organizations or local government agencies to bring yourself up to speed is a good idea. Community groups in particular are an excellent way to connect with other immigrants, and learn with and from one another.

3.   Build Credit

Building credit will allow you ample opportunities in your new country: a daunting feat if you’ve established excellent credit in your native country and must start over. Fortunately, some apps allow you to import your previous credit.

Like any U.S. borrower, establishing legal residency and maintaining good credit is crucial for loan eligibility. Lenders require at least two to three years of credit history to qualify. With excellent credit, newcomers can take out a loan to purchase a home, refinance or take out a second mortgage. You can use a second mortgage to pay off credit cards or fund home projects.

4.   Set a Budget

Immigrating to the United States can be expensive, with international relocation costs totalling anywhere between $2,000 USD and $10,000 USD. With these and the various expenses that follow, it’s important to create a budget for your relocation.

U.S. goods may cost less or more than your native country. Once you arrive, you’ll have a much better idea of what to expect from your monthly spending. Items you may not consider at first are car and health insurance, or the fees to obtain a driver’s license. Creating a budget by categorizing your spending — food, medical, housing and transportation — will help you determine how much you’ll need to set aside from your paycheck. Continue Reading…

10 Lifestyle Changes that could Lower your Life Insurance Premiums

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Image courtesy FitInsure.ca

By Lorne Marr, Jane Cotnam and Mohammed Azeez Amer,

FitInsure.ca

Special to Financial Independence Hub

Getting the best life insurance premium for the highest possible coverage amount is important. Life insurance is what stands between your and your loved ones’ financial future should something catastrophic happen. Whether it is critical illness insurance that pays a lump sum to the life insured to help with the costs of treatment or a bucket list trip, or life insurance that goes to a beneficiary, applicants have the power to lower their premiums. How? Through lifestyle changes.

Each applicant’s lifestyle figures heavily into the underwriting process for traditional/standard and rated policies. While simplified issue insurance does not have a medical exam, lifestyle/health questions are asked; the answers affect both the success of the application and the premium. Guaranteed issue insurance has no questions or medical exams – but this is typically reserved for applicants as a last resort. Guaranteed issue is expensive, has limiting conditions, and offers low coverage.

By taking care of the following lifestyle factors today, applicants greatly improve their access to favourable premiums on standard insurance.

10 Lifestyle Factors and how they Impact Life Insurance Premiums

  1. Quit smoking – Smoking has been proven to be a major risk factor for many health issues including cancer, heart disease, and stroke.
  2. Lose weight – Being overweight or obese increases your risk of developing chronic diseases such as diabetes, heart disease, and stroke.
  3. Reduce alcohol consumption – Excessive drinking can increase your risk of developing liver disease, high blood pressure, stroke, and other health problems.
  4. Get your blood pressure under control – High blood pressure increases your risk of developing several serious diseases. Keeping your blood pressure under control through diet, exercise, and medication will help reduce this risk.
  5. Lower your cholesterol – High cholesterol increases your risk of developing heart disease, among other problems. Eating a healthy diet and exercising regularly will help lower cholesterol levels.
  6. Increase water intake – Water makes you feel full faster so that you eat less food overall, which helps with weight loss efforts as well as reducing the amount of sugar in the body – and that helps with diabetes management too! Drinking more water throughout the day is an easy way to improve overall health.
  7. Meditate – Meditation has been shown to have positive impacts on both mental health and physical health by reducing stress levels, which in turn helps with weight management efforts too. Taking some time each day to practice meditation is an easy way to improve overall well-being.
  8. Eat more vegetables – Eating more vegetables is an easy way to improve overall nutrition while helping to lower life insurance premiums at the same time. Vegetables are packed with vitamins, minerals, antioxidants, and fibre, which all work together to promote better health outcomes.
  9. Exercise – Regular exercise has been proven to have numerous benefits for both physical and mental well-being including improved moods, increased energy levels, and improved cardiovascular fitness, which all contribute towards lowering life insurance premiums.
  10. Develop good sleep habits – Getting enough quality sleep each night is essential for maintaining good physical and mental health.

A Closer Look: Examples

Insurance broker Jane Cotnam shares a story about the power of weight loss impacting life insurance premiums.

“I had a client who applied for level CI with Canada Life. She was rated for her weight,” says Cotnam. “Bordering on obesity, this was the determining factor in her finally losing the weight. It’s been six months and she is down 50 pounds so far. She’s so much more confident now and will continue to lose weight in order to get a standard premium.”

Broker Mohammed Azeez Amer is also happy to share details by showing how Equitable Life’s Stop Smoking Incentive Program (ELSSIP) works.

“Applicable to Equation Generation IV and Equimax, the ELSSIP can be offered to applicants that have ‘quit smoking for 12 consecutive months within the first two policy years. Equitable Life will refund the difference between what they paid as a smoker and what they would have paid as a non-smoker for a maximum one month period. Eligibility is subject to certain conditions including a negative cotinine level and evidence of continued insurability. Term clients may be eligible to move from a Class 4 Preferred Smoker or Class 5 Smoker to a Class 3 Non-Smoker.’”

The Best Way to Get the Best Rate

Taking care of one’s health improves more than life insurance premiums. It improves quality of life and longevity. Health is a gift you can give yourself, and then enjoy its many resulting benefits. Yet, good health is not always in our hands. Illnesses or accidents can rob us no matter our good intentions. Continue Reading…

An ETF Strategy with Exposure to High Credit Security and High Monthly Income

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Harvest Premium Yield Treasury ETF (HPYT)

Harvest ETFs this week announced its new Harvest Premium Yield Treasury ETF, now available.

By Michael Kovacs, President & CEO of Harvest ETFs

(Sponsor Blog) 

Canadian investors have been forced to adapt to aggressive interest rate hikes from the Bank of Canada. This was preceded by a prolonged period of low interest rates that continued since the 2007-2008 Financial Crisis.

Some experts and analysts are projecting that interest rates are at or near the peak of this tightening cycle. In this environment, an optimal investment strategy factors in high interest rates while preparing for the eventual downward move that many analysts expect in 2024 or later. When the period of high interest rates subsides, there may be great potential for capital appreciation and income generation with an investment strategy that captures those benefits/opportunities. That is where the brand new HPYT ETF comes into play!

What is it?

HPYT is an ETF that holds several long-duration US Treasury ETFs and actively manages a covered call write position on those ETFs to generate an attractive monthly income.  It has an approximate yield of 15%, representing the highest fixed-income yield in Canada. The approximate yield is an annualized amount comprised of 12 unchanged monthly distributions (the announced distribution of 0.15 cents on Sept. 28 multiplied by 12) as a percentage of the opening market price of $12 on September 28, 2023.   Continue Reading…