All posts by Jonathan Chevreau

New Harvest Monthly Income ETF aims to beat inflation by combining 5 different “Best Ideas”

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Canadian retirees and would-be retirees who feel starved of high monthly income and are pressed by surging inflation may find relief in a unique new “Best Ideas” fund-of-funds Income ETF that began trading on Feb. 16th.

Harvest Portfolios Group Inc. announced on Wednesday the completion of the initial offering of Class A Units of the Harvest Diversified Monthly Income ETF, which is now trading under the ticker symbol HDIF [TSX.]

In a press release, Harvest president and CEO Michael Kovacs said the new ETF targets a high initial annual yield of 8.5% by accessing “five proven Harvest Equity Income ETFs efficiently in one single ETF.”  In a backgrounder  on its website, Harvest noted the inflation-busting 8.5% compares to a 4.5% Canadian inflation rate that ended 2021, and to the TSX’s 2.6% annual yield and S&P500’s 1.5%.

As outlined in a prospectus filed Feb. 4th with all provincial securities regulatory authorities in all Canadian provinces and territories, the innovative new ETF brings together five different Harvest “Best Ideas” in generating income, and is designed to provide Canadian investors access to a core diversified monthly income solution.

The portfolio is comprised of more than 90 large global companies diversified across these 5 equally weighted sectors: Healthcare, Technology, Global Brands, Utilities, and US Banks. The five underlying ETFs are illustrated below: There is no additional management fee apart from the MERs of the underlying Harvest ETFs. Because it’s a new fund and because of the leverage component, there is not yet an estimate of what the final MER might be. But it should be  in the ballpark of some blend of the MERs of the underlying funds: Referring to the tickers below, here are the Management Fees and MERs of the component Harvest ETFs, as of June 30, 2021:

HHL 0.85%/0.99%

HTA 0.85%/0.99%

HBF 0.75%/0.96%

HUBL 0.75%/0.99%

HUTL 0.50%/0.79%

 

The net result is a collection of global stocks that are allocated in the following sectors (a comparable geographical breakout is not yet available):


In addition to high monthly cash distributions the fund provides the opportunity for capital appreciation by investing, on a levered basis, in a portfolio of ETFs that engage in covered call strategies.  Harvest says the maximum aggregate exposure of the ETF to cash borrowing will not generally exceed approximately 33% of the ETF’s net asset value.

For additional information, visit www.harvestportfolios.com

Canadians more optimistic about money than their love lives this Valentines

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Despite Valentines Day being right around the corner, Canadians appear to be more optimistic about their financial futures than their love lives, according to a survey released Wednesday. Here is the press release.

TD’s second annual Love and Money survey gauged the financial behaviours of more than 1,700 Canadians who were married, in a relationship, or divorced in 2021.

It found that 60% of respondents claimed it’s harder to find true love than financial success, up from 51% in 2020’s report.

  • For those in committed relationships, 51% said they’re experiencing barriers to meeting their financial goals and are delaying milestones like planning a wedding.
  • 74%  of divorced Canadians feel their financial status is the same or better than when married: 54% said it is easier to manage their finances post-divorce.

The survey also explored millennials’ unique approach to love and money, including their intolerance for financial ‘red flags’ that would cause them to leave their partner:

  • They never offered to pay for anything (86%)
  • They were secretive about their finances (81%)
  • They didn’t seek professional financial advice (77%)

 As for life post-divorce, 52% said they learned a new financial skill like tracking their spending (28%), making bill payments (24%) and saving for retirement (23%). 57% said they are spending less after divorce while 45% consider themselves financially better off. 54% said it’s easier to manage their finances post-divorce.

TD says the survey also reveals the downside of not talking about finances in relationships. Divorced couples were less likely to have regularly discussed money during their marriage, with only 29% of divorced respondents saying they talked about money weekly with their former partner, compared to 50% of married couples who say they have the talk weekly.

Millennials, Love and Money

Millennials are more likely than other demographic cohorts to keep their money separate from their partners, with 49% of respondents saying they have no common accounts or shared credit cards. Millennials are also less tolerant of ‘red flag’ financial behaviours: they say they would leave their partner if they never offered to pay for anything (86%); if they were secretive about their finances (81%); or if they didn’t seek professional financial advice (77%).

Financial challenges of committed couples

The survey also shines a light on the financial challenges of committed couples. It found 28%  are keeping a financial secret from their partner, up from 8% from the 2020 report. Of those keeping a secret, 64% don’t plan to ever tell their partner. The survey also shows that a secret purchase is the most kept (42%), followed by a secret bank account (29%). Continue Reading…

Perfect storm of challenges awaits Canadians this RRSP season, survey finds

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Photo credit Wes Tyrell

A “perfect storm” of challenges faces Canadian investors this RRSP season, according to a a national online study conducted on the Angus Reid Forum Panel for Co-operators, released Tuesday. Jan. 25.

After surveying financial professionals across the banking and wealth management sectors, the panel believes this  “perfect storm” can be attributed to the uncertainty of this past year and to DIY [Do It Yourself] investing strategies.

2022 is poised to be a unique RRSP season because of multiple unique market conditions, the study finds: 58 per cent agree that in the face of rising consumer debt, natural disasters (climate change), Omicron, and looming hikes in interest rates, we are approaching a “perfect storm” of challenges, a figure that jumps to 65 per cent in Quebec.

Key findings

  • 80 per cent percent of respondents say that when people experience financial mishaps or losses, many feel overcome with doubt, which leads to indecision and in-action.
  • 76 per cent hypothesize that for many Canadians living in urban centres, home ownership is increasingly feeling out of reach, and because of this, many are looking for DIY investment strategies.
  • 93 per cent say the majority of Canadians have unleveraged opportunities in that they haven’t maximized their RRSP planning and TFSAs.

“By initiating a much-needed national conversation around financial literacy, the hope is that more Canadians will feel empowered to seek counsel from a financial advisor and develop a strategic financial plan to help achieve their goals,” Co-operators said in a press release.

Conducted in January 2021, “Canadian Attitudes on RRSPs” was designed to examine the state of RRSPs, TFSAs and retirement planning strategies that Canadians are using to secure their financial futures – all from the perspective of industry professionals with their ears to the ground across the country.

Consumer confusion appears to be rampant when it comes to understanding the different roles of RRSPs and TFSAs. 90 per cent of financial professionals believe most Canadians” have a lot of confusion” about those two key retirement savings vehicles.

This is reflected in similar confusion about Saving versus Investing: 70 per cent say they see Canadians declining in their ability to differentiate between saving and investing.

The study also sees what it calls “unleveraged opportunities”: 93 per cent think the majority of Canadians haven’t yet maximized their opportunities with RRSP planning, TFSAs, and other programs.

A majority (85%) of  industry pros attribute the influence of today’s “culture of now” as hindering people from seeing retirement planning as a priority.

The venerable Registered Retirement Savings Plan (RRSP) also seems to be suffering from the challenge of an “old school image”: 57 per cent say too many Canadians today see RRSPs as “an investing tool of the past” that is no longer as attractive today.

Adding to the angst is the continuing decline of availability of Defined Pension [DB] plans offered by employers: 85 per cent think defined benefit pension plans are going extinct. They too are viewed as a thing of the past: something Canadians don’t expect to have when they retire.

No surprise then that Early Retirement is largely regarded as a myth:  92 per cent of advisors believe that because most Canadians aren’t saving enough for retirement, concepts like “early retirement” are becoming more elusive.

What’s holding Canadians back

When it comes to identifying the causes for Canadians holding back on retirement saving, the survey found financial losses generally contribute to indecision: 80 per cent of advisors say when Canadians experience financial mishaps or losses, many become overcome with doubt, which then leads to indecision and in-action. In addition, 73 per cent see a stigma of shame among many Canadians around financial mishaps or losses.

Just the fact they feel they are not saving added to their stress: 80 per cent see many Canadians feeling paralyzed from the stress of not having enough savings to meet their long-term needs. And many also feel pressure to be perceived as  “financially in-the-know.” 65 per cent think there is social pressure among Canadians to appear “financially savvy.” Continue Reading…

MoneySense Retired Money: Are Asset Allocation ETFs truly diversified?

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OptimizedPortfolio.com

My latest MoneySense Retired Money column looks at the dilemma many retirees and would-be retirees face these days: that with sky-high stock prices and interest rates seemingly bottoming and headed up, there’s no such thing as a truly “safe” investment. Click on the highlighted headline for full column: Is the All-Weather portfolio the answer to the shortage of “safe” investments? 

Even supposedly safe bonds, bond funds or ETFs largely suffered losses in 2021 as interest rates seemed poised to rise: now that various central banks are starting to hike rates, such pain seems destined to continue in 2022 and beyond.

Yes, short-term bank savings accounts and GICs seem relatively safe from both stock market meltdowns and precipitous rises in interest rates, but then there’s the scourge of inflation. Even if you can get 2% annually from a GIC, if inflation is running at 4%, you’re actually losing 2% a year in real terms.

But what about those Asset Allocation ETFs that have become so popular in recent years. This site and many like it are constantly looking at products like Vanguard’s VBAL (60% stocks to 40% bonds) or similar ETFs from rivals: iShares’ XBAL or BMO’s ZBAL.

The nice feature of Asset Allocation ETFs is the automatic regular rebalancing. If stocks get too elevated, they will eventually plough back some of the gains into the bond allocation, which indeed may be cheaper as rates rise. Conversely, if stocks plummet and the bonds rise in value, the ETFs will snap up more stocks at cheaper prices.

But are these ETFs truly diversified?

True, any one of the above products will own thousands of stocks and bonds from around the world. They are geographically diversified but I’d argue that from an asset class perspective, the focus on stocks and bonds means they are lacking many other possibly non-correlated asset classes: commodities, gold and precious metals, real estate, cryptocurrencies, and inflation-linked bonds to name the major ones.

The Permanent Portfolio and the All-Weather Portfolio

I’ve always kept in mind Harry Browne’s famous Permanent Portfolio, which advocated just four asset classes in four 25% amounts: stocks for prosperity, long-term bonds for deflation, gold for inflation and cash for recessions.

A bit more complicated is the more recent All-Weather portfolio, from American billionaire and author Ray Dalio, founder of Bridgewater Associates. You can find any number of variants of this by googling those words, or videos on YouTube.com.  There’s a good book on this, Balanced Asset Allocation (by Alex Shahidi, Wiley), which makes the All-Weather portfolio its starting point. Continue Reading…

Here’s to 2022: Surely it will be better than 2021?

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A quick note to say Happy 2022 to all the Hub’s readers and supporters. We’ll be back to our regular blog-a-day rotation on Tuesday.

In the meantime, I’ll point readers to Dale Roberts’ excellent year-end market wrap for MoneySense, which was published Friday.

Click on the highlighted headline to access, but settle down with a coffee before you do: it’s quite a long read: Making Sense of the Markets: 2021.

It’s a thorough long read that looks at all the major market developments each month in 2021 and you’ll also see a number of prescient market calls made by Dale over the last few years, including an early call on Covid-19 itself, an early call on the Energy and Commodities recovery, and several others.

I’ve followed Dale for some years now: he famously tweets as @67Dodge and I now help edit his weekly MoneySense market wrap, seeing as I became MoneySense’s Investing Editor at Large a few months ago.

Don’t forget to contribute to your TFSA ASAP

Oh, while on the subject of MoneySense New Year’s content, I may as well point those to my own column that ran a few days ago: Why contributing to a TFSA is a good (New Year’s) resolution.

In normal years, I would move new money into the TFSA on January 1st but there’s probably no rush this year until Tuesday, Jan. 4, seeing as the Canadian market is closed Monday. (The US will be open that day though).

I’ve not decided exactly what to invest in but it will likely be inflation-related. Going back to Dale Roberts, you can glean a few ideas from his 2021 market wrap: things like short-term TIPS ETFs, or the Purpose Real Assets ETF, or energy/commodity plays.

Personally, I’ve been researching Ray Dalio’s All-Weather portfolio (google it for videos and articles, or try this Seeking Alpha link on it). I’ve concluded that our own family has sufficient US equity exposure but not enough in commodities or TIPS [Treasury Inflation Protected Securities] plays.

Dalio is a bit heavier on fixed-income than most, with a mix of long-term and short-term bonds. His recommended equity exposure is a bit lower, and he suggests 7.5% commodities and 7.5% in gold. Readers may therefore find Friday’s Hub article on gold of interest: A perfect storm for gold.

Every case is different of course. IF I were looking to boost US equity exposure, I’d certainly be considering the new Canadian Depositary Receipts (CDRs), more on which you can read on the Hub early in the new year. If we didn’t already own Berkshire Hathaway, I’d be tempted to add to it with the CDR version of Berkshire, seeing as it pays no dividends and would be a good value counterbalance to high-priced US tech stocks.

So by all means get your $6,000 (if available) into your TFSA early in 2022 but take a few days to figure out how to invest it.

The wild card is certainly Omicron. If you’ve not yet gotten your booster, I highly recommend it.

So again, have a happy, healthy and profitable 2022!